Information Booklet - ASX · 4.5 MSF historical financial information 39 4.6 Management discussion of historical financial information 41 4.7 Financial forecasts 41 4.8 MSF’s Board

StrongerTogether

StrongerTogether

Legal Adviser to MyState Financial

Information Booklet

MyState Financial Credit Union of Tasmania Limited ACN 067 729 195

29 June 2009

THIS IS AN IMPORTANT DOCUMENT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt as to how to deal with this Information Booklet, please consult your legal, financial, taxation or other professional adviser immediately.

YOUR VOTE IS IMPORTANT

YOUR DIRECTORS UNANIMOUSLY RECOMMEND THAT YOU VOTE IN FAVOUR OF THE RESOLUTIONS REQUIRED TO APPROVE THE MSF SCHEME AND THE TRANSACTION IN THE ABSENCE OF A SUPERIOR PROPOSAL.

For a scheme of arrangement between MyState Financial Credit Union of Tasmania Limited ACN 067 729 195 and its members in relation to the proposal to demutualise and to merge with Tasmanian Perpetual Trustees Limited ACN 009 475 629 with MyState Limited ACN 133 623 962 becoming the ultimate listed parent company

For

per

sona

l use

onl

y

GL

UE

GL

UE

GL

UE

GL

UE

What you have received with this Information BookletYou should have received the following items with your Information Booklet, as well as a reply paid envelope:

If any of the above items are missing from your pack, please call the Member Information Line on 1300 538 803 (within Australia) or +61 3 9415 4660 (outside Australia).

WHAT TO DO NEXT1. Read this Information Booklet

You should read and carefully consider this Information Booklet to help you make an informed decision.

2. You should vote on the proposal. Voting is easy. You can vote either online, by attending the Meetings or by Proxy.

•Online Go to www.investorvote.com.au, log in and then follow the prompts to cast your vote online.

•AttendingtheMeetings You can vote in person at the General Meeting and MSF Scheme Meeting. The General Meeting will be held on Tuesday, 18 August at 6.00pm at Tattersall’s Park Function Centre, 6 Goodwood Road, Glenorchy, Tasmania. The Scheme Meeting will be held immediately after the General Meeting, but no earlier than 7.00pm.

•VotingbyProxy You can appoint a proxy to vote on your behalf by completing the enclosed proxy forms, and returning them in the reply paid envelope or by fax before 7.00pm 16 August 2009. See Section 2 of this information Booklet for more details on how to vote.


Letter from the Chairman

Proxy Form for the General Meeting

Proxy Form for the Scheme Meeting

Sell Form for the Share Sale Facility

For

per

sona

l use

onl

y

MyState Financial - Information Booklet

1

Important NoticesGeneral

You should read this Information Booklet in its entirety before making a decision on how to vote on the resolutions to be considered at the General Meeting and the MSF Scheme Meeting. The notices convening the meetings are in Section 13. A proxy form for each meeting and a Sell Form for the Share Sale Facility are enclosed with this Information Booklet.

Defined terms and interpretation

Capitalised terms in this Information Booklet are defined either in the Glossary in Section 14 of this Information Booklet or where the relevant term is first used. References to ‘dollars’ or ‘$’ in this Information Booklet are to Australian dollars unless otherwise indicated. References to time in this Information Booklet is to the time in Hobart, Tasmania unless otherwise indicated.

Purposes of this MSF Information Booklet

The purposes of this Information Booklet are to:

explain the terms and effect of the MSF Scheme and the Transaction;(a)

explain the manner in which the MSF Scheme and the Transaction will be considered and, if approved, implemented;(b)

state any material interests of the MSF Directors, whether as directors, members or creditors of MSF or otherwise and (c) the effect of the MSF Scheme and the Transaction on those interests as far as that effect is different from the effect on similar interests of other persons; and

provide such information as is prescribed by the Corporations Act and the regulations to that Act or as is otherwise (d) material to the decision of Members whether to approve the MSF Scheme and the Transaction.

Status of Information Booklet

This Information Booklet is not a disclosure document required by Chapter 6D of the Corporations Act. Section 708(17) of the Corporations Act provides that Chapter 6D of the Corporations Act does not apply in relation to arrangements under Part 5.1 of the Corporations Act approved at a meeting held as a result of a Court order under section 411(1). Instead, Members asked to vote on an arrangement at such a meeting must be provided with an explanatory statement under section 412 of the Corporations Act.

This Information Booklet incorporates an ‘explanatory statement’ for the purposes of section 412 of the Corporations Act.

ASIC and the Court

A copy of this Information Booklet has been provided to ASIC for the purpose of section 411(2) and Part 5 of Schedule 4 of the Corporations Act and registered by ASIC for the purpose of section 412(6) and clause 32 of Part 5 of Schedule 4 of the Corporations Act on the basis that this Information Booklet sets out or explains the matters in clause 32(1) of Schedule 4 of the Corporations Act. Registration of this Information Booklet does not mean that ASIC has considered whether the proposed MSF Scheme and the Transaction are in the best interests of MSF Members as a whole.

ASIC has examined a copy of this Information Booklet. ASIC has been requested to provide a statement, in accordance with section 411(17)(b) of the Corporations Act, that ASIC has no objection to the MSF Scheme. If ASIC provides that statement, it will be produced to the Court at the time of the Court hearing to approve the MSF Scheme. The MSF Scheme has not been proposed by MSF for the purpose of enabling any person to avoid the operation of any of the provisions of Chapter 6 of the Corporations Act. Neither ASIC nor any of its officers takes any responsibility for the contents of this Information Booklet.

The order of the Court directing the MSF Scheme Meeting to be convened is not and should not be treated as an endorsement of, or any other expression of opinion by the Court, on the MSF Scheme or the Transaction.

For

per

sona

l use

onl

y

MyState Financial - Information Booklet2

Input from other parties

The MSF Information contained in this Information Booklet has been prepared by and is the responsibility of MSF. MSF does not assume any responsibility for the accuracy or completeness of the TPX Information.

The TPX Information contained in this Information Booklet has been prepared by and is the responsibility of TPX. TPX does not assume any responsibility for the accuracy or completeness of any part of this Information Booklet other than the TPX Information and the Joint Information.

The Joint Information contained in this Information Booklet has been prepared by and is the joint responsibility of MSF and TPX.

PKF has prepared the MSF Independent Expert’s Report in relation to the MSF Scheme and the Transaction in Appendix 1 of this Information Booklet and takes responsibility for that section.

Minter Ellison has prepared the general outline of taxation implications of the MSF Scheme and the Transaction in Section 8 of this Information Booklet and takes responsibility for that section.

Other than in respect of the information identified above, the information contained in the remainder of this Information Booklet has been prepared by MSF and its advisers and is the responsibility of MSF.

Investment decisions

This Information Booklet does not take into account the investment objectives, financial situation or particular needs of any Member or any other person. This Information Booklet should not be relied on as the sole basis for any investment decision in relation to Member Shares. Independent financial and taxation advice should be sought before making any decision in relation to the MSF Scheme and the Transaction.

Forward looking statements

Certain statements in this Information Booklet relate to the future. Such statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of MSF to be materially different from expected future results, performance or achievements expressed or implied by such statements. Such risks, uncertainties and other important factors include among other things, general economic conditions, specific market conditions, exchange rates, interest rates and regulatory changes. These statements reflect the expectations of relevant parties’ views only as of the date of this Information Booklet. Subject to any legal obligations (including under the Corporations Act or the Listing Rules or by an order of the Court), each of MSF, TPX and MyState Limited have no obligation to disseminate after the date of this Information Booklet any updates or revisions to any such statements to reflect any change in expectations in relation to those statements or any change in events, conditions or circumstances on which any of those statements are based.

None of MSF, TPX or MyState Limited, any directors of those companies nor any other person gives any representation, assurance or guarantee that the events expressed or implied in any forward looking statements in this Information Booklet will actually occur and you are cautioned not to place undue reliance on such forward looking statements.

Privacy statement

MSF collects personal information about its Members’ holdings of Member Shares in accordance with the Corporations Act. MSF will share that personal information with its advisers and service providers and with MyState Limited and its advisers and service providers in connection with the MSF Scheme and the Transaction. Members can contact the Member Information Line on 1300 538 803 if they have questions about their personal information.

No internet site is part of this Information Booklet

MSF maintains an internet site at mystate.com.au. Any references in this Information Booklet to any internet site are textual references for information only and do not form part of this Information Booklet.

For

per

sona

l use

onl

y


3

Table of ContentsWhat you have received with this Information Booklet A

Important Notices 1

Important dates and times 6

Letter from the Chairman 8

Letter from the Chairman of Tasmanian Perpetual Trustees Limited 9

Key reasons to vote in favour of the MSF Scheme and the Transaction 10

Disadvantages of the MSF Scheme and the Transaction 12

Section 1 - Key features of the MSF Scheme and the Transaction 161.1 What you will receive 161.2 MSF Scheme Participants 161.3 MSF Directors’ recommendations and intentions 161.4 Key conditions 171.5 Implementation and timetable 171.6 The MSF Scheme and the Transaction – your questions answered 171.7 Foreign Scheme Shareholders 21

Section 2 - How to vote on the MSF Scheme and the Transaction 242.1 Two meetings 242.2 Summary of how to vote 242.3 What to do next 25

Section 3 - Important considerations regarding the MSF Scheme and the Transaction 283.1 MSF Directors’ recommendation and intentions 283.2 Key reasons for your Directors’ unanimous recommendation 283.3 Possible disadvantages 303.4 Risks associated with the MSF Scheme and the Transaction 313.5 Other relevant considerations 313.6 Social security implications 323.7 What are your options and what should you do? 34

Section 4 - Profile of MSF 364.1 Overview of MSF 364.2 MSF revenue 384.3 MSF lending portfolio 384.4 MSF funding base 384.5 MSF historical financial information 394.6 Management discussion of historical financial information 414.7 Financial forecasts 414.8 MSF’s Board of Directors 424.9 MSF’s Company Secretary 43

Section 5 - Profile of TPX 465.1 Overview of TPX 465.2 Structure and staffing 465.3 Key management personnel 475.4 Tasmanian Banking Services 47

For

per

sona

l use

onl

y


5.5 Recent share price history 475.6 TPX revenue 485.7 TPX expenses 495.8 TPX earnings per share and dividends 495.9 TPX historical information 505.10 Normalisation of historical earnings 525.11 Management discussion of historical financial information 535.12 Financial forecasts 535.13 TPX Board of Directors 535.14 TPX’s issued securities 555.15 TPX – a disclosing entity 565.16 Proposed National Trustee Legislation 57

Section 6 - Profile of the MyState Limited Group 606.1 Rationale: Stronger together 606.2 Structure of the MyState Limited Group 606.3 Intentions of MyState Limited 616.4 Integration strategy 626.5 Employee Share Plan 626.6 Executive Long Term Incentive Plan 636.7 Capital structure 636.8 Dividend policy 646.9 Corporate Governance 646.10 MyState Limited Board remuneration 666.11 Prospects for the MyState Limited Group 666.12 Pro forma financial information 67

Section 7 - Risks 767.1 Overview 767.2 Merger specific risks 767.3 General business risks 78

Section 8 - Taxation implications 828.1 Introduction 828.2 Disposal of the Member Shares under the MSF Scheme 828.3 Distribution of dividends on MyState Limited Shares 858.4 Disposal of the MyState Limited Shares 858.5 GST 868.6 Stamp duty 86

Section 9 - Procedural aspects of the MSF Scheme and the Transaction 889.1 Introduction 889.2 Eligibility criteria regarding voting 889.3 Eligibility criteria regarding receipt of the benefits of the merger with TPX 899.4 Entitlement and eligibility dispute handling process 909.5 The MSF Scheme, TPX Scheme and the Transaction 919.6 The General Meeting 929.7 The MSF Scheme Meeting 949.8 The MSF Scheme and the Transaction - conditions and termination 949.9 Representations and warranties 969.10 No talk and no shop arrangements 989.11 Regulatory approvals 98

For

per

sona

l use

onl

y


5

9.12 Status of conditions and termination rights 999.13 Reimbursement Amount 999.14 Joint Steering Committee 1019.15 MSF scheme document 1019.16 MSF Deed Poll 103

Section 10 - Share Sale Facility 10610.1 Summary 10610.2 Participation 10610.3 Different features of the Share Sale Facility 10610.4 Important dates for the Share Sale Facility 10710.5 The Share Sale Facility – your questions answered 107

Section 11 - Implementation procedures 11011.1 Introduction 11011.2 Court approval of the MSF Scheme 11011.3 Receipt of Court orders 11011.4 Implementation 11011.5 Trading MyState Limited Shares on ASX 11111.6 Information held by MSF that it intends to provide to MyState Limited 111

Section 12 - Additional Information 11412.1 Introduction 11412.2 Rights attaching to MyState Limited Shares and Summary of MyState Limited Constitution 11412.3 Substantial holders 11612.4 MSF Directors 11612.5 Marketable securities of MSF held by or on behalf of MSF Directors 11612.6 Marketable securities of TPX held by or on behalf of MSF Directors 11612.7 Member Share sales 11612.8 Relevant interests in marketable securities of MyState Limited 11612.9 MSF Directors’ interests in any contracts with MyState Limited 11712.10 MSF Directors’ interests in agreements connected with or conditional on the MSF Scheme and the Transaction 11712.11 MSF Director retirements 11712.12 Material changes in the financial position of MSF 11712.13 Auditors 11712.14 Effect on MSF creditors 11712.15 Impact on material contracts of MSF 11712.16 MSF Directors’ intentions regarding the business, assets and employees of MSF 11712.17 ASX waivers 11712.18 No unacceptable circumstances 11812.19 Quotation of MyState Limited Shares 11812.20 Consents and disclaimers 11812.21 Independent advice 11912.22 Other material information 11912.23 Privacy 119

Section 13 - Meeting notices 122

Section 14 - Glossary 130

Appendix 1 - MSF Independent Expert’s Report 139

Appendix 2 - Facility Terms 234

For

per

sona

l use

onl

y


Important dates and timesDate of this Information Booklet 29 June 2009

Last time and date for lodging the proxy forms for the Meetings 7.00pm on Sunday, 16 August

Time and date for determining eligibility to vote at the General Meeting and MSF Scheme Meeting (Voting Entitlement Time)

5.00pm on Thursday, 13 August 2009

MSF Record Date – date for determining eligibility to participate in the MSF Scheme and the Transaction. You must also have been a Member at 5.00pm on 9 October 2008

5.00pm on Thursday, 13 August 2009

General Meeting* to vote on the Constitutional Amendment Resolution 6.00pm on Tuesday, 18 August 2009

MSF Scheme Meeting* to vote on the MSF Scheme and the Transaction

The MSF Scheme Meeting will be held immediately after the General Meeting has concluded if the General Meeting concludes after 7.00pm

7.00pm on Tuesday, 18 August 2009

*The meetings will be held at Tattersall’s Park Function Centre, 6 Goodwood Road, Glenorchy, Tasmania

The timetable below is indicative only. MSF has the right to vary any or all of these dates and times and will provide reasonable notice of any such variation. Certain dates and times are conditional on the approval of the MSF Scheme and the Transaction by Members and by the Court.

Court hearing to obtain orders approving the MSF Scheme Thursday, 20 August 2009

Effective Date of the MSF Scheme Friday, 21 August 2009

Last time and date for lodging the Sell Form 5.00pm on Friday, 28 August 2009

Dispatch of holding statements to MSF Scheme Participants for the MyState Limited Shares issued to them under the MSF Scheme

Friday, 4 September 2009

Commencement of normal trading in MyState Limited Shares Monday, 7 September 2009

Expected date for transfer of net proceeds from the sale of MyState Limited Shares under the Share Sale Facility to Members who elected to have their shares sold

no later than Thursday, 15 October 2009

Note: Unless specified otherwise, all times are Tasmanian local time.

ENQUIRIES REGARDING THE MSF SCHEME OR THE TRANSACTION

Member Information Line: 1300 538 803 (within Australia) or +61 3 9415 4660 (outside Australia).

If, after reading this Information Booklet, you have any questions in relation to the MSF Scheme or the Transaction, please call the Member Information Line on the above number between 9.00am and 5.00pm (AEST) from Monday to Friday (excluding non-Business Days).

Your Directors recommend that you consult your legal, financial, taxation or other professional adviser concerning the impact your decision may have on your own circumstances.

For

per

sona

l use

onl

y


7

For

per

sona

l use

onl

y



29 June 2009

Dear Member

In October, I was pleased to announce a proposal to merge MyState Financial Credit Union of Tasmania Limited (MSF) with Tasmanian Perpetual Trustees Limited (TPX) to create MyState Limited.

I am now writing to inform you that your MSF Directors unanimously support the proposal to create MyState Limited and we recommend that you vote in favour of the proposal at the upcoming meetings.

Your Directors unanimously support the proposal because we believe MyState Limited will have the increased strength and scale to help MSF to grow in the future.

As part of MyState Limited, a Tasmanian based diversified financial services group, MyState Financial will retain our brand and maintain our current services in locations across Tasmania.

Together with TPX, we will be better positioned to deliver a greater range of services and products to our members and customers.

Like us, TPX has a long history in Tasmania, and that proud Tasmanian heritage will be a key feature for the future of MyState Limited. Legislation will impose restrictions on substantial acquisitions of shares in MyState Limited. In particular, the Trustee Companies Act 1953 has been amended and will apply a 10% shareholder cap to MyState Limited. This means that MSF, as a subsidiary of MyState Limited, will enjoy a level of protection from unrecommended takeover bids.

Further, if the proposal is approved, each eligible member will be issued approximately 380 shares in MyState Limited (a MyState Share Parcel).

If the proposal is approved, you can choose to:

retain your MyState Share Parcel and receive the potential benefits such as dividends and franking credits•

sell your MyState Share Parcel at no cost at the time of the merger by completing the enclosed (green) Sell Form, or at •a later date on the Australian Securities Exchange.

The enclosed Information Booklet contains more details about the proposal (referred to as the MSF Scheme and the Transaction), including the report from MSF’s Independent Expert, PKF Corporate Advisory (East Coast) Pty Limited, who has concluded that the proposal is in the best interests of members.

I encourage you to read the Information Booklet carefully and, if you have any questions, call the Member Information Line on 1300 538 803 (within Australia) or +61 3 9415 4660 (outside Australia) or consult your professional adviser.

Your Directors support this proposal and recommend you vote in favour of the resolutions.

Yours sincerely

Tony Reidy Chairman

For

per

sona

l use

onl

y


9

Letter from the Chairman of Tasmanian Perpetual Trustees Limited

29 June 2009

Dear Member

As you know the MyState Financial (MSF) Board has unanimously recommended that you vote in favour of a proposal to merge with Tasmanian Perpetual Trustees Limited (TPX), of which I am Chairman.

The proposal provides an opportunity to create a substantial, Tasmanian based diversified financial services group that is focused on customer service and the needs of Tasmanians.

TPX employs around 92 staff located in ten branches and offices in the major population centres across Tasmania and like MSF, is highly committed to the communities in which it operates.

TPX is also proudly Tasmanian, having been established in Hobart and Launceston in 1887 and is the only private trustee company currently authorised to operate in Tasmania. TPX’s financial products and services, including managed investments, commercial and rural lending and its specialised role as executor, trustee, and attorney will greatly increase the range of services available to meet the needs of MSF customers.

Each of the TPX Directors intends to vote in favour of the transaction, in the absence of a Superior Proposal, when shareholders meet to vote on the scheme.

I urge all MSF members to support the proposal, when they meet to consider the transaction.

On behalf of the TPX Board I look forward to your support for our efforts to create a substantial Tasmanian based financial services group focussed on customers and quality service delivery.

Yours sincerely

Dr Michael Vertigan AC Chairman Tasmanian Perpetual Trustees Limited

For

per

sona

l use

onl

y


Key reasons to vote in favour of the MSF Scheme and the TransactionIf you believe the MSF Scheme and the Transaction are in your best interests as a Member, you may choose to vote in favour of the resolutions to approve the MSF Scheme and the Transaction. You will be eligible to vote if you held a Member Share at 5.00pm on 9 October 2009, continue to hold it until the MSF Record Date and are recorded in the MSF Share Register at the MSF Record Date. Some of the reasons that may lead you to support voting in favour of the resolutions are set out below.

Opportunity to create a Tasmanian based diversified financial services group

If the MSF Scheme and the Transaction are implemented, MSF and TPX will create a stronger Tasmanian based, diversified financial services group called the MyState Limited Group. MyState Limited will have additional strength and scale to compete in the financial services sector and continue to provide the standard of products and services Members have previously enjoyed.

The current MSF products and services will continue

The MSF Scheme and the Transaction will not result in any adverse changes to the products and services that MSF currently offers. There will be no change to members’ banking arrangements, and the branches and service centre will continue to provide the services Members have previously enjoyed.

10% shareholder cap for MyState Limited

The Trustee Companies Act has been amended and will apply a 10% shareholder cap to MyState Limited if the MSF Scheme and the Transaction are implemented. This means that MSF, as a subsidiary of MyState Limited, will have a level of protection from unrecommended takeover bids. Refer also to Section 5.16 for a discussion of the proposed new Federal legislation in relation to trustee companies. In addition, any substantial acquisition of shares in MyState Limited will be subject to a number of other Federal and State approvals.

Potential for merger synergies to improve MSF’s profitability and financial strength

If the MSF Scheme and the Transaction are implemented, your Directors estimate cost savings for the MyState Limited Group to be realised over a three year period will be in the range of $3.5 million to $4.5 million per annum (before tax) in the final year. In addition, distinct revenue synergies are expected (but not guaranteed) to arise in the future from cross selling and referral activities, where both companies will leverage off the other’s existing customer bases.

Head office will be retained in Tasmania

If the MSF Scheme and the Transaction are implemented, MSF will retain its head office in Tasmania. This will ensure management decisions continue to be made in Tasmania.

The ‘MyState Financial’ brand will remain

If the MSF Scheme and the Transaction are implemented, the ‘MyState Financial’ brand will remain. There will be no material rebranding costs.

Five MSF Board members on the MyState Limited Board

The MyState Limited Board will initially have equal representation from TPX and MSF. Five current MSF Directors and five current TPX Directors along with a Managing Director (yet to be appointed), will form the MyState Limited Board.

The opportunity to receive shares in MyState Limited or cash for those shares

If the MSF Scheme and the Transaction are implemented, each eligible Member will receive an allotment of shares in MyState Limited. Members can then choose to keep these shares, or sell them for cash, without brokerage costs, through the Share Sale Facility (see Section 10 of this Information Booklet for more details), or sell all or some of them at a later date on the ASX.

Opportunity to increase your MyState Limited shareholding

If the MSF Scheme and the Transaction are implemented, each eligible Member will be able to acquire additional MyState Limited Shares on the ASX.

For

per

sona

l use

onl

y


11

Opportunity to receive dividends for shares held in MyState Limited

If the MSF Scheme and the Transaction are implemented and you remain a shareholder in MyState Limited, you have the opportunity to share in the distribution of MyState Limited’s profits through future dividends. Subject to available profits and relevant circumstances at the time, MyState Limited intends to declare a dividend in October 2009.

Ownership of MyState Limited

Immediately following the implementation of the MSF Scheme, MSF Scheme Participants will collectively own approximately 67.5% of the issued shares in MyState Limited (which in turn will own MSF and TPX), which your Directors consider is a fair and reasonable proportion, based on a number of factors, including the net assets and historical normalised earnings of both TPX and MSF.

A common history in Tasmania and a shared commitment to Tasmania

TPX has been operating in Tasmania for more than 100 years. Just like MSF, TPX has a strong commitment to meeting the financial needs of Tasmanians.

Improved ability to raise capital in the future

As a mutual, MSF has had to rely predominantly on profits to provide the capital that is needed to improve systems and technology, enhance services or expand to meet Members’ growing financial needs. MyState Limited, as a listed company will have the ability to consider raising capital through other means in the future if it believes it is in the best interests of the MyState Limited Group.

Opportunity to improve products and services

The increased financial strength and the greater number of customers of the MyState Limited Group provides enhanced opportunities for other innovative products and services to be developed and offered to MSF and TPX customers.

Continued use of key service provider

MSF will be able to continue to utilise the services of Cuscal Limited. Cuscal Limited is a prime service provider of transaction, ATM network access, and funding services to ADIs across Australia. This long standing relationship will remain unchanged.

Your Directors’ unanimous recommendation

Your Directors unanimously recommend that you vote in favour of the resolutions required to approve the MSF Scheme and the Transaction, in the absence of a Superior Proposal.

Each of your Directors who holds a Member Share will vote that Member Share in favour of the MSF Scheme and the Transaction, in the absence of a Superior Proposal.

MSF Independent Expert’s conclusion

The MSF Independent Expert has assessed the MSF Scheme and the Transaction and has concluded that it is in the best interest of Members. The full report is contained in Appendix 1 of this Information Booklet.

No Superior Proposal has been received

Since MSF announced the MSF Scheme and the Transaction on 10 October 2008 and up to the date of this Information Booklet, no Superior Proposal has been received.

For

per

sona

l use

onl

y


Disadvantages of the MSF Scheme and the TransactionIf you believe the MSF Scheme and the Transaction are not in your best interests as a Member, you may choose to vote against the resolutions to approve the MSF Scheme and the Transaction. Some of the reasons that may lead you to vote against the resolutions are set out below.

Your rights as a member will change to those of a shareholder

If the MSF Scheme and the Transaction are implemented, you will no longer be a member of MSF, but you will be issued with shares in MyState Limited. You will no longer hold a Member Share with mutual rights, as MSF will demutualise as part of the MSF Scheme and the Transaction (see section 9.6 for an explanation of the demutualisation process). Instead, your rights as a shareholder of MyState Limited will be dependent on the number of MyState Limited shares you hold.

No direct continuing interest

You will not have a direct continuing interest in MSF’s business although you will maintain an indirect interest because MSF will become, if the MSF Scheme and the Transaction are implemented, a subsidiary of MyState Limited. You will also acquire an indirect interest in the business of TPX, which will also become a subsidiary of MyState Limited.

The listing value of the MyState Limited Shares is still to be determined

The value of the MyState Share Parcel that you will receive is dependent on the price at which MyState Limited Shares will trade on the ASX. No assurances can be given as to the price at which MyState Limited Shares will trade on the ASX as MyState Limited will be a newly listed company and, as such, its shares have not yet traded on the ASX.

Foreign Scheme Shareholders

Members with their registered address overseas will have their MyState Limited Shares sold by a Nominee under the Share Sale Facility. Accordingly, while they will be paid a cash sum for the net proceeds, they will not receive the ongoing benefit of the rights that attach to MyState Limited Shares.

Taxation and government benefit consequences

If the MSF Scheme and the Transaction are approved and implemented, it will potentially result in taxation consequences (possibly including capital gains tax) for Members, which may not have arisen or will arise earlier than may otherwise have been the case. It may also potentially affect your eligibility to receive certain Centrelink and Department of Veteran Affairs benefits.

Section 8 of this Information Booklet provides a general outline of the likely taxation consequences of the MSF Scheme for Members and Section 3.6 provides further information about social security implications of the MSF Scheme for Members.

A Superior Proposal could potentially emerge

It is possible that an alternative proposal for Members could materialise in the future.

However, no Superior Proposal has been received since the announcement of the MSF Scheme and the Transaction and up to the date of this Information Booklet.

Loss of customers The MSF Scheme and the Transaction could cause some MSF customers to leave because they prefer to bank with a credit union or other form of mutual entity.

Consequences of on-going statutory ownership protection

While the regulatory requirements (including the Trustee Companies Act) referred to in Section 3.2(c) provide some protection against takeover bids, this also means that it is less likely the price of MyState Limited Shares on the ASX will, at any stage, include a ‘takeover premium’.

For

per

sona

l use

onl

y


13

You may believe MSF should remain a mutual credit union

You may believe that if the MSF Scheme and the Transaction are implemented it will impact the quality of MSF’s services. You may also believe that MSF does not need to change because it is successful in its current form.

MSF will not be able to use the words “credit union” in its branding, however, it has never done so, nor had its predecessor credit unions for some time.

Access to CUFSS MSF currently has access to Credit Union Financial Support Scheme (CUFSS). This is a scheme funded by credit unions for credit unions, enabling them to access funds in an emergency liquidity situation. MSF and its predecessor credit unions have never utilised CUFSS, but it may no longer be available to MSF if the MSF Scheme and the Transaction are implemented. As an APRA regulated entity, MSF is required to maintain liquidity levels in accordance with prudential standards, and will continue to do so.

You may believe MSF should have pursued an alternative option

You may believe that MSF should have listed as an individual entity, or have merged with another credit union.

Change of business activity The operations of the MyState Limited Group will differ from MSF’s current business activity because TPX and its business will become a part of the MyState Limited Group if the MSF Scheme and the Transaction are implemented.

YOUR DIRECTORS BELIEVE THAT THE ADVANTAGES OF THE MSF SCHEME AND THE TRANSACTION OUTWEIGH THE DISADVANTAGES AND UNANIMOUSLY RECOMMEND

THAT YOU VOTE IN FAVOUR OF THE RESOLUTIONS TO APPROVE THE MSF SCHEME AND THE TRANSACTION IN THE ABSENCE OF A SUPERIOR PROPOSAL

You should read this Information Booklet in full before making any decision on the MSF Scheme and the Transaction. In particular, you should refer to Sections 3 and 7 for guidance on the expected advantages, possible disadvantages, risk factors and other considerations in respect of the MSF Scheme and the Transaction.

This Information Booklet does not take into account the financial situation, investment objectives and particular needs of any Member. You should consult your legal, financial, taxation or other professional adviser concerning the impact your decision may have on your own circumstances.F

or p

erso

nal u

se o

nly


For

per

sona

l use

onl

y


Section 1 - Key features of the MSF Scheme and the Transaction

15

Key features of the MSF Scheme and the

Transaction

Section 1

For

per

sona

l use

onl

y


– Key features Section 1 of the MSF Scheme and the TransactionOn 10 October 2008, MSF announced that it had signed an agreement with TPX under which the two organisations proposed to merge. The terms of the merger were subsequently amended on 21 January 2009 and again on 22 June 2009. TPX and MSF will become wholly-owned subsidiaries of a newly-incorporated holding company, MyState Limited. Subject to all necessary approvals, this will be effected by a number of steps, including all of the Member Shares being transferred to MyState Limited in return for the issue of MyState Limited Shares, and all TPX Shares being transferred to MyState Limited in return for the issue of equivalent numbers of MyState Limited Shares.

If both the MSF Scheme and the TPX Scheme are approved by Members and TPX Shareholders respectively, and both schemes are approved by the Court, and if all other necessary approvals and conditions for both schemes are satisfied (see Section 1.4), both MSF and TPX will become wholly-owned subsidiaries of MyState Limited. MSF will be demutualised, TPX will be delisted from the ASX and MyState Limited will become an ASX-listed company.

This Information Booklet contains information that the MSF Board considers is material to Members in making a decision whether or not to vote in favour of the MSF Scheme and the Transaction. You should carefully read this Information Booklet as part of your consideration of the MSF Scheme and the Transaction.

What you will receive1.1 MSF Scheme Participants will be issued approximately 380 MyState Limited Shares in exchange for their Member Share if the MSF Scheme becomes Effective. The final number of MyState Limited Shares you will receive will be dependent on the final determination of the number of MSF Scheme Participants as at the MSF Record Date.

MSF Scheme Participants1.2 You will be a MSF Scheme Participant if you held your Member Share at 5.00pm on 9 October 2008 and continue to hold it until the MSF Record Date (expected to be 5.00pm on Thursday, 13 August 2009). For more information about the eligibility to receive MyState Limited Shares see Section 9.3.

Any person who does not hold a Member Share at the MSF Record Date, or whose eligibility as a MSF Scheme Participant was not finalised at the MSF Record Date, is not a MSF Scheme Participant. A trust, called the MSF Unverified

Members Trust, will be established in connection with implementation of the MSF Scheme and the Transaction to hold approximately 500,000 MyState Limited Shares received from the MSF Scheme Consideration. These shares will be held on trust for the benefit of those persons with disputed or unverified eligibility to participate in the MSF Scheme who are determined by the MSF Board (after the MSF Record Date and before 30 June 2010) to be eligible to receive an allocation of MyState Limited Shares from the trust. Refer to Section 9.4 for further details of the operation of the MSF Unverified Members Trust.

If you are a Foreign Scheme Shareholder, the MyState Limited Shares that you are entitled to receive as a MSF Scheme Participant will be sold by a Nominee under the Share Sale Facility and the net proceeds remitted to you. See Sections 1.7 and 9.15 for more details about this.

A Share Sale Facility has been established, which will enable you to offer for sale for a cash consideration the MyState Limited Shares you are entitled to receive as a MSF Scheme Participant. The Share Sale Facility is not automatic and you will need to elect to use the Share Sale Facility by completing the Sell Form enclosed with this Information Booklet and returning it to the MSF Share Registry so it is received by MSF by Friday, 28 August 2009. See Section 10 for more details about the Share Sale Facility.

MSF Directors’ recommendations 1.3 and intentions

Your Directors unanimously believe that the MSF Scheme and the Transaction are in the best interests of Members and unanimously recommend that, in the absence of a Superior Proposal, Members vote in favour of the resolutions for the approval of the MSF Scheme and the Transaction.

In the absence of a Superior Proposal, each MSF Director intends to vote in favour of the MSF Scheme and the Transaction, in respect of the Member Share held by him or her in which he or she otherwise has a relevant interest.

In forming their unanimous recommendations, your Directors have carefully considered:

the results of the company’s due diligence and •analysis of TPX;

their analysis of the commercial advantages, •disadvantages and risks associated with the MSF Scheme and the Transaction;

the alternative strategies available to MSF in •pursuing its corporate objectives; and

the opinion of the MSF Independent Expert. •

For

per

sona

l use

onl

y



17

Key conditions1.4 The key conditions that must be satisfied or waived in order for the MSF Scheme and the Transaction to proceed are:

(• Regulatory Approvals and approvals under applicable legislation) all regulatory consents or approvals which are necessary or desirable to implement the Transaction and all necessary approvals under applicable legislation, are obtained;

(• Tasmanian State legislation) Ministerial approval under the Trustee Companies Act for MyState Limited to hold all of the issued share capital of TPX;

(• No Material Adverse Change) no MSF or TPX Material Adverse Change occurs, being a single event, or collection of events, occurrences or matters which has, or have in aggregate, resulted in or could reasonably be expected to result in, an adverse effect on the net assets of MSF of $6 million or TPX of $1.7 million or on the earnings or prospects of MSF in any financial year of $2.4 million or in the case of TPX, $1.05 million;

(• No Prescribed Occurrences) no MSF or TPX Prescribed Occurrences occur (these occurrences include occurrences relating to the ongoing solvency of each company and not taking any action to distribute cash outside the company or reorganise the company’s capital structure);

(• Representations and Warranties) the representations and warranties given by MSF and TPX to each other are (and remain) true and correct and all undertakings have been complied with;

(• Inconsistent obligations) any material agreement binding MSF or TPX which contains obligations which are or may be materially adverse to the interests of the MyState Limited Group is novated, assigned, terminated or otherwise dealt with to the reasonable satisfaction of the parties;

(• Listing of MyState Limited Shares) the MyState Limited Shares to be issued to MSF Scheme Participants under the MSF Scheme and to the TPX Scheme Shareholders under the TPX Scheme have been approved for official quotation on the ASX;

(• Approval of the Schemes) Members approve the Scheme and the Transaction in accordance with the Corporations Act and the MSF Constitution, and TPX Shareholders approve the TPX Scheme and the Transaction in accordance with the Corporations Act, the Listing Rules and the TPX Constitution;

(• Court approval of the Schemes) the MSF Scheme and the TPX Scheme are approved by the

Court in accordance with section 411(4)(b) of the Corporations Act;

(• No litigation) any current, pending or threatened legal proceedings against MSF, TPX or MyState Limited, which may have a material impact on the MyState Limited Group after the Implementation Date, are resolved.

These conditions are discussed more fully in Section 9.8 of this Information Booklet and are set out in full in the Merger Implementation Agreement which is available on MSF’s website at mystate.com.au.

As at the date of this Information Booklet, MSF is not aware of any circumstances which would cause any of the above conditions not to be satisfied or which could result in termination of the Merger Implementation Agreement. MSF will make a statement regarding the status of the conditions at the commencement of the General Meeting.

Implementation and timetable1.5 If all necessary approvals and conditions for the MSF Scheme and the Transaction are satisfied or waived (as applicable), it is expected that the MSF Scheme and the Transaction will be fully implemented by early September 2009. The key dates and times in relation to the MSF Scheme and the Transaction are set out at the beginning of this Information Booklet. Sections 9 and 11 of this Information Booklet describe in further detail the procedural aspects of the MSF Scheme and the Transaction and how they will be implemented.

The MSF Scheme and the 1.6 Transaction – your questions answered

Set out below are summary answers to some questions that Members may have in relation to the MSF Scheme and the Transaction. This information should be read in conjunction with the remainder of this Information Booklet.

What is the MSF Scheme and the Transaction?

The MSF Scheme is a scheme of arrangement under which it is proposed that MyState Limited will acquire all Member Shares on issue. MSF will demutualise and you will become a shareholder in MyState Limited.

The Transaction is the proposed merger of MSF and TPX pursuant to the MSF Scheme described above, as well as a similar scheme of arrangement under which MyState Limited will acquire all TPX Shares on issue. TPX will be delisted from the ASX and TPX Scheme Shareholders will also become shareholders of MyState Limited.

For

per

sona

l use

onl

y


What will I receive if the MSF Scheme and the Transaction are implemented?

If you are an eligible Member, and the MSF Scheme and the Transaction are implemented, you will be issued approximately 380 MyState Limited Shares in exchange for your Member Share if you continue to hold it until the MSF Record Date (expected to be 5.00pm on 13 August 2009) and meet the eligibility criteria. See Section 9.3 for more information about the eligibility of Members to participate in the MSF Scheme and the Transaction.

If you are a Foreign Scheme Shareholder, however, the MyState Limited Shares that you would otherwise be entitled to receive will be sold by a Nominee under the Share Sale Facility and the net proceeds remitted to you. See Section 1.7 for more information about this.

When will I receive my MyState Limited Shares?

If the MSF Scheme becomes Effective, you will be issued your MyState Limited Shares on or about 1 September 2009. This is known as the Implementation Date. MyState Limited will send you a holding statement confirming the issue of those shares.

What happens if the MyState Limited Share price increases or decreases?

The number of MyState Limited Shares you will be issued will not change due to movement in the market price of MyState Limited Shares. However, what will change is the market value of your MyState Limited Shares depending on the upward or downward movement in the market price of MyState Limited Shares on ASX.

Can I sell my MyState Limited Shares for cash straight away?

Yes. You may elect to sell the MyState Limited Shares you are issued through the Share Sale Facility. You will need to complete and follow the instructions on the Sell Form enclosed with this Information Booklet to sell your MyState Limited Shares using this facility. See Section 10 for more details about the Share Sale Facility.

What if I only want to sell some of my MyState Limited Shares for cash straight away?

You can only use the Share Sale Facility to sell all of your allocated shares in MyState Limited. If you only want to sell some of the shares, you will be able to offer your MyState Limited Shares for sale on the ASX once trading commences. For more details about how to do this, visit www.asx.com.au.

Can I sell my MyState Limited Shares at a later date?

Yes. You will be able to offer to sell some or all of your MyState Limited Shares on the ASX once trading

commences. For more details about how to do this, visit www.asx.com.au.

If I sell my MyState Limited Shares using the Share Sale Facility, when will I receive the cash?

If you choose to sell all of your MyState Limited Shares using the Share Sale Facility, you will be paid the sale proceeds no later than 15 October 2009.

Instructions on how to use the Share Sale Facility are set out in Section 10 of this Information Booklet.

Can I buy more MyState Limited Shares?

Yes. You may apply to purchase more MyState Limited Shares on the ASX.

What do the MSF Directors recommend?

Your Directors unanimously recommend that you vote in favour of the resolutions required to approve the MSF Scheme and the Transaction in the absence of a Superior Proposal.

Each of your Directors who holds a Member Share will vote that Member Share in favour of the MSF Scheme and the Transaction, in the absence of a Superior Proposal.

What is an Independent Expert, and what do they say?

The MSF Directors appointed independent advisers to give an expert opinion on whether the MSF Scheme and the Transaction are in the best interests of Members. Your Directors appointed PKF Corporate Advisory (East Coast) Pty Limited (PKF) as the independent expert.

PKF has concluded that the MSF Scheme and the Transaction are in the best interests of Members. Their report is contained in Appendix 1 of this Information Booklet.

What will be the effect of the MSF Scheme?

If the MSF Scheme is approved and becomes Effective you and all other eligible Members of MSF will transfer your MSF Scheme Shares to MyState Limited so that MSF becomes a wholly owned subsidiary of MyState Limited. MSF will cease to be a mutual entity.

In exchange for the transfer of your MSF Scheme Shares to MyState Limited, you will be issued with approximately 380 MyState Limited Shares.

What happens if the MSF Scheme is not approved?

If the MSF Scheme is not approved:

you will not receive a MyState Share Parcel, that is, a •share allocation in MyState Limited;

For

per

sona

l use

onl

y



19

you will not be able to elect to receive cash from the •sale of your entitlement to MyState Limited Shares, under the Share Sale Facility;

MyState Limited will not become the holding •company of MSF and TPX;

TPX will continue to operate as a separately listed •entity;

MSF will remain a mutual;•

you will keep your Member Share;•

the expected advantages of the MSF Scheme and •the Transaction, as outlined in Section 3.2 of this Information Booklet, will not be realised. However, some of the possible disadvantages and risks of the MSF Scheme and the Transaction identified in Section 3.3 will not arise; and

MSF will have incurred substantial costs and •expended management time and resources in pursuing the MSF Scheme and the Transaction.

If I wish to support the MSF Scheme and the Transaction, what should I do?

If you are a Member, you should vote in favour of the resolutions to approve the MSF Scheme and the Transaction. You can vote in favour of the MSF Scheme and the Transaction by attending the General Meeting and the MSF Scheme Meeting to be held on Tuesday, 18 August 2009 and exercising your right to vote at the meetings.

Members who are unable or unwilling to attend the meetings may vote by proxy, attorney, or in the case of corporate Members or their proxies, a natural person representative.

See Section 2 of this Information Booklet for a summary on how to vote.

Who is entitled to vote on the MSF Scheme?

You will be entitled to vote at the General Meeting and the MSF Scheme Meeting if you are registered as a Member in the MSF Share Register at the Voting Entitlement Time (5.00pm on Thursday, 13 August 2009).

Details of the eligibility criteria regarding voting at the General Meeting and MSF Scheme Meeting are described further in Section 9.2 of this Information Booklet.

What meetings are being held? When and where are they being held?

There are two meetings to consider the MSF Scheme and the Transaction, the General Meeting and the MSF Scheme Meeting.

Each meeting will be held at Tattersall’s Park Function Centre, 6 Goodwood Road, Glenorchy, Tasmania on Tuesday, 18 August 2009, commencing with the General Meeting at 6.00pm, followed immediately by the MSF Scheme Meeting.

Why are there two meetings?

The General Meeting will be held first. It is a meeting of Members to vote on amendments to the MSF Constitution that will enable the merger with TPX to occur.

See Section 9.6 of this Information Booklet for further information on the purpose and effect of this resolution.

The MSF Scheme Meeting will be held after the General Meeting. The MSF Scheme Meeting is a meeting that has been ordered to be convened by the Court for the purposes of Members considering and voting on the MSF Scheme and the Transaction.

What Member approvals are required for the MSF Scheme and the Transaction to proceed?

There are two Member approvals required.

The Constitutional Amendment Resolution must 1. be approved as a special resolution, being at least 75% of the votes cast by Members that vote at the General Meeting, whether in person, by proxy, by attorney or, in the case of a corporate Member or proxy, by a representative. The MSF Scheme is conditional on this resolution being passed which means that unless this resolution is passed, the MSF Scheme and the Transaction will not be implemented.

The law requires that for the MSF Scheme to be 2. approved, at the MSF Scheme Meeting, votes in favour of the MSF Scheme must be received from:

a majority in number (more than 50%) of •Members that vote at the MSF Scheme Meeting (whether in person, by proxy, by attorney or, in the case of corporate Members, by corporate representative); and

Members who together hold at least 75% of the •total number of Member Shares voted at the MSF Scheme Meeting.

In general terms, all Members have an equal holding of MSF Member Shares. Accordingly, this means that the MSF Scheme must be approved by 75% of Members voting at the MSF Scheme Meeting.

Is voting compulsory at either meeting?

Voting is not compulsory. However, the MSF Board believes that the MSF Scheme and the Transaction are important to all Members and urges you to read this Information Booklet

For

per

sona

l use

onl

y


and exercise your right to vote. Your vote is important and is your opportunity to have your say on the success or failure of the MSF Scheme and the Transaction.

What if I cannot or do not wish to attend the meetings?

If you cannot or do not wish to attend the MSF Scheme Meeting or the General Meeting, you may appoint a proxy, attorney or representative to vote at the meetings on your behalf. Full details of how these appointments may be made are contained in Section 2.2 and in the notes to the notice convening the meetings enclosed with this Information Booklet. Proxy forms are also enclosed with this Information Booklet.

What happens if I vote against the MSF Scheme?

If you vote against the MSF Scheme but:

the Constitutional Amendment Resolution is •approved by the requisite majority at the General Meeting;

the MSF Scheme is approved by the requisite •majorities at the MSF Scheme Meeting; and

the MSF Scheme is approved by the Court,•

all MSF Scheme Participants will be bound by the Court approval, including anyone who voted against it (or those who did not vote at all). In these circumstances, if you are an eligible Member, your Member Share will be transferred to MyState Limited, and you will be issued a MyState Share Parcel. You will be eligible to participate in the Share Sale Facility even if you voted against the MSF Scheme and the Transaction.

Note that the Corporations Act and the Supreme Court (Corporations) Rules 2008 provide a procedure for Members, if they wish to do so, to oppose the Court approving the MSF Scheme. Please refer to Section 11.2 for further information.

When will the results of the voting be known?

The results of the votes to be cast at the General Meeting and at the MSF Scheme Meeting will be made public during or shortly after the conclusion of each meeting.

What are the tax implications of receiving MyState Limited Shares as a result of the MSF Scheme and the Transaction?

Eligible Members who participate in the MSF Scheme and the Transaction will make either a capital gain or capital loss in relation to the exchange of their Member Share for MyState Limited Shares.

Scrip for scrip roll-over relief should be available for Australian resident MSF Scheme Participants who make a capital gain in relation to the exchange of Member Shares for MyState Limited Shares under the MSF Scheme.

MSF Scheme Participants will need to elect for scrip for scrip roll-over to apply. See Section 8.2 for details about how to make this election.

For the purposes of calculating a capital gain, the cost base that MSF Scheme Participants would have in their existing Member Share would be the amount originally paid to acquire those shares plus any incidental costs.

A guide to the general taxation implications of the MSF Scheme and the Transaction are set out further in Section 8 of this Information Booklet.

If implemented, will the MSF Scheme and the Transaction impact my Centrelink or Veterans Affairs payments?

Centrelink and the Department of Veterans Affairs have been notified of the MSF Scheme and the Transaction. They have advised MSF that the one-off entitlement of a MyState Share Parcel you receive if the MSF Scheme and the Transaction are implemented will not be regarded as income when it is received. However, the continuing income and asset test treatment may apply and this will depend on how you make use of the MyState Share Parcel. See Section 3.6 of this Information Booklet for more information.

Are there any conditions that need to be satisfied?

In addition to the approval of Members and the Court, implementation of the MSF Scheme and the Transaction are subject to various conditions being satisfied or waived. These conditions are summarised in Section 1.4 and are discussed more fully in Section 9.8 of this Information Booklet. The conditions are set out in full in the Merger Implementation Agreement which is available on MSF’s website at mystate.com.au.

MSF will make a statement regarding the status of these conditions at the commencement of the General Meeting.

What are my options?

As a Member, your options in relation to the MSF Scheme and the Transaction are to:

vote in favour of the resolutions to approve the MSF •Scheme and the Transaction at the General Meeting and the MSF Scheme Meeting, to be held on Tuesday, 18 August 2009 (this being the course of action unanimously recommended by your Directors);

vote against the resolutions to approve the •MSF Scheme and the Transaction at the General

For

per

sona

l use

onl

y



21

Meeting and the MSF Scheme Meeting (despite the unanimous recommendation of your Directors); or

do nothing; i.e. neither vote in favour of or against •the MSF Scheme and the Transaction.

Further Information

The information in this Section 1.6 is a summary only. Full details of the MSF Scheme and the Transaction are set out in the remainder of this Information Booklet. Please read it carefully.

Your Directors recommend that you consult your legal, financial, taxation or other professional adviser concerning the impact your decision may have on your own circumstances.

Foreign Scheme Shareholders1.7 MSF Scheme Participants whose address in the MSF Share Register at the MSF Record Date is a place outside Australia or its external territories are Foreign Scheme Shareholders.

If you are a Foreign Scheme Shareholder the MyState Limited Shares that you would otherwise be entitled to receive will be sold by a Nominee, under the Share Sale Facility. See Section 10 for more information about the Share Sale Facility. This is due to the fact that the laws relating to the offering of securities in other jurisdictions are different from the laws in Australia.

For

per

sona

l use

onl

y


For

per

sona

l use

onl

y


Section 2 - How to vote on the MSF Scheme and the Transaction

23

How to vote on the MSF Scheme and the

Transaction

Section 2

For

per

sona

l use

onl

y


- How to vote on Section 2 the MSF Scheme and the Transaction

Two meetings2.1 There are two meetings, the General Meeting and the MSF Scheme Meeting. Each meeting will be held at Tattersall’s Park Function Centre, 6 Goodwood Road, Glenorchy, Tasmania on Tuesday, 18 August 2009, commencing with the General Meeting at 6.00pm. The MSF Scheme Meeting will commence at 7.00pm or as soon as reasonably practicable after the General Meeting concludes or is adjourned (whichever time is later).

General Meeting(a)

The General Meeting will consider and, if thought fit, pass the Constitutional Amendment Resolution. The passing of this resolution is necessary for the MSF Scheme and the Transaction to be implemented.

For the Constitutional Amendment Resolution to be passed:

the approval of at least 75% of the votes cast •by Members entitled to vote on the resolution (whether in person, by proxy or attorney or, in the case of a corporate Member by proxy or representative); and

at least 5% of qualifying members of MSF •consent in writing to the amendments of the MSF Constitution proposed to be made by the resolution. The consent may be given before or within 3 months after the resolution is passed.

The purpose and effect of the Constitutional Amendment Resolution, and details about the Members who are 'qualifying members' for the purposes of the consent requirement, are described further in Section 9.6 of this Information Booklet.

The Constitutional Amendment Resolution will only take effect if the MSF Scheme and the Transaction also take effect.

MSF Scheme Meeting(b)

For the MSF Scheme and the Transaction to proceed:

unless the Court otherwise orders, a majority in •number (more than 50%) of Members that vote (in person, by proxy, by corporate representative or by attorney) at the MSF Scheme Meeting must be in favour of the MSF Scheme (Headcount Test); and

Members whose MSF Member Shares in •aggregate account for at least 75% of the votes cast on the resolution must be in favour of the MSF Scheme.

In general terms, all Members have an equal holding of MSF Member Shares. Accordingly, this means that the MSF Scheme must be approved by 75% of Members that vote at the MSF Scheme Meeting.

The Court has the power to approve the MSF Scheme even if the Headcount Test has not been satisfied. The Court may do so if there is evidence that the result of the vote has been unfairly influenced by activities such as share splitting and other unforseen extraordinary circumstances. Given MSF’s share structure, this is highly unlikely to occur.

Summary of how to vote2.2 Voting entitlements(a)

You will be entitled to vote at the General Meeting and the MSF Scheme Meeting if you are registered as a Member in the MSF Share Register at the Voting Entitlement Time (5.00pm Thursday, 13 August 2009).

Details of the eligibility criteria regarding voting at the General Meeting and the MSF Scheme Meeting are described further in Section 9.2 of this Information Booklet.

Voting at the meetings will be conducted by poll.

Voting in person(b)

Members wishing to vote in person should attend the General Meeting and the MSF Scheme Meeting and bring a form of personal identification (such as their driver’s licence).

Please arrive at the venue an hour prior to the time designated for the commencement of the General Meeting (being 6.00pm), if possible, so that your Member Share holding may be checked against the MSF Share Register and attendance noted.

Attorneys (see paragraph (d) below) should bring with them the original or a certified copy of the power of attorney under which they have been authorised to attend and vote at the meetings.

Parents, guardians or trustees of Members aged less than 18 years at the date of the meetings (see paragraph (e) below) should bring with them the original or a certified copy of the authority to operate under which they are able to act on behalf of the minor to attend and vote at the meetings.

For

per

sona

l use

onl

y


Section 2 - How to vote on the MSF Scheme and the Transaction

25

Corporate representatives (see paragraph (f) below) should bring with them the original or a certified copy of the resolution or instrument under which they have been authorised to attend and vote at the meetings.

Voting by proxy(c)

Members wishing to vote by proxy at the General Meeting and MSF Scheme Meeting must complete and sign or validly authenticate the appropriate personalised proxy form or forms which are enclosed with this Information Booklet.

A person appointed as a proxy may be an individual or a body corporate.

Completed proxy forms must be delivered to MSF by 7.00pm on Sunday, 16 August 2009, in any of the following ways:

By internet to Computershare: Log on through www.investorvote.com.au using the control number noted on your proxy forms

By post in the enclosed reply paid envelope provided to Computershare at: The Registrar GPO Box 242 Melbourne, Victoria 3001

By fax to Computershare on: (if within Australia) 1800 783 447 (if outside Australia) +61 3 9473 2555

Voting by attorney(d)

If a Member executes or proposes to execute any document, or do any act, by or through an attorney which is relevant to their Member Share holding in MSF, that Member must deliver the instrument appointing the attorney to MSF for notation.

Members wishing to have their vote at the meetings exercised by an attorney must, if they have not already presented an appropriate power of attorney to MSF for notation in relation to these meetings, deliver to MSF (at the address or facsimile number specified in Section 2.2(c)) the original instrument appointing the attorney or a certified copy of it by 7.00pm on Sunday, 16 August 2009.

Voting by parent or guardian of a minor(e)

If a Member will be aged less than 18 years at the date of the meetings, they are classified as a ‘minor’ in relation to their Member Share holding in MSF. Minors wishing to vote may do so by appointing a parent, guardian or trustee to exercise the vote on their behalf.

The parent, guardian or trustee must hold an authority to operate in respect to the Member Share held by the minor, for use in relation to these meetings. The original or a certified copy of the authority to operate must be delivered to MSF (by post to the address or by sending a facsimile to the numbers specified in Section 2.2(c)) by 7.00pm on Sunday, 16 August 2009.

Voting by corporate representative(f)

A Member or proxy which is a body corporate may appoint an individual to act as its representative at the General Meeting and MSF Scheme Meeting.

To vote by corporate representative at the General Meeting and MSF Scheme Meeting, a corporate Member or proxy should provide MSF with a certified copy of the resolution appointing the representative or, if the representative is not appointed by a resolution of directors, a copy of the instrument appointing the representative. This should be done as soon as practicable after the appointment and, in any event, must be delivered to MSF (by post to the address or by sending a facsimile to the numbers specified in Section 2.2(c)) by 7.00pm on Sunday, 16 August 2009.

Further information (g)

Please refer to the Notice of General Meeting and Notice of MSF Scheme Meeting in Section 13 of this Information Booklet for further information on voting procedures and details of the resolutions to be voted on at the meetings.

What to do next2.3 Read the remainder of this Information (a) Booklet

You should read and consider the remainder of this Information Booklet in full before making any decision on the MSF Scheme and the Transaction.

Consider your options(b)

Members should refer to Sections 3 and 7 of this Information Booklet for further guidance on the expected advantages, possible disadvantages and risk factors of the MSF Scheme and the Transaction. However, this Information Booklet does not take into account the financial situation, investment objectives and particular needs of any Member.

For

per

sona

l use

onl

y


Vote at the General Meeting and MSF (c) Scheme Meeting

Your Directors urge all Members to vote on the resolutions to approve the MSF Scheme and the Transaction. The MSF Scheme and the Transaction affect your Member Share holding and your votes at the General Meeting and MSF Scheme Meeting are important in determining whether the MSF Scheme and the Transaction proceed.

External advice(d)

Your Directors recommend you consult your legal, financial, taxation or other professional adviser.

For

per

sona

l use

onl

y


Section 3 - Important considerations regarding the MSF Scheme and the Transaction

27

Important considerations regarding the MSF Scheme

and the Transaction

Section 3

For

per

sona

l use

onl

y


- Important Section 3 considerations regarding the MSF Scheme and the TransactionThe purpose of this Section 3 is to identify significant issues for Members to consider in relation to the MSF Scheme and the Transaction.

Before deciding how to vote at the General Meeting and MSF Scheme Meeting, Members should carefully consider the factors discussed below, as well as the other information contained in this Information Booklet.

If, after reading this Information Booklet, you have any questions in relation to the MSF Scheme or the Transaction, please call the Member Information Line on 1300 538 803 from within Australia or +61 3 9415 4660 from outside Australia.

MSF Directors’ recommendation 3.1 and intentions

Your Directors are Tony Reidy, Colin Hollingsworth, Peter Armstrong, Dianne Bowerman, Bob Gordon, Tim Gourlay and Graeme Little. Details about the interests of the MSF Directors in the MSF Scheme and the Transaction are disclosed in Section 12 of this Information Booklet.

Having regard to all of the considerations discussed in this Section 3, your Directors unanimously consider that the expected advantages of the MSF Scheme and the Transaction outweigh their potential disadvantages and risks.

This conclusion is supported by the MSF Independent Expert, PKF. The MSF Independent Expert has concluded that the MSF Scheme and the Transaction are in the best interest of Members.

Your Directors unanimously recommend that, in the absence of a Superior Proposal, Members vote in favour of the resolutions to approve the MSF Scheme and the Transaction and, in the absence of a Superior Proposal, your Directors unanimously intend to vote the Member Shares held by them or in which they otherwise have a relevant interest in favour of the MSF Scheme and the Transaction.

Key reasons for your Directors’ 3.2 unanimous recommendationThe merger will create a Tasmanian based (a) diversified financial services group

If the MSF Scheme and the Transaction are implemented, MSF and TPX will create a stronger

Tasmanian based diversified financial services group called the MyState Limited Group. MyState Limited will have additional strength and scale to compete in the financial services sector and continue to provide the standard of products and services Members have enjoyed.

MSF will continue to offer the same (b) products and services in the future

The MSF Scheme and the Transaction will not result in any adverse changes to the products and services that MSF currently offers. There will be no change to members' banking arrangements, and the branches and service centre will continue to provide the services Members have enjoyed to date.

10% shareholder cap for MyState Limited (c)

The Trustee Companies Act has been amended and will apply a 10% shareholder cap to MyState Limited if the MSF Scheme and the Transaction are implemented. This means that MyState Limited and (as a subsidiary) MSF will have a level of statutory protection from unreccomended takeover bids. Refer also to Section 5.16 for a discussion of the proposed new Federal legislation in relation to trustee companies.

Further, any substantial acquisition of shares in MyState Limited will be subject to a number of regulatory hurdles including the approval of APRA and the Federal Treasurer, as well as Ministerial (Tasmanian) approval under the Trustee Companies Act.

Potential for merger synergies to improve (d) MSF’s profitability and financial strength

If the MSF Scheme and the Transaction are implemented, your Directors estimate cost savings for the MyState Limited Group to be realised over a three year period will be in the range of $3.5 million to $4.5 million per annum (before tax) in the final year. In addition, distinct revenue synergies are expected to arise in the future from cross selling and referral activities, where both companies will leverage off the other's existing customer bases. These revenue synergies are expected but not guaranteed.

Independent Expert’s conclusions(e)

PKF has concluded the MSF Scheme and the Transaction is in the best interests of Members as it is fair and reasonable.

PKF has assessed the fair market value of MSF on a minority interest basis to be between $115.0 million

For

per

sona

l use

onl

y



29

and $119.6 million, with a mid-point of $117.3 million. By comparison, PKF has assessed the fair market value of the consideration to be received by Members collectively, namely 67.5 percent of the issued capital of MyState Limited, on a minority interest basis to be between $135.3 million and $143.0 million, with a mid-point of $139.2 million. Based on the above, the assessed range of values for the consideration exceeds the assessed range of values for MSF, which means that the Transaction is “fair”.

PKF has also considered the advantages and disadvantages of the Transaction, as set out in the MSF Independent Expert’s Report (enclosed as Appendix 1 to this Information Booklet). PKF has concluded that the Transaction is “reasonable”, having weighed the advantages versus the disadvantages.

Head office will be retained in Tasmania(f)

If the MSF Scheme and the Transaction are implemented, MSF will retain its head office in Hobart, Tasmania. This will ensure management decisions continue to be made in Tasmania.

The ‘MyState Financial’ brand will remain(g)

If the MSF Scheme and the Transaction are implemented, the 'MyState Financial' brand will remain. The TPX brand will also remain, so there will be no material rebranding costs as a result of the MSF Scheme and the Transaction.

Five MSF Board members on the MyState (h) Limited Board

The MyState Limited Board will initially have equal representation from TPX and MSF. Five current MSF Directors and five current TPX Directors along with a Managing Director (yet to be appointed), will form the MyState Limited Board.

The opportunity to receive shares in (i) MyState Limited or cash for those shares

If the MSF Scheme and the Transaction are implemented, each eligible Member will receive an allotment of shares in MyState Limited. Members can then choose to keep these shares, or sell them without brokerage costs, through the Share Sale Facility (see Section 10 of this Information Booklet for more details), or sell all or some of them at a later date on the ASX.

Opportunity to increase your MyState (j) Limited shareholding

If the MSF Scheme and the Transaction are implemented, each eligible Member will be able to acquire additional MyState Limited Shares on the ASX.

Opportunity to receive dividends for shares (k) held in MyState Limited

If the MSF Scheme and the Transaction are implemented and you remain a shareholder in MyState Limited, you have the opportunity to share in the distribution of MyState Limited's profits through future dividends. Subject to available profits and relevant circumstances at the time, MyState Limited intends to declare a dividend in October 2009.

Ownership of MyState Limited(l)

Immediately following the implementation of the MSF Scheme and the Transaction, MSF Scheme Participants will collectively own approximately 67.5% of the issued shares in MyState Limited (which in turn will own MSF and TPX). Your MSF Directors consider this is a fair and reasonable proportion, based on a number of factors, including the net assets and historical normalised earnings of both TPX and MSF.

A common history in Tasmania and a shared (m) commitment to Tasmania

TPX has been operating in Tasmania for more than 100 years. Just like MSF, TPX has a strong commitment to meeting the financial needs of Tasmanians.

Opportunity to access external capital for (n) growth

As a mutual, MSF has been reliant on retained profits to fund investment in technology and new products and services. Implementation of the MSF Scheme and the Transaction will allow MyState Limited to access equity from various sources. As a mutual, MSF has had to rely predominantly on profits to provide the capital that is needed to improve systems and technology, enhance services or expand to meet Members' growing financial needs. MyState Limited, as a listed company will have the ability to consider raising capital through other means in the future if it believes it is in the best interests of the MyState Limited Group. In the current credit-constrained environment, the ability to access equity capital for growth opportunities via MyState Limited's

For

per

sona

l use

onl

y


ASX listing is considered by your Directors to be a significant reason for your Directors' unanimous recommendation.

Opportunity to improve products and (o) services

The increased financial strength and the greater number of customers of the MyState Limited Group provides enhanced opportunities for other innovative products and services to be developed and offered to MSF and TPX customers.

Continued use of key service provider(p)

MSF will be able to continue to utilise the services of Cuscal Limited. Cuscal Limited is a prime service provider of transaction, ATM network access, and funding services to ADIs across Australia. This long standing relationship will remain unchanged.

No Superior Proposal has been received(q)

Since the announcement of the Transaction on 10 October 2008 and up to the date of this Information Booklet, the MSF Board is not aware of any other bona fide proposal from a third party to merge with or acquire control of MSF.

As at the date of this Information Booklet, the MSF Board has no basis for believing that a Superior Proposal will emerge.

You should also note that the Merger Implementation Agreement has the effect of placing limits on the possibility of a Superior Proposal emerging, as set out in Section 3.5(c) of this Information Booklet.

Possible disadvantages 3.3 There are factors which may lead you to vote against the MSF Scheme and the Transaction. Your Directors have identified and considered the following disadvantages of the MSF Scheme and the Transaction.

Your rights as a member will change to (a) those of a shareholder

If the MSF Scheme and the Transaction are implemented, you will no longer be a member of MSF, but you will be issued with shares in MyState Limited. You will no longer hold a Member Share with mutual rights. Instead, your rights as a shareholder of MyState Limited will be dependent on the number of MyState Limited shares you hold. See Section 9.6(b) for more details about how your rights will change if the MSF Scheme and the Transaction are implemented.

No direct continuing interest(b)

If the MSF Scheme and the Transaction are implemented, you will cease to hold a direct interest in MSF. However, you will hold MyState Limited Shares, which will give you an indirect interest in the business of MSF, as it will become a subsidiary of MyState Limited. You will also acquire an indirect interest in the business of TPX. The financial performance and results of MyState Limited and any dividends that you receive as a result of holding shares in MyState Limited will be affected by the performance of the businesses of both MSF and TPX.

The listing value of the MyState Limited (c) Shares that you will receive is still to be determined by the market

The value of the MyState Share Parcel that you will receive is dependent on the price at which MyState Limited Shares will trade on the ASX. No assurances can be given as to the price at which MyState Limited Shares will trade on the ASX as MyState Limited will be a newly listed company and, as such, its shares have not yet traded on the ASX.

Foreign Scheme Shareholders(d)

MSF Scheme Participants with their registered address overseas will have their MyState Limited Shares sold by a Nominee under the Share Sale Facility. Accordingly, while they will be paid a cash sum for the net proceeds, they will not receive the ongoing benefit of the rights that attach to MyState Limited Shares.

Taxation and government benefit (e) consequences

If the MSF Scheme and the Transaction are approved and implemented, it will potentially result in taxation consequences (potentially including capital gains tax) for Members, which may not have arisen or will arise earlier than may otherwise have been the case. It may also potentially affect your eligibility to receive certain Centrelink and Department of Veteran Affairs benefits.

Section 8 of this Information Booklet provides a general outline of the likely taxation consequences of the MSF Scheme and the Transaction for Members and Section 3.6 provides further information about social security implications of the MSF Scheme and the Transaction for Members.

For

per

sona

l use

onl

y



31

A Superior Proposal could potentially (f) emerge

It is possible that a more attractive proposal for MSF could materialise in the future. However, since the announcement of the proposed merger on 10 October 2008 and up to the date of this Information Booklet, the MSF Board is not aware of any other bona fide proposal from a third party to acquire control of MSF. Also, as at the date of this Information Booklet, the MSF Board has no basis for believing that a Superior Proposal will emerge.

You should also note that the Merger Implementation Agreement has the effect of placing limits on the possibility of a Superior Proposal emerging, as set out in Section 3.5(c) of this Information Booklet.

Your Directors will inform you of any material developments in relation to any Superior Proposal that may emerge.

Loss of customers(g)

The MSF Scheme and the Transaction are not expected to have any material negative impact on the respective businesses of MSF or TPX. However, the MSF Scheme and the Transaction could cause some MSF customers to leave because they prefer to bank with a credit union or other form of mutual entity.

Consequences of on-going statutory (h) ownership protection

While the regulatory requirements (including the Trustee Companies Act) referred to in Section 3.2(c) provide some protection against takeover bids, this also means that it is less likely the price of MyState Limited Shares on the ASX will, at any stage, include a ‘takeover premium’.

You may believe MSF should remain a (i) mutual credit union

You may believe that if the MSF Scheme and the Transaction are implemented and, as a result, MSF loses its mutual status, it will impact the quality of MSF’s services. You may also believe that MSF does not need to change because it is successful in its current form.

However, through the MSF Scheme and the Transaction, the ‘MyState Financial’ brand will remain and the head office will be retained in Tasmania. The MSF Board believes this will ensure MSF’s services are continued at the level they are currently delivered.

MSF will not be able to use the words “credit union” in its branding, however, it has never done so, nor had its predecessor credit unions for some time.

Access to CUFSS(j)

MSF currently has access to Credit Union Financial Support Scheme (CUFSS). This is a scheme funded by credit unions for credit unions, enabling them to access funds in an emergency liquidity situation. MSF and its predecessor credit unions have never utilised CUFSS, but it may no longer be available to MSF if the Transaction is implemented. As an APRA regulated entity, MSF is required to maintain liquidity levels in accordance with prudential standards, and will continue to do so.

You may believe MSF should have pursued (k) an alternative option

You may believe that MSF should have listed as an individual entity, or have merged with another credit union.

However, the MSF Board believes the MSF Scheme and the Transaction deliver a superior financial outcome to Members, compared with both of those alternate options. The Board also believes the MSF Scheme and the Transaction deliver other positive outcomes, including retaining the ‘MyState Financial’ brand and head office in Tasmania.

Risks associated with the MSF 3.4 Scheme and the Transaction

A detailed discussion of the risks associated with the MSF Scheme and the Transaction is set out in Section 7 of this MSF Information Booklet.

Other relevant considerations 3.5 The MSF Scheme is conditional(a)

The MSF Scheme and the Transaction are subject to various conditions. The conditions are summarised in Section 1.4 of this Information Booklet, with full details provided in Section 9.8. As at the date of this Information Booklet, the MSF Directors are not aware of any matter which would result in a breach, or lead to non-performance, of any of those conditions.

For the MSF Scheme and the Transaction to be implemented, it is also necessary that the Members pass the Constitutional Amendment Resolution. The conditions for passing the resolution are summarised in Section 2.1(a) of this Information Booklet, with full details provided in Section 9.6.

For

per

sona

l use

onl

y


All or nothing proposal (b)

If all of the conditions and approvals for the MSF Scheme and the Transaction are satisfied or waived (as applicable) (see Section 9.8 of this Information Booklet):

the MSF Scheme will bind all persons registered •as Members as at the MSF Record Date, including those who do not vote on the MSF Scheme and the Transaction and those who vote against the MSF Scheme and the Transaction; and

MSF will become wholly-owned and controlled •by MyState Limited.

Conversely, if any of the conditions and approvals for the MSF Scheme and the Transaction are not satisfied or waived (as applicable), Members will retain their Member Shares and MSF will remain a mutual (see further paragraph (d) below, for the implications if the MSF Scheme and the Transaction do not proceed).

Likelihood of a Superior Proposal(c)

The Merger Implementation Agreement prohibits MSF from taking any actions with a view to obtaining, or which may reasonably be expected to lead to the obtaining of, a Third Party Proposal or lead to the completion of a Third Party Proposal, whether such actions are solicited or encouraged by MSF or otherwise.

However, MSF may undertake any action with respect to a bona fide Third Party Proposal that would otherwise be prohibited provided that the MSF Board has determined, in good faith and acting reasonably, after having obtained written advice from its advisers, that:

the Third Party Proposal is, or would be if •proposed, a Superior Proposal to the MSF Scheme and the Transaction; and

failing to respond to the Third Party Proposal •would be likely to constitute a breach of the MSF Directors' fiduciary or statutory obligations.

Section 9 of this Information Booklet provides more details about these exclusivity arrangements, including the qualifications and exceptions. Both MSF and TPX have agreed to pay $1.0 million (exclusive of GST) to the other if certain events occur, including in some cases, where a majority of the MSF Directors or TPX Directors (as applicable) recommend a Third Party Proposal. This amount equated to approximately 1% of TPX's market value at the time of entry into the Merger Implementation Agreement and slightly less than 1% of MSF's net

assets as at 30 June 2008. This payment obligation may have the effect of reducing the capacity of MSF to attract a Superior Proposal to the MSF Scheme and the Transaction.

Section 9.12 of this Information Booklet provides more details about this payment obligation, including the qualifications and exceptions.

Implications of not pursuing the MSF (d) Scheme

If any of the conditions and approvals for the MSF Scheme and the Transaction are not satisfied or waived (as applicable) and if no Superior Proposal emerges:

Members will retain their Member Shares and •will not receive a MyState Share Parcel;

Members will continue to be exposed to the •benefits and risks associated with holding a Member Share. These risks include general risks associated with participation as a member of a mutual, together with specific risks associated with MSF's business;

MSF's growth options will be limited by the •inability to raise equity capital; and

MSF will have incurred substantial costs and •expended management time and resources in pursuing the MSF Scheme and the Transaction.

Transaction in the best interest of TPX (e) Shareholders

TPX appointed Deloitte Corporate Finance Pty Limited (Deloitte), as an independent expert, to assess the TPX Scheme and the Transaction. Deloitte has concluded that the TPX Scheme and the Transaction are in the best interest of TPX Shareholders.

Social security implications3.6 If you currently receive a social security or veterans’ payment from Centrelink or the Department of Veterans’ Affairs, you should consider whether these payments will be reduced or lost if you receive an entitlement to a MyState Share Parcel if the MSF Scheme and the Transaction are implemented.

Receiving a MyState Share Parcel may not affect your social security or veterans’ payments materially, depending on the value of the MyState Share Parcel and the level of your other income and assets. However, the Board recommends that you carefully consider your own personal circumstances.

For

per

sona

l use

onl

y



33

Both Centrelink and the Department of Veterans’ Affairs are aware of the proposed demutualisation and merger with TPX by way of the MSF Scheme and the Transaction. They have advised MSF that the one-off entitlement of a MyState Share Parcel you receive from this merger, if the MSF Scheme and the Transaction are implemented, will not be regarded as income when it is received.

However, the continuing income and asset test treatment may apply and this will depend on how you make use of the MyState Share Parcel.

Your MyState Share Parcel, or a cash payment from •the sale of the MyState Share Parcel which is used to buy another asset, will under the assets test be considered as an assessable asset from the date of the investment or purchase; and

Under the income test, any investment in MyState •Limited Shares will be included with your other financial investments and will be ‘deemed’ to earn income based on the current deeming rates, regardless of any actual income (e.g. dividends) you may receive.

Please remember that you should comply with your obligations to notify Centrelink or the Department of Veterans’ Affairs of the number of shares or the amount of cash you have received.

If you are considering gifting all or part of your MyState Share Parcel then you should consider consulting your financial planner, adviser or Centrelink’s free Financial Information Service (FIS) to determine what impact (if any) that action will have on your social security or veterans’ affairs payments.

Centrelink’s FIS may be able to help you if you have further queries. The FIS provides assistance by telephone, by personal interview and through seminars. For more information about this service, call 13 23 00. You can find out more about whether or not any Centrelink income support payments you receive might be affected by contacting Centrelink on 13 23 00 (for age pension or aged care) or 13 27 17 (for disability, illness or injury and carer entitlements) or 13 28 50 (for Newstart Allowance) or 13 24 90 (for Youth Allowance) or 13 61 50 (for child care benefits and family tax benefits).

If you receive a veterans’ payment, you can contact the Department of Veterans’ Affairs on 13 32 54.

If you are entitled to receive an overseas Government pension or allowance, the Board recommends that you contact the relevant overseas body to determine the impact of receiving a MyState Share Parcel or a one-off payment for the sale of those shares.

If you are a resident of an Aged Care facility, you should note that receipt of a MyState Share Parcel or a payment from the sale of those shares may affect the amount of your fees payable to your provider.

For

per

sona

l use

onl

y


Vote in favour of the MSF Scheme and the Transaction

Your Directors have unanimously recommended the Scheme and the Transaction, in the absence of a Superior Proposal.

The reasons for your Directors' unanimous recommendation are set out earlier in this Section 3.

To follow your Directors' unanimous recommendation, you should vote in favour of the resolutions to approve the MSF Scheme and the Transaction. For a summary of how to vote at the meetings, please refer to Section 2 of this Information Booklet.

Vote against the MSF Scheme and the Transaction

If, despite your Directors’ unanimous recommendation and the conclusion of the MSF Independent Expert, you do not support the MSF Scheme and the Transaction, you may vote against the MSF Scheme and the Transaction at the General Meeting and the MSF Scheme Meeting.

However, if all of the conditions and approvals for the MSF Scheme are satisfied or waived (as applicable), the MSF Scheme will bind all MSF Scheme Participants, including those who vote against the resolutions at the meetings or those who do not vote at all.

Do nothing; i.e. neither vote in favour of nor against the MSF Scheme and the Transaction

Members who do not elect to vote at the MSF Scheme Meeting or the General Meeting will:

if the MSF Scheme and the Transaction are implemented - have their •MSF Scheme Share compulsorily transferred to MyState Limited, by operation of the MSF Scheme and be issued approximately 380 MyState Limited Shares in exchange for their MSF Scheme Share; and

if the MSF Scheme and the Transaction are not implemented - retain •their Member Share.

What are your options and what 3.7 should you do?

The following options are available to you as a Member in relation to your Member Share. MSF encourages you to consider your personal risk profile, investment portfolio strategy, tax position, financial circumstances and seek professional advice before making any decision in relation to your Member Share.

For

per

sona

l use

onl

y


Section 4 - Profile of MSF

35

Profile of MSF

Section 4

For

per

sona

l use

onl

y


- Profile of MSF Section 4

Overview of MSF4.1 MSF is an authorised deposit taking institution (ADI) operating predominantly in Tasmania. MSF provides the following products and services to approximately 117,000 members:

lending including mortgage, personal, overdraft, line •of credit and commercial products;

transactional savings accounts and fixed term •deposits;

wealth management and financial planning services;•

insurance products (CGU General Insurance and •Swann Consumer Credit Insurance); and

referral Health Insurance sales through an agreement •with St. Lukes Health.

The MyState Financial Group also includes:

MyState Financial Foundation Limited, which •provides annual grants to charities to educate and nurture the young people of Tasmania;

The Gourmet Club Pty Ltd – Tasmania’s largest •loyalty card program, offering discounts to members at more than 150 establishments across the State; and

Connect Asset Management Pty Ltd, which manages •two securitisation programs under the name of ConQuest: ConQuest Mortgage Trust and ConQuest 2007-1 Trust. These securitisation programs form part of MSF’s funding strategy. See Section 4.4 for further details.

The MyState Limited Directors currently intend that the operations of MSF’s subsidiaries will continue as normal after the implementation of the MSF Scheme, the TPX Scheme and the Transaction, including the ConQuest securitisation program. As with all operations of the MyState Limited Group, the operations of the MSF subsidiaries will be subject to periodic ongoing review by MyState Limited management and the MyState Limited Directors. In addition, as with all operations of the MyState Limited Group, the operations of the MSF subsidiaries will be subject to review by the Management Integration Committee. See Section 6.4 for further details.

Current Operations(a)

MSF employs approximately 300 people, with 12 branches in locations across Tasmania and a head office in Hobart. It is the sixth largest credit union

in Australia by total assets and the largest mutual credit union in Tasmania.

MSF has branches in the north-west at Burnie and Devonport, in the north at Kings Meadows, and Launceston and in the south of the State in Claremont, Glenorchy, Hobart, Kingston, New Norfolk, New Town, Rosny and Sandy Bay.

MSF provides internet banking and telephone banking through its Hobart-based service centre, and telephone and online lending and insurance sales through a remote distribution team also based in Hobart.

MSF provides members with direct charge-free ATM access on the rediATM network. More than 60 ATMs are available in Tasmania and more than 1,400 across Australia.

MSF is regulated by the APRA as an ADI and by ASIC as a holder of an Australian Financial Services Licence (AFSL) No. 240896 issued by ASIC.

Divisions(b)

Retail Banking

Insurance sales, financial planning, retail branch network, broker loans, remote distribution, service centre (call centre)

Brand, People & Strategy

Remuneration, recruitment, industrial relations, people & organisation development, training and development, marketing, communications, strategy and planning

Finance

Financial reporting, treasury, financial compliance, financial control, property and facilities management, business information and analysis, financial risk, securitisation, product development and management

Business Systems

Technology strategy, business systems, system integration, infrastructure, management, projects, loans processing and credit management

Company Secretarial & Risk

Policy, risk management framework, compliance, fraud, membership and shareholder register.

History(c)

MSF has been operating as ‘MyState Financial’ since 1 July 2007, following the merger of Connect Credit Union of Tasmania Limited (connectfinancial) with Island State Credit Union Limited (islandstate). MSF is the culmination of 28 merged credit unions.

For

per

sona

l use

onl

y



37

islandstate was the result of the coming together of 22 credit unions from across Tasmania over more than 35 years. connectfinancial started with the formation of the Tasmanian Public Service Savings & Loans Co-operative Society in 1959.

Key Management Personnel(d)

John Gilbert BComm, FAICD, Chief Executive

Mr Gilbert was appointed Chief Executive of MSF in May 2009, having retired as Chief Executive Officer and director of Cuscal Limited in December 2008. Mr Gilbert has extensive experience as a Chief Executive and as a director of a range of major commercial and regulatory organisations including three years as a director, World Council of Credit Unions, Chief Executive Officer of Members Australia Credit Union, and Chief Executive and director of the Victorian Financial Institutions Commission. Mr Gilbert is currently a director of QBE Lenders Mortgage Insurance Limited and a director of Cuesuper Pty Ltd.

Nina Nelson BComm (Acc & Mgmt), CPA, Chief Financial Officer

Ms Nelson was appointed to the position of Chief Financial Officer of MyState Financial in July 2007, and concurrently holds the position of General Manager - Connect Asset Management Pty Ltd to which she was appointed in 2002. Ms Nelson joined the credit union in 1995 and has held the positions of Senior Finance Officer, Manager Treasury and Risk and Chief Risk Officer since that date. She has more than 13 years experience in financial institutions management in the areas of Treasury, Securitisation, Finance and Risk Management. Prior to joining MSF, Ms Nelson was involved in the administration and management of a number of small businesses in the United Kingdom and New Zealand. Ms Nelson was the Tasmanian Winner of the 2007 Telstra Business Women’s Awards in the Hudson Private and Corporate Sector.

Scott Lukianenko Grad Cert BA Adv Dip Bus Mgt MAICD, Company Secretary and General Manager Risk

Mr Lukianenko was appointed General Manager Risk and Company Secretary for the MyState Financial group of companies in July 2007. He joined islandstate in 1999 as Head of Internal Audit and later became General Manager Corporate Services and then General Manager Risk. Mr Lukianenko was appointed Company Secretary for the islandstate group of companies in 2000. Mr Lukianenko has more than 19 years experience in the financial

services industry including roles in sales, lending, policy development and operational and executive management.

Darren Turner Grad Dip Bus Admin, Dip Bus, General Manager Retail Banking

Mr Turner joined islandstate in 2004 and has held executive roles responsible for Member Services and Corporate Strategy and Development before his current role as General Manager Retail Banking. Prior to joining islandstate Mr Turner worked for ANZ Banking Group for 21 years, progressing through the company to hold Senior Management roles responsible for Mortgage Operations nationally, Strategy and National Franchising Manager. Mr Turner has 26 years experience in financial services including experience in sales, operational and strategic management.

Tim Rutherford BA (Hons), MA, General Manager Business Systems

Mr Rutherford was appointed General Manager of Business Systems in November 2007 and director of Credit Union Financial Services Tasmania in March 2008. Prior to joining MyState Financial Mr Rutherford was Principal Adviser with Rio Tinto, Corporate Affairs Manager – Operations with National Australia Bank and Managing Consultant with IBM Business Consulting Services strategy practice. Mr Rutherford has extensive international experience in Asia, Europe and North America working on large organisational transformation projects covering operational strategy, large scale systems implementations, process management and organisational restructuring.

Marsha Cadman BA, General Manager Brand, People & Strategy

Ms Cadman was appointed MSF’s General Manager Marketing and Communications in July 2007, having held the same role at islandstate since February 2006. Ms Cadman’s portfolio now also includes the People and Culture and Corporate Strategy and Development functions. Ms Cadman has worked in various industries in wide-ranging internal and external communication, government liaison, and change management roles and has extensive experience in marketing and brand management. Previous roles included state and local government, education and energy, as well as three years managing her own marketing communications consultancy business.

For

per

sona

l use

onl

y


MSF revenue4.2 MSF revenue has grown steadily over recent years, with the merger of islandstate and connectfinancial resulting in additional growth on the back of a strong property market in Tasmania. Against a combined revenue of $130.0 million in the financial year ended 30 June 2007 for islandstate and connectfinancial, revenue for MSF in the first year of combined operation increased 17% in the financial year ended 30 June 2008 to $152 million.

Following a sound performance in the first half of 2009, MSF Directors expect that revenues will slow through to the end of the financial year, constricted by the ongoing impact of the global financial crisis.

(1) Total revenue comprises interest income and non-interest income before expenses (including interest expense).

(2) The results for the financial years ended 30 June 2006 and 30 June 2007 have been prepared on a pro forma, unaudited basis as if connectfinancial and islandstate had been merged at those times. See also Section 4.6(a).

MSF lending portfolio4.3 More than 80% of MSF’s loan portfolio is residential mortgage lending, with an additional 10% in personal lending. The balance comprises revolving credit and commercial lending. The MSF Board believes the conservative lending policies throughout the history of the organisations which formed MSF have resulted in a low level of credit risk in the mortgage loan portfolio.

MSF funding base4.4 Historically, MSF has had a strong retail deposit portfolio which has supported its lending activities. With the introduction of the Federal Government Guarantee the retail deposit portfolio has grown strongly for the half year ended 31 December 2008. As at 31 December 2008, retail deposits represented 81% of MSF’s funding base, providing a solid platform for future growth. MSF has historically utilised funding from the wholesale and securitisation markets as required to supplement its funding base. ‘Borrowings’ for the group at 19% are predominantly asset backed commercial paper notes issued by the ConQuest Securitisation Trusts. These Trusts buy loans from MSF using investment funds from large Australian institutions including banks and investment companies. MSF continues to service the loans in the Trusts and MSF subsidiary entity, Connect Asset Management Pty Ltd is the Trust manager.

As outlined in Section 4.1, there are two ConQuest Securitisation Trusts: ConQuest Mortgage Trust and ConQuest 2007-1 Trust. ConQuest Mortgage Trust includes only loans originated from MSF. ConQuest 2007-1 Trust also includes loans originated from Queenslanders Credit Union (approximately 25% of the total loans in that Trust). The loans securitised by MSF through the Trusts are included in the consolidated financial statements of MSF and its subsidiaries. They will also be included in the consolidated accounts of the MyState Limited Group.

For

per

sona

l use

onl

y



39

MSF historical financial information4.5 Consolidated Income Statement(a)

ConsolidatedYears ended Half years ended

30-Jun-08 30-Jun-07* 31-Dec-08 31-Dec-07Note $ $ $ $

Interest income 132,036,858 109,806,557 72,333,037 62,518,290

Interest expense 76,771,968 58,568,246 45,032,298 35,341,386

Net interest margin 55,264,890 51,238,311 27,300,739 27,176,904

Other revenue 20,002,853 21,177,503 9,798,756 10,594,779

Other expenses 55,156,503 61,577,518 29,731,081 29,904,283

Profit before bad and doubtful debts and income tax 20,111,240 10,838,296 7,368,414 7,867,400

Less bad and doubtful debts 3,442,163 1,367,205 1,246,321 920,912

Income tax expense 4,518,423 2,726,475 1,839,954 2,073,849

Net profit as reported 12,150,654 6,744,616 4,282,139 4,872,639

Non-recurring items net of income tax 1 1,610,000 5,236,570 1,083,000 -

Net profit after adding back non-recurring items 13,760,654 11,981,186 5,365,139 4,872,639

* See explanatory note at Section 4.6(a)

Note

1. Non-recurring item classifications for the year ended 30 June 2008 and half year ended 31 December 2008 were not part of either the audit or the audit review respectively.

For

per

sona

l use

onl

y


Consolidated Balance Sheet(b)

Years ended Half years ended

30-Jun-08 30-Jun-07* 31-Dec-08 31-Dec-07

$ $ $ $ASSETS

Cash and liquid assets 8,485,146 14,770,687 9,685,340 7,607,015

Due from other financial institutions 184,323,964 144,992,123 237,415,817 159,331,926

Receivables 5,609,441 12,234,466 3,817,547 5,341,047

Loans 1,482,013,037 1,362,889,856 1,468,526,898 1,420,346,225

Other investments 3,378,961 3,481,958 4,130,224 3,481,957

Property, plant and equipment 12,200,741 9,658,753 14,379,428 13,473,258

Tax assets 4,080,754 3,913,745 7,656,494 3,491,099

Other assets 908,178 56,432 2,236,071 8,572,106

Intangible assets and goodwill 5,694,482 6,439,961 2,945,652 3,417,109

TOTAL ASSETS 1,706,694,704 1,558,437,981 1,750,793,471 1,625,061,742

LIABILITIES

Deposits 1,217,602,763 1,036,121,584 1,305,522,786 1,151,863,719

Interest bearing loans and provisions 323,445,023 393,760,648 296,564,226 330,626,505

Payables and other liabilities 41,306,332 18,313,494 22,667,746 25,994,561

Tax liabilities 1,314,730 (99,975) 371,056 459,102

Provisions 2,827,926 2,911,807 4,986,040 2,066,236

TOTAL LIABILITIES 1,586,496,774 1,451,007,558 1,630,111,854 1,511,010,123

NET ASSETS 120,197,930 107,430,423 120,681,617 114,051,619

EQUITY

Redeemable preference share capital 363,410 311,590 386,689 311,590

General reserve 116,693,669 104,622,450 120,952,529 111,243,646

Asset revaluation reserve 2,990,394 2,496,383 2,990,394 2,496,383

Hedging reserve 150,457 - (3,647,995) -

TOTAL EQUITY 120,197,930 107,430,423 120,681,617 114,051,619

* See explanatory note at Section 4.6(a)

Audit(c)

The historical financial information included in the above sections was audited for the financial years ended 30 June 2007 and 30 June 2008. The audit for year ended 30 June 2008 did not include classification of non-recurring items for that period. The half year financial reports for the periods ended 31 December 2007 and 31 December 2008 were subject to reviews by MSF’s auditor. These reviews were not audits, and also did not include the non-recurring item classification for the half year ended 31 December 2008.

For

per

sona

l use

onl

y



41

Management discussion of 4.6 historical financial information Full year ended 30 June 2008 compared to (a) full year ended 30 June 2007

The 30 June 2007 income statement and balance sheet figures included in Section 4.5 are the combined figures of connectfinancial and islandstate. These figures have not been prepared on a consolidated basis and have not been audited as the audited financial statements of only connectfinancial were used as the 2007 legal comparative for MSF’s 2008 financial statements. Therefore the 30 June 2007 figures should be used only as a very basic guide. They should not be relied upon as if they were audited accounts.

Certain items of a non-recurring nature arose in the year ended 30 June 2007 and 30 June 2008. These amounted to $7,351,824 before tax in the year ended 30 June 2007 and $2,300,000 before tax for the year ended 30 June 2008. These items related to merger and redundancy costs as a result of the merger between connectfinancial and islandstate on 1 July 2007.

In addition, the MSF Board believe that a comparison of the financial performance of MSF in the financial year ended 30 June 2008 with the financial year ended 30 June 2007 does not give an accurate reflection of MSF, given the business was only established by the merger of connectfinancial and islandstate on 1 July 2007. Considerable differences between MSF and the two smaller entities in terms of operations, scale and market penetration exist and therefore simply combining the results of the two prior organisations for 30 June 2007 may provide a misleading indication of business trends and performance.

Half year ended 31 December 2008 (b) compared to the half year ended 31 December 2007

Significant factors arising out of a comparison between the half year ended 31 December 2008 and 31 December 2007 include:

Net interest margin• for the half year ended 31 December 2008 was $27.3 million, an increase of less than $125,000 on the half year ended 31 December 2007. This result reflects the Reserve Bank of Australia’s significant reduction in interest rates between September 2008 and 31 December 2008 and the need to hold

higher levels of liquidity from 1 July 2008 to 31 December 2008.

Non interest income• reduced by $796,000 for the half year ended 31 December 2008 compared to the prior half year. This result was primarily due to a reduction in commission income on funds under advice as a result of negative market conditions. The MSF Board believes that this result is comparable with industry trends during the same period.

Expenses• for the half year ended 31 December 2008 were in line with the prior period although these would have been significantly lower except for the following non-recurring items (before tax):

Redundancy costs of $320,000; -

One-off strategic project costs of $297,000; -and

Current merger proposal costs of $930,000. -

As a result of these factors, net profit after tax •for the half year ended 31 December 2008 was $4.3 million, a decrease of $590,500 compared to the prior half year.

Total assets• for the half year ended 31 December 2008 were $1.75 billion, an increase on the result of $1.63 billion for the prior half year. This reflects careful management of the loan portfolio and total asset base.

Deposits• increased to $1.3 billion for the half year ended 31 December 2008, an increase of 13.3% compared to the prior half year. This result reflects the increased focus on retail deposits as a key factor in managing MSF’s liquidity.

Financial forecasts4.7 As outlined in Section 4.2, the MSF Directors expect that revenue growth will slow through to the end of the financial year ending on 30 June 2009, constricted by the ongoing impact of the global financial crisis.

The MSF Directors are of the view that the current economic environment creates significant uncertainty about MSF’s likely financial performance for the balance of the current financial year and the financial year ending on 30 June 2010. Given this, the MSF Board believes that any attempt to provide detailed forecast financial information would be unduly speculative and potentially misleading as it would not be sufficiently reliable or based on sufficiently reasonable grounds to be useful to Members in making their

For

per

sona

l use

onl

y


decision as to how to vote at the General Meeting and the MSF Scheme Meeting.

In addition:

MSF's performance in the current uncertain •economic environment will reflect a number of factors that cannot be predicted with a high degree of confidence and are outside its control; and

MSF's future performance is subject to the risk •factors set out in Section 7 of this Information Booklet.

MSF’s Board of Directors4.8

Tony Reidy FAICD FAMI MFIA JPChairman

Mr Reidy is Executive Director of the Royal Hobart Hospital Research Foundation, and has been a company director for more than 20 years. He was elected Chairman of connectfinancial and The Gourmet Club Pty Ltd in December 2006, and appointed Chairman of MSF on 1 July 2007. He is a Fellow of both the Australian Institute of Company Directors and the Australasian Mutuals’ Institute, and a Member of the Fundraising Institute of Australia, and holds qualifications in company direction and superannuation management.

Peter Armstrong BEc (Hons) Dip Ed Dip FP CPA FAICD FAMIMSF Director

Mr Armstrong is Workforce Sector Leader for Business and ICT in the Tasmanian Polytechnic. He is an experienced company director and former Chairman of Teachers Police and Nurses Credit Union and connectfinancial. He is Chairman of MSF’s Audit and Risk Committee and is a director of The Gourmet Club Pty Ltd. He is a Fellow of both the Australian Institute of Company Directors and the Australasian Mutuals’ Institute.

Bob Gordon BSc MIFA MAICD AFAMI CPM FAMIMSF Director

Mr Gordon is the Managing Director of Forestry Tasmania. He has been a credit union director for fourteen years, including six years as Chairman of connectfinancial. He is a director of The Gourmet Club Pty Ltd and is currently a member of MSF’s Governance Committee and serves as a director of the MyState Financial Foundation.

Tim Gourlay DipTeach TTC Grad Cert Mgmt MAICD Dip MAMIMSF Director

Mr Gourlay is a Capital Works and Planning Consultant with the Tasmanian Catholic Education Office. He has been a director of a financial institution since 1986 and is a director of other private companies. He is currently Chairman of the MyState Financial Foundation, a director of The Gourmet Club Pty Ltd and a member of MSF’s Governance Committee. Mr Gourlay is a member of both the Australian Institute of Company Directors and the Australasian Mutuals’ Institute.

Colin Hollingsworth CPA FAMI MAICDMSF Director

Mr Hollingsworth was previously the General Manager, Corporate Services, TAFE Tasmania from 1998 to April 2008. He is a member of the Australian Institute of Company Directors and a Fellow of the Australasian Mutuals’ Institute. He is an experienced company director and former director and Chairman of both CPS and islandstate credit unions. He is a director of The Gourmet Club Pty Ltd and is currently the Chairman of MyState Financial’s Executive Committee and a member of MSF’s Audit and Risk Committee.

Dianne BowermanGAICD MAMIMSF Director

Ms Bowerman was first elected to the MSF Board in 2002. She was formerly a senior manager with insurer AAMI for over 20 years and employed in a managerial position at islandstate for 11 years until retiring in 2000. Ms Bowerman was Vice Chair of islandstate and is currently Chair of the MSF Governance Committee, a director of The Gourmet Club Pty Ltd and a member of the Vic/Tas regional council of the Australasian Mutuals’ Institute.

Ms Bowerman intends to resign if the MSF Scheme and the Transaction are implemented.

Graeme Little BE GAICD MAMI FI BrewMSF Director

Mr Little was elected to the Board of islandstate in October 2002. He was previously a director on J. Boag and Son Ltd from 1997-2000, having spent 36 years in the brewing industry in Tasmania during which time he was Cascade brewery manager (1982-1986) and Manager of Boags Brewery (1988- 2000). Mr Little is a director of The Gourmet Club Pty Ltd and is currently a member of MSF’s Executive and Audit and Risk Committees.

Mr Little intends to resign if the MSF Scheme and the Transaction are implemented.

For

per

sona

l use

onl

y



43

MSF’s Company Secretary4.9

Scott LukianenkoGrad Cert BA Adv Dip Bus Mgt MAICDMr Lukianenko was appointed General Manager Risk and Company Secretary for the MyState Financial group of companies in July 2007. He joined islandstate in 1999 as Head of Internal Audit and later became General Manager Corporate Services and then General Manager Risk. Mr Lukianenko was appointed Company Secretary for the islandstate group of companies in 2000. Mr Lukianenko has more than 19 years experience in the financial services industry including roles in sales, lending, policy development and operational and executive management.

For

per

sona

l use

onl

y


For

per

sona

l use

onl

y


Section 5 - Profile of TPX

45

Profile of TPX

Section 5

For

per

sona

l use

onl

y


- Profile of TPX Section 5 The information in this Section 5 has been provided by TPX and TPX is responsible for its accuracy.

Overview of TPX 5.1 TPX is a major Tasmanian based provider of financial products and trustee services and was formed in December 2001 following the merger of Tasmanian Trustees Limited and Perpetual Trustees Tasmania Limited, both of which were established in 1887. TPX is publicly listed on the ASX and had a market capitalisation of $65.52 million as at 31 December 2008. TPX has a strong balance sheet position with a net asset position of over $33.07 million as at 31 December 2008.

TPX is a trustee company authorised under the Trustee Companies Act and is the only private trustee company currently authorised to operate in Tasmania. The Trustee Companies Act prohibits any individual shareholder from obtaining an interest of more than 10% of the shares in TPX. Refer also to Section 5.16 for a discussion of the proposed new Federal legislation in relation to trustee companies.

TPX also holds a public offer Registered Superannuation Entity (RSE) Licence No. L0002943 issued by APRA, as well as an Australian Financial Services Licence (AFSL) No. 234630 issued by ASIC.

TPX manages over $1 billion in funds under management on behalf of personal, business and wholesale investors. In addition, TPX also has over $400 million of assets under administration or advice, through the Company’s role as financial adviser, attorney or trustee on behalf of various trusts, estates and other clients and is executor trustee of estates at any one time valued at approximately $80 million.

TPX was established to be an impartial and professional executor and trustee for Tasmanians and this remains a core part of its service and reputation supported by a long tradition of estate planning and will and power of attorney preparation.

TPX’s clients are also able to benefit from a workforce that is highly experienced and able to source a wide range of financial expertise, including the services of qualified financial planners, trust administrators and experienced lending managers.

TPX is also the product issuer and responsible entity for 12 managed investment schemes and directly manages six cash and income funds and indirectly manages six investment growth funds through external managers. These products are distributed on a “no advice”, “over the counter” basis throughout the branch network; and on an “advice” basis through TPX employed financial planners, located

throughout the network. TPX managed funds have online access available to investors for deposits, transfers and withdrawals. The income (or mortgage) funds enable TPX to provide first mortgage finance for rural, commercial and business purposes.

In all, TPX currently services approximately 90,000 customer relationships, both personal and business, drawn from the following key business lines:

Wills and Powers of Attorney – approximately 63,000 •clients

Investments, Financial Planning and Portfolio •Management – approximately 20,000 clients

Lending – approximately 1,600 borrowers•

Estates and Estate Beneficiaries – approximately •2,000 relationships (at any one time)

Trusts and Trust Beneficiaries – approximately 2,000 •on-going relationships

Structure and staffing 5.2 TPX employs 92 full time equivalent staff located in ten branches or offices across Tasmania. These include Launceston, Kings Meadows, Hobart, Rosny, Glenorchy, Kingston, Burnie, Devonport and Ulverstone.

The organisation is structured around four functional areas, these being:

Distribution 1. This area operates the sales and service network and distributes estate planning, trustee services, managed investments and financial planning services.

Marketing 2. This area supports the Distribution Division and the company through brand management, market and customer research, marketing strategy, product development, pricing, channel marketing, branch collateral, brand and product campaigns, media and customer communications, sponsorship and events.

Asset Management 3. This area manages and monitors all assets and investments including mortgage assets loan origination and administration.

Corporate Services 4. This area provides support services such as compliance and legal, taxation and accounting, finance, human resources and information technology.

For

per

sona

l use

onl

y



47

Key management personnel 5.3 In addition to the position of Managing Director / Chief Executive Officer (see Section 5.13), the following constitute the key senior management of TPX who are responsible for the four functional areas and who report to the Managing Director.

Distribution 1. – David Benbow FPNA, Dip SM, Dip FP, GAICD – General Manager Distribution

Mr Benbow joined TPX in 1998 and held the role of General Manager - Asset Management until 2008 when he was appointed General Manager - Distribution. Previously, Mr Benbow was employed at AXA from 1986 to 1998 in Hobart and Melbourne in various accounting and superannuation management roles. His last role was as Business Development Manager – Adviser Services. Mr Benbow has over twenty years experience in the financial services industry including experience in superannuation, funds management and client management roles.

Marketing 2. – Colin Kent BA, Grad Dip Mgt., AMAMI – General Manager Marketing

Mr Kent was appointed General Manager Marketing in April 2003. Prior to joining TPX, Mr Kent was General Manager – Projects for the Telemedia Group based in Adelaide, Managing Director of TARP Australia in Melbourne 1994 to 1998, Deputy Australian Banking Industry Ombudsman 1991 to 1994, Special Adviser to the Chief General Manager Retail– Commonwealth Bank of Australia 1988 to 1991 and director of the Financial Counselling and Consumer Information Service – Geelong 1977 to 1988. He has had extensive financial services experience including four years as a part time member of the Victorian Credit Licensing Authority and is a Past Australian President of SOCAP (Society of Consumer Affairs Professional in Business). He is an author of several landmark publications and research studies in the fields of complaint handling and customer service.

Asset Management3. – General Manager - Asset Management - Position Vacant (this area is currently being managed by the Managing Director).

Corporate Services 4. – Paul Viney B Bus (Bus Admin & Acc), FCPA, FCIS, CFTP, MAICD – Chief Financial Officer and Company Secretary.

Mr Viney was appointed Company Secretary and Chief Financial Officer of the Company and Secretary of Tasmanian Banking Services Limited in July 2003. Prior to joining TPX, Mr Viney was General Manager Corporate, Chief Financial Officer and Company Secretary for Harris & Company Limited, a director

of The Examiner Newspaper Pty Ltd, Group Treasurer of the Australian Cement Group of Companies, Manager Corporate Banking for Tasmania Bank and Assistant Commissioner for Corporate Affairs in Tasmania. He has had extensive experience in finance, accounting and company secretarial roles.

Tasmanian Banking Services5.4 In November 2000, TPX and Bendigo and Adelaide Bank Limited (Bendigo) established Tasmanian Banking Services (TBS), a joint venture operated through a single purpose public company owned by TPX and Bendigo in equal proportions. Through TBS, Bendigo offers banking and financial services to retail customers at nine branch locations around Tasmania, six of these locations are co-located with TPX.

The commercial rationale for the formation of TBS was to allow TPX customers access to a wider range of products and services more conveniently.

MSF offers similar products to Bendigo such as personal and business lending as well as savings, transaction and investment products. As at the date of this Information Booklet, TPX is finalising negotiations with Bendigo in relation to its exit from the TBS joint venture. The TPX Directors anticipate that TPX will receive consideration in the range of $5 million to $7 million for its stake in the TBS joint venture. The form of the consideration may be in cash or in ordinary shares in Bendigo (Bendigo’s ordinary shares are listed on ASX). TPX Directors expect to be in a position to announce further information on the finalisation of the TBS joint venture prior to the date of the TPX Scheme Meeting.

Recent share price history5.5 The latest recorded price of TPX Shares on ASX on 9 October 2008 (being the last trading day before the proposed merger with MSF was announced) was $3.75.

The latest recorded share price of TPX Shares on ASX on 23 June 2009 was $2.70.

The highest and lowest recorded share prices of TPX Shares on ASX during the three months prior to 24 June 2009 were $3.00 on 22 May 2009 and $2.60 on 19 June 2009, respectively.

The three month volume weighted average price (VWAP) of TPX Shares (being the average price of TPX shares traded over a three month period calculated by taking into account the volume of shares traded at different prices) prior to 24 June 2009 was $2.83.

For

per

sona

l use

onl

y


TPX revenue5.6 TPX revenues have increased significantly in recent years to over $21 million in the financial year ended 30 June 2008. In the 2003 financial year management fees derived from TPX managed investment schemes accounted for 72.19% of total revenue, but by 2008 had fallen to 56.44% of revenue in line with TPX’s stated strategy to diversify sources of income.

In the current financial year TPX revenues are expected by the TPX Directors to come under pressure in line with the deteriorating global and domestic financial outlook and falls in asset values, however, income for the half year to 31 December 2008 held up well at $10.36 million.

TPX released profit guidance to the ASX on 9 April 2009 in respect of expectations for the year ending 30 June 2009. This disclosure announced that TPX Directors expect TPX profit after tax and before significant items to be in the range $5.2 million to $5.5 million for the full financial year ending 30 June 2009, highlighting the ongoing constraining impact of the global financial crisis on TPX revenues.

For

per

sona

l use

onl

y



49

TPX expenses 5.7 TPX operating expenses have fluctuated between 52% and 60% of income in the six financial years ended on 30 June 2008. After a period during which the synergies of the 2001 merger were extracted and the expense ratio declined, TPX has recently embarked upon a program of expansion and redevelopment which has resulted in the expense to income ratio rising to a level of 56% at the end of June 2008.

The major areas of expenditure for TPX are shown in the graph below.

TPX earnings per share and 5.8 dividends

Following the previous merger in 2001, TPX experienced a period of sustained growth as the merger synergies were extracted and the business expanded through new branding, marketing and distribution strategies. The June 2008 results reflect the start of changing market and economic conditions, planned expansions and new developments, as well as the impacts of a non-cash impairment write down in relation to the Company’s equity linked investments.

While the 2008 earnings per share of 32.28 cents was a decline on the 2007 result, the graph below provides a longer term view of the growth in earnings adjusted for a share split in 2004 and changes in accounting standards in 2005.

The December 2008 half year result of 12.95 cents per share shows further softening in earnings per share consistent with expectations due to the challenging financial and economic environment, the costs of development and expansion as well as the impact of a further non-cash impairment write-down.

As mentioned in Section 5.6, TPX released profit guidance to the ASX on 9 April 2009 in respect of expectations for the year ending 30 June 2009. This disclosure announced that TPX Directors expect TPX profit after tax and before significant items to be in the range $5.2 million to $5.5 million for the full financial year ending 30 June 2009. This translates into an earnings per share projection for the year ending 30 June 2009 of between 23.7 cents per share and 25.1 cents per share.

For

per

sona

l use

onl

y


TPX historical information 5.9

4.9 TPX historical information

Income Statements


30 Jun 08 $

30 Jun 07 $

30 Jun 06 $

31 Dec 08 $

31 Dec 07 $

Revenue

Management fees 11,942,358 12,411,652 12,576,532

Commissions 5,386,253 4,216,138 5,002,373

Other fees 2,807,594 2,144,749 1,751,760

Distributions from managed fund investments 802,694 1,039,183 943,447

Interest 64,473 80,979 61,475

Rent 154,650 131,505 76,755

21,158,022 20,024,206 20,412,342

Other Income - 281,544 -

Total revenue and other income 21,158,022 20,305,750 20,412,342 10,361,737 10,345,923

Expenses

Employee benefits 7,608,935 6,941,475 6,840,857

External professional service providers 1,172,490 877,899 1,271,775

Depreciation and amortisation 442,578 383,058 450,747

Property expenses 807,087 621,875 474,783

Directors fees and travel 476,757 435,676 405,408

Computer and communications 457,904 356,711 268,940

Motor vehicles 153,063 142,205 180,489

Loss on disposal of plant & equipment - 6,175 20,311

Impairment loss recognised on available for sale financial assets

607,262 - -

Other ordinary operating expenses 814,817 835,611 922,025

Total 12,540,893 10,600,685 10,835,335 6,956,568 5,835,408

Share of profit of Tasmanian Banking Services Ltd 1,009,239 898,069 748,511 450,215 424,049

Profit before income tax 9,626,368 10,603,134 10,325,518 3,855,384 4,934,564

Income tax expense 2,590,786 2,842,261 2,802,138 1,028,396 1,363,064

Profit after income tax 7,035,582 7,760,873 7,523,380 2,826,988 3,571,500

Earnings per share (cents per share) 32.28 35.67 34.69 12.95 16.39

Dividends per share (cents per share):

Interim 13.00 13.00 12.00

Final 17.00 19.00 18.00

Total 30.00 32.00 30.00

TPX Explanatory Booklet 28

For

per

sona

l use

onl

y



51

Balance Sheets


30 Jun 08 $

30 Jun 07 $

30 Jun 06 $

31 Dec 08 $

31 Dec 07 $

CURRENT ASSETS

Cash and cash equivalents 8,192,295 10,467,900 11,344,141 6,854,902 8,398,919

Trade and other receivables 4,051,769 2,839,926 2,543,129 4,863,714 3,136,364

Total Current Assets 12,244,064 13,307,826 13,887,270 11,718,616 11,535,283

NON-CURRENT ASSETS

Investment in equity accounted investee 2,311,668 2,200,429 1,938,360 1,752,646 1,726,478

Other financial assets 2,435,392 2,885,059 1,919,890 1,976,982 2,875,553

Deferred tax assets 717,893 604,673 687,206 877,504 509,402

Property, plant and equipment 3,465,154 3,557,421 3,383,812 3,590,388 3,548,169

Goodwill 15,695,705 14,147,261 14,147,261 15,695,705 15,647,590

Other intangible assets 486,856 179,543 - 613,374 374,456

Total Non-Current Assets 25,112,668 23,574,386 22,076,529 24,506,599 24,681,648

TOTAL ASSETS 37,356,732 36,882,212 35,963,799 36,225,215 36,216,931

CURRENT LIABILITIES

Trade and other payables 1,810,438 1,354,211 1,518,558 1,183,438 1,559,413

Current tax payable 261,329 758,732 809,256 371,190 512,136

Provisions 756,277 752,682 738,490 691,023 709,756

Total Current Liabilities 2,828,044 2,865,625 3,066,304 2,245,651 2,781,305

NON-CURRENT LIABILITIES

Deferred tax liabilities 324,486 145,625 140,034 489,885 157,596

Provisions 337,543 334,437 259,504 418,854 317,040

Total Non-Current Liabilities 662,029 480,062 399,538 908,739 474,636

TOTAL LIABILITIES 3,490,073 3,345,687 3,465,842 3,154,390 3,255,941

Net Assets 33,866,659 33,536,525 32,497,957 33,070,825 32,960,990

EQUITY

Equity attributable to equity holders of Tasmanian Perpetual Trustees Limited

Share Capital 23,270,315 23,059,610 22,822,712 23,459,337 23,270,315

Reserves 245,790 184,151 395,332 146,819 (30,525)

Retained earnings 10,350,554 10,292,764 9,279,913 9,464,669 9,721,200

TOTAL EQUITY 33,866,659 33,536,525 32,497,957 33,070,825 32,960,990

29

For

per

sona

l use

onl

y


Normalisation of historical 5.10 earnings

The TPX Independent Expert has concluded that a number of items are either considered non-recurring or are related to surplus assets and hence do not form part of the trading

operations of TPX. This is presented at Table 6 of the TPX Independent Expert’s Report. The TPX Directors agree that a number of items could be treated as non-recurring or surplus in nature and Table 6 has been reproduced below:

Table 6: Adjusted financial performance

Refer-ence

Actual 30 June

2006 consolidated

($’000)

Actual 30 June

2007 consolidated

($’000)

Actual 30 June

2008 ($’000)

Actual six months ended

31 December 2008

reviewed ($’000)

Reported EBITDA 9,966 10,007 8,995 n/a

Profit on disposal of managed fund investment

a - (282) - -

Adjusted EBITDA 9,966 9,725 8,995 n/a

Adjusted margin (%) 49.0% 48.1% 42.6% n/a

Depreciation and amortisation (451) (383) (443) n/a

Adjusted EBIT 9,515 9,342 8,552 3,405

Adjusted margin (%) 46.8% 46.2% 40.5% 32.9%

Interest income 61 81 64 n/a

Impairment loss on available for sale financial assets

b - - 607 471

Adjusted NPBT 9,576 9,423 9,224 3,876

Adjusted margin (%) 47.1% 46.6% 43.7% 37.4%

Income tax expense c (2,873) (2,827) (2,767) (1,163)

Change in accounting policy d - - (379) (391)

Adjusted NPAT 6,703 6,596 6,078 2,322

Adjusted margin (%) 32.9% 32.6% 28.8% 22.4%

Source: Tasmanian Perpetual Trustees 2006, 2007, 2008 annual reports and financial results for the six months ended 31 December 2008

Notes:

1. The above figures do not include Tasmanian Perpetual Trustees’ share of profits relating to its interest in TBS

2. Figures in the table above are subject to rounding

For

per

sona

l use

onl

y



53

The TPX Independent Expert describes each of the above adjustments below:

Profit on disposal of managed fund investment has (a) been removed because this is a non-recurring item and does not relate to the trading operations of TPX;

Impairment loss on available for sale financial assets (b) has been removed as this is a non-recurring item;

Provision for income tax has been adjusted based on (c) a corporate tax rate of 30% on adjusted net profit before tax; and

As at 30 June 2008, the Company revised the (d) method used to determine the value of corpus administration fees earned but not charged at the reporting date, on estates administered by TPX. The effect of this change increased net profit after tax by $379,000 for the year to 30 June 2008 and $391,000 for the six months to 31 December 2008. The effect of this change has been removed as this is a non-recurring item.

Management discussion of 5.11 historical financial information

Full year ended 30 June 2008 compared to the full year ended 30 June 2007

Significant factors arising out of a comparison between the financial years ended 30 June 2008 and 30 June 2007 include:

Net profit attributable to equity holders for the •full year ended 30 June 2008 was $7.035 million a decrease of 9.34% compared to the previous year.

Revenues increased by 5.67% to $21.15 million. •Expenses increased by 18.30% to $12.54 million driven by new branch investments and a non-cash impairment loss of $0.61 million recognised on an available for sale financial asset.

Funds under management declined by 6.70% which •the TPX Board believes compared favourably with the extent of reported reduction in retail managed funds in the broader market.

Half year ended 31 December 2008 compared to the half year ended 31 December 2007

Significant factors arising out of a comparison between the half year ended 31 December 2008 and 31 December 2007 include:

Net profit attributable to equity holders for the half •year ended 31 December 2008 was $2.83 million, a decrease of $0.74 million or 20.84% compared to the prior half year.

Revenues were constant at $10.36 million. •Expenses increased by 19.21% and included an impairment loss of $0.47 million. The result also reflects increased expenditure over the previous corresponding period as a direct result of recent business expansion and growth initiatives consistent with the implementation of TPX’s strategic plan and budget expectations.

Funds under management reduced by 15% to $1.03 •billion at 31 December 2008, primarily as a result of the introduction of the Federal Government Guarantee for ADIs, negative equity markets and changes in the competitive landscape. The TPX Board believes that this result compares favourably with industry trends and reflects the underlying strength of the company’s brand.

Financial forecasts5.12 As outlined in Section 5.6, the TPX revenues are expected by the TPX Directors to come under pressure in the current financial year, in line with the deteriorating global and domestic financial outlook and falls in asset values.

The TPX Directors are of the view that the current economic environment creates significant uncertainty about TPX’s likely financial performance. Given this, the TPX Board believes that any attempt to provide forecast financial information beyond 30 June 2009 would be unduly speculative and potentially misleading as it would not be sufficiently reliable or based on sufficiently reasonable grounds to be useful to Members in making their decision as to how to vote at the General Meeting and the MSF Scheme Meeting.

In addition TPX’s performance in the current uncertain economic environment will reflect a number of factors that cannot be predicted with a high degree of confidence and are outside its control.

TPX’s future performance is subject to the risk factors set out in Section 7 of this Information Booklet.

TPX Board of Directors 5.13

Michael J Vertigan AC, B Ec (Hons), PhD, Hon LLD, FAICD Chairman and independent non-executive TPX Director

Dr Vertigan is currently Chair of the Tasmanian Polytechnic, a director of Eraring Energy and a Board Member of the Higher Education Endowment Fund. He was formerly Secretary of the Department of Treasury and Finance in both Tasmania and Victoria. For the past decade, he has had extensive involvement in the finance, investment, energy and utilities sectors. TPX Director since July 2004. Chairman since October 2004.

For

per

sona

l use

onl

y


Mark E Scanlon MBA, B Bus, FCPA, FAICD Managing Director and non-independent Executive TPX Director

Mr Scanlon was appointed Chief Executive Officer in 2000 and Managing Director in March 2004. He is also Managing Director of Tasmanian Banking Services Limited, a joint venture with Bendigo and Adelaide Bank Limited. He is a director of the Motor Accidents Insurance Board and the Heart Foundation Tasmania. He has held a number of senior executive positions in the financial services industry in Tasmania and Victoria.

Damian J Bugg AM, LLB, QC Independent non-executive TPX Director

Mr Bugg was formerly a partner of Dobson Mitchell and Allport and was the first Director of Public Prosecutions for Tasmania from 1986 until 1999. He was appointed Commonwealth Director of Public Prosecutions in 1999 and retired from that position in 2007. He is past President of the Bar Association of Tasmania, past Chairman of the Southern Legal Assistance Scheme, a past member of the Council of the Law Society of Tasmania and a past member of the Council of the Australian Institute of Judicial Administration. He is a past President and now a Board Member of the International Society for the Reform of Criminal Law. Mr Bugg is a member of the Council of the University of Tasmania and was appointed Chancellor of the University of Tasmania in 2006. TPX Director since 1 February 2008.

Mr Bugg intends to resign if the TPX Scheme and the Transaction are implemented.

Nicholas L d’Antoine MAICD Independent non-executive TPX Director

Mr d’Antoine is a former grazier with extensive experience in agriculture. He is Chairman of Tasmanian Banking Services Limited and holds various private company directorships. TPX Director since 1983.

Clyde A Eastaugh LFAPI, IAMA, MAICD Independent non-executive TPX Director

Mr Eastaugh is a Town Planner and Certified Practicing Valuer. He is a past member of the Tasmanian Resource Management and Planning Appeals Tribunal, past Chairman of the Tasmanian Gaming Commission, past President of the Australian Property Institute and director of the Tasmanian Community Foundation and a director of other private companies. TPX Director since 2001.

Mr Eastaugh intends to resign if the TPX Scheme and the Transaction are implemented.

Miles L Hampton B Ec (Hons), FCIS, FCPA, FAICD Independent non-executive TPX Director

Mr Hampton was appointed a TPX Director on 27 July 2006. Mr Hampton was Managing Director of agribusiness and real estate listed public company, Roberts Limited from 1987 until 29 July 2006.

He was Chief Financial Officer and Company Secretary of Roberts Limited from 1982 until July 1987.

Mr Hampton is currently Chairman of the Hobart Regional Water Authority and a director of Forestry Tasmania, Australian Pharmaceutical Industries Ltd, Impact Fertilisers Pty Ltd, Tasman Farms Limited, The Van Diemen’s Land Company and the Tasmanian Water and Sewerage Corporations (Southern, Northern & Northwest).

Mr Hampton was previously a director of public companies HMA Ltd, Gibsons Ltd, Wentworth Holdings Ltd and Ruralco Holdings Ltd.

Ian G Mansbridge CPA, FCIS, FCIM Non-independent non-executive TPX Director

Mr Mansbridge was appointed a TPX Director in March 2004. He has a number of other directorships including Australian Friendly Society Limited, National Stock Exchange of Australia Ltd, BSX Limited, Water Exchange Limited and Sandhurst Trustees Ltd and has been National President of the Trustee Corporations Association of Australia. He was formerly a director of Tasmanian Banking Services Limited and Elders Rural Bank Limited.

Sarah Merridew B Ec, FCA, FAICD Independent non-executive TPX Director

Mrs Merridew is a Chartered Accountant and a director of the Tasmanian Water and Sewerage Corporation (Northern Region) Pty Limited, Tasmanian Banking Services Limited and is Honorary Treasurer of the Royal Flying Doctor Service (Tasmanian Section) Inc. and actively involved with other community organisations. She was formerly a director of Tasmanian Public Finance Corporation from 1995-2008 and a partner of Deloitte Touche Tohmatsu from 1993 to 2003, including a period as Managing Partner for Tasmania. She has extensive experience in providing audit, risk management and business advisory services to the public and private sectors. TPX Director since 2001.F

or p

erso

nal u

se o

nly



55

TPX’s issued securities 5.14 As at the date of this Information Booklet, TPX had on issue 21,905,902 TPX Shares. All TPX Shares are quoted on the ASX. At close of trading on 24 June 2009, the 20 largest TPX Shareholders held approximately 44.69% of TPX Shares.

Rank Name Units % of Units

1. TRUST COMPANY FIDUCIARY SERVICES LIMITED <PTC0020 A/C> 2,093,344 9.570

2. SELECT MANAGED FUNDS LTD 1,225,960 5.600

3. COGENT NOMINEES PTY LIMITED 910,888 4.160

4. BENDIGO BANK LIMITED 886,490 4.050

5. MR BRIAN DAVID FAULKNER 678,000 3.100

6. UBS WEALTH MANAGEMENT AUSTRALIA NOMINEES PTY LTD 560,620 2.560

7. MILTON CORPORATION LIMITED 444,992 2.030

8. MRS WENDY JEAN FAULKNER 405,000 1.850

9. ANZ NOMINEES LIMITED <CASH INCOME A/C> 348,487 1.590

10. MRS JOAN E EVERSHED 312,160 1.430

11. J P MORGAN NOMINEES AUSTRALIA LIMITED 243,953 1.110

12.MR ANTHONY KEITH SHADFORTH + MR JULIAN DIGBY ABEY + MR KENNETH MURDOCH DRAKE <EST T K SHADFORTH A/C>

240,000 1.100

13. SANDHURST TRUSTEES LTD <TAS PERP EXEC PLAN A/C> 211,855 0.970

14. PRESTIGE FURNITURE PTY LTD 207,000 0.950

15.MR DAVID JOHN VAUTIN + MRS JACOBA MARIA VAUTIN <D VAUTIN P/L SUPER FUND A/C>

199,400 0.910

16. CHARMOF NOMINEES PTY LTD 185,706 0.850

17. MRS LORIS JESSIE MAY CRISP 171,796 0.790

18. TASMANIAN PERPETUAL TRUSTEES LIMITED <RICHARD JOHN MCKENZIE A/C> 153,920 0.700

19. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 152,000 0.690

20. ID NOMS PTY LTD <ID FUND A/C> 149,153 0.680

Totals: Top 20 Holders of FULLY PAID ORDINARY SHARES (TOTAL) 9,780,724 44.693

For

per

sona

l use

onl

y


TPX – a disclosing entity 5.15 TPX as a listed company is subject to the reporting and disclosure obligations under the ASX Listing Rules and the Corporations Act. TPX has obligations to notify the ASX upon becoming aware of any information which a reasonable person would expect to have a material effect on the price or value of TPX shares.

Any announcements made by TPX to the ASX are available on the ASX web site www.asx.com.au under the code TPX. These documents are also available on the TPX website at tasmanianperpetual.com.au. The following announcements have been made since 10 October 2008 up to the date of this Information Booklet.

Announcement date Brief description

24/06/2009 Change of Director's Interest Notice

02/06/2009 Tasmanian Perpetual and MyState Financial merger progress

25/05/2009 Appointment of new MyState Financial CEO

07/05/2009 Change of Director`s Interest Notice

07/05/2009 Appendix 3B

30/04/2009 Change of Director`s Interest Notice

09/04/2009 Full Year Profit Guidance

17/03/2009 Broker presentation re proposed Merger

06/03/2009 SandP Announces March SP/ASX Index Rebalance

24/02/2009 Half Yearly Report and Accounts

21/01/2009 Tasmanian Perpetual and MyState agree to vary Merger terms



19/12/2008 Becoming a substantial holder

12/12/2008 Corporate Governance Award -third consecutive year




28/10/2008 Results of Meeting

28/10/2008 Managing Directors AGM presentation 28 October 2008

28/10/2008 Chairman's Address to Shareholders AGM 28 Oct 11.30 am

24/10/2008 Business as usual at Tasmanian Perpetual Trustees

10/10/2008 Merger Company profiles

10/10/2008 Key merger terms

10/10/2008 Chairmen's Address regarding merger

10/10/2008 TPX and MyState Financial agree to merge

For

per

sona

l use

onl

y



57

Proposed National Trustee 5.16 Legislation

On 7 May 2009, the Federal Government released an exposure draft of the Corporations Legislation Amendment (Financial Services Modernisation) Bill 2009. Amongst other things, the exposure draft aims to create a national regulation regime for trustee companies. If enacted, the new legislation will see the regulation of trustee companies pass from the States and Territories to the Commonwealth. There is a present intention for the States and Territories to co-operate with this process, which would mean parts of the Trustee Companies Act would no longer be applicable.

ASIC is proposed to become the national regulator of trustee companies with a view to reducing the regulatory burden on trustee companies operating in multiple States or Territories. If enacted, the draft legislation will have the effect of creating a national market for trustee services, which should deliver competition benefits to consumers. The draft legislation includes restrictions on the control of voting power in trustee companies which are intended to maintain a broad spread of ownership and minimise the possibility that a single shareholder could gain control.

Current ownership restrictions exist in various State and Territory legislation to differing degrees. The Trustee Companies Act in Tasmania currently restricts a person from having an interest (which includes holding, controlling or having a beneficial interest in shares) in more than 10 per cent of the shares in a trustee company or its holding company. The draft National legislation would replace this 10 per cent restriction with a 15 per cent limit on voting power. The new legislation is more in line with the Financial Sector (Shareholdings) Act 1998 (Cth) which prevents shareholders of “financial sector companies” from holding a stake (which includes the interests of certain related persons or related entities in holding or controlling the relevant shares) of more than 15 per cent without the approval of the Treasurer.

Under the proposed legislation, a person’s voting power would be calculated by reference to the voting power of that person and that person’s associates (as defined in the Corporations Act). The proposed legislation does not expressly state whether the restriction on voting power would apply to MyState Limited as well as TPX, however, draft regulations may clarify this issue. Subject to further clarification under draft regulations, due to the way in which the proposed legislation will interact with the current provisions of the Corporations Act, a shareholder of MyState Limited would require approval if its holding of (or ability to control) MyState Limited Shares reached 20 per cent.

The new regime aims to give the Commonwealth exclusive responsibility for ‘entity-level’ regulation of trustee companies’ traditional services such as estate management,

will and attorney preparation and probate services. Trustee companies will be authorised under the Corporations Act to perform these traditional functions, and such services will be deemed to be “financial services” requiring the company to hold an Australian Financial Services Licence (AFSL). Where trustee corporations provide services other than ‘traditional services’, such as acting as a superannuation trustee, acting as a responsible entity for managed funds, providing a custodial or depository service, or acting as a trustee for debenture holders, they must also comply with other relevant Commonwealth legislation, such as the Superannuation Industry (Supervision) Act 1993 (Cth), the Managed Investments Act 1998 (Cth) and the Corporations Act respectively.

As part of the proposed laws, trustee companies will also be subject to obligations covering financial product and fee disclosure, licensing, conduct and advice and will also be required to have in place internal and external dispute resolution mechanisms.

MSF Response

At the time of preparing this Information Booklet, the exposure draft of the Corporations Legislation Amendment (Financial Services Modernisation) Bill 2009 (Cth) is yet to be finalised and face the scrutiny of the parliamentary process. Consequently, specific provisions may yet be amended, and MSF considers that any detailed comment by it on the proposals would not be of assistance to MSF Scheme Participants.

Despite this, MSF and TPX have reviewed the current legislative proposals and, as a matter of principle, broadly support the general intent of the legislation. As MSF is regulated at a Federal level, MSF considers a potential transfer of aspects of TPX’s regulation from a State to a Federal level as being beneficial in the context of the Transaction.

MSF and TPX acknowledge that the creation of a national market for trustee services may open up the possibility of new entrants into the Tasmanian market, however, the draft legislation would also create an opportunity for TPX and if the MSF Scheme, the TPX Scheme and the Transaction are implemented, the MyState Limited Group, to enter more easily the mainland market. This is consistent with MSF’s and TPX’s stated strategic intentions.

The move from State regulation to Federal regulation is not perceived negatively by MSF. TPX currently offers funds management and financial planning services which are also regulated by ASIC and require TPX to hold an AFSL and maintain the related compliance programs.

For

per

sona

l use

onl

y


For

per

sona

l use

onl

y


Section 6 - Profile of the MyState Limited Group

59

Profile of the MyState Limited Group

Section 6

For

per

sona

l use

onl

y


- Profile of the Section 6 MyState Limited Group

Rationale: Stronger together 6.1 The merger of MSF, an authorised deposit-taking institution and TPX, a trustee and wealth management company, represents a strategy for the long term value creation for the MSF Scheme Participants and TPX Scheme Shareholders. The result of combining the operations of these two entities will be a diversified financial services company. MSF and TPX will become wholly-owned subsidiaries of MyState Limited, a newly incorporated non operating holding company.

APRA requires that the parent entity of an ADI must be an authorised non operating holding company. MyState Limited will be APRA regulated.

The MSF Board believes that the MyState Limited Group will create shareholder value through:

the ongoing development of the group by optimising •the performance and improving productivity of MSF and TPX;

the stronger funding and capital position that is •achieved with the greater scale of the combined businesses of MSF and TPX, which will support the growth strategies of the group;

maximising the financial strength and scale of the •two complementary businesses to improve the competitiveness of each company in their respective markets;

increasing the strong brand affinity of MyState •Financial and Tasmanian Perpetual Trustees through the improved ability to offer more products and services to their respective customers;

providing greater benefits for the existing customer •base of more than 200,000 customers through the combination of the distribution networks of MSF and TPX; and

improving the capacity for MSF and TPX to pursue •expansion in both existing and new market segments as well as new geographic markets to increase customer and product diversity.

Structure of the 6.2 MyState Limited Group

MSF and TPX will be wholly owned subsidiaries of MyState Limited, a non operating holding company.

Regulatory framework(a)

Both MyState Limited and MSF will be regulated by APRA and MyState Limited will be enabled under Tasmanian legislation to own an authorised trustee company, i.e. TPX. TPX will continue to be regulated by APRA as a Registered Superannuation Entity (RSE). Both MSF and TPX hold Australian Financial Services Licences issued by ASIC.

Subsidiary operations(b)

Key features of the operations of MSF and TPX are outlined below:

MSF: the authorised deposit-taking institution

MSF is an authorised deposit-taking institution (ADI) operating predominantly in Tasmania. MSF has approximately 117,000 members, branches in 12 locations and approximately 300 staff. Further information is contained in Section 4.

TPX: The trustee and wealth management company

TPX was established to be an impartial and professional executor and trustee for Tasmanians and this will remain a core part of the business if the MSF Scheme and the Transaction are implemented, supported by the existing estate planning, trustee and attorney services as well as a financial planning operation which provides financial advice and portfolio administration services. Further information about TPX is contained in Section 5.

MyState LimitedGroup Structure

100%owned

100%owned

For

per

sona

l use

onl

y



61

Intentions of MyState Limited6.3 If the MSF Scheme and the Transaction are implemented, the MyState Limited Board’s intention is to consolidate the merger, leverage the combined existing TPX and MSF customer base of more than 200,000 and secure growth opportunities both within and outside of Tasmania. This will include:

operating the businesses of TPX and MSF as separate •subsidiaries;

identifying and realising cost and revenue synergies •across the MyState Limited Group; and

initially continuing with the existing employment •arrangements in place for MSF and TPX respectively.

If the MSF Scheme is successful and the Transaction is implemented, it is the current intention of the MyState Limited Directors to continue the employment of MSF’s and TPX’s key employees and, more broadly, continue the employment of all other employees, subject to the need to eliminate duplication of roles and responsibilities. The review of duplicated roles will be conducted on a merit basis.

The MyState Limited Board (a)

Upon implementation of the Transaction, the Board of MyState Limited will initially comprise ten non-executive members and a Managing Director. At present MyState Limited has not appointed a Managing Director, although the Chief Executive of MSF and Managing Director of TPX remain in their respective roles. The MyState Limited Board intends to make a decision with respect to the appointment of a Managing Director for the MyState Limited Group after the General Meeting and MSF Scheme Meeting but prior to the Implementation Date. The appointee will need to meet appropriate standards for “fit and proper” under APRA’s Australian Prudential Standard 520. When appointed, the Managing Director’s role will include responsibility for the appointment of new senior executives.

MyState Limited Directors from TPX

Dr Michael J Vertigan AC, Chairman and •independent non-executive MyState Limited Director

Mr Nicholas L d’Antoine, independent non-•executive MyState Limited Director

Mr Miles L Hampton, independent non-executive •MyState Limited Director

Mr Ian G Mansbridge, non-independent non-•executive MyState Limited Director

Mrs Sarah Merridew, independent non-executive •MyState Limited Director

MyState Limited Directors from MSF

Mr Peter D Armstrong, independent non-•executive MyState Limited Director

Mr Bob L Gordon, independent non-executive •MyState Limited Director

Mr Tim M Gourlay, independent non-executive •MyState Limited Director

Mr Colin M Hollingsworth, independent non-•executive MyState Limited Director

Mr Tony B Reidy, independent non-executive •MyState Limited Director

Managing Director

To be appointed.•

Both John Gilbert and Mark Scanlon will remain •in their current roles until implementation of the MSF Scheme and the Transaction.

Company Secretary

Mr Paul K M Viney was appointed Company Secretary of MyState Limited on 8 October 2008.

Operational structure (b)

MSF and TPX will initially operate as separate subsidiaries utilising their existing management and organisational structures. It is intended that the Board of MyState Limited will appoint a Managing Director for MyState Limited after the General Meeting and MSF Scheme Meeting and the TPX Scheme Meeting, but prior to the Implementation Date. Duplication of corporate functions will be eliminated over time to ensure cost synergies are met, and the shared services model is achieved.

Within the first three years, it is envisaged that MyState Limited Group shared services will be incorporated into MyState Limited. This may include marketing, human resources, finance, information technology, strategy, company secretarial and risk services. MyState Limited will provide these services to MSF and TPX, as subsidiaries, on a cost recovery basis.

The MyState Limited Directors currently intend that the operations of all subsidiaries will continue as normal after the implementation of the MSF Scheme, the TPX Scheme and the Transaction. As with all operations of the MyState Limited Group, the operations of the subsidiaries will be subject to periodic ongoing review by MyState Limited management and the MyState Limited Directors.

For

per

sona

l use

onl

y


In addition, as with all operations of the MyState Limted Group, the operations of the subsidiaries will be subject to review by the Management Integration Committee. See Section 6.4 for further details. See also Section 5.4 in relation to TBS. This Information Booklet has been prepared on the basis that TPX will exit from TBS shortly after implementation of the MSF Scheme and the Transaction and that TBS will not form part of the operational structure of the MyState Limited Group.

Registered office(c)

The registered office for MyState Limited will be in Launceston, with the head office for TPX remaining in the same location in Launceston, and the head office for MSF remaining in Hobart.

Growth(d)

If the MSF Scheme and the Transaction are implemented, MyState Limited will seek to achieve growth within and outside Tasmania through a number of strategies, including by seeking to:

expand the service and product offering to the •existing customer bases of TPX and MSF;

acquire aligned financial services businesses •which are value-adding and enhance the client base of the companies including in other Australian States; and

expand the existing offerings to its customer •base through alliances with other financial services providers to provide a diverse range of financial services which will expand the MyState Limited Group into new geographic markets or market segments within Tasmania.

Integration strategy6.4 If the MSF Scheme and the Transaction are implemented, a management integration committee (Management Integration Committee) will be established to ensure a successful integration of the merger. The Management Integration Committee will report directly to the MyState Limited Board and will oversee the merger transition. The focus of the Management Integration Committee will be on integration of MSF and TPX, identifying and realising cost synergies, maximising revenue opportunities and managing the cultural integration of staff. Your MSF Directors believe that merger implementation and integration costs, whilst not insignificant, will not be material in comparison to the revenue and cost synergies outlined in Section 6.11. The Management Integration Committee will carefully consider the costs of pursuing any opportunities offered by the merger.

Having successfully merged connectfinancial and islandstate in 2007, MSF’s Directors and management team have extensive expertise and experience in merging businesses. Similarly, TPX is the product of a successful merger of two Tasmanian trustee companies in 2001. The Management Integration Committee will include both TPX and MSF employees.

As discussed further in Section 6.11, the MyState Limited Board is exploring opportunities for the realisation of certain synergies if the MSF Scheme and the Transaction are implemented. These synergies are likely to result, over time, in the elimination of a number of employment positions within the MyState Limited Group. The MyState Limited Board has indicated its intention to continue the operations and utilisation of the assets of both MSF and TPX while at the same time exploring opportunities offered by an expanded customer base. Additionally the MyState Limited Board believes that the MyState Limited Group will improve the capacity for MSF and TPX to pursue expansion in both existing and new market segments as well as new geographic markets and, accordingly, increase customer and product diversity.

Employee Share Plan6.5 The Employee Share Plan (ESP) has been established by the MyState Limited Board pursuant to powers provided in the MyState Limited Constitution. Subject to an offer being made by MyState Limited or its subsidiaries, eligible employees can acquire shares up to a prescribed amount in respect of each financial year. There is no additional cost to MyState Limited or its subsidiaries for these issues as eligible employees who elect to participate agree to salary sacrifice the equivalent value of the shares they receive. The shares will be issued subsequent to the end of the financial year.

Eligible employees are those who meet certain service criteria determined by the MyState Limited Board. The price of the shares issued under the ESP will be determined by the weighted average price of the trades in MyState Limited Shares on the ASX in the week preceding the issue date. The shares will carry full voting rights and entitlement to dividends. The shares may not be disposed of by the employee until the earlier of three years from the issue date, or cessation of their employment with MyState Limited or its subsidiaries.

There may be occasions when the MyState Limited Board will determine to issue shares to employees under the ESP without requiring a contribution from those employees.

To the extent that the ESP does not meet the requirements of the relevant ASIC class orders in relation to employee share schemes and ASIC does not provide relief from those requirements, a prospectus relating to the ESP will be required for the offer of any shares under the ESP. As

For

per

sona

l use

onl

y



63

a consequence of proposed changes to the taxation rules relating to employee share schemes announced in the 2009 Federal Budget and subsequently, MyState Limited may suspend the ESP or propose changes to take into account the changed rules.

Executive Long Term Incentive 6.6 Plan

The Executive Long Term Incentive Plan (ELTIP) has been established by the MyState Limited Board to encourage the executive management team to have a greater involvement in the achievement of the MyState Limited Group’s objectives. To achieve this aim, the ELTIP provides for the issue to the executive management team of MyState Limited and its subsidiaries fully paid ordinary shares in MyState Limited if performance criteria specified by the MyState Limited Board are satisfied in a set performance period.

Under the ELTIP an offer may be made to the eligible members of the executive management team every year as determined by the MyState Limited Board. The maximum value of the offer is determined as a percentage of the fixed annual remuneration of each member of the executive management team. The value of the offer will be converted into fully paid ordinary shares based upon the weighted average price of the MyState Limited’s shares over the twenty trading days prior to the offer date.

In order for the shares to vest in each eligible member of the executive management team certain performance criteria must be satisfied within a predetermined performance period. Both the performance criteria and the performance period will be set by the MyState Limited Board at its absolute discretion.

The ELTIP provides for an independent trustee to acquire and hold shares. The trustee will be funded by MyState Limited to acquire shares, as directed by the MyState Limited Board, either by way of purchase from other shareholders on market or issue by MyState Limited. At the completion of each performance period the trustee will allocate shares to each member of the executive management team in accordance with their entitlement under the ELTIP. The trustee will hold the shares which have been allocated on behalf of the executive team member. The executive team member cannot transfer or dispose of shares which have been allocated to them until the earlier of, the tenth anniversary of the original offer date of the grant, leaving the employment of the MyState Limited Group, the MyState Limited Board giving permission for a transfer or sale to occur, or a specified event occurring (such as a change in control of MyState Limited). All shares held by the trustee, whether allocated to an executive management team member or not, carry full entitlements to dividends

and voting rights. During the period that allocated shares are held by the trustee, the executive management team member is entitled to receive the income arising from dividend payments on those shares and to have the trustee exercise the voting rights on those shares in accordance with their instructions.

To the extent that the ELTIP does not meet the requirements of the relevant ASIC class orders in relation to employee share schemes and ASIC does not provide relief from those requirements, a prospectus relating to the ELTIP may be required for the offer of any shares under the ELTIP. As a consequence of proposed changes to the taxation rules relating to employee share schemes announced in the 2009 Federal Budget and subsequently, MyState Limited may suspend the ESP or propose changes to take into account the changed rules.

Capital structure 6.7 Shares on issue(a)

The issued capital of MyState Limited will be 67,402,775 fully paid ordinary shares, immediately following implementation of the MSF Scheme and the Transaction.

TPX Scheme Shareholders and MSF Scheme Participants will respectively be entitled to the following proportions of the issued capital:

MyState Limited

Number %MyState Limited Shares available for TPX Scheme Shareholders

21,905,902 32.5

MyState Limited Shares available for MSF Scheme Participants

45,496,873 67.5

Total Fully Paid Ordinary Shares

67,402,775 100

This table shows the capital structure immediately following implementation of the MSF Scheme and the Transaction. This is the position before any sales of MyState Limited Shares by MSF Scheme Participants under the Share Sale Facility.

The number of MyState Limited Shares available for MSF Scheme Participants includes approximately 500,000 shares to be vested in the trustee of the MSF Unverified Members Trust. The vested shares will be available for transfer to persons whose eligibility as an MSF Scheme Participant was not finalised at the MSF Record Date. Any person with disputed or

For

per

sona

l use

onl

y


unverified eligibility as a MSF Scheme Participant must lodge a claim by 30 April 2010 which will be determined by the MSF Board or its committee by 30 June 2010 on a ‘first come, first served’ basis. Should there remain vested shares still held in trust and not distributed by 30 June 2010, the remaining MyState Limited Shares will be sold by the trustee and the proceeds paid to the MyState Financial Foundation Limited, which provides annual grants to charities to educate and nurture the young people of Tasmania.

A person who receives an entitlement to MyState Limited Shares from the MSF Unverified Members Trust is not a MSF Scheme Participant. The MSF Directors believe that the number of MyState Limited Shares allocated to the MSF Unverified Members Trust will be adequate to meet all accepted eligibility claims. The MSF Directors believe that no more than 1,300 Members will be identified through this process. Refer to Section 9.4 for information about the MSF Unverified Members Trust.

Capital management(b)

MyState Limited, the intended holding company of MSF which is an ADI, will be required by APRA to ensure capital adequacy is maintained at both the MSF ADI subsidiary level (Level 1) and at the MyState Limited level (Level 2). Whilst the APRA minimum prudential capital ratio is 8%, all ADIs are required to have an Internal Capital Adequacy Assessment Process (ICAAP) to determine an appropriate capital adequacy ratio for the risks to which it is exposed. Currently, MSF’s ICAAP indicates that a minimum capital adequacy ratio of 12% is appropriate. MyState Limited anticipates that it will maintain this level of minimum capital adequacy.

In addition ADIs must also keep minimum levels of High Quality Liquid Assets (HQLA). The APRA minimum is 9% and MSF policy currently requires a margin above this to accommodate market volatility. The HQLA ratio is applicable only at the MSF subsidiary level, and will continue to be maintained at these levels to meet our prudential requirements.

Dividend policy6.8 The Board of MyState Limited has established a policy of generally paying ordinary dividends each year within the range of 70% to 90% of net profit after tax.

This policy has been developed having regard to:

the growth prospects for the MyState Limited (i) Group and the continuing expectation of shareholders for a solid profit and dividend performance;

the need to safeguard the shareholders longer-(ii) term interests by adopting prudential targets that support the growth objectives of the business; and

the desirability for some flexibility in the payout (iii) ratio to take account of variability in profit from one year to the next.

The level of dividend paid year to year will depend on available profits and the circumstances facing MyState Limited at the time.

Corporate Governance6.9 The MyState Limited Directors have adopted practices and procedures for the corporate governance of the MyState Limited Group. These establish the framework of how the MyState Limited Directors conduct the affairs of the MyState Limited Board on behalf of MyState Limited Shareholders.

The MyState Limited Board has established the following committees to assist it in carrying out its responsibilities and to consider certain issues and functions in detail:

Audit Committee•

Business Risk and Compliance Committee•

Corporate Governance and Nomination Committee•

Human Resources and Remuneration Committee•

Investment, Lending and Credit Committee•

Audit Committee

Membership of the Audit Committee will comprise a minimum of three non-executive MyState Limited Directors appointed by the MyState Limited Board. Membership will be reviewed annually by the MyState Limited Board.

The role of the Audit Committee is to assist the MyState Limited Board to fulfil its responsibility to the shareholders and investment community by ensuring that MyState Limited’s accounting and reporting practices provide information of appropriate quality and integrity.

In particular, the Audit Committee will report to the MyState Limited Board and provide advice and recommendations in order to facilitate decision-making by the MyState Limited Board, in relation to the following areas:

the quality and accuracy of published financial (a) reports so they present a true and fair view of MyState Limited’s financial position;

the quality and accuracy of published financial (b) reports so they present a true and fair view of the financial position of the MyState Limited Group’s

For

per

sona

l use

onl

y



65

managed investment schemes and superannuation fund;

adopting, maintaining and applying appropriate (c) accounting policies and procedures;

maintaining effective internal control and risk (d) management systems;

providing a formal forum for communication (e) between the MyState Limited Board and senior management regarding financial and audit related issues;

providing the external auditor with the opportunity to (f) raise matters directly with the MyState Limited Board;

assessing the external auditor’s independence by (g) considering the relationships and services provided by the external auditors and others that may lead to an actual or perceived lack of independence;

overseeing the external auditor rotation process; (h)

addressing issues arising from the external audit (i) process;

directing the internal audit function ensuring (j) maximum value to MyState Limited;

establishing and maintaining whistleblowing (k) policies and procedures that enable employees of APRA regulated institutions to confidentially submit information on accounting, internal control, compliance, audit and other matters about which the employee may have concerns; and

establishing processes for communicating these (l) whistleblowing policies and procedures to employees and dealing with matters raised by those employees.

Business Risk and Compliance Committee

Membership of the Business Risk and Compliance Committee will comprise a minimum of three MyState Limited Directors appointed by the MyState Limited Board.

The role of the Business Risk and Compliance Committee is to assist the MyState Limited Board in fulfilling its responsibilities in relation to:

ensuring that the key business and financial risks and (a) compliance requirements are identified both now and in the future; and

the appropriate controls to effectively manage those (b) risks and compliance requirements.

Corporate Governance and Nomination Committee

Membership of the Corporate Governance and Nomination Committee will comprise a minimum of three MyState Limited Directors appointed by the MyState Limited Board.

The role of the Corporate Governance and Nomination Committee is to strengthen the governance framework of the business through:

ensuring the company has appropriate corporate (a) governance policies and practices;

an ongoing assessment of the composition and (b) effectiveness of the Board as a whole;

the establishment of a formal process for the (c) selection and appointment of non-executive MyState Limited Directors; and

issuing an annual corporate governance statement.(d)

Human Resources and Remuneration Committee

Membership of the Human Resources and Remuneration Committee will comprise a minimum of three MyState Limited Directors appointed by the MyState Limited Board.

The role of the Human Resources and Remuneration Committee is to assist the MyState Limited Board in fulfilling its responsibilities in relation to Human Resource and Remuneration Policy. All such policy to satisfy legal and regulatory requirements to protect the Company from liability, improve organisational effectiveness and assist in the attainment of business goals.

Investment, Lending and Credit Committee

Membership of the Investment, Lending and Credit Committee will comprise a minimum of three MyState Limited Directors appointed by the MyState Limited Board.

The role of the Investment, Lending and Credit Committee is to provide policy and operational oversight of the MSF Asset and Liability Committee and the TPX Investment and Mortgage Lending Committee and thereby assist the MyState Limited Board to fulfil its responsibility to the MyState Limited Shareholders and investment community in seeking to maximise returns from its investment and lending activities within acceptable levels of risk.

APRA requirements

In addition to MyState Limited’s other corporate governance policies, APRA requires MyState Limited as the non operating holding company of MSF (as an ADI) to comply with the prudential obligations that apply directly to MSF. To this end, the MyState Limited Board has adopted a governance framework whereby the applicable Board policies of MSF apply to MyState Limited.

Other policies

The MyState Limited Directors have also established a strict delegation framework to regulate external communications and facilitate compliance with ASX Listing Rule disclosure

For

per

sona

l use

onl

y


requirements, as well as a securities trading policy regulating MyState Limited Directors and officers of MyState Limited dealing in MyState Limited Shares on the ASX.

ASX Corporate Governance Council

Under the Listing Rules, MyState Limited will be required to provide a statement in its annual report disclosing the extent to which it has followed in the relevant reporting period the Good Governance Principles and Recommendations published by the ASX Corporate Governance Council on 2 August 2007. The ASX Corporate Governance Council has recognised that the range in size and diversity of companies is significant and that it may not be commercially practicable for some companies to follow all of the recommendations. As at the date of this Information Booklet, MyState Limited complies with all of the recommendations.

MyState Limited Board 6.10 remuneration

The non-executive MyState Limited Directors on the MyState Limited Board will be subject to a total fee cap of $750,000 per annum, inclusive of statutory superannuation. This amount cannot be exceeded without the approval of the shareholders of MyState Limited. In addition, the following non-executive director remuneration caps (all inclusive of statutory superannuation) will apply:

MyState Limited Director $65,000 per annum

Board Chairman Premium $60,000 per annum

Committee Chairman Premium $5,000 per annum

MyState Limited Directors are also entitled to:

reasonable director information technology support; •and

a professional development allowance of $7,500 per •annum inclusive of GST, cumulative over the term of a MyState Limited Director’s appointment.

Prospects for the 6.11 MyState Limited Group

No financial forecasts

In line with the decisions taken by the MSF Board not to provide detailed forecast financial information in relation to MSF (see Section 4.7) and by the TPX Board not to provide detailed forecast financial information in relation to TPX (see Section 5.12), the MyState Limited Board is not providing forecast financial information with respect to the MyState Limited Group. This is because the MyState Limited Board

believes that it would be unduly speculative and not be sufficiently reliable to provide forecast financial information for the reasons outlined in Sections 4.7 and 5.12.

The future performance of the MyState Limited Group is subject to the risk factors set out in Section 7 of this Information Booklet.

Synergies

The Management Integration Committee will be responsible for realising certain synergies. The MyState Limited Board believes the following cost synergies could, on an annualised basis, result in potential pre-tax cost synergies of $3.5 to $4.5 million per annum within a three year timeframe. The MyState Limited Board believes that the majority of the cost savings will be realised towards the later part of this three year period.

Cost synergies(a)

Administration expenses: there will be •consolidation of duplicate internal management functions.

Corporate expenses: there will be a consolidation •of corporate costs through the implementation of the shared services model.

Branch rationalisations: branches will continue •to operate in all existing localities initially, with mergers over time where two or more outlets exist.

Staff and management overlap: rationalisation •of staff at executive and management levels will occur as quickly as possible, in order to develop and implement the shared services model.

Information technology integration: significant •information technology cost and functionality benefits should be possible from the rationalisation of information technology platforms.

Revenue synergies(b)

The MyState Limited Board believes that there is potential for revenue synergies in the following areas to be realised as a result of the implementation of the MSF Scheme, the TPX Scheme and the Transaction. However, these revenue synergies are expected but not guaranteed.

Cross-selling: the merger of MSF and TPX •should create numerous product cross-selling opportunities across TPX and MSF, allowing both companies to leverage off each other’s existing client base, without cannibalising existing service offerings.

Improved client services: existing product and •service delivery should be enhanced through

For

per

sona

l use

onl

y



67

the development of integrated customer focused technologies, which are intended to deliver a streamlined customer interface, better serviceability of clients and improved identification of opportunities or new lines of business.

Information technology integration: revenue •opportunities should develop through improved whole of customer understanding and segmentation capabilities.

Pro forma financial information6.12 This section contains pro forma financial information including the pro forma balance sheet for MyState Limited at 31 December 2008, assuming the MSF Scheme and the Transaction had been implemented at that date.

This should be read in conjunction with the risks described in Section 7 and other information contained within this Information Booklet. The information in this section is unaudited and has been presented in abbreviated form. It does not include all the disclosures usually provided in an annual report, prepared in accordance with the Corporations Act.

As such, the unaudited pro forma financial information in this section is for illustrative purposes only.

For

per

sona

l use

onl

y


Pro forma income statement(a)

Consolidated Dec 2008

Consolidated June 2008


INCOME

Total Interest Earned 72,333,037 132,036,858 62,518,290

Total Interest Expense 45,032,298 76,771,968 35,341,386

NET INTEREST MARGIN 27,300,739 55,264,890 27,176,904

Non Interest Income

Loan, Other and Management Fees 15,098,298 31,945,211 12,605,046

Commissions 3,349,141 5,386,253 6,202,890

Other Income 2,163,269 4,838,650 2,556,824

Total Non Interest Income 20,610,708 42,170,114 21,364,760

Non Interest Expenses

Marketing & Promotion 234,723 536,302 2,014,467

Salaries and corporate costs 34,811,025 63,536,791 26,395,333

Office Occupancy & Associated Costs 454,773 798,017 1,865,288

Bad Debts Written Off 1,246,321 - 551,694

Doubtful Debts - 3,442,163 369,218

Other Expenditure 1,187,128 2,826,286 5,464,619

Total Non Interest Expenses 37,933,970 71,139,559 36,660,619

OPERATING PROFIT BEFORE TAX 9,977,477 26,295,445 11,881,045

Income Tax Expense 2,868,350 7,109,209 3,436,913

OPERATING PROFIT AFTER TAX 7,109,127 19,186,236 8,444,132

Non-recurring Item Adjustments

OPERATING PROFIT AFTER TAX 7,109,127 19,186,236 8,444,132

TPX (1) 80,000 228,000 0

MSF (1) 1,083,000 1,610,000 0

NORMALISED OPERATING PROFIT AFTER TAX 8,272,127 21,024,236 8,444,132

1. Non-recurring items adjustments - refer to Sections 5.10 and 4.5.For

per

sona

l use

onl

y



69

Pro forma summary balance sheet(b)


Consolidated June 2008


Net Loans 1,468,526,898 1,482,013,037 1,420,346,225

Cash on Hand 16,540,242 16,677,441 16,005,934

Special Service Providers - Current a/c 1,752,646 2,311,668 18,173,866

Short Term Investments 237,415,817 184,323,964 142,884,538

Prepayments 2,412,361 1,167,606 1,236,124

Sundry Debtors 8,504,970 9,401,782 7,241,286

Shares and SDDs in SSPs 4,130,224 3,378,961 3,481,957

Goodwill & Intangibles 44,706,455 47,328,767 44,890,879

Other Financial Assets 1,976,982 2,435,392 11,447,659

Deferred Tax Asset 8,533,998 4,798,647 4,000,501

Land & Buildings, equipment and l/hold improvements

18,069,816 15,665,895 17,021,427

TOTAL ASSETS 1,812,470,409 1,769,503,160 1,686,730,396

LIABILITIES

Deposits

At Call and fixed term 1,305,522,786 1,217,602,763 1,151,863,718

ConQuest & RMBS Notes 296,564,226 323,445,023 330,626,506

Total Deposits 1,602,087,012 1,541,047,786 1,482,490,223

Creditors & Accruals and other liabilities 23,851,183 43,116,770 27,553,965

Provision for Staff Entitlements 6,095,917 3,921,746 3,918,893

Provision for Income tax 742,246 1,576,059 - 313,725

Provision for Deferrred Tax Liability 489,885 324,486 616,698

TOTAL LIABILITIES 1,633,266,243 1,589,986,847 1,514,266,063

NET ASSETS 179,204,166 179,516,313 172,464,333

SHAREHOLDERS‘ EQUITY

Share Capital 65,803,488 65,591,187 65,227,777

General & Capital Profits Reserves 120,226,840 119,865,403 108,933,548

Retained profits/(Accumulated losses) - 6,826,162 - 5,940,277 - 1,696,992

TOTAL EQUITY 179,204,166 179,516,313 172,464,333

For

per

sona

l use

onl

y


Adjustments to the pro forma summary (c) balance sheet

Under AASB 3 the value of the consideration for MyState Limited acquiring TPX and MSF is determined at the time the TPX and MSF Schemes and the Transaction becomes effective rather than at the date the terms of merger are agreed and announced to the market. Thus, the value of goodwill to be created from the merger reflects the market’s assessment of the value of the MyState Limited Group on the Implementation Date, rather than at the date the Merger Implementation Agreement was executed. The value of the MyState Limited Group, and thus the goodwill recognised under the accounting standard, at the time the TPX and MSF Schemes and the Transaction becomes effective may include, among other things:

share market investors' views on the value •of synergies available to the MyState Limited Group;

the impact of any company announcements post •the announcement of the merger;

the performance of TPX and MSF post the •announcement of the merger; and

general share market and economic conditions •post the announcement of the merger.

The MyState Limited consolidated pro forma balance sheet has been prepared as if the following transactions, which are to take place on the Implementation Date, had occurred on 31 December 2008:

implied consideration being the issue of •21,905,902 MyState Limited Shares using the VWAP over 90 trading days for TPX Shares to 23 June of $2.83, representing the deemed consideration for acquiring TPX. This equates to total consideration in the form of equity instruments of $61,993,703. The actual cost of the acquisition will be based on the TPX share price at the Implementation Date; and

acquisition of TPX by MyState Limited at fair •value resulting in goodwill and the capitalisation of merger costs as allowed under AASB 3 Business Combinations. The allocation of the acquisition cost of TPX has not been separated in the MyState Limited pro forma consolidated balance sheet between identifiable intangible assets and goodwill as a result of the reduction in goodwill and intangibles implied by the purchase consideration calculated above. This increase has been applied entirely to goodwill in the

MyState Limited consolidated pro forma balance sheet. If the merger occurs, MyState Limited will conduct an assessment of the fair value of TPX's net assets acquired at the Implementation Date. This assessment will separately determine the amounts of identifiable intangible assets and goodwill arising from the merger. The identifiable intangible assets will be classified as either finite life or indefinite life based on their nature. The identifiable intangible assets and goodwill allocation in MSF will remain unchanged as a result of the merger in accordance with AASB 3.

The treatment of the adjustments in the MyState Limited pro forma balance sheet as at 31 December 2008 are based on preliminary analysis of relevant matters, and as such, may change in the future as more detailed analysis is performed. In particular, any deferred tax liability that may arise on the ultimate value of intangible assets has not been identified.

Significant accounting policies (d)

Set out below is a selection of the significant accounting policies applied to the MyState Limited Group in respect of the pro-forma income statement and pro forma summary balance sheet (assuming the MSF Scheme and the Transaction had been Implemented on 31 December 2008).

The accounting policies applicable to the MyState Limited Group and its accounts in the future will be adopted by the MyState Limited Directors and reflect relevant regulatory requirements from time to time.

Basis of consolidation

The merged entity comprises the new holding company, MyState Limited, MSF and its subsidiaries and TPX (together MyState Limited Group).

The pro forma MyState Limited Group financial information set out at (a) and (b) above incorporates the assets and liabilities and financial results of all subsidiaries.

Subsidiaries included are all those entities (including special purpose entities) over which MyState Limited has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one-half of the voting rights.

Subsidiaries are fully consolidated from the date on which control is transferred to MyState Limited. They are de-consolidated from the date that control ceases.

For

per

sona

l use

onl

y



71

The purchase method of accounting was used to account for the acquisition of subsidiaries and businesses by MyState Limited in accordance with AASB 3 Business Combinations. In applying the purchase method it was determined that MSF, as the larger entity, be the deemed acquirer and as such, MSF is deemed to have acquired TPX. The cost of the acquisition is the fair value of the equity instruments issued to the former shareholders of TPX plus costs directly attributable to the acquisition.

All intercompany balances and transactions, including unrealised profits arising from intra MyState Limited Group transactions, have been eliminated in full. Unrealised losses are eliminated unless costs cannot be recovered.

Accounts receivable

Accounts receivable represent accrued revenue for services rendered in the reporting period which will be received in subsequent reporting periods. They are recorded at the nominal amount due.

An estimate of doubtful debts is made when the collection of the amount is no longer probable. Bad debts are written off when identified.

Cash and cash equivalents

Cash in the balance sheet comprises cash on hand, cash at bank and short-term deposits with an original maturity of three months or less. Cash at bank and deposits at call are stated at nominal value.

Derecognition of financial instruments

The derecognition of a financial instrument takes place when a member of the MyState Limited Group no longer controls the contractual rights that comprise the financial instrument, which is normally the case when the instrument is sold, or all of the cash-flows attributable to the instrument are passed through to an independent third party.

Derivative instruments and hedging

The MyState Limited Group is exposed to changes in interest rates. The only derivative instruments currently entered into are interest rate swaps which are used to mitigate the risks arising from the exposure to changes in interest rates. These derivative instruments are principally used for the risk management of existing financial liabilities.

All derivatives, including those used for balance sheet hedging purposes were recognised on the pro forma summary balance sheet and are disclosed as an asset where they have a positive fair value at the

reporting date or as a liability where the fair value at the reporting date is negative.

Derivatives are initially recognised at fair value on the date a derivative contract is entered into and subsequently remeasured to their fair value. Fair values are obtained from quoted market prices in active markets and valuation techniques where appropriate. Movements in the carrying amounts of derivatives were recognised in the pro forma income statement, unless the derivative met the requirements for cash-flow hedge accounting.

The relationship between the hedging instruments and hedged items are documented at the inception of the transaction, as well as the risk management and strategy for underlying various hedge transactions. Also documented is an assessment of whether the derivatives used in hedging transactions have been or will continue to be, highly effective in offsetting changes in the fair values or cash-flows of hedged items. This assessment is carried out both at inception and on a monthly basis.

Accounting for hedges

Cash-flow hedges

For a derivative or financial instrument designated as hedging a cash-flow exposure arising from a recognised asset or liability (or a highly probable forecast transaction), the gain or loss on the derivative or financial instrument associated with the effective portion of the hedge is initially recognised in equity in the cash-flow hedge reserve and subsequently released to the income statement when the hedged item affects the income statement. The gain or loss relating to the ineffective portion of the hedge is recognised immediately in the income statement.

Derivatives that do not qualify for hedge accounting

Changes in the fair value of any derivative financial instrument that does not qualify for hedge accounting are recognised in the income statement in the period in which they arise.

Employee benefits

Liabilities for salaries, wages and annual leave are recognised in respect of the employee’s service up to the reporting date. Where settlement is expected to occur within twelve months of the reporting date, the liabilities are measured at their nominal amounts based on the remuneration rates which are expected to be paid when the liability is settled. Where settlement is expected to occur later than

For

per

sona

l use

onl

y


twelve months from reporting date, the liabilities are measured at the present value of payments which are expected to be paid when the liability is settled.

A liability for long service leave is recognised and measured at the present value of expected future payments to be made in respect of services provided up to the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service.

Goods and Services Tax

Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount of GST incurred is not recoverable from the taxation authority. In these circumstances, the GST is recognised as part of the cost of acquisition of the asset, or as part of the expense.

Receivables and payables are stated with the amount of GST included. The net amount of GST payable to, or recoverable from, the taxation authority is included as a current liability or asset in the balance sheet.

Goodwill

Goodwill on acquisition is initially measured at cost, being the excess of the cost of the business combination over the acquirer’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is not amortised. Goodwill is reviewed for impairment annually, or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. At the acquisition date, any goodwill acquired is allocated to each of the cash-generating units expected to benefit from the combination’s synergies. Impairment is determined by assessing the recoverable amount of the cash-generating unit to which the goodwill relates. Where the recoverable amount of the cash-generating unit is less than the carrying amount an impairment loss is recognised.

Income Tax

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities based on the current period’s taxable income. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date.

Deferred income tax is provided on all temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred income tax liabilities are recognised for all taxable temporary differences:

except where the deferred income tax liability •arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

in respect of taxable temporary differences •associated with investments in subsidiaries and jointly controlled entities, except where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry-forward of unused tax assets and unused tax losses can be utilised:

except where the deferred income tax asset •relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and,

in respect of deductible temporary differences •associated with investments in subsidiaries and jointly controlled entities, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred income tax assets is reviewed at the reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that

For

per

sona

l use

onl

y



73

have been enacted or substantively enacted at the reporting date.

Where the amount that is deductible for income tax purposes in respect of share-based payments is or is expected to be different to the amount recognised as an expense, then the tax effected value of that difference is recognised directly in equity.

Investments

All investments are initially recognised at cost, being the fair value of the consideration given and including acquisition charges associated with the investment.

Non-derivative financial assets with fixed or determinable payments and fixed maturity are classified as held-to-maturity when the MyState Limited Group has the positive intention and ability to hold to maturity. Investments intended to be held for an undefined period are not included in this classification.

Other long-term investments that are intended to be held-to-maturity, such as bonds, are subsequently measured at amortised cost using the effective interest method.

Amortised cost is calculated by taking into account any discount or premium on acquisition, over the period to maturity.

For investments carried at amortised cost, gains and losses are recognised in income when the investment is derecognised or impaired, as well as through the amortisation process.

Available for sale investments are those non-derivative financial assets that are designated as available for sale or are not classified as any of the three preceding categories. After initial recognition available for sale securities are measured at fair value with gains or losses being recognised as a separate component of equity until the investment is derecognised or until the investment is determined to be impaired, at which time the cumulative gain or loss previously reported in equity is recognised in the Income Statement.

Investments in a jointly controlled entity are carried at the lower of the equity-accounted amount and recoverable amount.

Interest recognition

Interest on loans is calculated daily on the outstanding balance and charged monthly in arrears. Future interest on long-term loans is not accounted for in advance.

Interest expense on deposits is calculated on the daily balance.

All borrowings are measured at the principal amount. Interest is charged as an expense as it accrues.

Loans and advances

Loans and advances are recognised at recoverable amount, after assessing required provisions for impairment.

Impairment of a loan is recognised when there is reasonable doubt that not all the principal and interest can be collected in accordance with the terms of the loan agreement. Impairment is assessed by specific identification in relation to individual loans and by estimation of expected losses in relation to loan portfolios where specific identification is impracticable.

The loan interest is calculated on the daily balance and is charged in arrears to a borrower’s account on the last day of each month.

All housing loans are secured by registered mortgages. The remaining loans are assessed on an individual basis.

Bad debts are written off when identified. If a provision for impairment has previously been recognised in relation to a loan, write-offs for bad debts are made against the provision. If no provision for impairment has previously been recognised, write-offs for bad debts are recognised as expenses in the Income Statement.

All loans and advances are reviewed and graded according to the anticipated level of credit risk. The classification adopted is described below:

Non-accrual loans, being loans classified as •categories two, three and four under the APRA Prudential Standards APS 220 - Credit Quality, where statutory provisioning is required. Interest on these loans is not recognised as revenue. There is reasonable doubt about the ultimate collectability of principal and interest, and hence, provisions for impairment are recognised.

Restructured loans, consisting of all loans for •which the original contractual terms have been revised to provide for concessions of interest, principal or repayment. Loans with revised terms are included in non-accrual loans when impairment provisions are required.

Other real estate and assets owned are assets •acquired in full or partial settlement of loan or

For

per

sona

l use

onl

y


similar facility through enforcement of security arrangements.

Past due loans, consisting of loans classified as •category one under APS 220 where payments of principal or interest are at least 90 days in arrears but the loans are well secured.

Payables

Liabilities for trade creditors and other amounts are carried at cost, which is the fair value of the consideration to be paid in the future for goods and services received, whether or not billed to the MyState Limited Group.

Property, plant and equipment

Plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses.

Land and buildings are measured at fair value less accumulated depreciation.

Asset residual values, useful lives and amortisation methods are reviewed and adjusted if appropriate at each reporting date.

The carrying values of plant and equipment are reviewed for impairment at each reporting date, with recoverable amount being estimated when events or changes in circumstances indicate that the carrying value may be impaired.

The recoverable amount of plant and equipment is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash-flows are discounted to their present value using a pre-tax discount rate that reflects current market assessment of the time value of money and the risks specific to the asset.

For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

Impairment exists when the carrying value is in excess of the estimated recoverable amount.

Following initial recognition at cost, land and buildings are carried at revalued amount which is the fair value at the date of the revaluation less any subsequent accumulated depreciation on buildings and accumulated impairment losses.

Fair value is determined by reference to market-based evidence, which is the amount for which the assets could be exchanged between a knowledgeable

willing buyer and a knowledgeable willing seller in an arm’s length transaction as at valuation date.

Any revaluation surplus is credited to the asset revaluation reserve included in the equity section of the balance sheet unless it reverses a revaluation decrease of the same asset class previously recognised in the income statement.

Any revaluation deficit is recognised in the income statement unless it directly offsets a previous surplus of the same asset class in the asset revaluation reserve.

With the exception of freehold land, property, plant and equipment is depreciated over the expected useful life of each asset using the diminishing value or prime cost basis as considered appropriate.

The depreciation useful lives used for each class of depreciable assets are:

Buildings 40 years

Leasehold improvements

lease term

Plant and equipment between 2 and 20 years

Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the MyState Limited Group and the revenue can be reliably measured.

Corpus administration fees are included as revenue progressively as the work is performed during the administration of the estates.

Management fee revenue is recognised as it accrues and is calculated in accordance with the Trustee Companies Act and the relevant funds’ constitutions.

Income commission is recognised as revenue as it accrues.

Revenue for other services is recognised as it accrues.

Dividends are recognised as revenue when control of the right to receive the dividend payment is obtained.

Rent revenue is recognised as it accrues.

Distributions from managed fund investments are recognised as revenue when the right to receive the distribution is obtained.

For

per

sona

l use

onl

y


Section 7 - Risks

75

Risks

Section 7

For

per

sona

l use

onl

y


- RisksSection 7

Overview7.1 If the MSF Scheme and the Transaction are implemented, MSF will become a wholly owned subsidiary of MyState Limited and all MSF Scheme Participants will become MyState Limited Shareholders. This means that MSF Scheme Participants will continue to be exposed to the risks associated with having an interest in MSF’s business. If the MSF Scheme and the Transaction are implemented, there are also additional risks that MSF Scheme Participants will be exposed to as a result of holding MyState Limited Shares, transaction risks associated with the merger and general economic and investment risks.

The risks set out in this Section 7 should not be taken as exhaustive of the risks faced by the MyState Limited Group. Additional risks other than those specifically referred to may in the future materially adversely affect the business of the MyState Limited Group.

The MSF Board believe that the advantages of the MSF Scheme and the Transaction set out in Section 3.2 and elsewhere in this Information Booklet outweigh the potential risks associated with holding MyState Limited Shares.

Merger specific risks7.2 The information below sets out the risks that relate specifically to the MSF Scheme and the Transaction.

Court delays(a)

There is a risk that the Court may not approve the MSF Scheme and the Transaction. There is also a risk that some or all of the aspects of the approvals required for the MSF Scheme and the Transaction to be implemented may be delayed or may not be granted.

Listing of MyState Limited Shares(b)

Although it is a condition to the MSF Scheme and the Transaction that the new MyState Limited Shares be granted official quotation on the financial market conducted by the ASX, if that condition is waived, there is a possibility that quotation of new MyState Limited Shares could be delayed. This could, in turn, cause delays in MSF Scheme Participants being able to trade their new MyState Limited Shares on the ASX.

Issue of MyState Limited Shares(c)

At the time of listing on the ASX, MyState Limited will issue a significant number of shares as consideration to both TPX Scheme Shareholders and MSF Scheme Participants. A risk in issuing such a large number of MyState Limited Shares is that the market price of MyState Limited may be affected if a significant number of MyState Limited Shareholders seek to sell their shares at commencement of trading or thereafter. However, the Share Sale Facility is expected to assist in reducing this risk by allowing for a smooth and orderly sale process.

Price of MyState Limited Shares(d)

Once the MSF Scheme and the Transaction are implemented, the value of the MyState Limited Shares provided to MSF Scheme Participants will be affected by a number of factors which include the financial performance of MyState Limited once it commences trading. As MyState Limited is not currently listed on the ASX the price of these shares is yet to be determined by the market.

Share market risks(e)

The share price of TPX is not reflective of the value to Members should the MSF Scheme and the Transaction be implemented although prior to implementation of the Transaction it may be considered, by some market participants, as a proxy for the value of a MyState Limited Share. However this is no assurance of the price at which MyState Limited shares will trade at on the ASX following the implementation of the MSF Scheme and the Transaction. The price of TPX Shares in the period up to the implementation of the MSF Scheme and the Transaction (including after any successful Member vote but prior to the delisting of TPX) will be subject to fluctuations which may reflect factors specific to TPX, its industry sector, the economy and equities markets as a whole.

Products and services(f)

It is not anticipated that there will be any immediate effect on the range and quantity of products and services able to be offered to customers by MSF and TPX once MyState Limited is listed on the ASX. However, in the future the range of products and services may be altered.

Integration risks(g)

The Boards of both MSF and TPX expect that value can be added for Members and TPX Shareholders respectively, by the efficient and timely integration

For

per

sona

l use

onl

y


Section 7 - Risks

77

of the two companies. However, there are risks that any integration may take longer than expected or that efficiencies may be less than expected. These potential risks are outlined further in this section. While the Management Integration Committee will be specifically focused on monitoring and managing integration, and extensive planning has and will continue to be devoted to avoiding and mitigating these integration risks, they cannot entirely be eliminated.

Synergies (h)

While the synergies from the merger with TPX are expected to result in cost savings and revenue enhancement for the MyState Limited Group, the value and timing of these synergies is uncertain. Planning has commenced as to how the cost savings and revenue enhancements can be realised, however there is no guarantee that these measures will be successful.

Dependence on key personnel (i)

MyState Limited’s performance is dependent on the talents and efforts of key senior executives and managers. MyState Limited’s continued ability to compete effectively depends on the capacity for it to retain and motivate existing employees as well as attract new employees. The loss of key executives or managers could cause material disruption to the activities and operations of MSF and TPX in the short to medium term. While MSF and TPX have historically enjoyed low turnover amongst their executives and managers, this does not provide a guarantee of their continued employment with MyState Limited.

At present MyState Limited has not appointed a Managing Director, although the Chief Executive of MSF and Managing Director of TPX remain in their roles. The MyState Limited Board intends to make a decision with respect to the appointment of a Managing Director of MyState Limited after the General Meeting and MSF Scheme Meeting but prior to the Implementation Date. The appointee will need to meet appropriate standards for “fit and proper” under APRA’s Australian Prudential Standard 520. Any delay in appointing a Managing Director may have an adverse impact on MyState Limited.

Tasmanian Banking Services(j)

As outlined in Section 5.4, TPX is currently making arrangements to exit from the TBS joint venture. If TPX does not finally agree the terms of its exit, it may have a material adverse impact on MyState Limited in both financial and operational terms.

Effect of change in control on MSF (k) contractual provisions

Some of the commercial agreements to which MSF is a party contain change of control clauses, which may enable the relevant counterparties to terminate the agreements upon implementation of the MSF Scheme and the Transaction. If a counterparty does terminate an agreement, MSF could lose the benefit of the agreement and additionally may not be able to obtain similarly favourable terms upon entry into replacement agreements (if at all). The MSF Directors believe that MSF will be in a position to either obtain the consent of the counterparties to all contracts which might be material to MSF’s ongoing operations or replace those contracts should they be terminated upon implementation of the MSF Scheme and the Transaction.

Tax and stamp duty(l)

Tax rules or their interpretation in relation to equity investments may change following implementation of the MSF Scheme and the Transaction. In particular, both the level and basis of taxation may change. In addition, an investment in MyState Limited Shares involves tax considerations which may differ for each MSF Scheme Participant. Each MSF Scheme Participant is encouraged to seek professional tax advice in connection with any investment in MyState Limited Shares.

Capital needs of MSF(m)

MyState Limited will become the sole provider of ordinary share capital for MSF. MSF may raise other capital, in accordance with APRA prudential standards, either from MyState Limited or from parties outside the MyState Limited Group.

APRA prudential requirements (n)

MSF is already prudentially supervised by APRA, as an ADI under the Banking Act. This supervision includes capital adequacy requirements which, prior to the Transaction being implemented, apply to the whole of MSF and its related entities (except as otherwise permitted by APRA). These requirements do not apply to TPX. If the Transaction is implemented, MSF will remain a regulated ADI for APRA purposes and subject to these capital adequacy requirements. However, other group entities in the MyState Limited Group (including TPX) will be subject to different regulatory requirements to the regulation applicable to MSF as an ADI.

MyState Limited will be regulated as an authorised Non Operating Holding Company (NOHC). Financial

For

per

sona

l use

onl

y


arrangements between MyState Limited as a NOHC and other members of the MyState Limited Group will generally be subject to arm’s length requirements.

TPX will continue as a licensed registrable superannuation entity (RSE) and be regulated by APRA under the requirements for an RSE.

The prudential supervisory arrangements that will apply, if the Transaction is implemented, to MyState Limited (as a NOHC), TPX (as an RSE) and MSF (as an ADI) are subject to changes in legislation and requirements imposed by APRA as regulator from time to time.

General business risks7.3 The information below sets out general business risks, not specific to the MSF Scheme and the Transaction. They may affect the performance of the MyState Limited Group and the value of MyState Limited Shares. The factors raised below are not an exhaustive list, and there may be other matters which cannot now be foreseen that may, in the future, affect the performance of the MyState Limited Group and the value of the MyState Limited Shares.

General share investment(a)

There are various risks associated with investing in any form of business and with investing in listed entities generally. The value of MyState Limited Shares will depend upon general stock market and economic conditions as well as the specific performance of the MyState Limited Group. There is no guarantee of profitability, dividends, return of capital, or the price at which the MyState Limited Shares will trade on the ASX.

Impact of the global financial crisis(b)

There have been significant and far-reaching changes to the global economic climate over the past twelve to eighteen months. These conditions cannot be controlled and further movements in the economic climate, which cannot be ruled out, will likely affect the financial performance of the MyState Limited Group in ways that cannot be precisely determined. Although MSF and TPX both monitor and manage business risks, the overall economic conditions will effect both companies in differing ways:

the credit worthiness of borrowers and the (i) quality of loan portfolios, the level of investment and economic output will have an effect on the performance of MSF and TPX; and

the level of funds under management and (ii) funds under advice will have an effect on the performance of TPX.

MSF is eligible for the current Australian Government guarantee scheme for large deposits and wholesale funding (Guarantee Scheme). The Guarantee Scheme, which formally commenced on 28 November 2008, provides eligible ADIs with guarantees for deposit balances totaling up to and including $1 million per customer. Separate arrangements apply for deposit balances over $1 million per customer per ADI. As an ADI, MSF’s eligibility for the Guarantee Scheme will continue if the MSF Scheme and the Transaction are implemented.

The Guarantee Scheme has had a beneficial effect on ADIs, including MSF. Conversely, it has had an adverse effect to varying degrees on other financial institutions not covered by the guarantee, including TPX. If the Guarantee Scheme is materially changed or ended, this may have an adverse impact on MSF.

There are also specific factors which will affect particular areas of the financial performance of the MyState Limited Group. Examples are interest rate changes which will affect the net interest margin achieved by the banking operations of the MyState Limited Group. This cannot be controlled by MyState Limited.

Changes in investment markets (c)

Changes in domestic and/or global investment market conditions could lead to a decline in the level of investment and customer interest in the MyState Limited Group’s financial products and services, adversely impacting the amount it earns in fees, commissions and charges.

Regulatory changes(d)

The MyState Limited Group will be subject to substantial regulatory supervision under Federal and State laws.

APRA undertakes the prudential regulation of the banking operations of MSF. Other group entities in the MyState Limited Group will be subject to different regulatory requirements from MSF as an ADI. Following implementation of the MSF Scheme and the Transaction, within the MyState Limited Group, APRA will also undertake the prudential regulation of MyState Limited as an authorised Non Operating Holding Company (NOHC) and the regulation of TPX as a registrable superannuation entity (RSE).

For

per

sona

l use

onl

y


Section 7 - Risks

79

ASIC already undertakes the regulation of financial services which MSF and TPX respectively provide, as each is the holder of an Australian Financial Services Licence (AFSL). Following implementation of the MSF Scheme and the Transaction, that regulation of MSF and TPX will continue.

TPX is regulated under Tasmanian state law governing the registration and operations of trustee companies. Following implementation of the MSF Scheme and the Transaction, that regulation of TPX will continue. Additionally, there is a current proposal to create a national regulation regime for trustee companies (refer Section 5.16).

Changes in the regulatory regimes under which MyState Limited and group entities will operate may have a significant effect on the financial performance and capital requirements of the MyState Limited Group and hence the share price of MyState Limited.

Changes in technology(e)

The financial services industry is increasingly reliant upon technology in delivering financial services to customers in a cost-effective manner. MyState Limited’s ability to compete will depend on its ability to maintain an appropriate technology platform for the efficient delivery of its products and services.

Competition in the financial services (f) industry

The financial services sectors in which the MyState Limited Group will operate are highly competitive and subject to change. The MyState Limited Group will face significant competition from both traditional banks and non-bank financial institutions, who compete vigorously for customer investments and deposits, including the provision of lending and wealth management services.

Litigation (g)

Legal proceedings arise from time to time in the course of the business of MSF and TPX. Neither MSF, TPX nor MyState Limited are currently a party to any material litigation and are not aware of any facts or circumstances that may give rise to any material litigation.

However, given the scope of the MyState Limited Group’s activities and the wide range of parties it deals with, the MyState Limited Group may be exposed to potential litigation from among others, customers, regulators, employees and business associates. To the extent that these risks are not covered by the MyState Limited Group’s insurance

policies, litigation, and the costs of responding to the threats of legal action, could have a material adverse impact on the MyState Limited Group’s financial position, earnings and share price.

Insurance(h)

The MyState Limited Group will have insurance, including errors and omissions (professional indemnity) and directors’ and officers’ insurance, which it believes to be commensurate with industry standards, and adequate having regard to the business activities of the MyState Limited Group. However, there are risks that insurance coverage will be insufficient to meet a very large claim or a number of large claims, that the MyState Limited Group is unable to secure insurance to satisfactorily cover all anticipated risks, or that the cost of insurance will increase beyond anticipated levels.

Accordingly, the MyState Limited Group could be adversely impacted by increases in the cost of insurance premiums or an inability to access insurance coverage arising from circumstances that might or might not be related to the business of the MyState Limited Group.

Operational risks and control(i)

Operational risk relates to the risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events which impact on the MyState Limited Group’s operations. The MyState Limited Group will be exposed to operational risks present in TPX’s and MSF’s current businesses including risks arising from process error, fraud, system failure, failure of security and physical protection systems, and unit pricing errors. Operational risk has the potential to have a material adverse effect on the MyState Limited Group’s financial performance and position as well as reputation.

MyState Limited ownership(j)

The information in this Information Booklet assumes that, after the implementation of the MSF Scheme and the Transaction, MyState Limited will be the holding company of MSF and TPX, with MyState Limited Shares listed on the ASX. If the MSF Scheme and the Transaction are implemented, any substantial acquisition of shares in MyState Limited will be subject to a number of Federal and State approvals. In particular, the Trustee Companies Act has been amended and will apply a 10% shareholder cap to MyState Limited if the MSF Scheme and the Transaction are implemented (refer also to Section 5.16 for a discussion of the proposed new Federal

For

per

sona

l use

onl

y


legislation in relation to trustee companies). MyState Limited’s constitution also contains provisions which permit the MyState Limited Board to take action against shareholders and associated persons they believe to be in breach of the Trustee Companies Act. Notwithstanding these ownership protections, the Trustee Companies Act can be amended or replaced, should the Tasmanian Parliament choose to do so, which may allow a third party to acquire all, or a controlling interest in, the issued shares in MyState Limited. Alternatively, if a third party is a company in which no person has an interest of more than 10% then the relevant Minister can approve the acquisition of the MyState Limited Shares. If a third party was able to gain a controlling interest in MyState Limited, the conduct of the business of MyState Limited would then be determined by that third party. A shareholding cap may adversely effect the price at which MyState Limited Shares trade on the ASX.

For

per

sona

l use

onl

y


Section 8 - Taxation implications

81

Taxation implications

Section 8

For

per

sona

l use

onl

y


- Taxation Section 8 implications

Introduction8.1 The following summary is intended only as a general outline of the Australian tax consequences for Members who participate in the MSF Scheme and exchange their Member Share for shares in MyState Limited.

The summary is not intended to constitute advice and should not be relied upon as such. All Members who participate in the MSF Scheme should seek their own independent legal and taxation advice based upon their specific circumstances.

This summary is relevant for persons or entities who hold their Member Share on capital account. The income tax consequences may differ where the Member Shares are held on revenue account, as trading stock or as part of a profit-making undertaking or scheme, or where Members are insurance companies, financial institutions, tax-exempt organisations, foreign residents or temporary residents.

This summary is based upon Australian tax law in force at the date of this Information Booklet. Should there be any amendment to the tax law between the date of the Information Booklet and the date of the MSF Scheme, the implications outlined below may be subject to change.

Disposal of the Member Shares 8.2 under the MSF Scheme

Under the MSF Scheme, Members will dispose of their Member Share to MyState Limited in exchange for MyState Limited Shares.

The disposal by Members of their Member Shares will constitute a capital gains tax (CGT) event. A capital gain or capital loss will arise to Members as a result of the disposal of their Member Shares.

A capital gain would arise to Members to the extent that the capital proceeds received by the Members exceed their cost base in their Member Share. A capital loss would arise where the capital proceeds received by the Members is less than their reduced cost base in the Member Share.

The capital proceeds received by Members under the MSF Scheme would be the market value of the new MyState Limited Shares issued to Members on the Implementation Date. The cost base that Members would have in their Member Share in MSF would be broadly based on the amount they paid to acquire their Member Share and any incidental costs.

The CGT implications for Members will depend on when Members acquired their Member Share and whether a

capital gain or loss will arise from the disposal of the Member Share under the MSF Scheme.

Members who acquired their Member Share 1. before 20 September 1985

This section applies to Members who:

acquired their share in MSF before 20 September •1985; or

acquired their share in another credit union •before 20 September 1985 which subsequently merged into MSF and are treated under tax law as having acquired their share in MSF before 20 September 1985.

Members should review their records or consult their financial adviser to determine if their Member Share will be treated as having been acquired before 20 September 1985.

Members who make a capital gain on (i) disposal of Member Shares

Disregard any capital gain

Members who acquired their Member Share before 20 September 1985, or are treated as having acquired their Member Share before 20 September 1985, should be able to disregard any capital gain they make on the disposal of that share to MyState Limited.

Normally, gains on shares acquired before 20 September 1985 are disregarded. However, because just before the MSF Scheme:

the market value of property held by MSF •acquired on or after 20 September 1985; or

the market value of interests MSF owns through •interposed companies or trusts in property acquired on or after 20 September 1985,

will be at least 75% of the net value of MSF, a capital gain may arise for Members on the disposal of a Member Share acquired before 20 September 1985. Nonetheless, these Members should be able to disregard their capital gain on the basis that they could have chosen scrip for scrip roll-over relief had they acquired the shares on or after 20 September 1985. We outline at section 2(i) below that the conditions for scrip for scrip roll-over relief should be satisfied.

Cost base of new MyState Limited Shares

The cost base of the new MyState Limited Shares acquired by these Members as a result of the MSF Scheme will be equal to the market value of the MyState Limited Shares at the Implementation Date, reduced by the amount of the capital gain that is

For

per

sona

l use

onl

y



83

disregarded because the scrip for scrip roll-over conditions would be satisfied if those Members had acquired their share on or after 20 September 1985.

Members who make a capital loss on disposal (ii) of Member Shares

Disregard any capital loss

Members who acquired their Member Share in MSF prior to 20 September 1985 or are treated as having acquired their Member Share prior to 20 September 1985 and make a capital loss would have their capital loss disregarded.


The cost base of the new MyState Limited Shares acquired by these Members as a result of the MSF Scheme will be equal to the market value of the MyState Limited Shares at the Implementation Date.

Members who acquired their Member 2. Shares on or after 20 September 1985

This section applies to Members who:

acquired their share in MSF after 20 September •1985;

acquired their share in another credit union after •20 September 1985 which subsequently merged into MSF; or

acquired their share in another credit union •before 20 September 1985 which subsequently merged into MSF but are treated under tax law as having acquired their share in MSF after 20 September 1985.

The disposal by Members of their Member Share that was acquired (or deemed to be acquired) on or after 20 September 1985 to MyState Limited under the MSF Scheme will constitute a CGT event. A capital gain will arise for Members where the capital proceeds received under the MSF Scheme exceed the cost base of the Member Share.

The capital proceeds received by Members under the MSF Scheme will be the market value of the MyState Limited Shares as at the Implementation Date.

The cost base that Members would have in the MSF Member Shares would be broadly based on the amount they originally paid to acquire the Member Shares and any incidental costs.

Members may be able to disregard their capital gain where scrip for scrip roll-over is available.

Members who make a capital gain on (i) disposal of Member Shares and obtain scrip for scrip roll-over relief

Conditions for scrip for scrip roll-over relief

Scrip for scrip roll-over relief will be available to Members who acquired their MSF Member Share on or after 20 September 1985 and derive a capital gain on the disposal of that share to MyState Limited under the MSF Scheme.

The following conditions for the scrip for scrip roll-over will be satisfied in respect of the MSF Scheme:

Members exchange their Member Share for •shares in MyState Limited and nothing else;

the exchange of MSF Member Shares for MyState •Limited Shares is in consequence of a single arrangement, being the MSF Scheme;

the MSF Scheme results in MyState Limited •becoming the owner of 80% or more of the voting shares in MSF;

the MSF Scheme enables at least all Members with •voting shares in MSF to be able to participate;

the MSF Scheme enables all Members to •participate on substantially the same terms;

the replacement shares that Members receive are •in MyState Limited;

no other roll-over applies to Members in relation •to the MSF Scheme; and

the MSF Scheme occurs on an arm’s length basis.•

Scrip for scrip roll-over relief does not apply where Members make a capital loss in respect of the disposal of their Member Share under the MSF Scheme.

Choosing scrip for scrip roll-over

In order to access scrip for scrip roll-over relief, the eligible Members must elect for the roll-over to apply. Members are not required to lodge a separate form in relation to making the election for scrip for scrip roll-over to apply. The way Members prepare their income tax return is sufficient evidence of making the choice. Members can choose for the roll-over to apply by excluding any capital gain arising from the disposal of their Member Share in their tax return for the income year in which they participate in the MSF Scheme.

Disregard any capital gain

For Members who are eligible and choose scrip for scrip roll-over relief, any capital gain arising on disposal of their Member Share to MyState Limited under the MSF Scheme is disregarded.

For

per

sona

l use

onl

y



For Members who obtain scrip for scrip roll-over relief, their cost base in the new MyState Limited Shares acquired under the MSF Scheme will be equal to the cost base they have in their existing Member Share. The cost base of the MyState Limited Shares will be relevant when Members dispose of the MyState Limited Shares in the future.

Members who make a capital gain on (ii) disposal of Member Shares but do not obtain scrip for scrip roll-over relief

Members who make a capital gain on the disposal of their Member Share to MyState Limited under the MSF Scheme and who do not choose for scrip for scrip roll-over relief to apply, will have the following CGT consequences depending on their status and specific circumstances.

Individuals and complying superannuation funds

Members that are individuals and complying superannuation funds may be able to apply either the CGT discount or indexation in respect of calculating their net capital gain on the disposal of their Member Share.

A CGT discount will be available where a Member held their Member Share for at least 12 months. The CGT discount, if available, will only reduce the net capital gain after first offsetting any current year or prior year capital losses. Broadly, where the CGT discount applies, individuals will be liable to CGT on only 50% of any capital gain and complying superannuation funds will be subject to CGT on only two-thirds of any capital gain.

Alternatively, if a Member acquired or was deemed to have acquired the Member Share before 21 September 1999, then the Member may index the cost base of the Member Share for inflation up to the September 1999 quarter.

Members that are individuals will be taxed at their marginal tax rate and Members that are complying superannuation funds will be taxed at 15% in respect of the net capital gain arising from the disposal of their Member Share.

Companies

Members that are companies, or are taxed as companies, are not entitled to the CGT discount in respect of the disposal of their Member Share. However, indexation is available where the Member Shares were acquired or deemed to have been acquired prior to 21 September 1999.

Any capital gain may be offset to the extent that Members that are companies have any current year or carried forward capital losses.

Companies will be taxed at the 30% corporate tax rate in respect of the net capital gain derived from the disposal of their Member Share.

Trustees

Where no beneficiaries are presently entitled to the income of a trust that is a Member, the trustee will be assessed on the capital gain arising from the disposal of the Member Share after applying any carried forward tax losses. The trustee in this instance will not benefit from the 50% CGT discount.

Where the beneficiaries are presently entitled, they will be assessed on their share of the net income of the trust, which will include any net capital gain arising from the disposal of the Member Share. Where the trust has held the Member Share for at least 12 months, the benefit of the CGT discount will effectively flow through to beneficiaries that are individuals or complying superannuation funds.

Any net capital gain remaining after the application of the CGT discount (if available), will be taxable to each beneficiary at their respective tax rate.


For Members who do not obtain scrip for scrip roll-over relief, their cost base in the new MyState Limited Shares acquired under the MSF Scheme will be the market value of the MyState Limited Shares as at the Implementation Date. The cost base of the MyState Limited Shares will be relevant when Members dispose of the MyState Limited Shares in the future.

Members who make a capital loss on disposal (iii) of Member Shares

As stated above, scrip for scrip roll-over relief is not available where Members make a capital loss in respect of the disposal of their Member Share under the MSF Scheme.

Members will make a capital loss on the disposal of their Member Share if the capital proceeds received under the MSF Scheme are less than the reduced cost base of their Member Share.

The capital proceeds received under the MSF Scheme will be the market value of the new MyState Limited Shares issued to the Members on the Implementation Date. The reduced cost base that Members would have in their Member Share would be broadly based on the amount they paid to acquire their Member Share and any incidental costs.

For

per

sona

l use

onl

y



85

Any capital losses arising from the disposal of the Member Share can be offset against any other capital gains derived by Members during the same income year. Any capital loss remaining can generally be carried forward to be offset against future capital gains. The ability of some entities (for example, companies or trusts) to utilise capital losses in future income years may be restricted in some circumstances.


The cost base of the new MyState Limited Shares acquired by the Members as a result of the MSF Scheme will be equal to the market value of the MyState Limited Shares at the Implementation Date. The cost base of the MyState Limited Shares will be relevant when Members dispose of the MyState Limited Shares in the future.

Members who are Foreign Scheme 3. Shareholders

Members who are Foreign Scheme Shareholders will have the MyState Limited Shares that they would otherwise receive, allocated to a nominee and sold under the Share Sale Facility. The net proceeds will then be distributed to the Foreign Scheme Shareholders.

A CGT event will occur when the Foreign Scheme Shareholders dispose of their Member Shares in consideration for cash proceeds.

However, Foreign Scheme Shareholders will not be subject to CGT on the disposal of their Member Share, unless, broadly:

the Foreign Scheme Shareholders (and their •associates) have a 10% or more interest in MSF at the time of the disposal or throughout a 12 month period that began 24 months before the disposal; and

50% or more of the market value of MSF is •represented by real property in Australia.

Any capital gain derived by Foreign Scheme Shareholders in respect of the disposal of their Member Share should be free from tax where the above requirements are not satisfied.

Distribution of dividends on 8.3 MyState Limited Shares

Members who acquire the new MyState Limited Shares under the MSF Scheme may receive distributions of profit in the form of dividends from MyState Limited in the future.

Members who receive a dividend from MyState Limited must include that dividend in their assessable income in the income year in which the dividend is received. Where and to the extent a dividend is franked, Members will also be required to include the attached franking credit in their assessable income.

Members must hold the MyState Limited Shares at risk for at least 45 days to be eligible for any franking credit benefits attached to the dividends.

The extent to which Members will be able to offset their tax liability will depend upon their status and specific circumstances, as outlined below.


Individuals and complying superannuation funds that receive a dividend from MyState Limited are entitled to a tax offset equal to the franking credit allocated to the dividend. Therefore, individuals on higher marginal tax rates receive a credit for the company tax already paid (at 30%) and effectively only pay the difference. Members who are individuals and complying superannuation funds are entitled to a refund for any franking credits in excess of their total tax liability (i.e. where they have a lower average tax rate compared to the company tax rate).

Companies

Companies that receive a dividend from MyState Limited will be entitled to offset the franking credit against the company tax liability and accordingly, should not pay any additional tax on the distribution.

A company will also receive a credit to the company’s franking account equal to the amount of the franking credit which can be passed on to their own members by way of a franked distribution.

Trustees

Where no beneficiaries are presently entitled to the income of a trust, the trustee will be liable to tax in respect of a dividend paid by MyState Limited and will be entitled to any franking credits attached to the dividend.

Where beneficiaries are presently entitled to the income of a trust, the dividend and any franking credits will flow through to those beneficiaries. The tax treatment of the dividend and any franking credits will depend upon the tax status of the beneficiaries.

Disposal of the MyState Limited 8.4 Shares

The disposal of the new MyState Limited Shares in the future will have CGT implications.

Capital gain on disposal of MyState Limited Shares

For

per

sona

l use

onl

y


A capital gain will arise to Members where the capital proceeds received on the disposal of the new MyState Limited Shares exceed the cost base of the MyState Limited Shares.

The cost base that Members will have in the new MyState Limited Shares will depend on whether scrip for scrip roll-over relief is obtained or not.

Where scrip for scrip roll-over relief is obtained by the Members in respect of the MSF Scheme, then their cost base in the new MyState Limited Shares will be equal to the cost base they had in their original Member Share. For the purposes of determining eligibility for the CGT discount, the Members who choose scrip for scrip roll-over are taken to acquire their MyState Limited Shares at the time their original Member Share was acquired.

Where scrip for scrip roll-over relief is not obtained, Members are taken to acquire the MyState Limited Shares on the Implementation Date and the cost base of the MyState Limited Shares will be the market value of the MyState Limited Shares as at the Implementation Date of the MSF Scheme.

Members who make a capital gain on the disposal of their new MyState Limited Shares will have the following CGT consequences depending on their status and specific circumstances.


Individuals and complying superannuation funds may be able to apply the CGT discount in respect of calculating their net capital gain on the disposal of their MyState Limited Shares. The indexation method will not be available.

A CGT discount will be available where the 12 month holding period is satisfied. The CGT discount, if available, will only reduce the net capital gain after first offsetting any current year or prior year capital losses. Broadly, where the CGT discount applies individuals will be liable to CGT on only 50% of any capital gain and complying superannuation funds will be subject to CGT on only two-thirds of any capital gain.

Individuals will be taxed at their marginal tax rate and complying superannuation funds will be taxed at 15% in respect of the net capital gain arising from the disposal of their MyState Limited Shares.

Companies

Companies, or entities that are taxed as companies, are not entitled to the CGT discount in respect of the disposal of their new MyState Limited Shares. Any capital gains may be offset to the extent that the companies have any current year or carried forward capital losses.

Companies will be taxed at the 30% corporate tax rate in respect of the net capital gain derived from the disposal of their MyState Limited Shares.

Trustees

Where no beneficiaries are presently entitled to the income of a trust, the trustee will be assessed on the capital gain arising from the disposal of the MyState Limited Shares after applying any carried forward tax losses. The trustee in this instance will not be able to benefit from the 50% CGT discount.

Where the beneficiaries are presently entitled, they will be assessed on their share of the net income of the trust, which will include any net capital gain arising from the disposal of the MyState Limited Shares. Where the trust has held the shares for at least 12 months, the benefit of the CGT discount will effectively flow through to beneficiaries that are individuals or complying superannuation funds.

Any net capital gain remaining after the application of the CGT discount (if available), will be taxable to each beneficiary at their respective tax rate.

Capital loss on disposal of MyState Limited Shares

A capital loss will arise if the capital proceeds received on the disposal of the new MyState Limited Shares is less than the reduced cost base of the MyState Limited Shares.

The reduced cost base of the new MyState Limited Shares for Members is outlined above and will depend on whether scrip for scrip roll-over relief is obtained or not.

A capital loss will reduce any other capital gains for the relevant year of income. Any unused capital losses may generally be carried forward to offset against future capital gains. The ability of some entities (for example, companies or trusts) to utilise capital losses in future income years may be restricted in some circumstances.

GST8.5 The provision, acquisition or disposal of shares in return for monetary or non-monetary consideration is an input taxed supply for GST purposes and is not subject to GST. Accordingly, no GST should be payable on:

(a) the disposal of Member Shares to MyState Limited;

(b) the issue of new MyState Limited Shares; or

(c) their future disposal.

Stamp duty8.6 No Australian stamp duty will arise on the disposal of the MSF Member Shares to MyState Limited by MSF Members or to the issue of new MyState Limited shares to MSF Members. In addition, no Australian stamp duty should be payable on the disposal of the new MyState Limited shares, provided that the new MyState Limited Shares are quoted on the ASX at the time of disposal.

For

per

sona

l use

onl

y


Section 9 - Procedural aspects of the MSF Scheme and the Transaction

87

Procedural aspects of the MSF Scheme and the Transaction

Section 9

For

per

sona

l use

onl

y


- Procedural aspects Section 9 of the MSF Scheme and the Transaction

Introduction9.1 This Section:

discusses the voting eligibility of Members; •

discusses the eligibility of MSF Scheme Participants •to receipt of benefits of the merger with TPX;

discusses the purpose and effect of the MSF Scheme •and the Transaction;

provides a summary of the Merger Implementation •Agreement (as amended) including:

the conditions and approvals required for the -MSF Scheme and the Transaction to proceed; and

the rights of MSF and TPX to withdraw from -the Transaction;

provides a summary of the MSF Scheme document •and the Deed Poll;

provides a summary of the arrangements MSF •has put in place to handle disputed eligibility to participate in the MSF Scheme; and

provides a summary about approvals which are •being sought under applicable legislation for the implementation of the MSF Scheme.

The full terms of the Merger Implementation Agreement, the MSF Scheme document and the Deed Poll are available on MSF's website at mystate.com.au.

Eligibility criteria regarding voting9.2 You will be entitled to vote at the General Meeting and the MSF Scheme Meeting if you are registered as a Member in the MSF Share Register at the Voting Entitlement Time (5.00pm on Thursday, 13 August 2009).

In general, each Member will have one vote. However the following exceptions apply.

Member Shares held on trust for someone else (a) – where a person is a holder of one or more Member Shares, held in their own right (Member Holding) and also holds a Member Share on trust for someone else (Trustee Holding), the Member will have one vote in respect of the Member Holding and one vote for each Trustee Holding. You may call the Member Information Line on 1300 538 803 between 8.30am and 5.30pm from Monday to Friday to confirm

whether a Member Share is registered as a Trustee Holding.

Joint memberships(b) – where a Member Share is held by two or more persons jointly, the vote in respect of the Member Share is exercisable by the first-named joint holder only.

Member shares registered in the name of a (c) minor – where a Member is a minor (under age 18 as at the date of the meeting), a vote by the Member must be exercised by a parent, guardian or trustee on their behalf. The appointment of a parent, guardian or trustee must be notified to MSF not later than 5.00pm on Sunday, 16 August 2009. You may call the Member Information Line on 1300 538 803 between 8.30am and 5.30pm from Monday to Friday to obtain an authority to operate form which will enable a parent, guardian or trustee to attend the General Meeting and the MSF Scheme Meeting, and to exercise the minor’s vote for their Member Share. A parent, guardian or trustee, authorised to exercise the vote of a minor, is also able to exercise a vote for Member Shares held in their own right or under a Trustee Holding.

Member shares registered to certain businesses (d) or unincorporated associations – where a Member is an unincorporated association, company, sole trader, or partnership, a vote by the Member must be exercised by a representative on the Member’s behalf. The appointment of a representative is to be notified to MSF not later than 5.00pm on Sunday, 16 August 2009. You may call the Member Information Line on 1300 538 803 between 8.30am and 5.30pm from Monday to Friday to obtain a form to appoint a representative for the General Meeting and the MSF Scheme Meeting. A representative appointed to exercise the vote of a business or association as noted above, is also able to exercise a vote for Member Shares held in their own right, under a Trustee Holding, or on behalf of a minor.

New customers since 10 October 2008(e) – any person who first became a customer of MSF after 5.00pm on 9 October 2008, being the close of business on the day before the announcement of the proposed merger, is not eligible to vote at the General Meeting or the MSF Scheme Meeting. These persons have been advised by MSF that their applications for membership will be considered by the MSF Board only if the MSF Scheme is not approved at the MSF Scheme Meeting.

For

per

sona

l use

onl

y



89

Eligibility criteria regarding receipt 9.3 of the benefits of the merger with TPX

MSF Scheme Participants will be entitled to receive a MyState Share Parcel if the MSF Scheme and the Transaction are approved (and the conditions satisfied).

The entitlement to a MyState Share Parcel will be based on the registration details of Members contained in the MSF Share Register at the MSF Record Date. These details are being supplemented by the following rules for eligibility, as summarised below, which have been adopted by the MSF Board.

To be eligible as an MSF Scheme Participant, a person must have been recorded as a Member at 5.00pm on 9 October 2008 and remain the registered holder of their Member Share at the MSF Record Date.

Member Shares are not currently transferable and no new membership applications have been considered by the MSF Board since 5.00pm on 9 October 2008, therefore all Members entitled to vote at the General Meeting and MSF Scheme Meeting and participate in the MSF Scheme will have been existing Members at that date.

In general, Members hold one Member Share and will receive one MyState Share Parcel in exchange for their Member Share. No differentiation will be made for the price originally paid in respect of the Member Share held, and whether or not the original price was fully paid.

The MSF Share Register includes people who are registered as the holder of more than one Member Share. The reasons why this has happened are varied. For example, a person may have been a member with more than one credit union that was previously merged into MSF and did not consolidate their accounts. Other reasons include a person has opened accounts at more than one branch or location, at different times, or under a different name (eg. before marriage), and they have not subsequently consolidated or updated their accounts under one membership. Under the principles of mutuality on which MSF is currently based, each person has one vote at Member meetings no matter how many Member Shares they hold. Similarly, the MSF Board has decided that people with multiple memberships should receive one MyState Share Parcel in total, and not an extra entitlement for each membership. The MyState Share Parcel they receive will be in exchange for all of their Member Shares.

There are, however, some situations which the MSF Board recognises are genuine exceptions and under which there will be eligibility to more than one MyState Share Parcel. These are based on the existing provisions of the MSF Constitution, which allow memberships to be issued for minors (persons who will be less than 18 years of age on

the date of the General Meeting and MSF Scheme Meeting), memberships to be registered as held on trust for someone else, and memberships to be issued to officeholders in the case of certain businesses and unincorporated associations. For an additional entitlement to be available under these exceptions, details of the minor, or the holding as trustee or for an unincorporated association or business must have been recorded in the MSF Register as at 5.00pm on 9 October 2008 (i.e. the close of business on the day before the merger proposal was announced) and remained on the MSF Register until the MSF Record Date.

The rules for eligibility are summarised below.

ELIGIBILITY RULES FOR THE MSF SCHEME

Persons who are eligible to participate in the MSF Scheme

The rules which have been used to determine the entitlements of MSF Scheme Participants as at the MSF Record Date are:

Member is an individual and not a minor, who is the (i) registered holder of one or more Member Shares in their own right (in other words, it is their Member Share and not held on trust for someone else).

The individual will be entitled to receive one MyState Share Parcel for all of their holdings in this category, if the MSF Scheme and the Transaction are implemented.

Member is two or more individuals who jointly are (ii) the registered holders of one or more Member Shares in their own right.

These individuals will jointly be entitled to receive one MyState Share Parcel for all of their joint holdings in this category, if the MSF Scheme and the Transaction are implemented.

Member is an individual who is a minor (aged under (iii) 18 years at the date of the meetings) and who is the registered holder of one or more Member Shares in their own right.

The individual will be entitled to receive one MyState Share Parcel for all of their holdings in this category, if the MSF Scheme and the Transaction are implemented. As the registered holder of MyState Limited Shares will be required to be aged 18 or over, the minor (or their parent or guardian) must notify MSF of the name of a person who is to be the registered holder of the MyState Share Parcel on behalf of the minor. MSF will separately contact this category of Members, for the information of the registered holder to be provided before the MSF Record Date.

For

per

sona

l use

onl

y


Member is an individual who is the registered holder (iv) of one or more Member Shares in trust for someone else. Each holding is referred to as a trustee holding.

The individual will be entitled to receive one MyState Share Parcel for each trustee holding on behalf of a different person under this category, if the MSF Scheme and the Transaction are implemented.

Member is an unincorporated association, or a (v) president, officeholder or former officeholder of the unincorporated association, which is the registered holder of one or more Member Shares.

The association will be entitled to receive one MyState Share Parcel for all of their holdings in this category, if the MSF Scheme and the Transaction are implemented. The entitlement may only be registered in the name of the association.

Member is a company which is the registered holder (vi) of one or more Member Shares.

The company will be entitled to receive one MyState Share Parcel for all of its holdings in this category if the MSF Scheme and the Transaction are implemented. The entitlement may only be registered in the name of the company.

Member is a company which is the registered holder (vii) of one or more Member Shares on trust for someone else. Each holding is referred to as a trustee holding.

The company will be entitled to receive one MyState Share Parcel for each trustee holding on behalf of a different person under this category, if the MSF Scheme and the Transaction are implemented. The entitlement may only be registered in the name of the company.

Member is an individual who was not the primary (viii) (first-named) member under a joint membership, where the primary member is no longer a Member.

The individual will be entitled to receive one MyState Share Parcel for all of their holdings in this category, if the MSF Scheme and the Transaction are implemented. If the individual already has an entitlement under category (i) or (iii), no additional entitlement will exist under this category.

Member is registered under a different form of legal (ix) title permitted by the MSF Constitution that is not specified in another category of these rules, and holds one or more Member Shares.

The Member will be entitled to receive one MyState Share Parcel for all of their holdings in this category, if the MSF Scheme and the Transaction are implemented. If the Member

already has an entitlement under another category of these rules, then no additional entitlement will exist under this category.

Any person who, at the MSF Record Date, is not a registered Member or who has disputed eligibility (as determined by MSF) will not receive a MyState Share Parcel.

Persons not eligible to participate in the MSF Scheme

The following persons will be ineligible to participate in the MSF Scheme if it is approved:

Any person who first became a customer of MSF (i) after 5.00pm on 9 October 2008, being the close of business on the day before the announcement of the merger proposal. These persons have not, at the date of this Information Booklet, been issued a Member Share and therefore are not eligible to receive a MyState Share Parcel. These persons have been advised by MSF that their applications for membership will be considered by the MSF Board only if the merger with TPX does not proceed. If the merger with TPX proceeds, these applications for membership will not be considered. Although these people are not Members of MSF, it does not affect their status as customers of MSF in relation to MSF’s products and services.

Any person who, while a customer of MSF, has (ii) not applied for or been issued a Member Share, or been accepted as a Member of MSF pursuant to the provisions of the MSF Constitution as at the MSF Record Date.

Any person who, at the MSF Record Date, is not a (iii) registered Member or has disputed eligibility (as determined by MSF).

Any persons who, at the MSF Record Date, holds a (iv) certificate or other evidence of membership of MSF but whose details are not recorded in the MSF Register.

MSF has established a claims handling process to deal with disputed eligibility for these persons. Please refer to Section 9.4 in this Information Booklet for further details.

Entitlement and eligibility dispute 9.4 handling process

In June 2009, MSF wrote to each person who has a current member number issued by MSF, advising of their status as either being eligible or ineligible to receive a MyState Share Parcel if the merger proposal is approved. MSF has established a dispute handling process to deal with claims that may be made by persons who have disputed eligibility as a Member to participate in the MSF Scheme and the Transaction. This process includes setting aside approximately 500,000 MyState Limited Shares from the MSF Scheme Consideration, which will be vested in

For

per

sona

l use

onl

y



91

the trustee of the MSF Unverified Members Trust if the Transaction is approved. The shares held by the trustee will be used to meet claims successfully made for disputed or unverified eligibility to participate in the MSF Scheme.

Unverified Members Trust(a)

A trust, called the MSF Unverified Members Trust, is to be established if the Transaction is approved to hold approximately 500,000 MyState Limited Shares received from the MSF Scheme Consideration. These shares will be held on trust for the benefit of those persons with disputed or unverified eligibility to participate in the MSF Scheme who are determined by the MSF Board after the MSF Record Date and before 30 June 2010 to be eligible to receive a number of MyState Limited Shares from the trust (MyState Trust Shares). The entitlement of any person determined by MSF to be eligible will not exceed the MyState Share Parcel.

MyState Trust Shares will be allocated to members determined to be eligible on a ‘first come, first served’ basis. Should all the MyState Trust Shares be distributed before a disputing or unverified member’s claim is proven or satisfied, that person’s claim cannot be satisfied and they will not be issued with any MyState Trust Shares. The MSF Directors believe that the number of MyState Limited Shares allocated to the MSF Unverified Members Trust will be sufficient for approximately 1,300 successful claims, and do not reasonably expect the numbers of successful eligibility claims to exceed this number through this process.

Should there remain MyState Trust Shares still held in trust and not distributed by 30 June 2010, the remaining MyState Trust Shares will be sold by the trustee and the proceeds paid to MyState Financial Foundation Limited, which provides annual grants to charities to educate and nurture the young people of Tasmania.

Claims for disputed eligibility(b)

All claims relating to disputed eligibility to participate in the MSF Scheme must be lodged with the Company Secretary of MSF not later than 5.00pm on 30 April 2010.

Claims must include all supporting documentation on which the claimant relies to establish eligibility to receive MyState Trust Shares, including any share certificate issued by MSF or a predecessor credit union whose customers were previously merged into MSF. Claims lodged prior to the deadline, but which have incomplete supporting documentation, will be

considered solely on the basis of the information supplied at the deadline date.

Claims lodged after the deadline of 5.00pm on 30 April 2010 will be ineligible for consideration and any such persons will have no claim on MSF or MyState Limited in relation to their membership, or former membership, of MSF.

The MSF Board, or a committee appointed by the MSF Board, will consider all claims submitted to determine the veracity of such claims. Decisions made by the MSF Board, or committee, will bind Members and claimants, and their successors.

All decisions with respect to eligibility are required to be made by 30 June 2010.

The MSF Scheme, TPX Scheme and 9.5 the TransactionPurpose(a)

The combined purpose of the MSF Scheme, TPX Scheme and the Transaction is to:

implement the terms of a proposed arrangement •between MSF and MSF Scheme Participants to deliver 100% ownership and control of MSF to MyState Limited; and

implement the terms of a proposed arrangement •between TPX and TPX Scheme Shareholders to deliver 100% ownership and control of TPX to MyState Limited,

in exchange for the issue of MyState Limited Shares by MyState Limited.

If both the MSF Scheme and the TPX Scheme become Effective, MSF and TPX will become wholly-owned subsidiaries of MyState Limited. MSF will be demutualised and TPX will be delisted from the ASX.

Eligible Members are entitled to vote on the resolutions to approve the MSF Scheme and the Transaction. Eligible TPX Shareholders are entitled to vote on the resolutions to approve the TPX Scheme and the Transaction.

The terms of the MSF Scheme are available on MSF's website at mystate.com.au.

Legal effect(b)

If the MSF Scheme becomes Effective, it will constitute a binding arrangement between MSF and each Member as at the MSF Record Date under which:

For

per

sona

l use

onl

y


the MSF Scheme Share held by each MSF Scheme •Participant (including those who do not vote on the MSF Scheme and those who vote against it) will be transferred to MyState Limited, without the need for any action on the part of the MSF Scheme Participants; and

each MSF Scheme Participant (including those •who do not vote on the MSF Scheme and those who vote against it) will receive a MyState Share Parcel as consideration in full for the transfer of their MSF Scheme Shares to MyState Limited.

Similarly, if the TPX Scheme becomes Effective, it will constitute a similar, binding arrangement between TPX and each TPX Shareholder as at the TPX Record Date.

Classes of members affected by the MSF (c) Scheme

MSF currently has only one class of share on issue – Member Shares. There is also only one class of shareholders who will be affected by the MSF Scheme, namely Members.

Accordingly, all Members will vote on the MSF Scheme and the Transaction as a single class at the MSF Scheme Meeting. Members will also vote as a single class at the General Meeting for approval of the Constitutional Amendment Resolution.

Certificates(d)

Any certificates held for Member Shares will cease to have effect as documents of title from the time the MSF Scheme and the Transaction are approved by the Court.

The General Meeting9.6 Purpose(a)

The purpose of the General Meeting is to seek approval from Members to amend the MSF Constitution to vary the rights of Member Shares to effect the demutualisation of MSF and enable the transfer of Member Shares to MyState Limited and entitle the holder of Member Shares to receive dividends, among other things.

Demutualisation (b)

Before the MSF Scheme and the Transaction can be implemented, MSF must demutualise. The demutualisation of MSF will require Member approval of the amendments to the MSF Constitution described at paragraph 9.6(c) below.

The demutualisation of MSF will change the rights of Members. Currently, each Member has the right to one vote at general meetings whether they hold one or more Member Shares. Each Member has the right to participate in the winding up of MSF, and the right to redeem his or her Member Shares. There is no entitlement to dividends, and Member Shares are not transferable.

If the MSF Scheme and the Transaction are implemented, MSF Members will give up these rights in exchange for ordinary shares in MyState Limited. The rights attaching to those ordinary shares will be different, and are as set out in Section 12.2. The rights attached to the MyState Limited Shares include the ability to transfer ownership of those shares, the right to receive dividends and the right to vote at meetings of MyState Limited Shareholders with one vote for every MyState Limited Share held.

Significantly, with ordinary shares a holder has the ability to increase their investment in a company and voting power on matters requiring shareholder decision or approval by purchasing additional ordinary shares. It is not currently possible for MSF Members to increase their investment or voting power as each Member (usually) holds only one share.

Constitutional Amendment Resolution(c)

In order to facilitate and implement the MSF Scheme and the Transaction, certain amendments are proposed to be made to the MSF Constitution.

The amendments proposed to be made to the MSF Constitution will:

replace all references to 'credit union' with •references to 'Company';

remove or amend provisions that reflect the •current status of MSF as a "mutual" such as:

the requirements for MSF customers and -MSF Directors to be members of MSF, and regulation on joint accounts and membership, because after implementation of the MSF Scheme MSF will be wholly owned by MyState Limited and neither customers nor MSF Directors will be members of MSF;

the restrictions or limits on the transfer of -shares in MSF and the number of shares held by a member, the right of a Member to request redemption of a Member Share and the right to participate in distributions of the assets of MSF (whether or not in a winding

For

per

sona

l use

onl

y



93

up of MSF), as these are no longer necessary or appropriate once MSF is wholly owned by MyState Limited;

the restrictions on the payment of dividends -and the objectives of MSF, so that (in common with the usual structure of a company) MSF may operate with the view to making profits and can pay dividends to MyState Limited; and

the requirement for 5% of Members -to approve modifications of the MSF Constitution that will affect its mutual status, because these are no longer necessary or appropriate once MSF is wholly owned by MyState Limited;

insert provisions that reflect the new status of •MSF as a company that is not a 'mutual' such as:

multiple shares may be issued to a member -and each share held has one vote;

dividends and distributions, whether income -or capital in nature, may be paid or made by the company to its shareholders, which are the usual provisions contained in the constitution of a public company that has ordinary share capital; and

provisions of a machinery or technical nature -which are necessary or desirable for the implementation of the MSF Scheme and the Transaction, or are considered usual or typical for a company that is an unlisted public company;

reduce the minimum number of MSF Directors •from 6 to 5;

confirm that MSF Directors appointed as •part of the transitional arrangements for the connectfinancial and islandstate merger continue to hold office, subject to removal or replacement by MyState Limited, and give MyState Limited the power to appoint new MSF Directors and the MSF Board power to fill casual vacancies to maintain the minimum number of MSF Directors; and

remove superseded or historical provisions •which relate to the election of MSF Directors or were of a transitional nature related to the connectfinancial and islandstate merger in July 2007, as these are no longer required once MSF is wholly owned by MyState Limited.

A full copy of the proposed amendments to the MSF Constitution will be available on MSF’s website at

mystate.com.au. A copy will also be tabled at the General Meeting for the purposes of identification.

Majority thresholds required for approval(d)

The Constitutional Amendment Resolution is proposed as a special resolution requiring the approval of at least 75% of the votes cast by Members entitled to vote on the resolution (whether in person, by proxy or attorney or, in the case of a corporate Member or proxy, by representative).

The Constitutional Amendment Resolution will not take effect unless the MSF Scheme becomes Effective. The MSF Scheme cannot become Effective if the Constitutional Amendment Resolution is not passed by the requisite majority.

For the Constitutional Amendment resolution to be approved, it is also required that at least five percent of qualifying members (by number) of MSF give their written consent to the amendments. The consent may be given before or within 3 months after the date on which the resolution is passed.

The consent requirement applies because Members have a right under the MSF Constitution to surplus and profits of MSF on its winding up. The Constitutional Amendment Resolution will modify that right, or have the effect of modifying, restricting or repealing its operation.

The persons who are qualifying members for the purpose of giving the consent are prescribed by the Constitution. A qualifying member is a person who is a Member at the MSF Record Date and also met one of the following requirements at an earlier date:

held a Member Share in their own right on 1 •May 2006, that is the date on which clause 1A-9 of the MSF Constitution was adopted;

previously was the holder of a Member •Share jointly with another person, and who subsequently has purchased their own Member Share for the purposes of financial accommodation provided to the other person where both applicants for a joint account were required to hold a Member Share;

was admitted to membership of MSF after 1 •July 2006 and has held a Member Share for not less than one year at the date of the General Meeting; and

was a member of islandstate Credit Union •Limited immediately before 1 July 2007, being the date of its merger with MSF (then called connectfinancial).

For

per

sona

l use

onl

y


Qualifying members are requested to give their written consent to the Constitutional Amendment Resolution. If you are a qualifying member but are not planning to attend the General Meeting, you may provide your consent by completing and signing the consent contained on the Proxy Form for the General Meeting enclosed with this Information Booklet and returning it as explained in Section 2.2.

If you are planning to attend the General Meeting and at the time of the General Meeting less than five percent of qualifying members have given their written consent using the Proxy Form then arrangements will be made at the General Meeting, should you wish to do so, for you to provide your consent.

There is no requirement for every qualifying member to give written consent to the Constitutional Amendment Resolution. However, if less than five percent of all qualifying members give their written consent, then the MSF Scheme cannot become Effective.

Eligibility to vote at the General Meeting(e)

Section 9.2 of this Information Booklet provides details about your eligibility to vote at the General Meeting. A proxy form for the General Meeting is enclosed with this Information Booklet.

Voting majority required(f)

For the Constitutional Amendment Resolution to be passed, the approval of at least 75% of the votes cast by Members entitled to vote on the resolution (in person, by proxy, by corporate representative or by attorney) is required.

The MSF Scheme Meeting9.7 The Court has ordered MSF to convene a meeting of Members to consider and vote on the MSF Scheme.

The notice convening the MSF Scheme Meeting is enclosed with this Information Booklet. The order of the Court convening the MSF Scheme Meeting is not and should not be treated as an endorsement of, or any other expression of opinion by the Court on, the MSF Scheme.

Eligibility to vote at the MSF Scheme (a) Meeting

Section 9.2 of this Information Booklet provides details about your eligibility to vote at the MSF Scheme Meeting. A proxy form for the MSF Scheme Meeting is enclosed with this Information Booklet.

Voting majority required(b)

The resolution to approve the MSF Scheme is subject to approval by the majorities required under section 411(4)(a)(ii) of the Corporations Act. The MSF Scheme resolution must be approved by:

a majority in number (more than 50%) of •Members that vote at the MSF Scheme Meeting (whether in person, by proxy, attorney or, in the case of corporate Members or proxies, by corporate representative); and

Members whose Member Shares in aggregate •account for at least 75% of the votes cast on the resolution.

This requires an approval by 75% of Members that vote at the MSF Scheme Meeting, as, generally speaking, all Members have an equal holding of Member Shares.

The MSF Scheme and the 9.8 Transaction - conditions and terminationConditions(a)

Implementation of the MSF Scheme and the Transaction are subject to the satisfaction or waiver of the following conditions.

(• Regulatory Approvals) before 8.00am on the MSF Second Court Date or the TPX Second Court Date (whichever occurs first), all regulatory consents or approvals which are necessary or desirable to implement the Transaction including but not limited to ASIC, ASX, ACCC and APRA approvals (other than the approval of the MSF Scheme by the Court in accordance with section 411(4)(b) of the Corporations Act);

(• No prohibitive orders or determinations) before 8.00am on the MSF Second Court Date or the TPX Second Court Date (whichever occurs first), no prohibitive orders of determinations prevent the implementation of the Transaction;

(• Approvals under applicable legislation) before 8.00am on the MSF Second Court Date or the TPX Second Court Date (whichever occurs first), all necessary approvals are required in respect of the Transaction under the Banking Act 1959 (Cth), the Financial Sector (Shareholdings) Act 1998 (Cth) and the Financial Sector (Business Transfer and Group Restructure) Act 1999 (Cth) which MSF and TPX agree are necessary or desirable to implement the Transaction;

For

per

sona

l use

onl

y



95

(• Tasmanian State legislation) before 8.00am on the MSF Second Court Date or the TPX Second Court Date (whichever occurs first) all necessary approvals as agreed between MSF and TPX (acting reasonably) are provided in respect of the Transaction under relevant Tasmanian State legislation including Ministerial approval under the Trustee Companies Act for MyState Limited to hold all of the issued share capital of TPX;

(• No Material Adverse Change) before 8.00am on the MSF Second Court Date or the TPX Second Court Date (whichever occurs first), no MSF or TPX Material Adverse Change occurs, being a single event, or collection of events, occurrences or matters which has, or have in aggregate, resulted in or could reasonably be expected to result in, an adverse effect on the net assets of MSF of $6 million or TPX of $1.7 million or on the earnings or prospects of MSF in any financial year of $2.4 million or in the case of TPX, $1.05 million;

(• No Prescribed Occurrences) before 8.00am on the MSF Second Court Date or the TPX Second Court Date (whichever occurs first) no MSF or TPX Prescribed Occurrences occur (these occurrences include occurrences relating to the ongoing solvency of each company and not taking any action to distribute cash outside the company or reorganise the company’s capital structure);

(• Representations and Warranties) the representations and warranties given by MSF and TPX to each other are (and remain) true and correct at 8.00am on the MSF Second Court Date or the TPX Second Court Date (whichever occurs first) and all undertakings have been complied with;

(• Inconsistent obligations) before 8.00am on the MSF Second Court Date or the TPX Second Court Date (whichever occurs first) any material agreement binding MSF or TPX which contains obligations which are or may be materially adverse to the interests of the MyState Limited Group is novated, assigned, terminated or otherwise dealt with;

(• Listing of MyState Limited Shares) before 8.00am on the MSF Second Court Date or the TPX Second Court Date (whichever occurs first) the MyState Limited Shares to be issued to MSF Scheme Participants under the MSF Scheme and to the TPX Scheme Shareholders under the

TPX Scheme have been approved for official quotation on the ASX;

(• Approval of the Schemes) before 8.00am on the MSF Second Court Date or the TPX Second Court Date (whichever occurs first), Members approve the MSF Scheme and the Transaction in accordance with the Corporations Act and the MSF Constitution, and TPX Shareholders approve the TPX Scheme and the Transaction in accordance with the Corporations Act, the Listing Rules and the TPX Constitution;

(• Court approval of the Schemes) the MSF Scheme and the TPX Scheme are approved by the Court in accordance with section 411(4)(b) of the Corporations Act;

(• MyState Limited) MyState Limited does not take any step other than as strictly required to implement the Transaction; and

(• No litigation) before 8.00am on the MSF Second Court Date or the TPX Second Court Date (whichever occurs first) any current, pending or threatened legal proceedings against MSF, TPX or MyState Limited, which may have a material impact on the MyState Limited Group after the Implementation Date, are resolved.

If any of the conditions are not satisfied or waived by the required date, or if either the MSF Scheme or the TPX Scheme is not Effective before the End Date (being 30 September 2009 or other date agreed between TPX, MSF and MyState Limited), MSF, TPX and MyState Limited have agreed that they will consult in good faith with a view to determining whether:

the Transaction, or a transaction which results in •a merger of MSF and TPX, may proceed by way of alternative means or methods; or

to extend the date for satisfaction of the relevant •condition or the End Date; or

to adjourn or change the date of an application •to the Court.

If MSF, TPX and MyState Limited are unable to reach such an agreement within five Business Days of becoming aware that the condition has not been satisfied or waived, either MSF or TPX may, provided that the relevant condition is for their benefit, terminate the Merger Implementation Agreement within a further five Business Days.

For

per

sona

l use

onl

y


Termination of Merger Implementation (b) Agreement

The Merger Implementation Agreement may be terminated by MSF, TPX or MyState Limited at any time prior to 8.00am on the MSF Second Court Date or the TPX Second Court Date (whichever occurs first), by that party (the Terminating Party) giving the other parties written notice if:

another party is in breach of a material term of •the Merger Implementation Agreement, other than as a result of a breach by the Terminating Party, and that party has not rectified the breach within the required period after it is given notice of that breach;

the Court fails to make orders in accordance •with the Corporations Act to convene the MSF Scheme Meeting or TPX Scheme Meeting, and either all appeals from such failure are unsuccessful or the parties determine, in accordance with the Merger Implementation Agreement, not to initiate an appeal;

a Court or other Government Agency has issued •an order, decree or ruling or taken other action that permanently restrains or prohibits the MSF Scheme or TPX Scheme, or has refused to do any thing necessary to permit the Transaction, and such order, decree, ruling or other action has become final and cannot be appealed;

if the conditions (as summarised above in •paragraph (a)) are not satisfied or waived (if capable of being waived) by the required date and MSF, TPX and MyState Limited are unable to reach agreement on an alternative course of action as summarised above; or

if the Effective Date does not occur on or before •the End Date.

MSF may terminate the Merger Implementation Agreement at any time prior to 8.00am on the MSF Second Court Date or the TPX Second Court Date (whichever occurs first) if:

the TPX Board (or a majority of the TPX •Directors):

withdraw their recommendation that TPX -Shareholders vote in favour of the TPX Scheme and the Transaction; or

make a public statement indicating that they -no longer support the TPX Scheme and the Transaction or that they support a TPX Third Party Proposal, or

the MSF Board (or a majority of the MSF •Directors) withdraw or change their recommendation that Members vote in favour of the MSF Scheme for the reason that they have determined that a MSF Third Party Proposal is more favourable to Members than the MSF Scheme and the Transaction.

TPX may terminate the Merger Implementation Agreement at any time prior to 8.00am on the MSF Second Court Date or the TPX Second Court Date (whichever occurs first) if:

the MSF Board (or a majority of the MSF •Directors):

withdraw their recommendation that -Members vote in favour of the MSF Scheme and the Transaction; or

make a public statement indicating that they -no longer support the MSF Scheme or that they support a MSF Third Party Proposal, or

the TPX Board (or a majority of the TPX Directors) •withdraw or change their recommendation that TPX Shareholders vote in favour of the TPX Scheme for the reason that they have determined that a TPX Third Party Proposal is more favourable to TPX Shareholders than the TPX Scheme and the Transaction.

Representations and warranties9.9 In the Merger Implementation Agreement, each of MSF, TPX and MyState Limited represented and warranted certain matters, as at 10 October 2008, as at both the MSF Second Court Date and the TPX Second Court Date and also at any other date the representation or warranty is expressed to be given. Each of MSF, TPX and MyState Limited also provided indemnities against losses incurred in respect of the representations and warranties made.

MSF, TPX and MyState Limited agreed to promptly advise the others in writing if they become aware of any fact, matter or circumstance which constitutes or may constitute a breach of any of the representations or warranties given by them.

Each representation and warranty given is severable, survives the completion of the Transaction and was given with the intent that liability thereunder will not be confined to breaches which are discovered prior to the date of termination of the Merger Implementation Agreement.

Each indemnity is severable, is a continuing obligation, constitutes a separate and independent obligation of the party giving the indemnity from any other obligations of that party under the Merger Implementation Agreement

For

per

sona

l use

onl

y



97

and survives the termination of the Merger Implementation Agreement.

The representations and warranties made by MSF are as follows:

it is a validly existing corporation registered under •the laws of its place of incorporation;

the execution and delivery of the Merger •Implementation Agreement by MSF has been properly authorised by all necessary corporate action and MSF has full corporate power and lawful authority to execute and deliver the Merger Implementation Agreement and to perform or cause to be performed its obligations under the Merger Implementation Agreement;

the Merger Implementation Agreement constitutes •legal, valid and binding obligations on MSF and the Merger Implementation Agreement does not result in a breach of or default under any agreement or any writ, order or injunction, rule or regulation to which MSF or any of its subsidiaries is a party or to which they are bound;

the MSF Information provided to TPX for inclusion in •the TPX Explanatory Booklet will be provided in good faith and on the understanding that each of the TPX Indemnified Parties will rely on that information for the purposes of preparing the TPX Explanatory Booklet and proposing and implementing the TPX Scheme in accordance with the requirements of the Corporations Act;

the MSF Information provided to the TPX •Independent Expert will be provided in good faith and on the understanding that the TPX Independent Expert will rely on that information for the purposes of preparing its report for inclusion in the TPX Explanatory Booklet;

as at the date the TPX Explanatory Booklet •is despatched to TPX Shareholders, the MSF Information and the Joint Information (to the extent that MSF has prepared, contributed to or assisted in preparing the Joint Information), in the form and context in which that information appears in the version of the TPX Explanatory Booklet registered by ASIC under section 412(6) of the Corporations Act, will not be misleading or deceptive in any material respect (whether by omission or otherwise);

MSF will, as a continuing obligation, provide to •TPX all such further or new information which may arise after the TPX Explanatory Booklet has been despatched until the date of the TPX Scheme Meeting which is necessary to ensure that the MSF Information and the Joint Information (to the extent

that MSF has prepared, contributed to or assisted in preparing the Joint Information), in the form and context in which that information appears in the version of the TPX Explanatory Booklet registered by ASIC under section 412(6) of the Corporations Act, is not misleading or deceptive in any material respect (whether by omission or otherwise);

the Information Booklet (excluding the TPX •Information but including any Joint Information that MSF has itself prepared or contributed) will be prepared in good faith and on the understanding that each of the TPX Indemnified Parties will rely on that information for the purposes of preparing the TPX Information and the Joint Information and implementing the TPX Scheme;

the MSF Information provided to the MSF •Independent Expert will be provided in good faith and on the understanding that the MSF Independent Expert will rely on that information for the purposes of preparing its report for inclusion in the MSF Information Booklet;

as at the date the MSF Information Booklet is •despatched to Members the MSF Information Booklet (excluding the TPX Information but including any Joint Information that MSF has itself prepared or contributed) will not be misleading or deceptive in any material respect (whether by omission or otherwise);

all information MSF provided to TPX prior to the date •of the Merger Implementation Agreement is, to the best of MSF’s knowledge, accurate in all material respects and not misleading in any material respect;

MSF’s financial statements for the year ended 30 •June 2008 give a true and fair view of the financial position of it as at the relevant date;

no Insolvency Event has occurred in relation to MSF •or any of its subsidiaries;

MSF’s issued securities as of the date of the Merger •Implementation Agreement comprise only Member Shares; and

MSF has not issued any other securities or •instruments which are still outstanding and may convert into Member Shares.

The representations and warranties made by TPX are substantially the same as those made by MSF and outlined above.

The representations and warranties made by MyState Limited are as follows:

For

per

sona

l use

onl

y


it was incorporated on 8 October 2008 and is •registered in Tasmania;

it is a validly existing corporation registered under •the laws of its place of incorporation;

since incorporation, it has taken no steps other •than execution and delivery of the Merger Implementation Agreement or as otherwise strictly required by the Merger Implementation Agreement;

the execution and delivery of the Merger •Implementation Agreement by MyState Limited has been properly authorised by all necessary corporate action and MyState Limited has full corporate power and lawful authority to execute and deliver the Merger Implementation Agreement and to perform or cause to be performed its obligations under the Merger Implementation Agreement;

the Merger Implementation Agreement constitutes •legal, valid and binding obligations on MyState Limited and the Merger Implementation Agreement does not result in a breach of or default under any agreement or any writ, order or injunction, rule or regulation to which MyState Limited or any of its subsidiaries is a party or to which they are bound;

there are no restrictions on MyState Limited issuing •new MyState Limited Shares to MSF Scheme Participants and TPX Scheme Shareholders in accordance with the MSF Scheme and the TPX Scheme and there are no restrictions to those new MyState Limited Shares being quoted on the financial market conducted by ASX (initially on a deferred settlement basis and thereafter on an ordinary settlement basis), other than receiving permission from ASX to have those new MyState Limited Shares so quoted; and

the new MyState Limited Shares to be issued to MSF •Scheme Participants and TPX Scheme Shareholders will upon issue be fully paid, be free from encumbrances and will rank equally in all respects with all existing MyState Limited Shares.

No talk and no shop arrangements9.10 MSF entered into a confidentiality agreement with TPX on 3 June 2008 for the purposes of holding discussions in relation to the Transaction and negotiating the Merger Implementation Agreement.

Under the Merger Implementation Agreement, MSF and TPX have agreed that during the Exclusivity Period but subject to the exceptions below, they must not, and must ensure that their Representatives do not, except with the prior written consent of the other party:

directly or indirectly solicit, encourage, facilitate •or invite any enquiries, discussions or proposals or communicate any intention to do any of these things in relation to, or which may reasonably be expected to lead to, a Third Party Proposal;

initiate or continue any discussions or negotiations •in relation to, or which may reasonably be expected to lead to, a Third Party Proposal, whether any such discussions or negotiations are solicited or encouraged by MSF or TPX (as applicable) or otherwise; or

enter into any agreement, arrangement or •understanding in relation to a Third Party Proposal or any agreement, arrangement or understanding which may reasonably be expected to lead to the completion of a Third Party Proposal.

However, MSF and TPX may undertake any action that would otherwise be prohibited by the above exclusivity arrangements to the extent that they restrict MSF or the MSF Board, or TPX or the TPX Board (as applicable) from taking or refusing to take any action with respect to a bona fide Third Party Proposal provided that the MSF or TPX Board (as applicable) has determined, in good faith and acting reasonably, after having obtained written advice from its advisers, that:

the Third Party Proposal is, or would be if proposed, a •Superior Proposal to the MSF Scheme or TPX Scheme (as applicable) and the Transaction; and

failing to respond to the Third Party Proposal would •be likely to constitute a breach of the relevant directors’ fiduciary or statutory obligations.

The MSF Board believes that by including clauses in the Merger Implementation Agreement which allow the MSF Board not to comply with the exclusivity restrictions if non-compliance is necessary to discharge their fiduciary duties, the MSF Board are not in breach of their fiduciary duties, merely by agreeing to the exclusivity restrictions.

Regulatory approvals9.11 As noted in Section 9.8 of this Information Booklet, implementation of the MSF Scheme and the Transaction are subject to the satisfaction or waiver of various conditions. These include all necessary approvals which are required, or that MSF and TPX agree are necessary or desirable to implement the Transaction.

MSF and TPX have agreed that it is desirable to obtain an approval by the Federal Treasurer under the Financial Sector (Business Transfer and Group Restructure) Act 1999 (Restructure Act). The Restructure Act facilitates an existing financial group with an ADI, such as MSF, to

For

per

sona

l use

onl

y



99

become wholly owned by a non operating holding company and gives the Treasurer power to grant relief from specific statutory requirements of the Corporations Act that might otherwise be necessary (in addition to the MSF Scheme). Accordingly it is relevant to the Transaction, which if implemented will result in MSF becoming a wholly-owned subsidiary of MyState Limited.

In relation to the implementation of the Transaction, and in accordance with the Restructure Act, MSF is applying for a restructure approval and relief so as to:

provide for the redeemable preference share capital •to be transferred to the general reserve, to the extent it relates to Member Shares held by former Members as these amounts have already been repaid to those former Members;

provide that the amount MSF holds as deposits for •redeemable preference shares – members, being the total subscription price paid for all Member Shares remaining on issue at the MSF Record Date in connection with the MSF Scheme, is the share capital of MSF as at the Implementation Date;

provide that the share capital of MSF immediately •following implementation of the Transaction is reconstructed so that MyState Limited will be issued with the number of ordinary shares having an issue price of $1.00 per share that equals the share capital of MSF as at the Implementation Date, and all Member Shares on issue at that time will be cancelled;

provide that MyState Limited, when determining •profits of the company available for distribution to its shareholders under the Corporations Act, may disregard losses attributable to any future impairment of goodwill due to changes in the carrying value of its investments in MSF and TPX; and

permit MSF to pay dividends out of the pre-•restructure profits of MSF or other related entities, so that these payments are not an unauthorised reduction of its capital and reserves.

MSF and TPX have also agreed that it is necessary to obtain other approvals by the Federal Treasurer, which include approvals under the Banking Act 1959 in relation to MSF’s status as an ADI and the changes made by the Transaction, and the Financial Sector (Shareholdings) Act 1998 so as to permit MyState Limited to own 100% of the issued capital of MSF from the Implementation Date. A similar 100% approval by the Tasmanian Treasurer is required under the Trustee Companies Act.

Status of conditions and 9.12 termination rights

As at the date of this Information Booklet, MSF is not aware of any circumstances which would cause any of the above conditions not to be satisfied or which could result in termination of the Merger Implementation Agreement.

MSF will make a statement regarding the status of the other conditions to the Merger Implementation Agreement at the commencement of the General Meeting.

Reimbursement Amount9.13 As compensation for the costs incurred in relation to the Transaction, MSF and TPX have agreed to pay to the other $1.0 million (exclusive of GST) (Reimbursement Amount) in certain circumstances. The agreement to pay the Reimbursement Amount has regard to the guidelines issued by the Takeovers Panel.

The Reimbursement Amount may be payable if any of the following circumstances arise and the Merger Implementation Agreement is terminated in accordance with its terms prior to the Implementation Date:

either party is in material breach of its obligations •under the Merger Implementation Agreement;

a MSF Prescribed Occurrence or TPX Prescribed •Occurrence (as applicable) occurs between 10 October 2008 (the date that the Merger Implementation Agreement was executed) and 8.00am on the MSF Second Court Date or the TPX Second Court Date (whichever occurs first);

a MSF Material Adverse Change or TPX Material •Adverse Change (as applicable) occurs, or is discovered, announced, disclosed or otherwise becomes known to TPX or MSF (as applicable) between 10 October 2008 (the date that the Merger Implementation Agreement was executed) and 8.00am on the MSF Second Court Date or the TPX Second Court Date (whichever occurs first) unless the Material Adverse Change was fairly disclosed to the other party prior to 10 October 2008 or if it occurred on or after 10 October 2008 it was beyond the control of the party;

at any time before the end of the MSF Scheme •Meeting or the TPX Scheme Meeting (as applicable), a majority of the MSF or TPX Directors (as applicable) recommend a Third Party Proposal; or

at any time before the end of the MSF Scheme •Meeting or the TPX Scheme Meeting (as applicable), a majority of the MSF or TPX Directors (as applicable) make a public statement changing or

For

per

sona

l use

onl

y


withdrawing their support or recommendation of the relevant Scheme or of the Transaction, except where the change or withdrawal of their support or recommendation is as a consequence of:

any event referred to above;•

the MSF or TPX Independent Expert (as •applicable) giving an opinion to the effect that the MSF Scheme or the TPX Scheme (as applicable) and the Transaction are not in the best interests of Members or TPX Shareholders (as applicable);

in the case of MSF, terminating the Merger •Implementation Agreement prior to 8.00am on the MSF Second Court Date or the TPX Second Court Date (whichever has occurred first) due to the TPX Board (or a majority of the TPX Directors) withdrawing their recommendation that TPX Shareholders vote in favour of the TPX Scheme and the Transaction or making a public statement indicating that they no longer supported the TPX Scheme and the Transaction or that they support a TPX Third Party Proposal;

in the case of TPX, terminating the Merger •Implementation Agreement prior to 8.00am on the MSF Second Court Date or the TPX Second Court Date (whichever has occurred first) due to the MSF Board (or a majority of the MSF Directors) withdrawing their recommendation that Members vote in favour of the MSF Scheme and the Transaction or making a public statement indicating that they no longer supported the MSF Scheme and the Transaction or that they support a MSF Third Party Proposal.

The Reimbursement Amount is not payable in certain circumstances, including:

not being payable by TPX if the Merger •Implementation Agreement is terminated by TPX:

due to a material, un-rectified breach of MSF’s •obligations under the Merger Implementation Agreement;

at any time prior to 8.00am on the MSF Second •Court Date or the TPX Second Court Date (whichever occurs first) due to the TPX Board (or a majority of the TPX Directors) withdrawing or changing their recommendation due to the TPX Independent Expert giving an opinion to the effect that the TPX Scheme and the Transaction are not in the best interests of TPX Shareholders;

at any time prior to 8.00am on the MSF Second •Court Date or the TPX Second Court Date

(whichever occurs first) due to the MSF Board (or a majority of the MSF Directors) withdrawing their recommendation that Members vote in favour of the MSF Scheme and the Transaction or making a public statement indicating that they no longer support the MSF Scheme and the Transaction or that they support a MSF Third Party Proposal,

unless at the time TPX terminates the Merger Implementation Agreement, MSF was entitled to terminate the Merger Implementation Agreement as outlined below,

not being payable by MSF if the Merger •Implementation Agreement is terminated by MSF:

due to a material, un-rectified breach of TPX’s •obligations under the Merger Implementation Agreement;

at any time prior to 8.00am on the MSF Second •Court Date or the TPX Second Court Date (whichever occurs first) due to the MSF Board (or a majority of the MSF Directors) withdrawing or changing their recommendation due to the MSF Independent Expert giving an opinion to the effect that the MSF Scheme and the Transaction are not in the best interests of Members;

at any time prior to 8.00am on the MSF Second •Court Date or the TPX Second Court Date (whichever occurs first) due to the TPX Board (or a majority of the TPX Directors) withdrawing their recommendation that TPX Shareholders vote in favour of the TPX Scheme and the Transaction or making a public statement indicating that they no longer support the TPX Scheme and the Transaction or that they support a TPX Third Party Proposal,

unless at the time MSF terminates the Merger Implementation Agreement, TPX was entitled to terminate the Merger Implementation Agreement as outlined above,

not being payable by either party if the Merger •Implementation Agreement is terminated by either party:

if the court fails to make orders in accordance •the Corporations Act to convene the MSF Scheme Meeting or TPX Scheme Meeting (as applicable) and either all appeals from such failure are unsuccessful or the parties determine, in accordance with the Merger Implementation Agreement, not to initiate an appeal;

For

per

sona

l use

onl

y



101

if a court or other Government Agency has •issued an order, decree or ruling or taken other action that permanently restrains or prohibits the TPX Scheme or MSF Scheme (as applicable), or has refused to do any thing necessary to permit the Transaction, and such order, decree, ruling or other action has become final and cannot be appealed;

the conditions (as summarised above in Section •9.8) are not satisfied or waived (if capable of being waived) by the required date;

if the MSF Scheme or TPX Scheme has not •become Effective on or before the End Date,

in each case only where the circumstances giving rise to the termination would not have entitled MSF or TPX to terminate for a material, un-rectified breach by the other.

For the avoidance of doubt, the Reimbursement Amount is not payable only because the Members or TPX Shareholders fail to pass, by the requisite majorities, the resolutions to approve the MSF Scheme and TPX Scheme respectively (in circumstances where a majority of the MSF Board or TPX Board (as applicable) have not made a public statement changing or withdrawing their support or recommendation of the Transaction).

Joint Steering Committee9.14 In the course of negotiations concerning the structure of the merger the Joint Steering Committee was established to facilitate negotiations and to ensure that informed decisions could be made by the MSF Board and the TPX Board, in some instances through representatives on the Joint Steering Committee. Under the Merger Implementation Agreement, it was agreed to continue the function of the Joint Steering Committee in relation to all material matters relevant to implementing the Transaction. The Joint Steering Committee comprises:

three Directors and the Chief Executive from MSF; •and

four directors, including the Managing Director from •TPX.

The Joint Steering Committee has met regularly since the announcement of the Transaction.

MSF scheme document9.15 The MSF Scheme document contains the formal steps required for the implementation of the MSF Scheme and the Transaction if the required resolutions are passed at the General Meeting and the MSF Scheme Meeting and all other

conditions, including the approval of the Court, are satisfied or waived in accordance with the Merger Implementation Agreement. It is available on MSF’s website at mystate.com.au.

Implementation of the Transaction

If the conditions of the MSF Scheme and the TPX Scheme are satisfied:

MSF must lodge with ASIC an office copy of the •Court Order; and

TPX will, in accordance with the TPX Scheme, •lodge with ASIC an office copy of the Court Order approving the TPX Scheme,

in accordance with section 411(10) of the Corporations Act promptly after, and in any event by 5.00pm on the first Business Day (or such other Business Day as MSF and TPX agree) after the Court has approved both the MSF Scheme and the TPX Scheme and on the same Business Day.

When the MSF Scheme becomes Effective

The MSF Scheme will take effect when an office copy of the Court Order is lodged with ASIC in accordance with section 411(10) of the Corporations Act.

If the MSF Scheme becomes Effective it will:

bind MSF and all MSF Scheme Participants, including •those who did not attend the MSF Scheme Meeting, those who did not vote at that meeting and those who voted against the MSF Scheme at that meeting; and

override the MSF Constitution, to the extent of any •inconsistency.

Consent to variation of rights attaching to Member Shares

Under the MSF Scheme document, each MSF Scheme Participant consents for the purposes of section 246D(1) of the Corporations Act to the variation of rights attaching to the Member Shares effected by the Constitutional Amendment Resolution. Each MSF Scheme Participant authorises MSF to consent in writing on behalf of the MSF Scheme Participant for the purposes of section 246D(1) of the Corporations Act to the variation of rights attaching to their MSF Scheme Shares.

Implementation Steps

MSF must execute the consent referred to •immediately above;

the Constitutional Amendment Resolution will take •effect;

all of the shares in TPX will be transferred to MyState •Limited in accordance with the TPX Scheme;

For

per

sona

l use

onl

y


all of the MSF Scheme Shares together with all rights •and entitlements attaching to those shares as at the Implementation Date will be transferred to MyState Limited without the need for any further act by any MSF Scheme Participant (other than acts performed by MSF or its Directors or officers as attorney and agent of the MSF Scheme Participants) by:

MSF delivering to MyState Limited the duly •completed MSF Scheme Share Transfer duly executed by MSF as the attorney and agent of each MSF Scheme Participant as transferor;

MyState Limited duly executing the MSF Scheme •Share Transfer as transferee and delivering it to MSF for registration; and

MSF entering the name and address of MyState •Limited into the MSF Share Register as the holder of all of the MSF Scheme Shares;

MyState Limited will issue new MyState Limited •Shares to the former holders of the TPX Scheme Shares transferred to MyState Limited as provided above; and

MyState Limited will issue the MSF Scheme •Consideration to MSF Scheme Participants.

MSF Scheme Consideration

On the Implementation Date after completion of each of the steps set out above, MyState Limited will issue to or register a transfer in favour of each MSF Scheme Participant a number of new MyState Limited Shares calculated in accordance with the MSF Scheme. The total consideration of 45,496,873 MyState Limited Shares will be applied towards the issue of a MyState Share Parcel to each MSF Scheme Participant and to the trustee of the MSF Unverified Members Trust which will initially hold approximately 500,000 MyState Limited Shares for the purposes described in Section 9.4. The 45,496,873 MyState Limited Shares will represent 67.5% of the total number of MyState Limited Shares on issue immediately after implementation of the MSF Scheme and the Transaction. The number has been calculated to reflect that eligible TPX Shareholders will receive one MyState Limited Share for each TPX Share the TPX Shareholder holds.

The final number of MyState Limited Shares that each MSF Scheme Participant receives will also be dependent on the final determination of the number of MSF Scheme Participants at the MSF Record Date. MyState Share Parcels will not include any fractional entitlements and will therefore comprise a whole number of shares. Fractional entitlements will be rounded down. For details of the mathematical formula which sets out the calculation of the MSF Scheme Consideration, refer to the Merger

Implementation Agreement which is available on MSF’s website at mystate.com.au.

Foreign Scheme Shareholders

The new MyState Limited Shares to which a Foreign Scheme Shareholder would otherwise be entitled (Sale Shares) will be issued to a nominee agent approved by each of MSF, TPX and MyState Limited.

MyState Limited must procure that on, or as soon as reasonably practicable and in any event not more than 20 Business Days after, the Implementation Date, the nominee:

sells on the ASX all Sale Shares it holds; and•

pays the net proceeds received, after deducting any •applicable brokerage, stamp duty and other taxes and charges, to that Foreign Scheme Shareholder.

Payment by the nominee to a Foreign Scheme Shareholder satisfies in full the Foreign Scheme Shareholder’s right to MSF Scheme Consideration.

Each Foreign Scheme Shareholder appoints MSF as its agent to receive on its behalf any Financial Services Guide or other notices which may be given by the nominee agent appointed by MyState Limited to that Foreign Scheme Shareholder.

Covenants by MSF Scheme Participants

Each MSF Scheme Participant:

agrees to the transfer of all of their MSF Scheme •Shares to MyState Limited in accordance with the MSF Scheme;

agrees to the modification or variation of the rights •attaching to their MSF Scheme Shares arising from the MSF Scheme;

without the need for any further act, irrevocably •appoints MSF and each of its Directors and officers, jointly and severally, as that MSF Scheme Participant’s attorney and agent for the purpose of executing any document or doing any other act necessary to give full effect to the MSF Scheme and the transactions contemplated by it, including without limitation, the execution and provision of a MSF Scheme Share Transfer; and

consents to MSF doing all things and executing all •deeds, instruments, transfers and other documents as may be necessary or desirable to give full effect to the MSF Scheme and the transactions contemplated by it.

The MSF Scheme Participants who receive new MyState Limited Shares as MSF Scheme Consideration accept those new MyState Limited Shares and agree to:

For

per

sona

l use

onl

y



103

become a shareholder of MyState Limited for the •purposes of section 231 of the Corporations Act; and

be bound by the MyState Limited Constitution.•

From the Effective Date until MSF registers MyState Limited as the holder of the MSF Scheme Shares in the MSF Share Register, each MSF Scheme Participant is deemed to have appointed MSF as its attorney and agent (and directed MSF in such capacity) to appoint the chairman of MyState Limited as its sole proxy and, where applicable, corporate representative to attend shareholder meetings of MSF, exercise the votes attaching to the MSF Scheme Shares of which they are the registered holder and sign any MSF Scheme Participants’ resolution, and no MSF Scheme Participant may attend or vote at any of those meetings or sign or vote on any resolutions (whether in person, by proxy or by corporate representative). MSF undertakes in favour of each MSF Scheme Participant that it will appoint the chairman of MyState Limited as the MSF Scheme Participant’s proxy or, where applicable, corporate representative.

MSF Deed Poll9.16 Prior to the date of this Information Booklet, MyState Limited signed a deed poll in favour of MSF Scheme Participants under which it confirmed its contractual obligations under the Merger Implementation Agreement including the obligation to issue the MyState Limited Shares to MSF Scheme Participants if the MSF Scheme becomes Effective. The MSF Deed Poll operates to contractually require MyState Limited to take the necessary steps required of it in relation to the MSF Scheme and gives the MSF Scheme Participants direct contractual rights, through MSF, as their appointed agent and attorney, against MyState Limited. MyState Limited has signed a similar deed poll in relation to the TPX Scheme.

For

per

sona

l use

onl

y


For

per

sona

l use

onl

y


Section 10 - Share Sale Facility

105

Share Sale Facility

Section 10

For

per

sona

l use

onl

y


- Share Sale FacilitySection 10

Summary10.1 Share Sale Facility(a)

While your Directors believe that there are a number of advantages of obtaining MyState Limited Shares if the MSF Scheme and the Transaction are implemented, MSF Scheme Participants may offer to sell all of their MyState Limited Shares under the Share Sale Facility and be paid net sale proceeds instead. The Share Sale Facility will only operate if the MSF Scheme and the Transaction are implemented and there is sufficient buying demand from the market for MyState Limited Shares.

Your Directors do not make any recommendation as to whether you should make an election to participate in the Share Sale Facility. You should be aware that participating in the Share Sale Facility will amount to a disposal of your MyState Limited Shares for taxation purposes.

Your decision whether or not to participate in the Share Sale Facility and the nature of your participation should be made only after consultation with your investment, financial, taxation or other professional adviser based on your own particular circumstances.

Participation10.2 To participate in either the Share Sale Facility, the Sell Form must be completed in accordance with the instructions and received by MSF before 5.00pm on 28 August 2009.

If MSF does not receive a Sell Form from you before 5.00pm on 28 August 2009, you will be deemed to have elected not to participate in either the Share Sale Facility and will be issued your MyState Share Parcel under the mechanics described in Section 9. The Share Sale Facility is entirely voluntary. You do not have to sell any MyState Limited Shares. It is entirely your decision.

Different features of the Share Sale Facility10.3

Selling MyState Limited Shares through the Share Sale Facility

Selling MyState Limited Shares through your broker on the ASX

You can only sell all of your MyState Limited Shares •through the Share Sale Facility subject to there being sufficient buying demand from the market for MyState Limited Shares.

You can sell a portion of your MyState Limited •Shares.

To participate, simply complete and return either the •Sell Form. There is no need to appoint a broker.

If you have never used a broker then you must •first appoint one to represent you and establish an account.

You will receive the average price of all MyState •Limited Shares sold through the Facility. You cannot set a sale price.

You will receive the market price at the time your •transaction request is acted upon – that price may be higher or lower than the average price of all MyState Limited Shares sold through the Facility.

The date on which your transaction request is acted •on depends on the operation of Facility, however, there is no guarantee as to the price achieved through the Facility.

You can control the date on which your transaction •request is acted on through your specific directions given to your broker.

There will be zero brokerage fees paid by MSF •Scheme Participants for using the Share Sale Facility.

You must pay all brokerage fees that are agreed with •your broker (plus any applicable GST).

For

per

sona

l use

onl

y


Section 10 - Share Sale Facility

107

Important dates for the Share Sale Facility10.4 The timetable below is indicative only. MSF has the right to vary any or all of these dates and times and will provide reasonable notice of any such variation. Certain dates and times are conditional on the approval of the MSF Scheme and the Transaction by Members and by the Court.

Share Sale open (Offer Period) Friday, 17 July 2009 to Friday, 28 August 2009

Last date for submitting your Sell Form to participate in the Share Sale Facility

Friday, 28 August 2009

Holding statements dispatched to MSF Scheme Participants for shares issued under the MSF Scheme

Friday, 4 September 2009

Commencement of normal trading in MyState Limited Shares Monday, 7 September 2009

Share Sale Facility Trading Period Monday, 7 September 2009 to Thursday, 1 October 2009

Cheques posted to participants for shares sold under the Share Sale Facility

No later than Thursday, 15 October 2009

The Share Sale Facility – your 10.5 questions answered

Who is eligible to participate in the Share Sale Facility and when is it open?

If you are a MSF Scheme Participant, you will be able to participate in the Share Sale Facility if you so elect. The period during which you will be able to elect to participate in the Share Sale Facility will be from Friday, 17 July 2009 to Friday, 28 August 2009 inclusive (Offer Period).

MSF may extend or shorten the Offer Period or suspend or terminate the Share Sale Facility at any time up until the close of the Offer Period.

If you participate in the Share Sale Facility all of the MyState Limited Shares you are entitled to receive under the MSF Scheme will be offered for sale during the period commencing on Monday, 7 September 2009 and expected to end on Thursday, 1 October 2009 (Share Sale Facility Trading Period).

What price will I receive?

If you choose to participate in the Share Sale Facility you cannot specify the price at which your Sell Form will be completed. The price received by you for your MyState Limited Shares sold through the Share Sale Facility will be the average price of all MyState Limited Shares sold.

However, you should note that that price may be different to the price for MyState Limited Shares appearing in the newspaper or quoted by the ASX on the day that your Sell Form is sent or on any other day, and may not be the best price obtained on the trading day or trading days that your MyState Limited Shares are sold.

The amount of money you are paid (if you participate in the Share Sale Facility) for your MyState Limited Shares may as a consequence of the averaging mechanism mentioned above be more or less than is received for a like number of MyState Limited Shares by third party brokers engaged by MSF. Please note that none of MyState Limited, MSF nor any other party involved in the Share Sale Facility gives any assurance as to the price that will be received for MyState Limited Shares under the Share Sale Facility.

The implementation of the Share Sale Facility may result in a significant number of MyState Limited Shares being offered for sale at the same or within a relatively short time. This could have the effect of depressing the sale price for MyState Limited Shares.

When will I receive the proceeds from the sale of my MyState Limited Shares?

For eligible MSF Scheme Participants participating in the Share Sale Facility, the cheque for your sale proceeds will be posted to you within ten business days after the end of the Facility Trading Period. Cheques will only be made payable to the MSF Scheme Participant and posted to the MSF Scheme Participant’s address on the MSF Share Register and made payable to the name(s) on the share register.

What if there is not a sufficient demand to buy my MyState Limited Shares under the Share Sale Facility?

If there is not a sufficient market demand for MyState Limited Shares, MSF Scheme Shareholders submitting Sell Forms will be treated on a pro rata basis. This means that all MSF Scheme Shareholders that lodge their Sell Form by Friday, 28 August 2009 will have a pro rata number of

For

per

sona

l use

onl

y


their MyState Limited Shares sold and will receive MyState Limited Shares to the extent that they do not receive cash.

Can I withdraw my form?

No. When you return your Sell Form you are irrevocably bound to sell the number of MyState Limited Shares you are entitled to as MSF Scheme Consideration.

Further information on the Share Sale Facility

The terms and conditions of the Share Sale Facility are attached to this Information Booklet as Appendix 2.

For

per

sona

l use

onl

y


Section 11 - Implementation procedures

109

Implementation procedures

Section 11

For

per

sona

l use

onl

y


- Implementation Section 11 procedures

Introduction11.1 If:

the Constitutional Amendment Resolution is duly •passed by Members at the General Meeting;

the MSF Scheme is approved by Members at the MSF •Scheme Meeting; and

all other conditions to the MSF Scheme and the •Transaction as described in Section 9.8 of this Information Booklet (other than Court approval of the MSF Scheme) have been satisfied or waived (as applicable),

the further general steps required to implement the MSF Scheme and the Transaction are as described in this Section 11.

The description of these general steps is based on the obligations of MSF, TPX and MyState Limited under the Merger Implementation Agreement. MyState Limited has also executed a Deed Poll in which it acknowledges and confirms, for the benefit of MSF Scheme Participants, its obligation to pay them the MSF Scheme Consideration. The full terms of the Merger Implementation Agreement and the Deed Poll are available on MSF’s website at mystate.com.au.

Court approval of the MSF Scheme11.2 MSF will apply to the Court for orders approving the MSF Scheme. It is expected that the Court hearing to approve the MSF Scheme will be held on or about 20 August 2009. The Court has a wide, overriding discretion whether or not to approve the MSF Scheme under section 411(4)(b) of the Corporations Act.

The Corporations Act and the Supreme Court (Corporations) Rules 2008 provide a procedure for Members to oppose the approval by the Court of the MSF Scheme. If you wish to oppose the approval of the MSF Scheme at the MSF Second Court Hearing, you may do so by filing with the Court and serving on MSF a notice of appearance, in the prescribed form together with any affidavit on which you wish to rely at the hearing. The notice of appearance and affidavit must be served on MSF at its address for service at least one day before the MSF Second Court Hearing Date. The date for the MSF Second Court Hearing is currently scheduled to be 20 August 2009, though an earlier or later date may be sought. Any change to this date will be publicly announced.

Receipt of Court orders11.3 If the Court makes orders approving the MSF Scheme, MSF will lodge a copy of those orders with ASIC under section 411(10) of the Corporations Act. As soon as the copies of the Court orders approving the MSF Scheme are lodged with ASIC, the MSF Scheme will become legally Effective. This is expected to occur on or about 21 August 2009.

If the MSF Scheme becomes legally Effective, MSF and MyState Limited will become bound to implement the MSF Scheme in accordance with the terms of the MSF Scheme and the Deed Poll.

Only Members who qualify as MSF Scheme Participants will be bound by and have the benefit of the MSF Scheme. Section 9.2 of this Information Booklet describes the principles in the MSF Scheme for determining the identity of MSF Scheme Participants.

If the MSF Scheme does not become Effective by the End Date, the MSF Scheme will lapse.

Implementation11.4 MSF Record Date(a)

The MSF Record Date is the date for determining entitlements to the MSF Scheme Consideration. The MSF Record Date is expected to be 5.00pm on 13 August 2009.

Section 246D(1) consent and Constitutional (b) Amendment Resolution

On the Implementation Date MSF will execute on behalf of each MSF Scheme Participant a written consent for the purposes of s246D(1) of the Corporations Act to the variation of rights attached to their MSF Scheme Shares. The Constitutional Amendment Resolution will then take effect.

Transfer and registration of MSF Scheme (c) Shares

Once the Constitutional Amendment Resolution has taken effect, the MSF Scheme Shares held by MSF Scheme Participants, together with all rights and entitlements attaching to those MSF Scheme Shares as at the Implementation Date, will be transferred to MyState Limited, without the need for any further act by any MSF Scheme Participant, by MSF effecting on behalf of MSF Scheme Participants a valid transfer or transfers of the MSF Scheme Shares to MyState Limited (this may be by a master MSF Scheme Share Transfer).

For

per

sona

l use

onl

y


Section 11 - Implementation procedures

111

Issue of MSF Scheme Consideration(d)

On the Implementation Date, MyState Limited will issue the MyState Limited Shares to MSF Scheme Participants.

If you are a Foreign Scheme Shareholder the MyState Limited Shares to which you would otherwise be entitled will be sold by a Nominee under the Share Sale Facility. This means that while you will be paid a cash sum in respect of your MyState Limited Shares, you will not receive the ongoing benefit of the rights that attach to MyState Limited Shares.

Trading MyState Limited Shares on 11.5 ASXDeferred settlement market(a)

Trading on the ASX of MyState Limited Shares issued as MSF Scheme Consideration is expected to commence on a deferred settlement basis on or about 25 August 2009. Deferred settlement trading will continue until the dispatch of holding statements, which is expected to occur on or about 4 September 2009. These dates are indicative only and are subject to change without notice.

MSF and MyState Limited disclaim all liability, whether in negligence or otherwise, to any MSF Scheme Participants who trades MyState Limited Shares before receiving their holding statement.

CHESS and issuer sponsored holdings(b)

Shortly following the issue of MyState Limited Shares to MSF Scheme Participants, MSF Scheme Participants will be sent a holding statement which will provide details of their Securityholder Reference Number (SRN) for their holding on the issuer sponsored subregister. MSF Scheme Participants receiving MyState Limited Shares under the MSF Scheme will be required to quote their SRN, as applicable, in all dealings with a stockbroker or the MyState Limited share registry.

MyState Limited will not issue share certificates to its shareholders.

MSF Scheme Participants will be issued subsequent holding statements at the end of any month in which there has been a change to their holding on the MyState Limited share register and as otherwise required under the Listing Rules.

Information held by MSF 11.6 that it intends to provide to MyState Limited

Under the tax law, a company is entitled to ask its shareholders to disclose their tax file numbers (TFN) to the company. A shareholder can choose to disclose or not disclose the TFN. As part of the MSF Scheme, MSF intends to transfer to MyState Limited (or the share registry of MyState Limited) those TFNs which have been provided to MSF by MSF Scheme Participants.

Under the MSF Scheme, the MSF Scheme Participants consent to MSF doing all things necessary, expedient or incidental to the implementation of the MSF Scheme. MSF intends to also transfer details of the MSF Scheme Participant’s bank account at MSF for payment by direct credit of dividends and other cash amounts to MyState Limited on behalf of the MSF Scheme Participants to MyState Limited (or the share registry of MyState Limited) on behalf of the MSF Scheme Participants in respect of their tax affairs so that MyState Limited will not otherwise be required to collect this information again. Following the Effective Date, you may make use of the Investor Centre located at www-au.computershare.com and select the Investor Centre page. You will need to have your SRN to gain access to your information from this secure internet site.

If a Member does not wish their TFN and bank account details to be disclosed and collected in accordance with the process discussed above, they should notify MSF in writing before the Record Date.

For

per

sona

l use

onl

y


For

per

sona

l use

onl

y


Section 12 - Additional Information

113

Additional information

Section 12

For

per

sona

l use

onl

y


- Additional Section 12 Information

Introduction12.1 This Section 12 sets out the statutory information required by section 412(1)(a) of the Corporations Act and Part 3 of Schedule 8 to the Corporations Regulations 2001 (Cth) to be included in the Information Booklet, but only to the extent that this information is not otherwise disclosed in other Sections. This Section also includes additional information that your Directors consider material to a decision on how to vote on the resolution to be considered at the General Meeting and the MSF Scheme Meeting.

In this Section, the terms ‘associate’, ‘marketable securities’, ‘related body corporate’ and ‘subsidiary’ have the meanings given to them in the Corporations Act. The term ‘executive officer’ is assumed to mean ‘senior manager’ as defined in the Corporations Act including the company secretary.

Rights attaching to MyState 12.2 Limited Shares and Summary of MyState Limited Constitution

The rights attaching to the MyState Limited Shares are set out in the MyState Limited Constitution and arise from a combination of the MyState Limited Constitution, legislation, general law and while MyState Limited is listed on ASX, the Listing Rules and ASTC Settlement Rules. A summary of the rights attaching to the MyState Limited Shares and certain provisions of the MyState Limited Constitution are set out below. This summary is not intended to be exhaustive and is qualified by the full terms of the Constitution, a copy of which is available on the MSF website at mystate.com.au.

General

The MyState Limited Shares will on implementation of the Transaction be the only securities on issue in the capital of MyState Limited. All MyState Limited Shares are of the same class and rank equally in all respects. The MyState Limited Board is empowered to issue shares of other classes with such rights as the MyState Limited Directors determine.

Notices

Each MyState Limited Shareholder is entitled to receive notice of and to attend and vote at general meetings of MyState Limited and to receive all notices, accounts and other documents required to be sent to MyState Limited Shareholders under the MyState Limited Constitution, the

Corporations Act or the Listing Rules. The quorum required is 25 members present in person or by proxy, attorney or representative.

General meetings and voting

At a general meeting of MyState Limited, each MyState Limited Shareholder present in person or by proxy, representative or attorney has one vote on a show of hands and one vote for each fully paid MyState Limited Share held on a poll (adjusted for any partly paid shares on issue).

Voting is by a show of hands unless a poll is demanded and not withdrawn. A poll may be demanded by at least five MyState Limited Shareholders entitled to vote on the resolution, MyState Limited Shareholders with at least five per cent of the votes that may be cast on the resolution of the poll, or the chairperson.

The chairperson does not have a casting vote on a show of hands or on a poll.

Dividends

The MyState Limited Board may, from time to time, resolve to distribute the profits of MyState Limited by way of a dividend. A dividend declared by the MyState Limited Board will be payable in respect of each MyState Limited Share, subject to the rights attaching to any MyState Limited Shares with special dividend rights.

Shareholding limitations and enforcement of shareholding limitation

No MyState Limited Shareholders may, together with their associates, hold more than 10% of the MyState Limited Shares. This reflects the requirements of the Trustee Companies Act under which MyState Limited is a holding company of an approved trustee company. MyState Limited Shareholders holding MyState Limited Shares in excess of the shareholding limitations may be required to dispose of their MyState Limited Shares held in excess of the shareholding limitations and otherwise have their rights to vote at general meetings or to receive distributions or dividends suspended in relation to the MyState Limited Shares held in excess of the shareholding limitations.

Transfer of MyState Limited Shares

Subject to the Constitution and the Listing Rules, a transfer of MyState Limited Shares may be effected in any manner compliant with the ASTC Settlement Rules, including by a written instrument approved by the MyState Limited Directors. The MyState Limited Directors may refuse to register a transfer of MyState Limited Shares in circumstances permitted by the Listing Rules, ASX or the MyState Limited Constitution.

For

per

sona

l use

onl

y



115

Non-marketable parcels

Subject to the MyState Limited Constitution, the Corporations Act, the Listing Rules and the ASTC Settlement Rules, MyState Limited may sell the MyState Limited Shares held by a MyState Limited Shareholder where the number of MyState Limited Shares held is less than a marketable parcel.

Share buy-backs

MyState Limited may buy back MyState Limited Shares at times and on terms determined from time to time by the MyState Limited Directors.

Proportional takeover provisions

The Constitution contains provisions requiring the approval of MyState Limited Shareholders to any proportional takeover scheme. A transfer resulting from acceptance of an offer made under a proportional takeover bid must not be registered unless and until approved by an ordinary resolution. This provision will lapse in three years unless renewed by a special resolution of MyState Limited Shareholders.

Winding up

Subject to any rights that may be attached to MyState Limited securities issued with rights different to the MyState Limited Shares, if MyState Limited is wound up, the liquidator may, with the sanction of a special resolution, divide the whole or any part of the property of MyState Limited amongst the MyState Limited Shareholders.

For this purpose, the liquidator may determine a value considered fair for any property and may decide how the division shall be carried out as between MyState Limited Shareholders or different classes of MyState Limited Shareholders.

MyState Limited Directors – appointment and removal

The minimum number of MyState Limited Directors is 5 and the maximum number of MyState Limited Directors is 12. MyState Limited Directors are elected at the annual general meeting.

The MyState Limited Constitution provides that:

at the 2009 annual general meeting, two non-•executive MyState Limited Directors nominated by TPX must retire and subject to the MyState Limited Constitution, the Corporations Act and the Listing Rules, will be eligible for re-election;

at the 2010 annual general meeting, two non-•executive MyState Limited Directors nominated by TPX must retire and subject to the MyState Limited Constitution, the Corporations Act and the Listing Rules, one will be eligible for re-election;

at the 2010 annual general meeting, two non-•executive MyState Limited Directors nominated by MSF must retire and subject to the MyState Limited Constitution, the Corporations Act and the Listing Rules, one will be eligible for re-election; and

at the 2011 annual general meeting, one non-•executive MyState Limited Director nominated by TPX and three MyState Limited Directors nominated by MSF must retire and subject to the MyState Limited Constitution, the Corporations Act and the Listing Rules, all will be eligible for re-election.

Subject to the requirements of the Listing Rules, the retirement requirements set out above may be varied if approved by:

no less than 80% of the MyState Limited Directors; •and

the MyState Limited Directors whose appointment •will be directly affected by the proposed variation,

provided that there must be no more than eight of the initial ten MyState Limited Directors at the close of the 2011 annual general meeting of the Company.

Subject to the requirements of the Listing Rules, following the 2011 annual general meeting, one-third of the MyState Limited Directors (those who have been longest in office since their last election) must retire at each annual general meeting. A retiring MyState Limited Director is eligible for re-election.

The MyState Limited Board may appoint a person to fill a casual vacancy or in addition to the existing MyState Limited Directors. This person will hold office until the next annual general meeting of MyState Limited, at which time they must be elected.

MyState Limited Directors – voting

Questions arising at a MyState Limited Board meeting will be decided on a majority vote of the MyState Limited Directors present and entitled to vote on the matter. The chairperson does not have a casting vote in respect of a tied vote.

MyState Limited Directors – remuneration

Subject to the Listing Rules, the MyState Limited Directors (other than the executive MyState Limited Directors) shall be paid for their services the maximum aggregate sum approved from time to time by MyState Limited in general meeting.

The remuneration of an executive MyState Limited Director is fixed by the MyState Limited Board.

For

per

sona

l use

onl

y


MyState Limited will pay all reasonable expenses of all MyState Limited Directors in attending MyState Limited Board meetings and carrying out their duties.

MyState Limited Directors’ and officers’ indemnity

MyState Limited may, to the extent permitted by law, indemnify each of its current or former Directors’ and officers against any liability or any legal costs incurred because of the office they hold with MyState Limited.

MyState Limited’s right to recover certain payments

MyState Limited has certain rights including an entitlement to recover payments from a MyState Limited Shareholder and its personal representative and assigns, including by way of lien or set-off, in certain limited circumstances, including in relation to amounts unpaid on partly paid shares in MyState Limited and in relation to dividends or distributions paid to persons holding shares in breach of the shareholding limitations.

Alteration of Constitution

The MyState Limited Constitution may only be amended by a special resolution passed by at least three quarters of the votes cast by MyState Limited Shareholders present and voting at a general meeting. If the Corporations Legislation Amendment (Financial Services Modernisation) Bill 2009 (Cth) is enacted (see Section 5.16 for a discussion of this proposed legislation), the MyState Limited Board will consider whether it is appropriate to recommend to MyState Limited Shareholders any changes to the MyState Limited Constitution in order to reflect the requirements of the new legislation, including in relation to shareholding limitations.

Substantial holders12.3 There are no persons who have a substantial holding (as that term is defined in section 9 of the Corporations Act) in MSF as at the date of this Information Booklet.

MSF Directors12.4 The MSF Board consists of the following MSF Directors:

MSF Director’s name Position

Tony Reidy Chairman

Colin Hollingsworth Deputy Chairman

Peter Armstrong MSF Director

Dianne Bowerman MSF Director

Bob Gordon MSF Director

Tim Gourlay MSF Director

Graeme Little MSF Director

Marketable securities of MSF held 12.5 by or on behalf of MSF Directors

As at the date of this Information Booklet, each MSF Director holds one Member Share in their own right.

Marketable securities of TPX held 12.6 by or on behalf of MSF Directors

As at the date of this Information Booklet, no MSF Director holds any TPX Shares either directly or indirectly.

Member Share sales12.7 Member Shares are not able to be sold or transferred. As such, no Member Shares were sold in the six months immediately prior to the date this Information Booklet was lodged for registration with ASIC.

Relevant interests in marketable 12.8 securities of MyState Limited

Each of the MSF Directors who are MyState Limited Directors will, prior to the Implementation Date, be the registered holder of ten shares in MyState Limited. Those MyState Limited Shares form part of the MSF Scheme Consideration and will be transferred to MSF Scheme Participants under the MSF Scheme.

Other than those MyState Limited Shares and MyState Limited Shares forming part of the MyState Share Parcel to be received by the MSF Directors as MSF Scheme Participants, no MSF Director nor any of the MSF Directors’ associates has any relevant interest in, or in any marketable security issued by, MyState Limited.

For

per

sona

l use

onl

y



117

MSF Directors’ interests in any 12.9 contracts with MyState Limited

No MSF Director nor any of the MSF Directors’ associates has entered into, or otherwise has any interest in, any contract with MyState Limited or any of its respective associates other than in the ordinary course of MSF’s retail banking business.

MSF Directors’ interests in 12.10 agreements connected with or conditional on the MSF Scheme and the Transaction

The MSF Directors appointed to the Board of MyState Limited, as set out in Section 6.3, will be entitled to receive MSF Directors remuneration as summarised in Section 6.10.

Subject to Section 12.11, no MSF Director has any other interest in any agreement or arrangement connected with or conditional on the outcome of the MSF Scheme and the Transaction.

MSF Director retirements12.11 Dianne Bowerman and Graeme Little have expressed their intention to retire as MSF Directors if the MSF Scheme and the Transaction are implemented. Dianne Bowerman has agreed to provide consultancy services to MSF on an “as required” basis in relation to the MSF Unverified Members Trust for a period of up to 24 months from the Implementation Date. The remuneration payable under the consultancy arrangement in each 12 months of the contract will not exceed the amounts paid to Ms Bowerman as a director of MSF.

No other payment or benefit is proposed to be made or given in connection with the MSF Scheme and the Transaction to any MSF Director, secretary or executive officer of MSF, or of any related body corporate of MSF, as compensation for loss of, or as consideration for, or in connection with, his or her retirement from office in MSF or in a related body corporate.

Material changes in the financial 12.12 position of MSF

So far as is known to any MSF Director, except as disclosed in this Information Booklet or as otherwise disclosed by MSF, the financial position of MSF has not materially changed since the date of its final report for the year ended 30 June 2008, released to Members at the Annual General Meeting on 15 October, 2008.

Other than the MSF Scheme or as set out in this Information Booklet, there are no significant changes to the nature of MSF’s activities as at the date of this Information Booklet.

Auditors12.13 Wise Lord and Ferguson Chartered Accountants are the auditors of MSF.

Effect on MSF creditors12.14 MSF has paid and is paying all its creditors within normal terms of trade. It is solvent and is trading in an ordinary commercial manner. The MSF Scheme and the Transaction will not adversely affect the interests of MSF’s creditors.

Impact on material contracts of 12.15 MSF

MSF is a party to a large number of agreements, including property leases. Some of these agreements may contain change of control clauses, which could enable the relevant counterparties to terminate the agreements upon Implementation of the MSF Scheme and the Transaction. If a counterparty does terminate an agreement, MSF could lose the benefit of the agreement. However, the MSF Directors do not believe there are any contracts material to MSF which will be terminated or, if terminated, will not be able to be replaced on similar terms.

MSF Directors’ intentions 12.16 regarding the business, assets and employees of MSF

If the MSF Scheme and the Transaction is approved and implemented, MyState Limited will have 100% ownership of MSF and will control MSF. Your Directors have been advised that the intentions of MyState Limited are as set out in Section 6 of this Information Booklet.

ASX waivers12.17 An application will be made for listing MyState Limited Shares on the financial market conducted by ASX within seven days of the date of this MSF Information Booklet. In anticipation of that application, MyState Limited has sought a number of confirmations from ASX and waivers of a number of ASX Listing Rules:

ASX has been requested to waive a number of ASX •Listing Rules to permit the constitution of MyState Limited to contain provisions entitling the MyState Limited Directors to ensure compliance with the requirements of the Trustee Companies Act (see section 7.3(j) for further details of these provisions);

For

per

sona

l use

onl

y


ASX has been requested to confirm that provisions •in MyState Limited’s constitution which ensure compliance with APRA’s ‘fit and proper person’ policies for directors do not breach the ASX Listing Rules; and

ASX has been requested to confirm that MyState •Limited is not required to issue a prospectus (disclosure document) under Part 6D(2) of the Corporations Act on the basis that this MSF Information Booklet is a sufficient substitute;

ASX has provided confirmation on each of the above matters.

ASX has also been requested to confirm that the shareholder spread requirements for a company listing its shares on the financial market conducted by ASX can be satisfied by the shareholdings in MyState Limited held by former TPX Shareholders.

Further, as the MyState Limited Group includes an ADI, MSF will maintain a relatively high level of cash holdings (or assets readily convertible to cash). MyState Limited will seek a waiver from ASX to allow cash (or assets readily convertible to cash) to represent more than half of MyState Limited’s total tangible assets despite MyState Limited not being committed to expending more than half of these resources.

In accordance with the requirements for the listing of MyState Limited, MyState Limited has confirmed:

there will be enough working capital to carry out •MyState Limited’s immediate objectives as outlined in Section 6 of this Information Booklet;

MyState Limited has not raised capital in the three •months prior to the date of this Information Booklet and will not need to do so in the three months from the date of this Information Booklet;

admission to the official list by ASX does not indicate •the merits of MyState Limited; and

ASX takes no responsibility for the contents of this •Information Booklet.

No unacceptable circumstances12.18 The MSF Board believes that the MSF Scheme and the Transaction do not involve any circumstances in relation to the affairs of MSF that could reasonably be characterised as constituting unacceptable circumstances for the purposes of section 657A of the Corporations Act.

Quotation of MyState Limited 12.19 Shares

Within seven days after the date of this Information Booklet, MyState Limited will make an application for the admission to quotation on ASX of MyState Limited Shares to be issued pursuant to the MSF Scheme. MyState Limited has no reason to believe that the MyState Limited Shares will not be admitted to quotation by the ASX.

Consents and disclaimers12.20 The following parties have given and have not, before the time of registration of this Information Booklet by ASIC, withdrawn their written consent to be named in this Information Booklet in the form and context in which they are named:

Minter Ellison as legal and tax advisers to MSF;•

PKF as the MSF Independent Expert and to the •inclusion of the MSF Independent Expert's Report set out in Appendix 1 to this Information Booklet. PKF received fees of approximately $130,000 plus GST for the production of the report;

Wise Lord & Ferguson as auditors of MSF;•

TPX (in relation to the TPX Information and the Joint •Information);

MyState Limited in relation to the information •concerning MyState Limited in this Information Booklet; and

Computershare Investor Services Pty Limited as the •TPX Share Registry.

Each of the above persons:

does not make, or purport to make, any statement •in this Information Booklet or any statement on which a statement in this Information Booklet is based other than, in the case of PKF, a statement or report included in this Information Booklet with the consent of that party;

to the maximum extent permitted by law, expressly •disclaims and takes no responsibility for any part of this Information Booklet, other than a reference to its name and, in the case of PKF, any statement or report which has been included in this Information Booklet with the consent of that party; and

except TPX, does not assume any responsibility •for the accuracy or completeness of the TPX Information. The TPX Information has been prepared by and is the responsibility of TPX.

For

per

sona

l use

onl

y



119

Independent advice12.21 Members should consult their legal, financial, taxation or other professional adviser if they have any queries regarding:

the MSF Scheme or the Transaction;•

the taxation implications for them if the Transaction •is implemented;

your Directors' recommendations and intentions in •relation to the MSF Scheme and the Transaction, as set out in Section 3.1 of this Information Booklet; or

any other aspects of this Information Booklet.•

Other material information12.22 Except as set out in this Information Booklet, in the opinion of the MSF Board, there is no other information material to the making of a decision in relation to the MSF Scheme and the Transaction, being information that is within the knowledge of any director or of any related body corporate of MSF which has not been previously disclosed to Members.

MSF will issue a supplementary document to this Information Booklet if it becomes aware of any of the following between the date of lodgement of this Information Booklet for registration by ASIC and the Effective Date:

a material statement in this Information Booklet is •false or misleading in a material respect;

a material omission from this Information Booklet;•

a significant change affecting a matter included in •this Information Booklet; or

a significant new matter has arisen and it •would have been required to be included in this Information Booklet if it had arisen before the date of lodgement of this Information Booklet for registration by ASIC.

Depending on the nature and timing of the changed circumstances and subject to obtaining any relevant approvals, MSF may circulate and publish any supplementary document by:

placing an advertisement in a prominently published •newspaper which is circulated generally throughout Australia; and/or

posting the supplementary document to Members at •their registered address as shown in the MSF Share Register; and/or

posting a statement on the MSF website at mystate.•com.au,

as MSF in its absolute discretion considers appropriate.

Privacy12.23 MSF may collect personal information in the process of implementing the MSF Scheme and the Transaction. Such information may include the name and contact details of Members, and the name of persons appointed by Members to act as proxy, corporate representative or attorney at the General Meeting or the MSF Scheme Meeting. The primary purpose of collection of the personal information is to assist MSF in the conduct of the General Meeting and the MSF Scheme Meeting and to enable the Transaction to be implemented in the manner described in this Information Booklet. Without this information, MSF may be hindered in its ability to carry out these purposes to full effect. The collection of certain personal information is authorised by the Corporations Act.

Personal information may be disclosed to the MSF Share Registry, print and mail service providers, authorised securities brokers and to related bodies corporate of MSF, TPX and MyState Limited.

Members have certain rights to access personal information that has been collected. Members should contact the Member Information Line in the first instance, if they wish to request access to their personal information.

Members who appoint a named person to act as their proxy, corporate representative or attorney at either or both the meetings should ensure that they inform that person of the contents of this Section 12.23.

For

per

sona

l use

onl

y


For

per

sona

l use

onl

y


Section 13 - General Meeting Notice and MSF Scheme Meeting Notice

121

General Meeting Notice and MSF Scheme Meeting Notice

Section 13

For

per

sona

l use

onl

y


– Meeting noticesSection 13

Notice of General MeetingNotice is given that a meeting of the holders of member shares (Members) of MyState Financial Credit Union of Tasmania Limited ACN 067 729 195 (MSF) will be held at Tattersall’s Park Function Centre, 6 Goodwood Road, Glenorchy, Tasmania on Tuesday, 18 August 2009 commencing at 6.00pm.

Purpose of the meeting

The purpose of the meeting is to consider, and if thought fit, approve a resolution to amend the constitution of MSF for the purposes of the scheme of arrangement proposed to be made between MyState Limited, MSF and the Members.

Under the constitution, for the resolution to be passed it must be approved as a special resolution. In addition, at least five per cent of qualifying members of MSF must give their written consent to the amendments made by the resolution either before the meeting or within three (3) months after the special resolution is passed.

The Information Booklet contains details about the proposed amendments to the constitution, and the MSF Scheme, which you should consider in making an informed voting decision.

Agenda

Chairman’s welcome.

Business of the meeting.

To consider and, if thought fit, to approve the following resolution submitted by the MSF Board:

Constitutional Amendment Resolution

‘That, if the MSF Scheme is approved by Court Order of the Supreme Court of Tasmania (with or without modifications), the MSF Constitution be amended with effect from the time the MSF Scheme becomes Effective in the manner described in Section 9.6(c) headed ‘The General Meeting – Constitutional Amendment Resolution’ of the Information Booklet that accompanies this Notice of General Meeting and more particularly as shown in the copy of the MSF Constitution tabled at the meeting and signed and dated by the Chairman of the meeting for the purposes of identification.’

Close of meeting.

Dated this 29th day of June 2009.

BY ORDER OF THE BOARD

Scott Lukianenko Company Secretary

Registration will commence at 5.00pm on the date of the meeting. Please refer to Section 2 of the Information Booklet for information concerning:

Registration of Members attending the meeting •

Registration of proxies and other representatives, appointed by Members, who are attending the meeting•

The requirements for the appointment of proxies and representatives•

The voting majority requirements for the resolution•

Entry to the meeting will be restricted to Members, their duly appointed representatives, and other persons who have •been approved by the MSF Board to be present at the meeting.

For

per

sona

l use

onl

y



123

Explanatory notes for the General Meeting

GENERAL

Capitalised words and phrases used in this Notice of General Meeting (including the proposed resolution) have the same meaning as set out in the Glossary in Section 14 of this Information Booklet of which this notice forms part.

This notice should be read in conjunction with the entire Information Booklet.

VOTING ENTITLEMENTS

Each person registered in the MSF Share Register as the holder of Member Shares at the Voting Entitlement Time is entitled to attend and vote at the General Meeting, either in person, by proxy or attorney or, in the case of a corporate Member, by a personal representative.

REQUIRED VOTING MAJORITY

For the Constitutional Amendment Resolution to be approved at the General Meeting, the resolution must be passed as a special resolution. Votes in favour of the resolution must be received from at least 75% of the votes cast by Members present and voting at the MSF General Meeting, whether in person, by proxy, by attorney of, in the case of a corporate MSF Member or proxy, by a representative. The MSF Scheme is conditional on this resolution being passed.

For the special resolution to be passed it is also required that at least five percent of qualifying members (by number) of MSF give their written consent to the amendments of the MSF Constitution proposed by the Constitutional Amendment Resolution. The consent may be given before or within three (3) months after the special resolution is passed. The consent requirement applies because Members have a right under the MSF Constitution to surplus and profits of MSF on its winding up. The Constitutional Amendment Resolution will modify that right, or have the effect of modifying, restricting or repealing its operation. For further details refer to Section 9.6(b) of the Information Booklet.

HOW TO VOTE

Members entitled to vote at the General Meeting may vote:

by attending the meeting and voting in person; or•

by appointing an attorney to attend the meeting •and vote on their behalf or, in the case of corporate Members or proxies, a corporate representative to attend the meeting and vote on its behalf; or

by appointing a proxy to attend and vote on their •behalf, using the proxy form accompanying this Notice or online by logging onto www.investorvote.com.au using the control number noted on your proxy form. A proxy may be an individual.

VOTING IN PERSON (OR BY ATTORNEY OR REPRESENTATIVE)

Members or their proxies, attorneys or •representatives (including representatives of corporate proxies) wishing to vote in person by attending the General Meeting should bring a form of personal identification (such as their driver’s licence).

To attend and vote as attorney for a member, or as •parent, guardian or trustee for a member who is a minor, the original or a certified copy of the power of attorney or other authority to operate (if any) under which the person will exercise powers on behalf of the member must be received by the MSF Share Registry before 7.00pm on Sunday, 16 August in any of the following ways:

By post in the enclosed reply paid envelope provided to the MSF Registry: The Registrar GPO Box 242 Melbourne, Victoria 3001

By fax to the Share Registry on: (if within Australia) 1800 783 447 (if outside Australia) +61 3 9473 2555

To vote in person, you or your proxy, attorney, •representative or corporate proxy representative must attend the General Meeting.

A vote cast in accordance with the appointment of a •proxy or power of attorney is valid even if before the vote was cast the appointor:

died; -

became mentally incapacitated; -

revoked the proxy or power; or -

unless MSF received written notification of the death, mental incapacity, revocation or transfer before the meeting or adjourned meeting.

VOTING BY PROXY

Members wishing to vote by proxy at this meeting •must:

complete and sign or validly authenticate -the proxy form, which is enclosed with the Information Booklet; and

For

per

sona

l use

onl

y


deliver the signed and completed proxy form -to the MSF Share Registry by 7.00pm on Sunday, 16 August 2009 in accordance with the instructions below.

Submitting proxy votes

Members wishing to submit proxy votes for the •General Meeting must return the enclosed proxy form to MSF in any of the following ways:

Online log on through www.investorvote.com.au using the control number noted on your proxy form; or



Note• : proxies may not be returned by email.

Notes for proxy appointments

A Member entitled to attend and vote at the General •Meeting is entitled to appoint a proxy.

A Member cannot appoint more than one proxy •in respect of a single membership. A membership carries one vote, and only the whole vote may be exercised.

A proxy need not be a Member. •

A proxy will be able to exercise the vote of the •member who has appointed them, unless the member attends the General Meeting in person in which case the proxy is invalidated.

A Member who is entitled to cast two or more •votes at the General Meeting, in respect to separate memberships of MSF (for example, as a member individually and as the primary joint member of another membership), may appoint a proxy in respect of each membership.

A proxy may demand or join in demanding a poll.•

A proxy form, along with instructions on how to vote •using the proxy form will be sent to every Member entitled to cast a vote.

A proxy may vote or abstain as he or she chooses •except where the appointment of the proxy directs the way the proxy is to vote on a particular resolution. If an appointment directs the way the proxy is to vote on a particular resolution:

if the proxy has two or more appointments -that specify different ways to vote on the resolution - the proxy must not vote on a show of hands;

if the proxy is the chair - the proxy must vote -on a poll and must vote in the way directed; and

if the proxy is not the chair - the proxy need -not vote on a poll, but if the proxy does so, the proxy must vote in the way directed.

If a proxy appointment is signed by the Member but •does not name the proxy or proxies in whose favour it is given, the Chairman may either act as proxy or complete the proxy appointment by inserting the name or names of one or more MSF Directors or the company secretary.

VOTING BY CORPORATE REPRESENTATIVES

To vote in person at the General Meeting, a Member •or proxy which is a body corporate may appoint an individual to act as its representative.

To vote by corporate representative at the meeting, •a corporate Member or proxy should obtain an Appointment of Corporate Representative Form from the MSF Share Registry, complete and sign the form in accordance with the instructions on it. The appointment should be lodged at the registration desk on the day of the meeting.

The appointment of a representative may set out •restrictions on the representative’s powers.

For

per

sona

l use

onl

y



125

Notice of MSF Scheme MeetingNotice is given that, by an Order of the Supreme Court of Tasmania (Court) made on 29 June 2009, pursuant to section 411(1) of the Corporations Act 2001 (Cth) (Corporations Act), a meeting of the holders of member shares (Members) of MyState Financial Credit Union of Tasmania Limited ACN 067 729 195 (MSF) will be held at Tattersall’s Park Function Centre, 6 Goodwood Road, Glenorchy, Tasmania on Tuesday, 18 August 2009.

The meeting will commence at 7.00pm, or as soon as possible thereafter should the business of the General Meeting called for 6.00pm not be completed at 7.00pm.

Purpose of the meeting

The purpose of the meeting is to consider, and if thought fit, approve a resolution for a scheme of arrangement proposed to be made between MSF and the Members.

The Information Booklet contains details about the MSF Scheme which you should consider in making an informed voting decision.

Agenda

Chairman’s welcome.

Business of the meeting.

To consider and, if thought fit, to approve the following resolution:

‘That pursuant to and in accordance with the provisions of section 411 of the Corporations Act, the members are in favour of the arrangement proposed between MyState Financial Credit Union of Tasmania Limited and its members, designated as the ‘MSF Scheme’, as contained in and more particularly described in the Information Booklet accompanying the notice calling this meeting (with or without any modifications or conditions required or approved by the Court to which MSF agrees).’

Close of meeting.

Court approval

In accordance with section 411(4)(b) of the Corporations Act, the MSF Scheme is subject to the approval of the Court. If the resolution put to this meeting is approved, MSF intends to apply to the Court for the approval of the MSF Scheme.

Dated this 29th day of June 2009.

BY ORDER OF THE BOARD

Scott Lukianenko Company Secretary

Registration will commence at 5.00pm on the date of the meeting. Please refer to Section 2 of the Information Booklet for information concerning:

Registration of Members attending the meeting •

Registration of proxies and other representatives, appointed by Members, who are attending the meeting•

The requirements for the appointment of proxies and representatives•

The voting majority requirements for the resolution•

Entry to the meeting will be restricted to Members, their duly appointed representatives, and other persons who have •been approved by the MSF Board to be present at the meeting.

For

per

sona

l use

onl

y


Explanatory notes for the MSF Scheme Meeting

GENERAL

Capitalised words and phrases used in this Notice of MSF Scheme Meeting (including the proposed resolution) have the same meaning as set out in the Glossary in Section 14 of this Information Booklet of which this notice forms part.

This notice should be read in conjunction with the entire Information Booklet.

VOTING ENTITLEMENTS

Each person registered in the MSF Share Register as the holder of Member Shares at the Voting Entitlement Time is entitled to attend and vote at the MSF Scheme Meeting, either in person, by proxy or attorney or, in the case of a corporate Member, by a personal representative.

REQUIRED VOTING MAJORITY

For the MSF Scheme to be approved at the MSF Scheme Meeting, votes in favour of the MSF Scheme must be received from:

a majority in number (more than 50%) of Members •that vote (in person, by proxy, by corporate representative or by attorney) at the MSF Scheme Meeting, although the Court has the power by order to disregard this, see Section 2.1(b) of the Information Booklet for details; and

Members who together hold at least 75% of the •total number of Member Shares voted at the MSF Scheme Meeting.

HOW TO VOTE

Members entitled to vote at the MSF Scheme Meeting may vote:

by attending the meeting and voting in person; or•

by appointing an attorney to attend the meeting •and vote on their behalf or, in the case of corporate Members or proxies, a corporate representative to attend the meeting and vote on its behalf; or

by appointing a proxy to attend and vote on their •behalf, using the proxy form accompanying this Notice or online by logging onto www.investorvote.com.au using the control number noted on your proxy form. A proxy may be an individual.

VOTING IN PERSON (OR BY ATTORNEY OR BY REPRESENTATIVE)

Members or their proxies, attorneys or •representatives (including representatives of

corporate proxies) wishing to vote in person by attending the MSF Scheme Meeting should bring a form of personal identification (such as their driver’s licence).

To attend and vote as attorney for a member, or as •parent, guardian or trustee for a member who is a minor, the original or a certified copy of the power of attorney or other authority to operate (if any) under which the person will exercise powers on behalf of the member must be received by the MSF Share Registry before 7.00pm on Sunday, 16 August in any of the following ways:



To vote in person, you or your proxy, attorney, •representative or corporate proxy representative must attend the MSF Scheme Meeting.

A vote cast in accordance with the appointment of a •proxy or power of attorney is valid even if before the vote was cast the appointor:

died; -

became mentally incapacitated; -

revoked the proxy or power; or -

unless MSF received written notification of the death, mental incapacity, revocation or transfer before the meeting or adjourned meeting.

VOTING BY PROXY

Members wishing to vote by proxy at this meeting •must:

complete and sign or validly authenticate -the proxy form, which is enclosed with the Information Booklet; and

deliver the signed and completed proxy form -to the MSF Share Registry by 7.00pm on Sunday, 16 August 2009 in accordance with the instructions below.

Submitting proxy votes

Members wishing to submit proxy votes for the MSF •Scheme Meeting must return the enclosed proxy form to MSF in any of the following ways:

For

per

sona

l use

onl

y



127

Online log on through www.investorvote.com.au using the control number noted on your proxy form; or



Note• : proxies may not be returned by email.

Notes for proxy appointments

A Member entitled to attend and vote at the MSF •Scheme Meeting is entitled to appoint a proxy.

A Member cannot appoint more than one proxy •in respect of a single membership. A membership carries one vote, and only the whole vote may be exercised.

A proxy need not be a Member. •

A proxy will be able to exercise the vote of the •member who has appointed them, unless the member attends the MSF Scheme Meeting in person in which case the proxy is invalidated.

A Member who is entitled to cast two or more votes •at the MSF Scheme Meeting, in respect to separate memberships of MSF (for example, as a member individually and as the primary joint member of another membership), may appoint a proxy in respect of each membership.

A proxy may demand or join in demanding a poll.•

A proxy form, along with instructions on how to vote •using the proxy form will be sent to every Member entitled to cast a vote.

A proxy may vote or abstain as he or she chooses •except where the appointment of the proxy directs the way the proxy is to vote on a particular resolution. If an appointment directs the way the proxy is to vote on a particular resolution:

if the proxy has two or more appointments -that specify different ways to vote on the resolution - the proxy must not vote on a show of hands;

if the proxy is the chair - the proxy must vote -on a poll and must vote in the way directed; and

if the proxy is not the chair - the proxy need -not vote on a poll, but if the proxy does so, the proxy must vote in the way directed.

If a proxy appointment is signed by the Member but •does not name the proxy or proxies in whose favour it is given, the Chairman may either act as proxy or complete the proxy appointment by inserting the name or names of one or more MSF Directors or the company secretary.

VOTING BY CORPORATE REPRESENTATIVES

To vote in person at the MSF Scheme Meeting, a •Member or proxy which is a body corporate may appoint an individual to act as its representative.

To vote by corporate representative at the meeting, •a corporate Member or proxy should obtain an Appointment of Corporate Representative Form from the MSF Share Registry, complete and sign the form in accordance with the instructions on it. The appointment should be lodged at the registration desk on the day of the meeting.

The appointment of a representative may set out •restrictions on the representative’s powers.

For

per

sona

l use

onl

y


For

per

sona

l use

onl

y


Section 14 - Glossary

129

Glossary

Section 14

For

per

sona

l use

onl

y


- GlossarySection 14 The following terms used in this Information Booklet (including the Notice of General Meeting and Notice of MSF Scheme Meeting that form part of this Information Booklet) have the meanings given to them below, unless the context otherwise requires.

ACCC the Australian Competition and Consumer Commission

ADI authorised deposit-taking institution

AFSL Australian Financial Services Licence

APRA Australian Prudential Regulation Authority

ASIC Australian Securities and Investments Commission

ASX ASX Limited ACN 008 624 691 or, as the context requires, the financial market conducted by it

ASTC ASX Settlement and Transfer Corporation Pty Ltd ABN 49 008 504 532

ASTC Settlement Rules the operating rules of ASTC

Bendigo Bendigo and Adelaide Bank Limited

Business Day a week day on which Australian banks are open for business in Hobart and Launceston in Tasmania, Australia

CHESS the Clearing House Electronic Sub-register System for the electronic transfer of securities operated by ASX Settlement and Transfer Corporation Pty Limited ACN 008 504 532

connectfinancial Connect Credit Union of Tasmania Limited, the previous name of MSF

Constitutional Amendment Resolution

the special resolution of Members to enable or facilitate the transfer of Member Shares as provided by the MSF Scheme for the purposes of the Demutualisation and the MSF Scheme

Corporations Act the Corporations Act 2001 (Cth)

Court the Supreme Court of Tasmania

Court Order the order of the Court approving the MSF Scheme or the TPX Scheme (as applicable) made under section 411(4)(b) of the Corporations Act

CRN Customer Reference Number

CUFFS Credit Union Financial Support Scheme

Deed Poll the deed poll executed by MyState Limited for the benefit of MSF Scheme Participants in which MyState Limited acknowledges and confirms its obligation to provide the MSF Scheme Consideration. A copy of the executed Deed Poll is available on MSF’s website at mystate.com.au

Demutualisation the demutualisation of MSF under Part 5 of Schedule 4 to the Corporations Act and pursuant to the MSF Scheme whereby, amongst other things, the existing rights of Members are cancelled and MSF Scheme Participants receive an issue of new MyState Limited Shares, allocated as determined by the MSF Board

Director or MSF Director a director of MSF (the MSF Directors as at the date of this Information Booklet are the persons specified in Section 4.8)

EBIT earnings before interest and tax

EBITDA earnings before interest, tax, depreciation and amortisation

For

per

sona

l use

onl

y



131

Effective the coming into effect, pursuant to section 411(10) of the Corporations Act, of the order of the Court approving the MSF Scheme or the TPX Scheme (as applicable) under section 411(4)(b) of the Corporations Act

Effective Date the date on which the order of the Court approving the MSF Scheme or the TPX Scheme (as applicable) under section 411(4)(b) of the Corporations Act comes into effect pursuant to section 411(10) of the Corporations Act

ELTIP MyState Limited’s Executive Long Term Incentive Plan

End Date 30 September 2009 or such later date as agreed in writing by MSF, TPX and MyState Limited

ESP MyState Limited’s Employee Share Plan

Exclusivity Period the period commencing on 10 October 2008 and ending on the earlier of:

the End Date;•

the Implementation Date; and•

the date the Merger Implementation Agreement is terminated in accordance with •its terms.

Facility Trading Period the period commencing on Monday, 7 September 2009 and expected to end on Thursday, 1 October 2009 during which MyState Limited Shares are sold under the Share Sale Facility

Federal Government Guarantee

the Federal Government guarantee of deposits of Australian banks, building societies and credit unions and Australian subsidiaries of foreign-owned banks that are regulated by APRA, announced on 12 October 2008

FIS Financial Information Service

Foreign Scheme Shareholder a MSF Scheme Participant whose address in the MSF Share Register as at the MSF Record Date is a place outside Australia or its external territories

General Meeting the general meeting of MSF to be held on Tuesday, 18 August 2009 to consider and, if thought fit, pass the Constitutional Amendment Resolution. The notice convening the General Meeting forms part of this Information Booklet

Government Agency any government or governmental, semi-governmental, administrative, fiscal, regulatory or judicial body, department, commission, authority, tribunal, agency or entity and includes ASIC, APRA, ASX, ACCC and the Treasurer of the Commonwealth of Australia

GST Goods and Services Tax

HIN Holder Identification Number

Headcount Test a majority in number (more than 50%) of shareholders of a company that are present and voting (in person, by proxy, by corporate representative or by attorney) at a meeting of members in relation to the approval of a scheme of arrangement under the Corporations Act

HQLA High Quality Liquid Assets

ICAAP Internal Capital Adequacy Assessment Process

Implementation Date the date that the MSF Scheme and the TPX Scheme are to be implemented according to their terms. The Implementation Date is expected to be on or about 1 September 2009

Information Booklet this Information Booklet in relation to the MSF Scheme and the Transaction

For

per

sona

l use

onl

y


Insolvency Event means in relation to a person:

insolvency official: the appointment of a liquidator, provisional liquidator, •administrator, receiver and manager or other insolvency official (whether made under an Australian law or a foreign law) to the person or to the whole or a substantial part of the property or assets of the person;

arrangements with creditors: the entry by the person into a compromise or •arrangement with its creditors generally;

winding up: the calling of a meeting to consider a resolution to wind up the •person (other than where the resolution is frivolous or cannot reasonably be considered to be likely to lead to the actual winding up of the person) or the making of an application or order for the winding up or deregistration of the person other than where the application or order (as the case may be) is set aside within 14 days;

suspends payment: the person suspends or threatens to suspend payment of its •debts generally;

ceasing business: the person ceases or threatens to cease to carry on business; or•

presumed insolvency: the person is or becomes unable to pay its debts when they •fall due within the meaning of the Corporations Act or is otherwise presumed to be insolvent under the Corporations Act

Investor Centre Computershare’s online investor centre which allows registered users to view holdings for companies registered with Computershare online, among other things

islandstate Island State Credit Union Limited ACN 087 651 287

Joint Information information included in this Information Booklet regarding the profile of the MyState Limited Group (if the Transaction is implemented) and the risk factors associated with the Transaction

Joint Steering Committee the committee established in accordance with the Merger Implementation Agreement to oversee and progress the Transaction

Listing Rules the listing rules of ASX

Management Integration Committee

the committee that will be established if the MSF Scheme and the Transaction are implemented to ensure a successful integration of the merger with TPX

Material Adverse Change when used in relation to MSF:

a single event, or collection of events, occurrences or matters which has, or •have in aggregate, resulted in or could reasonably be expected to result in, an adverse effect on the net assets of MSF of $6,000,000 or more, or the earnings or prospects of MSF in any financial year of $2,400,000 or more; and

when used in relation to TPX:

a single event, or collection of events, occurrences or matters which has, or •have in aggregate, resulted in or could reasonably be expected to result in, an adverse effect on the net assets of MSF of $1,700,000 or more, or the earnings or prospects of MSF in any financial year of $1,050,000 or more

Member a person who is registered in the MSF Share Register as a holder of one or more Member Shares

Member Share an issued member share in MSF having the rights set out in Appendix 1 Division A of the MSF Constitution

Member Holding a Member’s holding of a Member Share in his or her own right

For

per

sona

l use

onl

y



133

Merger Implementation Agreement

the agreement between MyState Limited, MSF and TPX dated 10 October 2008 and amended on 21 January 2009 and 22 June 2009 under which each party undertakes specific obligations to give effect to the MSF Scheme and the Transaction. The Merger Implementation Agreement (without schedules) and as amended on 21 January 2009 and 22 June 2009 is available on MSF’s website at mystate.com.au

MSF or MyState Financial MyState Financial Credit Union of Tasmania Limited ACN 067 729 195 (formerly Connect Credit Union of Tasmania Limited)

MSF Board the board of directors of MSF as at the date of this Information Booklet

MSF Constitution the constitution of MSF, which is available for download from MSF’s website at mystate.com.au

MSF Independent Expert or PKF

PKF Corporate Advisory (East Coast) Pty Limited

MSF Independent Expert’s Report

the report of the MSF Independent Expert expressing an opinion on whether the MSF Scheme and the Transaction are in the best interests of Members. The MSF Independent Expert’s Report is set out in Appendix 1 of this Information Booklet

MSF Information all information contained in this Information Booklet excluding the TPX Information and the Joint Information

MSF Record Date the date for determining entitlements to the MSF Scheme Consideration. The MSF Record Date is expected to be 5.00pm on Thursday, 13 August 2009

MSF Scheme the proposed Demutualisation and scheme of arrangement under Part 5.1 of the Corporations Act between MSF and the MSF Scheme Participants to give effect to the MSF Scheme, subject to any modifications or conditions made or required by the Court under section 411(6) of the Corporations Act and approved in writing by MSF and TPX. The scheme document is available on MSF’s website at mystate.com.au

MSF Scheme Consideration the aggregate consideration of MyState Limited Shares to be issued or transferred to MSF Scheme Participants pursuant to the MSF Scheme or vested in the trustee of the MSF Unverified Members Trust

MSF Scheme Meeting the meeting of Members to be held on Tuesday, 18 August 2009 to consider and vote on the MSF Scheme. The notice convening the Scheme Meeting forms part of this Information Booklet

MSF Scheme Participant a Member other than MSF, as determined by the MSF Board, who held a Member Share at the time the Transaction was announced (9.30am on 10 October 2008) and who continues to hold the Member Share at the MSF Record Date.

MSF Scheme Share a Member Share on issue as at the MSF Record Date

MSF Scheme Share Transfer a duly completed and executed instrument of transfer for each MSF Scheme Participant of their MSF Scheme Shares which may be a master transfer of all the MSF Scheme Shares held by all MSF Scheme Participants

MSF Second Court Date the first day on which the MSF Second Court Hearing is heard

MSF Second Court Hearing the hearing by the Court of MSF’s application to approve the MSF Scheme under section 411(4)(b) of the Corporations Act

MSF Share Register the register of members of MSF maintained by or on behalf of MSF in accordance with section 168(1) of the Corporations Act

MSF Unverified Members Trust

the trust to be established by MSF to hold MyState Trust Shares

MyState Limited MyState Limited ACN 133 623 962

For

per

sona

l use

onl

y


MyState Limited Board the board of directors of MyState Limited, from time to time

MyState Limited Constitution

the constitution of MyState Limited, which is available from MSF website at mystate.com.au

MyState Limited Director a director of MyState Limited and, where appropriate, includes an alternate director

MyState Limited Group MyState Limited and each of its related bodies corporate after the implementation of the Transaction, including MSF and TPX

MyState Limited Share fully paid ordinary shares in the capital of MyState Limited

MyState Limited Shareholder

a person who is registered in the MyState Limited Share Register as a holder of one or more MyState Limited Shares

MyState Limited Share Register

the register of members of MyState Limited maintained by or on behalf of MyState Limited in accordance with section 168(1) of the Corporations Act

MyState Share Parcel the entitlement of a MSF Scheme Participant to MyState Limited Shares determined in accordance with the rules adopted by the MSF Board for the purpose of the MSF Scheme

MyState Trust Shares shares in MyState Limited held by a trustee to be appointed by MSF for the benefit, and on behalf, of persons whose eligibility as an MSF Scheme Participant was not determined as at the MSF Record Date and which is established not later than 30 June 2010

NOHC Non Operating Holding Company

Nominee Bell Potter Securities Limited (ACN 006 390 772)

NPAT net profit after tax

NPBT net profit before tax

Offer Period the period during which you will be able to elect to participate in the Share Sale Facility, which will be from Friday, 17 July 2009 to Friday, 28 August 2009 inclusive

Prescribed Occurrence other than as required or contemplated by the Merger Implementation Agreement or the Transaction, or with the express written consent of MSF or TPX (as applicable), the occurrence of any of the following by TPX or MSF (as applicable):

converting all or any of its shares into a larger or smaller number of shares;•

resolving to reduce its share capital in any way or reclassifying, combining, •splitting or redeeming or repurchasing directly or indirectly any of its shares;

entering into a buy-back agreement in relation to its issued share capital;•

resolving to approve the terms of a buy-back agreement in relation to its issued •share capital under the Corporations Act;

declaring, paying or distributing any dividend, bonus or other share of its profits •or assets or returning or agreeing to return any capital to its members;

issuing shares, or granting an option over its shares, or agreeing to make such an •issue or grant such an option;

issuing or agreeing to issue, securities or other instruments convertible into shares •or debt securities;

making or proposing any change or amendment to its constitution other than as •provided by the Constitutional Amendment Resolution;

disposing, or agreeing to dispose, of the whole, or a substantial part, of its •business or property other than in the ordinary course of business;

creating, or agreeing to create, any mortgage, charge, lien or other encumbrance •over the whole, or a substantial part, of its business or property; or

an Insolvency Event occurring in relation to it or any of its subsidiaries.•

For

per

sona

l use

onl

y



135

Reimbursement Amount $1.0 million (exclusive of GST)

Representatives an officer, employee or professional adviser of TPX, MSF or MyState Limited or their subsidiaries

RSE Registered Superannuation Entity

Sale Shares the new MyState Limited Shares to which a Foreign Scheme Shareholder would otherwise be entitled (refer section 9.14)

Section a section of this Information Booklet

Sell Form the form enclosed with this Information Booklet for you to complete if you want to participate in the Share Sale Facility

Share Sale Facility the facility under which MSF Scheme Participants may elect to sell the MyState Limited Shares they are eligible to receive as MSF Scheme Consideration if the MSF Scheme and the Transaction are implemented

SRN Securityholder Reference Number

Superior Proposal a bona fide Third Party Proposal which:

in the determination of the MSF Board or the TPX Board (as applicable) acting •in good faith is reasonably capable of being financed and completed within a reasonable time, taking into account the nature of the Third Party Proposal and the person or persons making it; and

in the determination of the MSF Board or the TPX Board (as applicable) acting •in good faith and in order to satisfy what the MSF Board or the TPX Board (as applicable) reasonably considers to be its fiduciary or statutory duties, would, if completed substantially in accordance with its terms, be likely to result in a transaction more favourable to the Members or TPX Shareholders than the Transaction.

Terminating Party a party (TPX, MSF or MyState Limited) that terminates the Merger Implementation Agreement at any time prior to 8.00am on the MSF Second Court Date or the TPX Second Court Date (whichever occurs first)

TBS Tasmanian Banking Services Limited

TFN Tax File Number

Third Party Proposal any expression of interest, proposal or offer by any person made in writing to evaluate or enter into any transaction which is similar to the Transaction or under which, other than as required or contemplated by the Transaction:

that person (together with its associates) may acquire a relevant interest in all or •a substantial percentage of TPX Shares or Member Shares (as applicable) or the issued shares of any subsidiary of TPX or MSF (as applicable);

that person may acquire, directly or indirectly (including by way of joint venture, •dual listed company structure, strategic alliance or otherwise), any interest in all or a substantial part of the business or assets of TPX or MSF (as applicable); or

that person may otherwise acquire control of or merge or amalgamate with TPX •or MSF or any subsidiary of TPX or MSF (as applicable).

TPX Tasmanian Perpetual Trustees Limited ACN 009 475 629

TPX Board the Board of directors of TPX as at the date of this Information Booklet

TPX Constitution the constitution of TPX, which is available on the TPX website at tasmanianperpetual.com.au

For

per

sona

l use

onl

y


TPX Director a director of TPX (the TPX Directors as at the date of this Information Booklet are the persons specified in Section 1.1)

TPX Explanatory Booklet the explanatory booklet sent by TPX to the TPX Shareholders in relation to the TPX Scheme and the Transaction

TPX Indemnified Parties TPX, each of its related bodies corporate and each of their respective Representatives

TPX Independent Expert or Deloitte

Deloitte Corporate Finance Pty Limited

TPX Information information regarding TPX and its related bodies corporate included in Sections 5 and 6 of this Information Booklet

TPX Record Date the date for determining entitlements to the TPX Scheme Consideration, being 5.00pm on the fifth Business Day (or such as other Business Day as MSF, TPX and MyState Limited agree) following the date on which the TPX Scheme becomes Effective. The TPX Record Date is expected to be 7.00pm on 28 August 2009

TPX Scheme the proposed scheme of arrangement under Part 5.1 of the Corporations Act between TPX and the TPX Scheme Shareholders to give effect to the TPX Scheme, subject to any modifications or conditions made or required by the Court under section 411(6) of the Corporations Act and approved in writing by MSF and TPX

TPX Scheme Consideration the consideration to be provided by MyState Limited to TPX Scheme Shareholders pursuant to the TPX Scheme

TPX Scheme Meeting the meeting of TPX Shareholders to be held on Wednesday, 19 August 2009 to consider and vote on the TPX Scheme.

TPX Scheme Share a TPX Share held by a TPX Shareholder as at the TPX Record Date

TPX Scheme Shareholder a TPX Shareholder as at the TPX Record Date

TPX Second Court Date the first day on which the TPX Second Court Hearing is heard

TPX Second Court Hearing the hearing by the Court of TPX’s application to approve the TPX Scheme under section 411(4)(b) of the Corporations Act

TPX Share a fully paid ordinary share in the capital of TPX

TPX Shareholder a person who is registered in the TPX share register as a holder of one or more TPX Shares

Transaction the proposed merger of MSF and TPX pursuant to the TPX Scheme and the MSF Scheme

Trustee Companies Act the Trustee Companies Act 1953 (Tasmania)

Trustee Holding the holding by a Member of a Member Share on trust for someone else

Voting Entitlement Time the time for determining eligibility of Members to vote on the Constitutional Amendment Resolution at the General Meeting and the MSF Scheme at the MSF Scheme Meeting, being 5.00pm on Thursday, 13 August 2009

VWAP has the meaning given to it in Section 5.5.

For

per

sona

l use

onl

y


Appendix 1 - MSF Independent Expert's Report

137

MSF Independent Expert’s Report

Appendix 1

For

per

sona

l use

onl

y

MyState Financial Credit Union of Tasmania Limited

Independent Expert’s Report

29 June 2009

138

For

per

sona

l use

onl

y

MyState Financial Credit Union of Tasmania Limited

Independent Expert’s Report

29 June 2009

139

For

per

sona

l use

onl

y

Tel: 61 3 9603 1700 | Fax: 61 3 9602 3870 | www.pkf.com.au

PKF Corporate Advisory (East Coast) Pty Limited | Australian Financial Services Licence 247420 | ABN 70 050 038 170

Level 14, 140 William Street | Melbourne | Victoria 3000 | Australia

GPO Box 5099 | Melbourne | Victoria 3001

PKF East Coast Practice is a member of PKF Australia Limited a national association of independent chartered accounting and consulting firms each trading as PKF. The East Coast Practice has offices in NSW, Victoria and Brisbane. PKF Australia Limited is a member of PKF International, an association of legally independent chartered accounting and consulting firms.

Liability limited by a scheme approved under Professional Standards Legislation

29 June 2009

The Directors MyState Financial Credit Union of Tasmania Limited 172 Collins Street HOBART TAS 7000

Dear Directors

PROPOSED DEMUTUALISATION AND MERGER WITH TASMANIAN PERPETUAL TRUSTEES LIMITED INDEPENDENT EXPERT’S REPORT

Introduction

The Directors of MyState Financial Credit Union of Tasmania Limited (“MSF”) have engaged PKF Corporate Advisory (East Coast) Pty Limited (“PKFCA” or “we”), to prepare an independent expert’s report (“Report”) in respect of the proposed transaction involving MSF’s demutualisation (including the proposed modifications of the MSF constitution) and merger with Tasmanian Perpetual Trustees Limited (“TPX”) hereinafter referred to as “the Transaction”.

The Transaction is to be implemented by way of separate but conditional schemes of arrangement between MSF and its members (“MSF Scheme”) and between TPX and its ordinary shareholders (“TPX Scheme”). The MSF Scheme and the TPX Scheme are interdependent and neither the MSF Scheme nor the TPX Scheme can proceed without the other proceeding. If either the MSF Scheme or the TPX Scheme is not approved, the demutualisation of MSF and its merger with TPX will not take effect.

The Transaction is also conditional on certain terms in the Merger Implementation Agreement (“MIA”) and the Deed of Amendment to the Merger Implementation Agreement (“Deed of Amendment”) being satisfied. Further details of the Transaction are set out at Section 1 of our Report.

If the Transaction proceeds and the other conditions precedent in the MIA and Deed of Amendment are satisfied, the eligible members of MSF (“MSF Members”) will ultimately receive fully paid ordinary shares in a newly incorporated public company, MyState Limited, in exchange for cancelling their existing rights as members of MSF. MyState Limited has been incorporated to enable the merger of MSF and TPX. MSF Members will receive ordinary shares in MyState Limited such that MSF Members will collectively have a relevant interest in 67.5 percent of the issued capital of MyState Limited and TPX shareholders will collectively have a relevant interest in 32.5 percent of the issued capital of MyState Limited.

The purpose of our Report is to express an opinion as to whether the Transaction (including the proposed modifications of the MSF constitution) is “in the best interests” of MSF Members as a whole.

Conclusion

In our opinion, for the reasons set out in this Report, the Transaction (including the proposed modifications of the MSF constitution) is in the best interests of MSF Members as a whole as it is fair and reasonable.

The reasons for our opinion are summarised below.

MyState Financial Credit Union of Tasmania Limited – Independent Expert’s Report Page 3 of 93

The Transaction is Fair

PKFCA has assessed the fair market value of MSF on a minority interest basis to be between $115 million and $119.6 million, with a mid-point of $117.3 million. By comparison, PKFCA has assessed the fair market value of the consideration to be received by MSF Members collectively, namely 67.5 percent of the issued capital of MyState Limited, on a minority interest basis to be between $135.3 million and $143 million, with a mid-point of $139.2 million. We note that for an offer to be “fair”, the consideration under the terms of an offer should be equal to or greater than the value of the securities under offer. Based on the above, the assessed range of values for the consideration exceeds the assessed range of values for MSF, which means that the Transaction is “fair”.

We note that the above analysis is based on an assessed fair market value of MSF that ignores the current inability of MSF Members to transfer or dispose of their member shares in MSF (“Member Shares”).

The assessed value of MyState Limited above indicates that the premium which will be received by MSF Members under the Transaction is in the range of 17.6 percent to 19.6 percent. The premium predominately reflects the cost savings anticipated to result from the Transaction’s implementation. Again however, we note that currently, Member Shares are not able to be sold or transferred. This lack of negotiability would ordinarily warrant a discount to the valuation of MSF as set out above. We have ignored this lack of negotiability in assessing the value of MSF and note that the indicative premium would be higher were this lack of negotiability to be factored in.

The Transaction is Reasonable

Set out below are the matters considered by PKFCA in assessing the reasonableness of the Transaction.

Advantages of the Transaction

Unlocking Value

In accordance with the constitution of MSF (“MSF Constitution”) and the mutual status of MSF, MSF Members are not entitled to dividends and may only access the accumulated net assets of MSF in the event of winding up. As such, the value of MSF is only able to be realised by MSF Members through demutualisation, winding up or the receipt of significantly more favourably priced products and services than those available from other financial institutions.

If the Transaction is approved, MSF Members will exchange their Member Shares for ordinary shares in MyState Limited which will be listed on the Australian Securities Exchange (“ASX”). MSF Members will have the ability to sell their shares in order to realise their investment and unlock value or hold their shares in order to participate in future dividends and benefit from any capital growth.

MSF’s products and services are priced in the context of a very competitive environment. PKFCA does not consider MSF Members to be currently receiving products and services on terms that are significantly more favourable than those available at competing financial institutions.

Greater Access to Capital

Implementation of the Transaction should provide MSF with better access to capital markets through the listing of MyState Limited on the ASX and the increased scale of the business. MSF has historically relied on retained profits as a source of capital and improved access to capital markets will allow MyState Limited to respond more quickly and with more flexibility to strategic opportunities such as expansion or diversification and allow them to compete more effectively with banks and other authorised deposit taking institutions (“ADIs”).

Greater Director and Management Accountability

If the Transaction is approved, MSF Members will receive a direct financial interest in MyState Limited including a direct interest in dividends, the performance of the business and the share price. This is likely

140

For

per

sona

l use

onl

y


The Transaction is Fair

PKFCA has assessed the fair market value of MSF on a minority interest basis to be between $115 million and $119.6 million, with a mid-point of $117.3 million. By comparison, PKFCA has assessed the fair market value of the consideration to be received by MSF Members collectively, namely 67.5 percent of the issued capital of MyState Limited, on a minority interest basis to be between $135.3 million and $143 million, with a mid-point of $139.2 million. We note that for an offer to be “fair”, the consideration under the terms of an offer should be equal to or greater than the value of the securities under offer. Based on the above, the assessed range of values for the consideration exceeds the assessed range of values for MSF, which means that the Transaction is “fair”.

We note that the above analysis is based on an assessed fair market value of MSF that ignores the current inability of MSF Members to transfer or dispose of their member shares in MSF (“Member Shares”).

The assessed value of MyState Limited above indicates that the premium which will be received by MSF Members under the Transaction is in the range of 17.6 percent to 19.6 percent. The premium predominately reflects the cost savings anticipated to result from the Transaction’s implementation. Again however, we note that currently, Member Shares are not able to be sold or transferred. This lack of negotiability would ordinarily warrant a discount to the valuation of MSF as set out above. We have ignored this lack of negotiability in assessing the value of MSF and note that the indicative premium would be higher were this lack of negotiability to be factored in.

The Transaction is Reasonable

Set out below are the matters considered by PKFCA in assessing the reasonableness of the Transaction.

Advantages of the Transaction

Unlocking Value

In accordance with the constitution of MSF (“MSF Constitution”) and the mutual status of MSF, MSF Members are not entitled to dividends and may only access the accumulated net assets of MSF in the event of winding up. As such, the value of MSF is only able to be realised by MSF Members through demutualisation, winding up or the receipt of significantly more favourably priced products and services than those available from other financial institutions.

If the Transaction is approved, MSF Members will exchange their Member Shares for ordinary shares in MyState Limited which will be listed on the Australian Securities Exchange (“ASX”). MSF Members will have the ability to sell their shares in order to realise their investment and unlock value or hold their shares in order to participate in future dividends and benefit from any capital growth.



Implementation of the Transaction should provide MSF with better access to capital markets through the listing of MyState Limited on the ASX and the increased scale of the business. MSF has historically relied on retained profits as a source of capital and improved access to capital markets will allow MyState Limited to respond more quickly and with more flexibility to strategic opportunities such as expansion or diversification and allow them to compete more effectively with banks and other authorised deposit taking institutions (“ADIs”).


If the Transaction is approved, MSF Members will receive a direct financial interest in MyState Limited including a direct interest in dividends, the performance of the business and the share price. This is likely

141

For

per

sona

l use

onl

y


to create an increased interest in the performance of Directors and management which in turn may lead to improved Director and management accountability and focus.

Disadvantages of the Transaction

Loss of Membership Rights

Each Member Share currently entitles the holder the right to one vote per member at general meetings, the right to participate in the winding up of MSF and the right to redeem their Member Shares. Should the Transaction be approved, MSF Members would relinquish these rights. The MyState Limited ordinary shares to be received under the Transaction will carry different rights including the ability to transfer ownership of shares, the right to dividends and the right to vote at shareholder meetings. One key difference is that the right to vote will be proportionate to the number of MyState Limited ordinary shares held whereas currently MSF Members are entitled to one vote regardless of their level of investment. Ordinarily this change in rights would provide an opportunity for significant or controlling interests to be established with the capacity to influence or control strategy and dividend policy. However, the Trustee Companies Act 1953 (Tasmania) has been amended and will apply a 10 percent shareholder cap to MyState Limited and therefore this disadvantage is largely mitigated.

Potential Divergence of Interests

As a mutual, MSF currently operates for the sole benefit of its members who are also customers. Approval and implementation of the Transaction may create divergent interests between maximising profits and therefore shareholder returns and maximising benefits provided to customers. However, as set out above, MSF’s products and services are priced in the context of a very competitive environment and therefore PKFCA does not consider that the pricing or range of products and services would be significantly affected by the Transaction.

Loss of Mutuality

Some MSF Members may be attracted to the current mutual status of MSF and the associated principles of mutuality such as the consideration of members’ benefits above competing commercial considerations.

Taxation

Implementation of the Transaction and the resulting ownership of MyState Limited ordinary shares may result in taxation implications for MSF Members. MSF Members should seek and rely on their own tax advice.

Conclusion

Based on the above, we have concluded that the Transaction is “reasonable”, having weighted the advantages versus the disadvantages.

This summary opinion should be read in conjunction with the following Report that sets out in full the purpose, scope, basis of evaluation, limitations, valuation analysis and our other findings.

A glossary of terms used throughout the Report is set out in Appendix 1 of the Report.

Yours faithfully PKF Corporate Advisory (East Coast) Pty Limited

David Garvey Domenic Quartullo Director Director


Financial Services Guide

This Financial Services Guide is issued in relation to the independent expert’s report (“Report”) prepared by PKF Corporate Advisory (East Coast) Pty Limited (ABN 70 050 038 170) (“PKFCA”) at the request of the Directors (“Directors”) of MyState Financial Credit Union of Tasmania Limited (“MSF”) for inclusion in an Information Booklet to be issued by MSF in respect of the proposed demutualisation of MSF and merger with Tasmanian Perpetual Trustees Limited by way of a scheme of arrangement (“Transaction”).

Engagement

PKFCA has been engaged by the Directors to prepare the Report in relation to the Transaction, expressing our opinion as to whether the Transaction is in the best interests of the members of MSF.


PKFCA holds an Australian Financial Services Licence (License No: 247420) (“Licence”). As a result of our Report being provided to you, PKFCA is required to issue to you, as a retail client, a Financial Services Guide (“FSG”). The FSG includes information on the use of general financial product advice and is issued so as to comply with our obligations as holder of an Australian Financial Services Licence.

Financial services PKFCA is licensed to provide

The Licence authorises PKFCA to provide reports for the purposes of acting for and on behalf of clients in relation to proposed or actual mergers, acquisitions, proposed transactions, corporate restructures or share issues, to carry on a financial services business to provide general financial product advice for securities and certain derivatives (limited to old law securities, options contracts and warrants) to retail and wholesale clients.

PKFCA provides financial product advice by virtue of an engagement to issue the Report in connection with the Transaction.

Our Report includes a description of the circumstances of our engagement and identifies the party who has engaged us. You have not engaged us directly but will be provided with a copy of our Report (as a retail client) because of your connection with the matters on which our Report has been issued. Our Report is provided on our own behalf as an Australian Financial Services Licensee authorised to provide the financial product advice contained in the Report.

General financial product advice

Our Report provides general financial product advice only, and does not provide personal financial product advice, because it has been prepared without taking into account your particular personal circumstances or objectives (either financial or otherwise), your financial position or your needs.

Some individuals may place a different emphasis on various aspects of potential investments. An individual’s decision in relation to the Transaction as described in the Information Booklet may be influenced by their particular circumstances and, therefore, individuals should seek independent advice.

Benefits that PKFCA may receive

PKFCA has charged fees for providing our Report. The basis on which our fees will be determined has been agreed with, and our fees will be paid by, the person who engaged us to provide the Report. Our fees have been agreed on either a fixed fee or time cost basis.

Remuneration or other benefits received by our employees

All our employees receive a salary. Employees may be eligible for bonuses based on overall productivity and contribution to the operation of PKFCA or related entities, but any bonuses are not directly connected with any assignment and, in particular, are not directly related to the engagement for which our Report was provided.

Referrals

PKFCA does not pay commissions or provide any other benefits to any parties or person for referring customers to us in connection with the reports that PKFCA is licensed to provide.

Associations and relationships

PKFCA is the licensed corporate advisory arm of PKF East Coast Practice, Chartered Accountants and Business Advisers (“PKF”). The Directors of PKFCA may also be partners in PKF. PKF is comprised of a number of related entities that provide audit, accounting, tax and financial advisory services to a wide range of clients. PKFCA’s contact details are as set out on our letterhead.

142

For

per

sona

l use

onl

y



This Financial Services Guide is issued in relation to the independent expert’s report (“Report”) prepared by PKF Corporate Advisory (East Coast) Pty Limited (ABN 70 050 038 170) (“PKFCA”) at the request of the Directors (“Directors”) of MyState Financial Credit Union of Tasmania Limited (“MSF”) for inclusion in an Information Booklet to be issued by MSF in respect of the proposed demutualisation of MSF and merger with Tasmanian Perpetual Trustees Limited by way of a scheme of arrangement (“Transaction”).

Engagement

PKFCA has been engaged by the Directors to prepare the Report in relation to the Transaction, expressing our opinion as to whether the Transaction is in the best interests of the members of MSF.


PKFCA holds an Australian Financial Services Licence (License No: 247420) (“Licence”). As a result of our Report being provided to you, PKFCA is required to issue to you, as a retail client, a Financial Services Guide (“FSG”). The FSG includes information on the use of general financial product advice and is issued so as to comply with our obligations as holder of an Australian Financial Services Licence.

Financial services PKFCA is licensed to provide

The Licence authorises PKFCA to provide reports for the purposes of acting for and on behalf of clients in relation to proposed or actual mergers, acquisitions, proposed transactions, corporate restructures or share issues, to carry on a financial services business to provide general financial product advice for securities and certain derivatives (limited to old law securities, options contracts and warrants) to retail and wholesale clients.

PKFCA provides financial product advice by virtue of an engagement to issue the Report in connection with the Transaction.

Our Report includes a description of the circumstances of our engagement and identifies the party who has engaged us. You have not engaged us directly but will be provided with a copy of our Report (as a retail client) because of your connection with the matters on which our Report has been issued. Our Report is provided on our own behalf as an Australian Financial Services Licensee authorised to provide the financial product advice contained in the Report.

General financial product advice

Our Report provides general financial product advice only, and does not provide personal financial product advice, because it has been prepared without taking into account your particular personal circumstances or objectives (either financial or otherwise), your financial position or your needs.

Some individuals may place a different emphasis on various aspects of potential investments. An individual’s decision in relation to the Transaction as described in the Information Booklet may be influenced by their particular circumstances and, therefore, individuals should seek independent advice.

Benefits that PKFCA may receive

PKFCA has charged fees for providing our Report. The basis on which our fees will be determined has been agreed with, and our fees will be paid by, the person who engaged us to provide the Report. Our fees have been agreed on either a fixed fee or time cost basis.

Remuneration or other benefits received by our employees

All our employees receive a salary. Employees may be eligible for bonuses based on overall productivity and contribution to the operation of PKFCA or related entities, but any bonuses are not directly connected with any assignment and, in particular, are not directly related to the engagement for which our Report was provided.

Referrals

PKFCA does not pay commissions or provide any other benefits to any parties or person for referring customers to us in connection with the reports that PKFCA is licensed to provide.

Associations and relationships

PKFCA is the licensed corporate advisory arm of PKF East Coast Practice, Chartered Accountants and Business Advisers (“PKF”). The Directors of PKFCA may also be partners in PKF. PKF is comprised of a number of related entities that provide audit, accounting, tax and financial advisory services to a wide range of clients. PKFCA’s contact details are as set out on our letterhead.

143

For

per

sona

l use

onl

y


Complaints resolution

As the holder of an Australian Financial Services Licence, PKFCA is required to have a system for handling complaints from persons to whom PKFCA provides financial product advice. All complaints must be in writing, addressed to The Complaints Officer, PKF Corporate Advisory (East Coast) Pty Ltd, Level 10, 1 Margaret Street, Sydney NSW 2000.

On receipt of a written complaint PKFCA will record the complaint, acknowledge receipt of the complaint and seek to resolve the complaint as soon as practical.

If PKFCA cannot reach a satisfactory resolution, you can raise your concerns with the Financial Ombudsman Service (“FOS”). FOS is an independent body established to provide advice and assistance in helping resolve complaints relating to the financial services industry. PKFCA is a member of FOS. FOS may be contacted directly via the details set out below.

Financial Ombudsman Service Limited GPO Box 3 Melbourne VIC 3001 Toll free: 1300 78 08 08 Facsimile: (03) 9613 6399

Email: [email protected]

TABLE OF CONTENTS FINANCIAL SERVICES GUIDE .................................................................................................................................... 5 1 OVERVIEW OF THE TRANSACTION ................................................................................................................... 9

1.1 INTRODUCTION AND BACKGROUND ............................................................................................................. 9 1.2 KEY CONDITIONS .................................................................................................................................... 10 1.3 OTHER MATTERS.................................................................................................................................... 10

2 SCOPE AND LIMITATIONS OF THE REPORT .................................................................................................. 11 2.1 PURPOSE .............................................................................................................................................. 11 2.2 SCOPE .................................................................................................................................................. 11 2.3 BASIS OF ASSESSMENT ........................................................................................................................... 12 2.4 GENERAL LIMITATIONS ............................................................................................................................ 14 2.5 RELIANCE ON INFORMATION ..................................................................................................................... 14 2.6 PROSPECTIVE FINANCIAL INFORMATION .................................................................................................... 14 2.7 ASSUMPTIONS ........................................................................................................................................ 15 2.8 CURRENT MARKET CONDITIONS............................................................................................................... 16 2.9 SOURCES OF INFORMATION ..................................................................................................................... 16

3 INDUSTRY REVIEW – MSF ................................................................................................................................ 17 3.1 CREDIT UNION INDUSTRY OVERVIEW ........................................................................................................ 17 3.2 CREDIT UNION AND BANKING INDUSTRY PARTICIPANTS .............................................................................. 17 3.3 RECENT INDUSTRY PERFORMANCE AND TRENDS ....................................................................................... 18 3.4 CRITICAL SUCCESS FACTORS .................................................................................................................. 19 3.5 REGULATIONS ........................................................................................................................................ 20 3.6 INDUSTRY OUTLOOK ............................................................................................................................... 21 3.7 CONCLUSIONS........................................................................................................................................ 21

4 PROFILE OF MSF ............................................................................................................................................... 22 4.1 OVERVIEW ............................................................................................................................................. 22 4.2 HISTORY ................................................................................................................................................ 23 4.3 OPERATIONS .......................................................................................................................................... 23 4.4 PERSONNEL ........................................................................................................................................... 25 4.5 SWOT ANALYSIS ................................................................................................................................... 26 4.6 CAPITAL STRUCTURE .............................................................................................................................. 26 4.7 INCOME STATEMENT ............................................................................................................................... 27 4.8 BALANCE SHEETS ................................................................................................................................... 32

5 INDUSTRY REVIEW – TPX ................................................................................................................................. 36 5.1 FUNDS MANAGEMENT SECTOR ................................................................................................................ 36 5.2 FINANCIAL PLANNING AND ADVISORY SECTOR ........................................................................................... 39

6 PROFILE OF TPX ................................................................................................................................................ 42 6.1 OVERVIEW ............................................................................................................................................. 42 6.2 OPERATIONS .......................................................................................................................................... 42 6.3 PERSONNEL ........................................................................................................................................... 45 6.4 SWOT ANALYSIS ................................................................................................................................... 46 6.5 CAPITAL STRUCTURE .............................................................................................................................. 46 6.6 INCOME STATEMENTS ............................................................................................................................. 47 6.7 NORMALISATION OF EARNINGS................................................................................................................. 48 6.8 FORECAST ............................................................................................................................................. 48 6.9 BALANCE SHEET..................................................................................................................................... 49 6.10 TPX SHARE TRADING ............................................................................................................................. 50 6.11 CONCLUSION ON TPX SHARE TRADING .................................................................................................... 54

7 PROFILE OF MYSTATE LIMITED ...................................................................................................................... 55 7.1 OVERVIEW OF MYSTATE LIMITED ............................................................................................................. 55 7.2 IMPACT OF THE PROPOSED MERGER ........................................................................................................ 55 7.3 POTENTIAL SYNERGIES AND COST SAVINGS .............................................................................................. 55 7.4 CAPITAL STRUCTURE .............................................................................................................................. 56 7.5 FRANKING CREDITS ................................................................................................................................ 56

144

For

per

sona

l use

onl

y

TABLE OF CONTENTS FINANCIAL SERVICES GUIDE .................................................................................................................................... 5 1 OVERVIEW OF THE TRANSACTION ................................................................................................................... 9

1.1 INTRODUCTION AND BACKGROUND ............................................................................................................. 9 1.2 KEY CONDITIONS .................................................................................................................................... 10 1.3 OTHER MATTERS.................................................................................................................................... 10

2 SCOPE AND LIMITATIONS OF THE REPORT .................................................................................................. 11 2.1 PURPOSE .............................................................................................................................................. 11 2.2 SCOPE .................................................................................................................................................. 11 2.3 BASIS OF ASSESSMENT ........................................................................................................................... 12 2.4 GENERAL LIMITATIONS ............................................................................................................................ 14 2.5 RELIANCE ON INFORMATION ..................................................................................................................... 14 2.6 PROSPECTIVE FINANCIAL INFORMATION .................................................................................................... 14 2.7 ASSUMPTIONS ........................................................................................................................................ 15 2.8 CURRENT MARKET CONDITIONS............................................................................................................... 16 2.9 SOURCES OF INFORMATION ..................................................................................................................... 16

3 INDUSTRY REVIEW – MSF ................................................................................................................................ 17 3.1 CREDIT UNION INDUSTRY OVERVIEW ........................................................................................................ 17 3.2 CREDIT UNION AND BANKING INDUSTRY PARTICIPANTS .............................................................................. 17 3.3 RECENT INDUSTRY PERFORMANCE AND TRENDS ....................................................................................... 18 3.4 CRITICAL SUCCESS FACTORS .................................................................................................................. 19 3.5 REGULATIONS ........................................................................................................................................ 20 3.6 INDUSTRY OUTLOOK ............................................................................................................................... 21 3.7 CONCLUSIONS........................................................................................................................................ 21

4 PROFILE OF MSF ............................................................................................................................................... 22 4.1 OVERVIEW ............................................................................................................................................. 22 4.2 HISTORY ................................................................................................................................................ 23 4.3 OPERATIONS .......................................................................................................................................... 23 4.4 PERSONNEL ........................................................................................................................................... 25 4.5 SWOT ANALYSIS ................................................................................................................................... 26 4.6 CAPITAL STRUCTURE .............................................................................................................................. 26 4.7 INCOME STATEMENT ............................................................................................................................... 27 4.8 BALANCE SHEETS ................................................................................................................................... 32

5 INDUSTRY REVIEW – TPX ................................................................................................................................. 36 5.1 FUNDS MANAGEMENT SECTOR ................................................................................................................ 36 5.2 FINANCIAL PLANNING AND ADVISORY SECTOR ........................................................................................... 39

6 PROFILE OF TPX ................................................................................................................................................ 42 6.1 OVERVIEW ............................................................................................................................................. 42 6.2 OPERATIONS .......................................................................................................................................... 42 6.3 PERSONNEL ........................................................................................................................................... 45 6.4 SWOT ANALYSIS ................................................................................................................................... 46 6.5 CAPITAL STRUCTURE .............................................................................................................................. 46 6.6 INCOME STATEMENTS ............................................................................................................................. 47 6.7 NORMALISATION OF EARNINGS................................................................................................................. 48 6.8 FORECAST ............................................................................................................................................. 48 6.9 BALANCE SHEET..................................................................................................................................... 49 6.10 TPX SHARE TRADING ............................................................................................................................. 50 6.11 CONCLUSION ON TPX SHARE TRADING .................................................................................................... 54

7 PROFILE OF MYSTATE LIMITED ...................................................................................................................... 55 7.1 OVERVIEW OF MYSTATE LIMITED ............................................................................................................. 55 7.2 IMPACT OF THE PROPOSED MERGER ........................................................................................................ 55 7.3 POTENTIAL SYNERGIES AND COST SAVINGS .............................................................................................. 55 7.4 CAPITAL STRUCTURE .............................................................................................................................. 56 7.5 FRANKING CREDITS ................................................................................................................................ 56

145

For

per

sona

l use

onl

y

8 VALUATION METHODOLOGIES ........................................................................................................................ 57 8.1 INTRODUCTION ....................................................................................................................................... 57 8.2 MSF ..................................................................................................................................................... 57 8.3 TPX ...................................................................................................................................................... 58 8.4 MYSTATE LIMITED .................................................................................................................................. 58

9 VALUATION OF MSF .......................................................................................................................................... 59 9.1 INTRODUCTION ....................................................................................................................................... 59 9.2 FUTURE MAINTAINABLE EARNINGS ........................................................................................................... 59 9.3 CAPITALISATION MULTIPLE ...................................................................................................................... 59 9.4 SURPLUS ASSETS ................................................................................................................................... 61 9.5 MSF VALUATION SUMMARY .................................................................................................................... 62 9.6 MSF VALUATION CROSS CHECK .............................................................................................................. 63

10 VALUATION OF TPX ........................................................................................................................................... 64 10.1 INTRODUCTION ....................................................................................................................................... 64 10.2 FUTURE MAINTAINABLE EARNINGS ........................................................................................................... 64 10.3 CAPITALISATION MULTIPLE ...................................................................................................................... 64 10.4 SURPLUS ASSETS ................................................................................................................................... 67 10.5 TPX VALUATION SUMMARY ..................................................................................................................... 68 10.6 TPX VALUATION CROSS CHECK .............................................................................................................. 68

11 VALUATION OF MYSTATE LIMITED ................................................................................................................. 70 11.1 INTRODUCTION ....................................................................................................................................... 70 11.2 ANTICIPATED SYNERGIES ........................................................................................................................ 70 11.3 AGGREGATED VALUE .............................................................................................................................. 70 11.4 PREMIUM ............................................................................................................................................... 71

12 EVALUATION ...................................................................................................................................................... 72 12.1 FAIRNESS .............................................................................................................................................. 72 12.2 REASONABLENESS.................................................................................................................................. 72 12.3 CONCLUSION ......................................................................................................................................... 74

13 QUALIFICATIONS DECLARATIONS AND CONSENTS .................................................................................... 75 13.1 QUALIFICATIONS ..................................................................................................................................... 75 13.2 INDEPENDENCE ...................................................................................................................................... 75 13.3 DISCLAIMER ........................................................................................................................................... 76

APPENDIX 1 GLOSSARY .................................................................................................................................... 77 APPENDIX 2 SOURCES OF INFORMATION ...................................................................................................... 79 APPENDIX 3 VALUATION METHODS ................................................................................................................ 80 APPENDIX 4 COMPARABLE COMPANY INFORMATION ................................................................................. 82 APPENDIX 5 COMPARABLE COMPANY TRADING MULTIPLES – MSF ......................................................... 84 APPENDIX 6 COMPARABLE COMPANY TRADING MULTIPLES – TPX .......................................................... 85 APPENDIX 7 COMPARABLE COMPANY REVENUE AND MARGIN ANALYSIS - TPX ................................... 86 APPENDIX 8 COMPARABLE COMPANY FUMA ANALYSIS - TPX .................................................................. 87 APPENDIX 9 MERGER AND ACQUISITION INFORMATION – MSF ................................................................. 88 APPENDIX 10 MERGER AND ACQUISITION INFORMATION - TPX ................................................................... 91


1 OVERVIEW OF THE TRANSACTION

1.1 Introduction and Background

On 10 October 2008 MSF announced its intention to demutualise and merge with TPX by way of two schemes of arrangement. On 21 January 2009 amended details of the Transaction were announced.

The key terms of the Transaction have been agreed by MSF and TPX in the MIA dated 10 October 2008 and the subsequent Deed of Amendment dated 21 January 2009.

The Transaction is to be implemented by way of separate schemes of arrangement between MSF and MSF Members and between TPX and its ordinary shareholders (“TPX Shareholders”). The MIA and the Deed of Amendment govern the Transaction.

The MSF Scheme involves the demutualisation of MSF (“Demutualisation”) whereby, amongst other things, MSF Members who meet the eligibility criteria will have their Member Shares transferred to a new company, MyState Limited and receive an issue of MyState Limited fully paid ordinary shares.

MyState Limited is a recently incorporated company that has been incorporated to enable the merger of MSF and TPX. If the Transaction is implemented, MyState Limited will be a non-operating holding company with MSF and TPX as wholly-owned subsidiaries (“Merged Entity”).

If the Transaction is implemented, MSF Members will receive ordinary shares in MyState Limited such that MSF Members will collectively have a relevant interest in 67.5 percent of the issued capital of MyState Limited.

The TPX Scheme involves all of the ordinary shares in TPX (“TPX Shares”) being transferred to MyState Limited and the TPX Shareholders receiving one MyState Limited ordinary share for every TPX Share held. If the Transaction is implemented, TPX Shareholders will receive an issue of ordinary shares in MyState Limited such that TPX Shareholders will collectively have a relevant interest in 32.5 percent of the issued capital of MyState Limited.

The corporate structure post the implementation and completion of the Transaction is set out below:

Figure 1

Proposed Corporate Structure

Source: MIA

TPX

MyState Limited (non-operating

holding company)

MSF

146

For

per

sona

l use

onl

y


1 OVERVIEW OF THE TRANSACTION

1.1 Introduction and Background

On 10 October 2008 MSF announced its intention to demutualise and merge with TPX by way of two schemes of arrangement. On 21 January 2009 amended details of the Transaction were announced.

The key terms of the Transaction have been agreed by MSF and TPX in the MIA dated 10 October 2008 and the subsequent Deed of Amendment dated 21 January 2009.

The Transaction is to be implemented by way of separate schemes of arrangement between MSF and MSF Members and between TPX and its ordinary shareholders (“TPX Shareholders”). The MIA and the Deed of Amendment govern the Transaction.

The MSF Scheme involves the demutualisation of MSF (“Demutualisation”) whereby, amongst other things, MSF Members who meet the eligibility criteria will have their Member Shares transferred to a new company, MyState Limited and receive an issue of MyState Limited fully paid ordinary shares.

MyState Limited is a recently incorporated company that has been incorporated to enable the merger of MSF and TPX. If the Transaction is implemented, MyState Limited will be a non-operating holding company with MSF and TPX as wholly-owned subsidiaries (“Merged Entity”).

If the Transaction is implemented, MSF Members will receive ordinary shares in MyState Limited such that MSF Members will collectively have a relevant interest in 67.5 percent of the issued capital of MyState Limited.

The TPX Scheme involves all of the ordinary shares in TPX (“TPX Shares”) being transferred to MyState Limited and the TPX Shareholders receiving one MyState Limited ordinary share for every TPX Share held. If the Transaction is implemented, TPX Shareholders will receive an issue of ordinary shares in MyState Limited such that TPX Shareholders will collectively have a relevant interest in 32.5 percent of the issued capital of MyState Limited.

The corporate structure post the implementation and completion of the Transaction is set out below:

Figure 1

Proposed Corporate Structure

Source: MIA

TPX

MyState Limited (non-operating

holding company)

MSF

147

For

per

sona

l use

onl

y


1.2 Key Conditions

The MSF Scheme and the TPX Scheme are interdependent and neither the MSF Scheme nor the TPX Scheme will be implemented unless the conditions of the Transaction as set out in the MIA and Deed of Amendment are met or waived by the relevant party in accordance with the MIA, including:

• MSF Members approving a special resolution in accordance with Section 136(2) of the Corporations Act 2001 (“the Act”) and the MSF Constitution to amend the MSF Constitution which will enable the transfer of Member Shares as provided by the MSF Scheme;

• the approval of the MSF Scheme by the required majorities of MSF Members under the Act;

• the approval of the TPX Scheme by the required majorities of TPX Shareholders under the Act;

• the approval of both the MSF Scheme and the TPX Scheme by the Supreme Court of Tasmania;

• receipt of all regulatory approvals required to implement the Transaction including Australian Prudential Regulation Authority (“APRA”), Australian Securities and Investments Commission (“ASIC”) and ASX approvals;

• the MyState Limited fully paid ordinary shares to be issued to MSF Members and TPX Shareholders being approved for official quotation on the ASX;

• no material adverse changes occurring in relation to MSF or TPX;

• no prescribed occurrences eventuate in relation to MSF or TPX;

• MSF and TPX representations and warranties being true and correct;

• the obtaining of tax opinions to the satisfaction of the MSF Board and the TPX Board in relation to the MSF Scheme and the TPX Scheme;

• the novation, assignment, termination or otherwise dealing with to the reasonable satisfaction of the parties, of any material agreements binding MSF or TPX which are or may be materially adverse to the interests of the Merged Entity;

• the Trustee Companies Act 1953 (Tasmania) being amended to accommodate the new ownership structure and apply the 10 percent ownership limit currently in place for TPX to MyState Limited; and

• approvals under the Banking Act 1959, the Financial Sector (Shareholdings) Act 1998 and the Financial Sector (Business Transfer and Group Restructure) Act 1999 that are necessary or desirable to implement the MSF Scheme and the TPX Scheme.

1.3 Other Matters

The Board of Directors of MyState Limited will initially be comprised of five Directors appointed by MSF and five Directors appointed by TPX. The current chairman of TPX, Dr Michael Vertigan AC, will chair MyState Limited.

The Transaction has the unanimous support of both the Directors of MSF and TPX.

Further details of the MSF Scheme and the TPX Scheme are set out in the Information Booklet. MSF Members are advised to read and have regard to the full details of the Transaction as set out in the Information Booklet.


2 SCOPE AND LIMITATIONS OF THE REPORT

2.1 Purpose

The Directors of MSF have requested that PKFCA prepare a Report setting out our opinion as to whether or not the Transaction is “in the best interests” of MSF Members.

This Report is to accompany the Information Booklet required to be provided to MSF Members entitled to vote on the MSF Scheme and has been prepared to assist MSF Members entitled to vote on the MSF Scheme in their considerations of whether or not to approve the MSF Scheme. PKFCA has provided its consent for inclusion of this Report in the Information Booklet. Apart from this Report, PKFCA is not responsible for the contents of the Information Booklet or any other document associated with the MSF Scheme.

This Report should not be used for any other purpose and PKFCA does not accept any responsibility for its use outside this purpose. Except in accordance with the stated purpose, no extract, quote or copy of our Report, in whole or in part, should be reproduced without our written consent, as to the form and context in which it may appear.

2.2 Scope

The Demutualisation is subject to Part 5 of Schedule 4 to the Act (“Schedule 4”).

Under Schedule 4, if a modification of the constitution of a credit union is proposed and the modification would have the effect of varying or cancelling the rights of members, or a class of members, the notice of meeting of the company’s members at which the proposed modification is to be considered must be accompanied by a report by an expert that states whether, in the expert’s opinion, the proposed modification is “in the best interests” of the members of the company as a whole and gives the expert’s reasons for forming that opinion.

Relevant to the MSF Scheme are Section 411 of the Act (“Section 411”) and Part 3 of Schedule 8 of the Corporations Regulations 2001 (“Part 3”).

Section 411 governs schemes of arrangements between a company and its members, creditors or any class of members or creditors. Regulation 8303 of Part 3 (“Regulation 8303”) prescribes the information to be sent to members or shareholders in relation to schemes of arrangement.

Regulation 8303 requires an independent expert’s report in relation to a scheme of arrangement to be prepared:

• when a party to the scheme of arrangement has a prescribed shareholding (being defined as an interest in the company’s issued securities of 30 percent or more); or

• where any of the acquiring company’s Directors are also Directors of the company subject of the scheme.

Pursuant to Regulation 8303, the independent expert’s report must state whether or not, in the opinion of the expert, the proposed scheme is “in the best interests” of the members of the company the subject of the scheme and set out the reasons for that opinion.

MSF and MyState Limited have five common Directors. Accordingly, in addition to the requirements under Schedule 4, an independent expert’s report may also be required under Section 411. In any event, the Directors of MSF have decided it is appropriate to commission an independent expert’s report for the benefit of MSF Members.

Given that the MSF Scheme includes the Demutualisation and both are interdependent, the requirements in relation to both have been considered together in this Report.

148

For

per

sona

l use

onl

y


2 SCOPE AND LIMITATIONS OF THE REPORT

2.1 Purpose

The Directors of MSF have requested that PKFCA prepare a Report setting out our opinion as to whether or not the Transaction is “in the best interests” of MSF Members.

This Report is to accompany the Information Booklet required to be provided to MSF Members entitled to vote on the MSF Scheme and has been prepared to assist MSF Members entitled to vote on the MSF Scheme in their considerations of whether or not to approve the MSF Scheme. PKFCA has provided its consent for inclusion of this Report in the Information Booklet. Apart from this Report, PKFCA is not responsible for the contents of the Information Booklet or any other document associated with the MSF Scheme.

This Report should not be used for any other purpose and PKFCA does not accept any responsibility for its use outside this purpose. Except in accordance with the stated purpose, no extract, quote or copy of our Report, in whole or in part, should be reproduced without our written consent, as to the form and context in which it may appear.

2.2 Scope

The Demutualisation is subject to Part 5 of Schedule 4 to the Act (“Schedule 4”).

Under Schedule 4, if a modification of the constitution of a credit union is proposed and the modification would have the effect of varying or cancelling the rights of members, or a class of members, the notice of meeting of the company’s members at which the proposed modification is to be considered must be accompanied by a report by an expert that states whether, in the expert’s opinion, the proposed modification is “in the best interests” of the members of the company as a whole and gives the expert’s reasons for forming that opinion.

Relevant to the MSF Scheme are Section 411 of the Act (“Section 411”) and Part 3 of Schedule 8 of the Corporations Regulations 2001 (“Part 3”).

Section 411 governs schemes of arrangements between a company and its members, creditors or any class of members or creditors. Regulation 8303 of Part 3 (“Regulation 8303”) prescribes the information to be sent to members or shareholders in relation to schemes of arrangement.

Regulation 8303 requires an independent expert’s report in relation to a scheme of arrangement to be prepared:

• when a party to the scheme of arrangement has a prescribed shareholding (being defined as an interest in the company’s issued securities of 30 percent or more); or

• where any of the acquiring company’s Directors are also Directors of the company subject of the scheme.

Pursuant to Regulation 8303, the independent expert’s report must state whether or not, in the opinion of the expert, the proposed scheme is “in the best interests” of the members of the company the subject of the scheme and set out the reasons for that opinion.

MSF and MyState Limited have five common Directors. Accordingly, in addition to the requirements under Schedule 4, an independent expert’s report may also be required under Section 411. In any event, the Directors of MSF have decided it is appropriate to commission an independent expert’s report for the benefit of MSF Members.

Given that the MSF Scheme includes the Demutualisation and both are interdependent, the requirements in relation to both have been considered together in this Report.

149

For

per

sona

l use

onl

y


2.3 Basis of Assessment

The Act does not define the expression “in the best interests”. However, guidance is provided by ASIC Regulatory Guides and Guidance Notes, which establish certain guidelines in respect of independent expert’s reports required under the Act. In particular, Regulatory Guide 111 “Content of Expert Reports” (“RG 111”) has been considered.

RG 111 relates in part to the assessment of demutualisations under Schedule 4. RG 111 states that in the absence of:

• a change in the underlying economic interests of security holders;

• a change of control; or

• selective treatment of different security holders,

“value” may be of secondary importance and the expert should provide an opinion as to whether the advantages of the transaction outweigh the disadvantages. If the demutualisation involves a scheme of arrangement and the expert concludes that the advantages of the transaction outweigh the disadvantages, the expert should say that the scheme is in the best interests of the members.

RG 111 states that the advantages and disadvantages to be considered might include questions of unlocking value for members and greater management accountability as reasons to demutualise, as compared to the loss of the benefits of being a mutual organisation.

RG 111 further states that an expert might need to consider whether using the form of analysis described in RG 111 for the assessment of takeover offers is appropriate when demutualisations involve one or more of:

• a change in the underlying economic interests of security holders;

• a change of control; or

• selective treatment of different security holders.

RG 111 also relates to the assessment of takeover offers pursuant to Section 640 of the Act and discusses the interpretation of the term “fair and reasonable”. It also relates specifically to schemes of arrangement pursuant to Section 411. It states that in relation to Section 411 independent expert reports, the term “fair and reasonable” should be taken as a reference to “in the best interest” of members as follows:

• if an expert would conclude that a transaction was “fair and reasonable” if it was in the form of a takeover bid, it will also be able to conclude that the scheme is “in the best interests” of the members of the company;

• if an expert would conclude that the transaction was “not fair but reasonable” if it was in the form of a takeover bid, it is still open to the expert to also conclude that the scheme is “in the best interests” of the members of the company; and

• if an expert concludes that a transaction is “not fair and not reasonable”, then the expert would conclude that the scheme is not “in the best interests” of the members of the company.

RG 111 draws a distinction between the meaning of the terms “fair” and “reasonable”. An offer is “fair” if the value of the consideration is equal to or greater than the value of the securities subject to the offer.

RG 111 considers an offer to be “reasonable” if:

• the offer is “fair”; or

• despite not being “fair”, the expert believes that there are sufficient reasons for security holders to accept the offer in the absence of any higher offer.


Considering RG 111 as it relates to the Transaction including the Demutualisation, in our opinion, the Transaction will be in the best interests of MSF Members if:

• the value of the consideration, being 67.5 percent of the issued capital of MyState Limited is equal to or greater than the assessed value of MSF (that is, if the Transaction is “fair”);and

• the advantages of the Transaction outweigh any disadvantages of its approval notwithstanding that the Transaction may be “fair” (and therefore “reasonable” by definition); or

• should the Transaction not be “fair”, it may still be “reasonable” if the advantages of the Transaction outweigh its disadvantages, including any shortfall in consideration.

2.3.1 Premium for Control

RG 111 relates predominately to the assessment of “control transactions” (i.e: where a change in control occurs) and comments on the meaning of “fair and reasonable” in this context.

If the bidder is offering non-cash consideration in a control transaction, RG 111 requires the value of the securities being offered on a minority interest basis to be compared with the value of the target’s securities, assuming 100 percent of the securities are available for sale, i.e: including a control premium.

However, RG 111 also indicates that the independent expert may be justified in using an equivalent approach to valuing the securities of the bidder and the target when control of the merged entity will be shared equally between the bidder and the target.

PKFCA has considered the nature of the Transaction; in particular, we note that:

• MSF Members and TPX Shareholders will hold shares in MyState Limited in the proportions of 67.5 percent and 32.5 percent respectively immediately following implementation of the Transaction;

• both MSF Members and TPX Shareholders will share in any synergistic benefits arising from the Transaction;

• MyState Limited is to be Chaired by Dr Vertigan of TPX following implementation of the Transaction; and

• the MyState Limited Board will comprise five Directors from MSF and five Directors from TPX, which includes Dr Vertigan.

Based on the above, we consider the Transaction to be more akin to a merger between MSF and TPX rather than a control transaction. Consequently, in assessing the value of MSF and the value of the consideration, being 67.5 percent of the issued capital of MyState Limited, we have used an equivalent approach and have not included a premium for control.

As previously stated, PKFCA is required to comment on whether the Transaction is in the best interests of MSF Members. We consider the above approach as the most appropriate methodology in assessing whether the Transaction is “fair” to MSF Members.

Were the Transaction to be assessed as a control transaction, whereby MSF Members had acquired control of TPX due to their 67.5 percent proportionate interest in MyState Limited immediately following implementation of the Transaction, our assessed value of the consideration would only increase based on the methodology adopted by PKFCA and not impact our overall conclusion.

We note that the Transaction would not preclude MSF Members from receiving a control premium from a subsequent transaction.

150

For

per

sona

l use

onl

y


Considering RG 111 as it relates to the Transaction including the Demutualisation, in our opinion, the Transaction will be in the best interests of MSF Members if:

• the value of the consideration, being 67.5 percent of the issued capital of MyState Limited is equal to or greater than the assessed value of MSF (that is, if the Transaction is “fair”);and

• the advantages of the Transaction outweigh any disadvantages of its approval notwithstanding that the Transaction may be “fair” (and therefore “reasonable” by definition); or

• should the Transaction not be “fair”, it may still be “reasonable” if the advantages of the Transaction outweigh its disadvantages, including any shortfall in consideration.

2.3.1 Premium for Control

RG 111 relates predominately to the assessment of “control transactions” (i.e: where a change in control occurs) and comments on the meaning of “fair and reasonable” in this context.

If the bidder is offering non-cash consideration in a control transaction, RG 111 requires the value of the securities being offered on a minority interest basis to be compared with the value of the target’s securities, assuming 100 percent of the securities are available for sale, i.e: including a control premium.

However, RG 111 also indicates that the independent expert may be justified in using an equivalent approach to valuing the securities of the bidder and the target when control of the merged entity will be shared equally between the bidder and the target.

PKFCA has considered the nature of the Transaction; in particular, we note that:

• MSF Members and TPX Shareholders will hold shares in MyState Limited in the proportions of 67.5 percent and 32.5 percent respectively immediately following implementation of the Transaction;

• both MSF Members and TPX Shareholders will share in any synergistic benefits arising from the Transaction;

• MyState Limited is to be Chaired by Dr Vertigan of TPX following implementation of the Transaction; and

• the MyState Limited Board will comprise five Directors from MSF and five Directors from TPX, which includes Dr Vertigan.

Based on the above, we consider the Transaction to be more akin to a merger between MSF and TPX rather than a control transaction. Consequently, in assessing the value of MSF and the value of the consideration, being 67.5 percent of the issued capital of MyState Limited, we have used an equivalent approach and have not included a premium for control.

As previously stated, PKFCA is required to comment on whether the Transaction is in the best interests of MSF Members. We consider the above approach as the most appropriate methodology in assessing whether the Transaction is “fair” to MSF Members.

Were the Transaction to be assessed as a control transaction, whereby MSF Members had acquired control of TPX due to their 67.5 percent proportionate interest in MyState Limited immediately following implementation of the Transaction, our assessed value of the consideration would only increase based on the methodology adopted by PKFCA and not impact our overall conclusion.


151

For

per

sona

l use

onl

y


2.3.2 Definition of Value

For the purposes of our opinion, the term “value” has been interpreted as meaning “fair market value”, which is defined as the price that would be negotiated in an open and unrestricted market between a knowledgeable, willing, but not anxious purchaser and a knowledgeable, willing, but not anxious vendor, acting at arm’s length.

If the Transaction is approved, MSF Members will be exchanging their minority interests in MSF for minority interests in MyState Limited. As such, and in accordance with the requirements of RG 111 set out above, in considering whether or not the Transaction is “fair”, our assessment of the value of MyState Limited and MSF has been conducted on a minority interest basis.

2.4 General Limitations

We have evaluated the Transaction as a whole by assessing its overall impact on MSF Members rather than considering the impact of each element of the Transaction in isolation.

PKFCA has not considered the effect of the Transaction on the particular circumstances of individual MSF Members. Some individual MSF Members may place a different emphasis on various aspects of the Transaction from that adopted in our Report. Accordingly, individuals may reach different conclusions on whether or not the Transaction is in their particular best interests.

An individual MSF Member’s decision in relation to the Transaction may be influenced by their particular circumstances (including their taxation position) and, therefore, MSF Members are advised to seek their own independent advice.

2.5 Reliance on Information

This Report is based upon financial and other information provided by both MSF and TPX. PKFCA has considered and relied upon this information. PKFCA believes the information provided to be reliable, complete and not misleading, and we have no reason to believe that any material facts have been withheld. The information provided was evaluated through analysis, inquiry and review for the purpose of forming an opinion as to whether the Transaction is in the best interests of MSF Members.

PKFCA’s procedures involved an analysis of financial information and accounting records. This does not include verification work, nor does it constitute an audit or review in accordance with Australian Auditing and Assurance Standards. Further, PKFCA does not warrant that its inquiries have identified or verified all of the matters which an audit, extensive examination or “due diligence” investigation might disclose. In any event, an opinion as to whether a corporate transaction is in the best interests of members is in the nature of an overall opinion rather than an audit or detailed investigation and it is in this context that PKFCA advises that it is not in a position nor is it practical for PKFCA to undertake such an extensive verification exercise.

It is understood that the accounting information provided to PKFCA was prepared in accordance with generally accepted accounting principles and, except where noted, prepared in a manner consistent with the method of accounting used by MSF and TPX in previous accounting periods.

Under the terms of PKFCA’s engagement, MSF has agreed to indemnify the partners, directors and staff (as appropriate) of PKFCA and PKF East Coast Practice and their associated entities, against any claim, liability, loss or expense, costs or damage, arising out of reliance on any information or documentation provided by MSF or TPX which is false and misleading or omits any material particulars, or arising from failure to supply relevant information.

2.6 Prospective Financial Information

In preparing this Report, PKFCA has had regard to prospective financial information for FY09 in relation to both MSF and TPX (“Forecasts”). The Forecasts incorporate actual financial information for the six months ended 31 December 2008 and prospective financial information for the six months ending 30 June 2009. Actual financial information for the six months ended 31


December 2008 has been subject to independent review by the respective auditors of MSF and TPX.

The Forecasts are based on assumptions concerning future events and market conditions. While PKFCA understands that the Forecasts have been prepared with due care and attention, and the Directors of both MSF and TPX consider the assumptions to be reasonable, future events and conditions are not accurately predictable and the assumptions and outcomes are subject to significant uncertainties.

Actual results are likely to vary from the Forecasts and any variation may be materially positive or negative. Neither the Directors of MSF and TPX, PKFCA nor anyone else can or does guarantee that the Forecasts or any other prospective statement contained in this Report will be achieved.

Prospective financial information is dependent on the outcome of many assumptions, some of which are outside the control of MSF and TPX. Assumptions relating to prospective financial information can be reasonable at the time of their preparation, but can change materially over a relatively short time.

The Directors of MSF and TPX are of the view that the current economic environment creates significant uncertainty about likely financial performance and that any attempt to provide detailed forecast financial information would be unduly speculative and potentially misleading as it would not be sufficiently reliable or based on sufficiently reasonable grounds to be useful to MSF Members in making their decision as to whether to approve the Transaction. For this reason, we have not included a detailed disclosure of the Forecasts in this Report.

PKFCA has not been engaged to undertake an independent review of the Forecasts in accordance with Australian Auditing and Assurance Standards, and has not undertaken such a review. Accordingly, PKFCA does not express an opinion in accordance with Australian Auditing or Assurance Standards on the reasonableness of the assumptions underlying the Forecasts, or their achievability. However, during the course of considering its opinion, PKFCA has undertaken a limited review of the Forecasts. The scope of PKFCA’s work in this regard comprised the following:

• obtaining details of the Forecasts and the process by which this information was prepared;

• enquiring if the Forecasts are adopted by the respective Board of Directors;

• discussions with management regarding the basis on which the Forecasts were formulated and where possible on a “desktop” level, undertaking evaluation of such information, by reference to past trading performance, available evidence and/or other documentation provided;

• reviewing the most recently available monthly management accounts for MSF;

• reviewing the 31 December 2008 Half Year Report for TPX; and

• consideration of the position of the businesses within their respective industries.

Based on the limited scope of work undertaken by PKFCA, as outlined above, PKFCA is satisfied that there is a reasonable basis for the use of the Forecasts in the analysis contained in this Report and for the purpose of forming our opinion.

2.7 Assumptions

In forming our opinion, we made the following assumptions:

• that matters such as title, compliance with laws and regulations and contracts in place are in good standing, and will remain so, and that there are no material legal proceedings, other than as publicly disclosed;

• information in relation to the Transaction distributed by any of the parties to their respective shareholders and members or any statutory body is complete, accurate and fairly presented in all material respects;

152

For

per

sona

l use

onl

y


December 2008 has been subject to independent review by the respective auditors of MSF and TPX.

The Forecasts are based on assumptions concerning future events and market conditions. While PKFCA understands that the Forecasts have been prepared with due care and attention, and the Directors of both MSF and TPX consider the assumptions to be reasonable, future events and conditions are not accurately predictable and the assumptions and outcomes are subject to significant uncertainties.

Actual results are likely to vary from the Forecasts and any variation may be materially positive or negative. Neither the Directors of MSF and TPX, PKFCA nor anyone else can or does guarantee that the Forecasts or any other prospective statement contained in this Report will be achieved.

Prospective financial information is dependent on the outcome of many assumptions, some of which are outside the control of MSF and TPX. Assumptions relating to prospective financial information can be reasonable at the time of their preparation, but can change materially over a relatively short time.

The Directors of MSF and TPX are of the view that the current economic environment creates significant uncertainty about likely financial performance and that any attempt to provide detailed forecast financial information would be unduly speculative and potentially misleading as it would not be sufficiently reliable or based on sufficiently reasonable grounds to be useful to MSF Members in making their decision as to whether to approve the Transaction. For this reason, we have not included a detailed disclosure of the Forecasts in this Report.

PKFCA has not been engaged to undertake an independent review of the Forecasts in accordance with Australian Auditing and Assurance Standards, and has not undertaken such a review. Accordingly, PKFCA does not express an opinion in accordance with Australian Auditing or Assurance Standards on the reasonableness of the assumptions underlying the Forecasts, or their achievability. However, during the course of considering its opinion, PKFCA has undertaken a limited review of the Forecasts. The scope of PKFCA’s work in this regard comprised the following:

• obtaining details of the Forecasts and the process by which this information was prepared;

• enquiring if the Forecasts are adopted by the respective Board of Directors;

• discussions with management regarding the basis on which the Forecasts were formulated and where possible on a “desktop” level, undertaking evaluation of such information, by reference to past trading performance, available evidence and/or other documentation provided;

• reviewing the most recently available monthly management accounts for MSF;

• reviewing the 31 December 2008 Half Year Report for TPX; and

• consideration of the position of the businesses within their respective industries.

Based on the limited scope of work undertaken by PKFCA, as outlined above, PKFCA is satisfied that there is a reasonable basis for the use of the Forecasts in the analysis contained in this Report and for the purpose of forming our opinion.

2.7 Assumptions

In forming our opinion, we made the following assumptions:

• that matters such as title, compliance with laws and regulations and contracts in place are in good standing, and will remain so, and that there are no material legal proceedings, other than as publicly disclosed;

• information in relation to the Transaction distributed by any of the parties to their respective shareholders and members or any statutory body is complete, accurate and fairly presented in all material respects;

153

For

per

sona

l use

onl

y


• public available information relied on by us is accurate and not misleading; and

• if the Transaction is implemented, that it will be implemented in accordance with its terms.

2.8 Current Market Conditions

Our opinion is based on economic, market and other conditions prevailing at the date of this Report. Such conditions can change significantly over relatively short periods of time and such changes may result in our opinion becoming outdated and in need of revision. PKFCA reserves the right to revise any valuation, or other opinion, in the light of material information existing at the date of this Report that subsequently becomes known to PKFCA.

2.9 Sources of Information

Appendix 2 to this Report identifies the information referred to, and relied upon, by PKFCA during the course of preparing this Report and forming our opinion.


3 INDUSTRY REVIEW – MSF

In order to assess the Transaction, PKFCA has reviewed the industry within which MSF operates, primarily being the credit union industry in Australia (“Credit Union Industry”) and specifically within Tasmania. In reviewing the Credit Union Industry, PKFCA has also considered the Credit Union Industry’s position within the wider banking industry in Australia (“Banking Industry”).

3.1 Credit Union Industry Overview

Credit unions are owned by their members who are also their customers. As with banks, they are ADIs and are regulated by the Banking Act and APRA. Credit unions generally offer the same products and services as banks, although some will offer a more limited number of products and services due to the demand and cost constraints of their smaller customer bases.

Credit unions predominately source funding from member deposits and lend that money to other members (typically in the form of residential, personal and commercial loans). Credit unions are more active in the retail segment of the Banking Industry.

Credit unions traditionally have membership bases that are industry or community based, (i.e.: members who work in a particular industry or who live in a particular geographical area). Recently this characteristic has changed to some extent as an increasing number of credit unions have merged to improve financial strength and remain competitive.

As at 30 June 2008, there were 133 credit unions in Australia operating 899 branch level services.1

3.2 Credit Union and Banking Industry Participants

The level of concentration in the Credit Union Industry is low, with Australia’s top four credit unions accounting for less than 40 percent of Credit Union Industry revenue; however concentration is increasing due to consolidation activity. The level of concentration in the Credit Union Industry is significantly lower than the Banking Industry and is due in part to the restrictions that credit unions’ common bond of association places on their growth and market share.

Credit Union Australia Limited is the largest credit union in Australia with approximately $7.5 billion in assets as at 30 June 2008. MSF is the sixth largest with approximately $1.7 billion in assets.

The Banking Industry in Tasmania comprises 11 ADIs operating 155 branch level services. The four major banks; CBA, ANZ, Westpac and NAB together operate 74 branch level services, with CBA being the dominant participant with 42. Bendigo and Adelaide Bank also have a significant presence through both Bendigo Bank branded branches (14) and its Elders Rural Bank joint venture (15 branches). MSF is well placed with its 13 branches and clearly the dominant non-bank ADI, with B&E Limited (9 branches) and Heritage Isle Credit Union (3 branches) the only other non-bank ADIs.1

The Credit Union Industry serves over 4.5 million members or approximately 25 percent of the Australian population. In Tasmania, this proportion is significantly higher at approximately 36 percent, which is the highest in Australia along with South Australia.2 The higher penetration in Tasmania is indicative of the Credit Union Industry’s member profile, with approximately 50 percent of members residing outside capital cities.

1 APRA ADI Points of Presence Statistics. 2 Association of Building Societies and Credit Unions (“Abacus”).

154

For

per

sona

l use

onl

y


3 INDUSTRY REVIEW – MSF

In order to assess the Transaction, PKFCA has reviewed the industry within which MSF operates, primarily being the credit union industry in Australia (“Credit Union Industry”) and specifically within Tasmania. In reviewing the Credit Union Industry, PKFCA has also considered the Credit Union Industry’s position within the wider banking industry in Australia (“Banking Industry”).

3.1 Credit Union Industry Overview

Credit unions are owned by their members who are also their customers. As with banks, they are ADIs and are regulated by the Banking Act and APRA. Credit unions generally offer the same products and services as banks, although some will offer a more limited number of products and services due to the demand and cost constraints of their smaller customer bases.

Credit unions predominately source funding from member deposits and lend that money to other members (typically in the form of residential, personal and commercial loans). Credit unions are more active in the retail segment of the Banking Industry.

Credit unions traditionally have membership bases that are industry or community based, (i.e.: members who work in a particular industry or who live in a particular geographical area). Recently this characteristic has changed to some extent as an increasing number of credit unions have merged to improve financial strength and remain competitive.

As at 30 June 2008, there were 133 credit unions in Australia operating 899 branch level services.1

3.2 Credit Union and Banking Industry Participants

The level of concentration in the Credit Union Industry is low, with Australia’s top four credit unions accounting for less than 40 percent of Credit Union Industry revenue; however concentration is increasing due to consolidation activity. The level of concentration in the Credit Union Industry is significantly lower than the Banking Industry and is due in part to the restrictions that credit unions’ common bond of association places on their growth and market share.

Credit Union Australia Limited is the largest credit union in Australia with approximately $7.5 billion in assets as at 30 June 2008. MSF is the sixth largest with approximately $1.7 billion in assets.

The Banking Industry in Tasmania comprises 11 ADIs operating 155 branch level services. The four major banks; CBA, ANZ, Westpac and NAB together operate 74 branch level services, with CBA being the dominant participant with 42. Bendigo and Adelaide Bank also have a significant presence through both Bendigo Bank branded branches (14) and its Elders Rural Bank joint venture (15 branches). MSF is well placed with its 13 branches and clearly the dominant non-bank ADI, with B&E Limited (9 branches) and Heritage Isle Credit Union (3 branches) the only other non-bank ADIs.1

The Credit Union Industry serves over 4.5 million members or approximately 25 percent of the Australian population. In Tasmania, this proportion is significantly higher at approximately 36 percent, which is the highest in Australia along with South Australia.2 The higher penetration in Tasmania is indicative of the Credit Union Industry’s member profile, with approximately 50 percent of members residing outside capital cities.

1 APRA ADI Points of Presence Statistics. 2 Association of Building Societies and Credit Unions (“Abacus”).

155

For

per

sona

l use

onl

y


3.3 Recent Industry Performance and Trends

3.3.1 Asset Base

Total Credit Union Industry assets as at 31 December 2008 were approximately $45.4 billion, which represented growth of 11 percent over the year compared to 8.9 percent growth in the prior year. The growth was predominately driven by growth in housing loans which increased 12.8 percent. Housing loans accounted for 82 percent of total Credit Union Industry loans and advances as at 31 December 2008.3

There has been significant competition in the housing loan market in the past decade driven by relatively low interest rates, the increased availability of credit and the increasing market share of non-bank lenders and mortgage brokers.

Housing loans as a share of total Credit Union Industry assets have increased significantly from approximately 14 percent in 1984 to 82 percent at 31 December 2008. Conversely, personal loans have decreased significantly from approximately 85 percent of total Credit Union Industry assets in 1984 to fewer than 16 percent at 31 December 2008. This trend is indicative of both the growth in demand for housing finance and a trend in substitution of expensive personal credit with cheaper mortgage loans.4

3.3.2 Deposits

Total Credit Union Industry deposits as at 31 December 2008 were approximately $38.9 billion, which represented growth of 11.8 percent over the year, slightly higher than the growth in assets. Credit unions source a majority of their funds from deposits which represented 93.5 percent of total Credit Union Industry liabilities as at 31 December 2008.3

By comparison, deposits represented 53.6 percent of total Banking Industry Liabilities as at 30 September 2008.5 The Credit Union Industry has a much higher proportion of deposit liabilities than the Banking Industry which has minimised their exposure to the rising cost of wholesale funding.

There has been significant competition in the deposit market in the past decade driven by the introduction of compulsory superannuation (which has resulted in an increased level of competing products such as managed funds) and the introduction of high yield, online savings accounts by foreign banks. Credit unions have been forced to increase interest rates on deposits to compete with these alternative products.

In October 2008, the Federal Government introduced new legislation to guarantee all deposits held in APRA approved ADIs such as credit unions, building societies and banks to ensure depositors will be guaranteed repayment of their funds in the unlikely event that an ADI faces stress (“Federal Deposit Guarantee”). The Credit Union Industry has benefited in the short term from the flow of funds from alternative investments into deposits which are subject to the Federal Deposit Guarantee as investors adjust to the changed risk and reward dynamics the Federal Deposit Guarantee has created. As of 28 November 2008, fees are payable by ADIs to guarantee deposits over $1 million. The fee varies depending on the credit rating of the ADI and is expected to disadvantage the Credit Union Industry to some extent when compared to AA and A rated banks.

3.3.3 Net Interest Income and Non-interest Income

The Credit Union Industry generated net interest income of approximately $1.3 billion for the year ended 31 December 2008 which represented growth of approximately 4 percent over the year. Net interest income represented approximately 70.5 percent of total operating income for the Credit Union Industry which is much higher than the Banking Industry at 58.9 percent.3

3 APRA Quarterly Credit Union and Building Society Performance Statistics. 4 IBISWorld. 5 APRA Quarterly Bank Performance Statistics.


Notwithstanding the growth in net interest revenue, the ratio of net interest income to average assets decreased from approximately 3.2 percent in the year ended 31 December 2007 to approximately 3.0 percent in the year ended 31 December 2008.6

The Credit Union Industry generated non-interest income of approximately $550.5 million for the year ended 31 December 2008 which represented a decline of 2.8 percent over the year.6 The Banking Industry experienced more significant declines in non-interest income over the same period primarily due to the poor performance of their wealth management operations.

3.3.4 Costs

Credit Union Industry costs increased by 3.1 percent in the year ended 31 December 2008 and the cost-to-income ratio increased to 76.4 percent compared to 75.5 percent in the year ended 31 December 2007.6

The Banking Industry cost-to-income ratio in the year ended 30 September 2008 was approximately 56.8 percent.7 The Credit Union Industry has traditionally operated at higher cost levels than the Banking Industry due to the smaller scale of their operations, but also due in part to the Credit Union Industry’s desire to maintain higher service standards and pass on margins to members.

The Credit Union Industry has experienced a high level of merger and acquisition activity as participants seek to achieve economies of scale and more competitive cost structures in order to compete with the Banking Industry.

3.4 Critical Success Factors

3.4.1 Credit Growth

The performance of the Credit Union Industry is underpinned by the level of credit growth, which in turn is underpinned by the overall strength of the economy. Buoyant economic conditions, low unemployment, rising housing prices and relatively low interest rates have all contributed to strong credit growth in the last decade; however the onset of the global credit crisis has slowed credit growth significantly in the last 12 months, particularly growth in personal lending.

In the year ended 30 April 2009, growth in housing credit was 7.1 percent (2007: 11.1 percent), growth in business credit was 3.5 percent (2007: 19.5 percent) and total personal credit actually decreased 6.6 percent (2007: 9.5 percent growth).8 With the economy slowing and consumer and business confidence weakened, credit growth is expected to be subdued further in the short to medium term.

3.4.2 Deposit Growth

The Credit Union Industry is reliant on growth in deposits in order to finance its lending operations and demand for credit union deposits is largely driven by deposit interest rates relative to other investments and competitors. Increased volatility on equity markets and the introduction of the Federal Deposit Guarantee may help contribute to continued growth in deposits however the level of competition with the Banking Industry is expected to remain high. It is also unclear what level of negative impact deteriorating economic conditions may have on the level of deposits.

3.4.3 Asset Quality

Asset quality is also important to the success of the Credit Union Industry. Bad debts expense for the Credit Union Industry increased by 12.8 percent in the year ended 31 December 20086 which was significantly lower than the 184.5 percent increase in bad debts expense for the Banking Industry in the year ended 30 September 2008.7 Total Credit Union Industry provisions as a

6 APRA Quarterly Credit Union and Building Society Performance Statistics. 7 APRA Quarterly Bank Performance Statistics. 8 RBA Financial Aggregates.

156

For

per

sona

l use

onl

y


Notwithstanding the growth in net interest revenue, the ratio of net interest income to average assets decreased from approximately 3.2 percent in the year ended 31 December 2007 to approximately 3.0 percent in the year ended 31 December 2008.6

The Credit Union Industry generated non-interest income of approximately $550.5 million for the year ended 31 December 2008 which represented a decline of 2.8 percent over the year.6 The Banking Industry experienced more significant declines in non-interest income over the same period primarily due to the poor performance of their wealth management operations.

3.3.4 Costs

Credit Union Industry costs increased by 3.1 percent in the year ended 31 December 2008 and the cost-to-income ratio increased to 76.4 percent compared to 75.5 percent in the year ended 31 December 2007.6

The Banking Industry cost-to-income ratio in the year ended 30 September 2008 was approximately 56.8 percent.7 The Credit Union Industry has traditionally operated at higher cost levels than the Banking Industry due to the smaller scale of their operations, but also due in part to the Credit Union Industry’s desire to maintain higher service standards and pass on margins to members.

The Credit Union Industry has experienced a high level of merger and acquisition activity as participants seek to achieve economies of scale and more competitive cost structures in order to compete with the Banking Industry.

3.4 Critical Success Factors

3.4.1 Credit Growth

The performance of the Credit Union Industry is underpinned by the level of credit growth, which in turn is underpinned by the overall strength of the economy. Buoyant economic conditions, low unemployment, rising housing prices and relatively low interest rates have all contributed to strong credit growth in the last decade; however the onset of the global credit crisis has slowed credit growth significantly in the last 12 months, particularly growth in personal lending.

In the year ended 30 April 2009, growth in housing credit was 7.1 percent (2007: 11.1 percent), growth in business credit was 3.5 percent (2007: 19.5 percent) and total personal credit actually decreased 6.6 percent (2007: 9.5 percent growth).8 With the economy slowing and consumer and business confidence weakened, credit growth is expected to be subdued further in the short to medium term.

3.4.2 Deposit Growth

The Credit Union Industry is reliant on growth in deposits in order to finance its lending operations and demand for credit union deposits is largely driven by deposit interest rates relative to other investments and competitors. Increased volatility on equity markets and the introduction of the Federal Deposit Guarantee may help contribute to continued growth in deposits however the level of competition with the Banking Industry is expected to remain high. It is also unclear what level of negative impact deteriorating economic conditions may have on the level of deposits.

3.4.3 Asset Quality

Asset quality is also important to the success of the Credit Union Industry. Bad debts expense for the Credit Union Industry increased by 12.8 percent in the year ended 31 December 20086 which was significantly lower than the 184.5 percent increase in bad debts expense for the Banking Industry in the year ended 30 September 2008.7 Total Credit Union Industry provisions as a

6 APRA Quarterly Credit Union and Building Society Performance Statistics. 7 APRA Quarterly Bank Performance Statistics. 8 RBA Financial Aggregates.

157

For

per

sona

l use

onl

y


percentage of gross loans and advances were also significantly lower than the Banking Industry at 31 December 2008. The lower level of bad debt provisioning relative to the Banking Industry is reflective of the fact that the Credit Union Industry has little or no exposure to troubled overseas markets and large Australian corporates.

3.4.4 Net Interest Income

The Credit Union Industry generates a majority of income from net interest income. In recent years, the Credit Union and Banking Industries have continued to experience contraction in net interest margins due to increased competition particularly in deposits and housing lending. An increase in funding costs on wholesale markets has also contributed to decreasing net interest margins in the Banking Industry while the Credit Union Industry was sheltered to some extent by its low reliance on wholesale funding.

3.4.5 Non-interest Income

Faced with contracting net interest margins, the importance of non-interest income has increased for the Credit Union Industry. Typically account fees are very low reflecting the member focused nature of the Credit Union Industry and non-interest income predominately includes fees from wealth management and insurance operations as participants utilise their member base and branch networks to provide a broader range of products. Non-interest income for the Credit Union Industry decreased by 2.8 percent in the year ended 31 December 20089 while major banks experienced significant declines as a decrease in funds under management (“FUM”) negatively impacted their wealth management operations.

3.4.6 Costs

Faced with contracting net interest margins, the importance of improving cost efficiency has increased. The cost-to-income ratio for the Credit Union Industry increased from 75.5 percent to 76.4 percent in the year ended 31 December 2008.9 The cost to average assets ratio (which is often preferred for credit unions given their focus on maximising member benefits) decreased from 3.5 percent to 3.3 percent in the year ended 31 December 2008.9 In light of the current market conditions of slowing economic growth, reduced asset growth, continuing competition for deposits and potential worsening of asset quality, managing costs will only increase in importance.

3.5 Regulations

APRA is responsible for overseeing the prudential regulation of the Australian financial services industry (including the Credit Union and Banking Industries), a key component of which is capital adequacy. APRA also monitors liquidity and credit quality.

APRA’s capital adequacy requirements are imposed predominately to ensure ADIs maintain adequate levels of capital to act as a buffer against losses. APRA generally requires ADIs to maintain a minimum capital adequacy ratio (capital base to total risk-weighted assets) of 8 percent however APRA may impose higher ratios on individual ADIs on a case by case basis. Tier 1 capital must constitute at least 50 percent of an ADI’s capital base.

APRA’s liquidity requirements aim to ensure that all ADIs have sufficient funds available to meet calls on deposits and obligations to deposit holders as they fall due. ADIs are required to hold a minimum of 9 percent of liabilities in high-quality liquid assets.

9 APRA Quarterly Credit Union and Building Society Performance Statistics.


3.6 Industry Outlook

Set out below are the factors that are expected to influence the outlook for the Credit Union Industry in the next 12 months:

• the Federal Government Guarantee may benefit the Credit Union Industry by attracting deposits from alternative investments although the higher cost faced by credit unions in guaranteeing deposits over $1 million will make competition with the Banking Industry for high value deposits more difficult;

• despite recent interest rate cuts, the slowing economy is expected to have a negative impact on sentiment;

• credit growth is expected to continue to slow with personal and business lending expected to be the worst performers;

• deterioration in asset quality is expected to continue although the high proportion of housing lending is expected to benefit the Credit Union Industry comparatively to the Banking Industry;

• the Credit Union Industry will have the opportunity to benefit from the difficulties of many non-bank lenders who have a greater reliance on wholesale funding, although increased competition from the Banking Industry in winning this business is expected;

• the continued consolidation in the regional banking sector including the merger of Westpac and St George and the acquisition of BankWest by CBA may present opportunities for the Credit Union Industry to target customers who do not wish to bank with a major bank; and

• consolidation activity in the Credit Union Industry is expected to continue as participants attempt to improve member service and reduce costs.

3.7 Conclusions

Key conclusions from the above are as follows:

• the Credit Union Industry is heavily reliant on growing deposits in order to fund its growth and the deposit market is extremely competitive;

• credit unions are more active in the retail segment of the Banking Industry and have a high proportion of residential loans which has sheltered them to some extent from a deterioration in asset quality;

• the Credit Union Industry generally has much higher cost-to-income ratios than the Banking Industry which has contributed to industry consolidation as participants aim to remain competitive;

• credit growth has slowed significantly in the last 12 months and is expected to remain subdued in the short to medium term; and

• the Credit Union Industry generally has had little or no exposure to troubled overseas markets ensuring performance has been less affected by turbulent financial markets.

158

For

per

sona

l use

onl

y


3.6 Industry Outlook

Set out below are the factors that are expected to influence the outlook for the Credit Union Industry in the next 12 months:

• the Federal Government Guarantee may benefit the Credit Union Industry by attracting deposits from alternative investments although the higher cost faced by credit unions in guaranteeing deposits over $1 million will make competition with the Banking Industry for high value deposits more difficult;

• despite recent interest rate cuts, the slowing economy is expected to have a negative impact on sentiment;

• credit growth is expected to continue to slow with personal and business lending expected to be the worst performers;

• deterioration in asset quality is expected to continue although the high proportion of housing lending is expected to benefit the Credit Union Industry comparatively to the Banking Industry;

• the Credit Union Industry will have the opportunity to benefit from the difficulties of many non-bank lenders who have a greater reliance on wholesale funding, although increased competition from the Banking Industry in winning this business is expected;

• the continued consolidation in the regional banking sector including the merger of Westpac and St George and the acquisition of BankWest by CBA may present opportunities for the Credit Union Industry to target customers who do not wish to bank with a major bank; and

• consolidation activity in the Credit Union Industry is expected to continue as participants attempt to improve member service and reduce costs.

3.7 Conclusions

Key conclusions from the above are as follows:

• the Credit Union Industry is heavily reliant on growing deposits in order to fund its growth and the deposit market is extremely competitive;

• credit unions are more active in the retail segment of the Banking Industry and have a high proportion of residential loans which has sheltered them to some extent from a deterioration in asset quality;

• the Credit Union Industry generally has much higher cost-to-income ratios than the Banking Industry which has contributed to industry consolidation as participants aim to remain competitive;

• credit growth has slowed significantly in the last 12 months and is expected to remain subdued in the short to medium term; and

• the Credit Union Industry generally has had little or no exposure to troubled overseas markets ensuring performance has been less affected by turbulent financial markets.

159

For

per

sona

l use

onl

y


4 PROFILE OF MSF

4.1 Overview

MSF is a Tasmanian based credit union that was formed on 1 July 2007 following a merger of the connectfinancial credit union (“Connectfinancial”) and the islandstate credit union (“Islandstate”). MSF has approximately 117,000 members and approximately 300 staff.

MSF provides a range of products and services to members that include:

• personal and commercial lending;

• mortgage lending;

• savings and investment products;

• wealth management services; and

• insurance advice.

MSF’s products and services are provided through a network of 12 branches across Tasmania as well as 24 hour internet and telephone banking facilities. MSF Members also have access to over 1,400 ATMs across Australia free of charge through the rediATM network. MSF’s other key distribution channel is its telephone Service Centre.

The current corporate structure of MSF is summarised below:

Figure 2

MSF Corporate Structure

Source: MSF management

Notes:

1. The above subsidiaries are all 100 percent equity owned except for Credit Union Financial Services (TAS) Pty Ltd which is 50 percent owned.

2. Placed into liquidation in September 2008. 3. Dormant company.

4.1.1 MyState Financial Community Foundation Limited

MyState Financial Community Foundation Limited is the corporate trustee for the MyState Financial Community Foundation Trust (“Foundation”). In addition to its core products and services, MSF provides base funding and administrative support to the Foundation which provides grants to local charities involved in a range of education and development activities targeted at the youth of Tasmania. MSF contributed approximately $250,000 to the Foundation in both FY07 and FY08.

4.1.2 Connect Asset Management Pty Ltd

Connect Asset Management Pty Ltd (“Connect Asset Management”) is the Trust Manager of MSF’s securitisation vehicles; ConQuest Mortgage Trust and ConQuest 2007-1 Trust

MyState Financial

Community Foundation

Limited

MyState Financial Credit Union of

Tasmania Limited

ConnectAsset

ManagementPty Ltd

The Gourmet Club Pty Ltd

Credit Union FinancialServices(TAS) Pty

Ltd

Island State Financial

Planning Pty Ltd2

ConnectGroup

Limited3


(“ConQuest Trusts”). Connect Asset Management is a wholly-owned subsidiary and accordingly, securitised loans are included in the consolidated financial statements of MSF. MSF charges Connect Asset Management a fee to cover accounting, payroll, computer and occupancy expenses. MSF also charges Connect Asset Management a loan servicing fee based on the outstanding monthly balance of loans sold to the ConQuest Trusts at a rate of 0.25 percent per annum. Both amounts are eliminated on consolidation.

4.1.3 The Gourmet Club Pty Ltd

The Gourmet Club Pty Ltd (“the Gourmet Club”) was acquired by Connectfinancial in 2001 and is Tasmania’s largest membership loyalty club. The Gourmet Club provides its members with benefits at over 150 Tasmanian establishments, including discounts on dining, shopping and accommodation. The Gourmet Club is wholly-owned and contributed approximately $100,000 to MSF’s profit in FY08.

4.1.4 Island State Financial Planning Pty Ltd

The financial planning and wealth management services of Islandstate were previously provided by Island State Financial Planning Pty Ltd (“ISFP”), a wholly-owned subsidiary. These services have now been integrated with MSF’s banking operations and ISFP has been placed into liquidation.

4.1.5 Credit Union Financial Services (TAS) Pty Ltd

Credit Union Financial Services (TAS) Pty Ltd (“CUFSTAS”) is jointly owned by MSF and Australian Central Credit Union. CUFSTAS is an intermediary entity established for the purpose of engaging contractors such as IT service providers.

4.2 History

MSF’s predecessor credit unions, Connectfinancial and Islandstate, have extensive histories in Tasmania dating back more than 35 years.

Connectfinancial had developed from the progressive merger of a number of credit unions across Tasmania from 1959 to 1998. The Connectfinancial Group also included The Gourmet Club, Connect Asset Management and Connect Community Foundation Limited. At the date of the merger, Connectfinancial had approximately $889.4 million in assets under management, $227.6 million in funds under advice (“FUA”) and 159 full-time equivalent employees.

Islandstate had developed from the progressive merger of 22 credit unions across Tasmania from 1970 to 2001. At the date of the merger, Islandstate had approximately $669 million in assets under management, $169.3 million in FUA and 171 full-time equivalent employees.

The new MSF brand was launched on 3 September 2007. Duplicated branches in Burnie, Hobart and Launceston were consolidated on launch and duplicated branches in Devonport, Kingston and Rosny were also consolidated soon after. Duplicated branches in Glenorchy were consolidated on 20 March 2009.

4.3 Operations

The major operations of MSF are summarised below.

4.3.1 Lending

The majority of MSF’s loan book is comprised of residential mortgage loans however they also offer a range of lending products that includes motor vehicle loans, personal loans, overdrafts, commercial loans and credit cards (credit cards are not included in MSF’s loan book).

160

For

per

sona

l use

onl

y


(“ConQuest Trusts”). Connect Asset Management is a wholly-owned subsidiary and accordingly, securitised loans are included in the consolidated financial statements of MSF. MSF charges Connect Asset Management a fee to cover accounting, payroll, computer and occupancy expenses. MSF also charges Connect Asset Management a loan servicing fee based on the outstanding monthly balance of loans sold to the ConQuest Trusts at a rate of 0.25 percent per annum. Both amounts are eliminated on consolidation.

4.1.3 The Gourmet Club Pty Ltd

The Gourmet Club Pty Ltd (“the Gourmet Club”) was acquired by Connectfinancial in 2001 and is Tasmania’s largest membership loyalty club. The Gourmet Club provides its members with benefits at over 150 Tasmanian establishments, including discounts on dining, shopping and accommodation. The Gourmet Club is wholly-owned and contributed approximately $100,000 to MSF’s profit in FY08.

4.1.4 Island State Financial Planning Pty Ltd

The financial planning and wealth management services of Islandstate were previously provided by Island State Financial Planning Pty Ltd (“ISFP”), a wholly-owned subsidiary. These services have now been integrated with MSF’s banking operations and ISFP has been placed into liquidation.

4.1.5 Credit Union Financial Services (TAS) Pty Ltd

Credit Union Financial Services (TAS) Pty Ltd (“CUFSTAS”) is jointly owned by MSF and Australian Central Credit Union. CUFSTAS is an intermediary entity established for the purpose of engaging contractors such as IT service providers.

4.2 History

MSF’s predecessor credit unions, Connectfinancial and Islandstate, have extensive histories in Tasmania dating back more than 35 years.

Connectfinancial had developed from the progressive merger of a number of credit unions across Tasmania from 1959 to 1998. The Connectfinancial Group also included The Gourmet Club, Connect Asset Management and Connect Community Foundation Limited. At the date of the merger, Connectfinancial had approximately $889.4 million in assets under management, $227.6 million in funds under advice (“FUA”) and 159 full-time equivalent employees.

Islandstate had developed from the progressive merger of 22 credit unions across Tasmania from 1970 to 2001. At the date of the merger, Islandstate had approximately $669 million in assets under management, $169.3 million in FUA and 171 full-time equivalent employees.

The new MSF brand was launched on 3 September 2007. Duplicated branches in Burnie, Hobart and Launceston were consolidated on launch and duplicated branches in Devonport, Kingston and Rosny were also consolidated soon after. Duplicated branches in Glenorchy were consolidated on 20 March 2009.

4.3 Operations

The major operations of MSF are summarised below.

4.3.1 Lending

The majority of MSF’s loan book is comprised of residential mortgage loans however they also offer a range of lending products that includes motor vehicle loans, personal loans, overdrafts, commercial loans and credit cards (credit cards are not included in MSF’s loan book).

161

For

per

sona

l use

onl

y


Set out below is a summary of MSF’s loan book as at 31 December 2008:

Figure 3

MSF Loan Book – 31 December 2008

Residential80.6%

Personal9.5%

Commercial3.2%

Revolving credit6.7%

Source: MSF management and PKFCA analysis

Notes:1. Percentages are based on the percentage of total gross loans by value.

2. Residential loans include approximately 19.8 percent relating to securitised residential loans.

The loan book is discussed in more detail at Section 4.8.1.

4.3.2 Savings and Investment

MSF provide a range of savings and investment products including transaction accounts, savings accounts and term deposits.

4.3.3 Wealth Management

MSF holds an Australian Financial Services Licence (“AFSL”) and has 11 advisers who are authorised representatives. The advisers are based at various branches and provide a range of financial planning services including advice on superannuation and estate planning. As at 31 December 2008, MSF had total FUA of approximately $259 million.

FUA has been negatively impacted recently by falling equity markets, decreasing from approximately $303 million as at 30 June 2008, a fall of approximately 15 percent. FUA has decreased significantly from approximately $397 million at the date of the merger of Connectfinancial and Islandstate.

4.3.4 Insurance Advice

MSF provide access to a range of general insurance products including home, motor vehicle, caravan, boat and travel insurance. These insurance products are issued by CGU Insurance and MSF receive varying commissions on the premiums paid. MSF also have a strategic partnership with Tasmanian health insurance provider, St.Lukes Health which allows MSF Members a 3 percent discount on health insurance premiums paid via direct deposit from a bank account held with MSF.


4.4 Personnel

Set out below is a summary of the Directors and key management personnel of MSF:

Table 1: MSF Directors and Key Management

Name Position Background

Tony Reidy Non-Executive Chairman

• Has been a credit union Director for more than 20 years.

• Elected Chairman of Connectfinancial and the Gourmet Club in December 2006 and Chairman of MSF from 1 July 2007.

• Mr Reidy is also Executive Director of the Royal Hobart Hospital Research Foundation, a Fellow of both the Australian Institute of Company Directors and the Australasian Mutuals’ Institute and a Member of the Fundraising Institute of Australia.

Colin Hollingsworth Non-Executive Deputy Chairman

• Mr Hollingsworth was previously the General Manager, Corporate Services, TAFE Tasmania from 1998 to April 2008 and a former Director of CPS Credit Union for 20 years (5 as Chairman).

• Appointed to the Islandstate Board in 2000, Mr Hollingsworth was Chairman at the date of the merger with Connectfinancial.

• Chairman of MSF’s Executive Committee and a member of MSF’s Audit and Risk Committee.

Peter Armstrong Non-Executive Director

• Has been a credit union Director for over 20 years.

• Chairman of MSF’s Audit and Risk Committee and previously a Chairman of Connectfinancial.

• Mr Armstrong is also Senior Manager, Vocational Education and Training, at Hobart College and is a Fellow of both the Australian Institute of Company Directors and the Australasian Mutuals’ Institute.

Dianne Bowerman Non-Executive Director

• Previously a Senior Manager with insurer AAMI for more than 20 years, Mrs Bowerman was elected to the Islandstate Board in 2002.

• Chairman of MSF’s Governance Committee.

• Mrs Bowerman is also a member of the Victoria/Tasmania regional council of the Australasian Mutuals’ Institute.

Bob Gordon Non-Executive Director

• Has been a credit union Director for 14 years, including 6 years as Chairman of Connectfinancial.

• Member of MSF’s Governance Committee.

• Mr Gordon is also the Managing Director of Forestry Tasmania and a Director of the Foundation.

Tim Gourlay Non-Executive Director


• Chairman of the Foundation and a member of MSF’s Governance Committee.

• Mr Gourlay is also a member of both the Australian Institute of Company Directors and the Australasian Mutuals institute.

Graeme Little Non-Executive Director

• Previously a Director of J. Boag & Son from 1997 to 2000.

• First elected to the Islandstate Board in 2002.

• Mr Little is currently a member of MSF’s Executive and Audit Risk Committees.

John Gilbert Chief Executive Officer

• Appointed CEO in May 2009.

• Extensive experience as a Chief Executive and Director of a range of major commercial and regulatory organisations.

Nina Nelson Chief Financial Officer

• Certified Practicing Accountant who commenced with Connectfinancial in 1995.

• Roles at Connectfinancial included Senior Finance Officer, Manager of Treasury and Risk and Chief Risk Officer.

Source: MSF 2008 Annual Report and MSF management

Residen�al80.6%

Personal9.5%

Commercial3.2%

Revolving credit6.7%

162

For

per

sona

l use

onl

y


4.4 Personnel

Set out below is a summary of the Directors and key management personnel of MSF:

Table 1: MSF Directors and Key Management


Tony Reidy Non-Executive Chairman


• Elected Chairman of Connectfinancial and the Gourmet Club in December 2006 and Chairman of MSF from 1 July 2007.

• Mr Reidy is also Executive Director of the Royal Hobart Hospital Research Foundation, a Fellow of both the Australian Institute of Company Directors and the Australasian Mutuals’ Institute and a Member of the Fundraising Institute of Australia.

Colin Hollingsworth Non-Executive Deputy Chairman

• Mr Hollingsworth was previously the General Manager, Corporate Services, TAFE Tasmania from 1998 to April 2008 and a former Director of CPS Credit Union for 20 years (5 as Chairman).

• Appointed to the Islandstate Board in 2000, Mr Hollingsworth was Chairman at the date of the merger with Connectfinancial.

• Chairman of MSF’s Executive Committee and a member of MSF’s Audit and Risk Committee.

Peter Armstrong Non-Executive Director

• Has been a credit union Director for over 20 years.

• Chairman of MSF’s Audit and Risk Committee and previously a Chairman of Connectfinancial.

• Mr Armstrong is also Senior Manager, Vocational Education and Training, at Hobart College and is a Fellow of both the Australian Institute of Company Directors and the Australasian Mutuals’ Institute.

Dianne Bowerman Non-Executive Director

• Previously a Senior Manager with insurer AAMI for more than 20 years, Mrs Bowerman was elected to the Islandstate Board in 2002.

• Chairman of MSF’s Governance Committee.

• Mrs Bowerman is also a member of the Victoria/Tasmania regional council of the Australasian Mutuals’ Institute.

Bob Gordon Non-Executive Director

• Has been a credit union Director for 14 years, including 6 years as Chairman of Connectfinancial.

• Member of MSF’s Governance Committee.

• Mr Gordon is also the Managing Director of Forestry Tasmania and a Director of the Foundation.

Tim Gourlay Non-Executive Director


• Chairman of the Foundation and a member of MSF’s Governance Committee.

• Mr Gourlay is also a member of both the Australian Institute of Company Directors and the Australasian Mutuals institute.

Graeme Little Non-Executive Director

• Previously a Director of J. Boag & Son from 1997 to 2000.

• First elected to the Islandstate Board in 2002.

• Mr Little is currently a member of MSF’s Executive and Audit Risk Committees.

John Gilbert Chief Executive Officer

• Appointed CEO in May 2009.

• Extensive experience as a Chief Executive and Director of a range of major commercial and regulatory organisations.

Nina Nelson Chief Financial Officer

• Certified Practicing Accountant who commenced with Connectfinancial in 1995.

• Roles at Connectfinancial included Senior Finance Officer, Manager of Treasury and Risk and Chief Risk Officer.

Source: MSF 2008 Annual Report and MSF management

163

For

per

sona

l use

onl

y


4.5 SWOT Analysis

Set out below is an analysis of the strengths, weaknesses, opportunities and threats (“SWOT”) of MSF:

Table 2: MSF SWOT Analysis

Strengths Weaknesses

• Strong brand recognition in the Tasmanian market

• Loyal and diverse customer base

• Strong branch network and local support in Tasmania

• Strong management team

• Well trained staff

• Subject to Federal Deposit Guarantee

• Limited access to capital with which to compete against larger, better funded competitors

• Lack of diversification in both geographical and product distribution

• Lack of scale with which to leverage corporate overheads

Opportunities Threats

• Diversification and expanding non-interest income

• Pursuing business banking opportunities

• Geographic expansion

• Prolonged economic downturn and slow or negative credit growth

• Increased competition, including pressure on net interest margins


4.6 Capital Structure

Member Shares are redeemable preference shares that entitle the member to vote at meetings and to participate in the distribution of surplus assets upon a winding up of MSF. Member Shares are not entitled to dividends and are not able to be sold or transferred.

Member Shares issued on or after 10 October 2008 are not eligible to participate in the MSF Scheme and will have their Member Shares repaid should the MSF Scheme be approved. Under the MSF Constitution, MSF may redeem Member Shares if the member has not initiated any transactions in a 12 month period and the Board determines that the membership is dormant. At the date of this Report, MSF is in the process of reviewing its member share register to determine which memberships they consider dormant and applying a Board resolution to determine dormancy at two years. MSF will then determine the eligibility of these MSF Members to participate in the MSF Scheme. At the date of this Report the final number of MSF Members entitled to participate has therefore not been finalised.

Under the MSF Constitution, MSF may also raise capital by the issue of non-redeemable preference shares, however to date, none have been issued.


4.7 Income Statement

Set out below are the proforma income statements of MSF for FY06 and FY07, the audited income statement for FY08 and the income statement for the six months ended 31 December 2008 which has been subject to independent review by MSF’s auditor. The income statements for FY06 and FY07 are proforma in nature as they are based on the aggregated financial statements of Connectfinancial and Islandstate following the merger of these two entities on 1 July 2007 to form MSF:

Table 3: MSF Historical Income Statements

FY06

Proforma1

$000s

FY07

Proforma1

$000s

FY08

Audited

$000s

Six Months Ended 31 Dec

2008

Reviewed

$000s

Interest income 91,424 109,806 132,037 72,333

Interest expense (44,903) (58,568) (76,772) (45,032)

Net interest income 46,521 51,238 55,265 27,301

Non-interest income 20,454 21,178 20,003 9,799

Total revenue 66,975 72,416 75,268 37,100

Operating expenses (51,943) (61,578) (55,157) (29,731)

Bad and doubtful debts expense (1,218) (1,367) (3,442) (1,246)

Net profit before tax 13,814 9,471 16,669 6,122

Income tax expense (4,125) (2,726) (4,518) (1,840)

Net profit after tax 9,689 6,745 12,151 4,282

Add: significant items (net of tax) - 5,2362 1,6772 1,0823

Cash Profit 9,689 11,981 13,828 5,364

Net interest income growth (%) n/a 10.1% 7.9% n/a

Total revenue growth (%) n/a 8.1% 3.9% n/a

Non-interest income / total revenue (%) 30.5% 29.2% 26.6% 26.4%

Cash operating expenses growth (%) n/a 4.4% -2.5% n/a

Cash cost-to-income ratio (%) 77.6% 74.9% 70.2% 76.0%

Cash Profit growth (%) n/a 23.7% 15.4% n/a

Source: Connectfinancial, Islandstate and MSF Annual Reports, MSF management and PKFCA analysis

Notes:

1. Proforma income statements are based on the aggregated audited financial statements of Connectfinancial and Islandstate.

2. Significant items include costs associated with the merger of Connectfinancial and Islandstate net of tax (calculated at effective tax rate).

3. Significant items include costs associated with the Transaction, staff redundancies and strategic projects undertaken that are considered one-off net of tax (calculated at effective tax rate).

Amounts disclosed above are subject to rounding

Despite the negative effects of a decline in non-interest income and an increase in bad debts expense, robust growth in net interest income and an improved cost-to-income ratio, resulted in MSF recording strong growth in Cash Profit in FY08; the first year of merged operations. Cash Profit is commonly reported by Australian financial services businesses and typically reflects net profit after tax (“NPAT”) available to ordinary equity holders excluding significant items and goodwill impairment.

In undertaking our assessment of the Transaction, we have also had regard to MSF’s forecast for FY09.

As noted earlier, the Directors of MSF are of the view that the current economic environment creates significant uncertainty about likely financial performance and that any attempt to provide detailed forecast financial information would be unduly speculative and potentially misleading as it would not be sufficiently reliable or based on sufficiently reasonable grounds to be useful to MSF

164

For

per

sona

l use

onl

y


4.7 Income Statement

Set out below are the proforma income statements of MSF for FY06 and FY07, the audited income statement for FY08 and the income statement for the six months ended 31 December 2008 which has been subject to independent review by MSF’s auditor. The income statements for FY06 and FY07 are proforma in nature as they are based on the aggregated financial statements of Connectfinancial and Islandstate following the merger of these two entities on 1 July 2007 to form MSF:

Table 3: MSF Historical Income Statements

FY06

Proforma1

$000s

FY07

Proforma1

$000s

FY08

Audited

$000s


2008

Reviewed

$000s

Interest income 91,424 109,806 132,037 72,333

Interest expense (44,903) (58,568) (76,772) (45,032)

Net interest income 46,521 51,238 55,265 27,301

Non-interest income 20,454 21,178 20,003 9,799

Total revenue 66,975 72,416 75,268 37,100

Operating expenses (51,943) (61,578) (55,157) (29,731)

Bad and doubtful debts expense (1,218) (1,367) (3,442) (1,246)




Add: significant items (net of tax) - 5,2362 1,6772 1,0823

Cash Profit 9,689 11,981 13,828 5,364

Net interest income growth (%) n/a 10.1% 7.9% n/a

Total revenue growth (%) n/a 8.1% 3.9% n/a

Non-interest income / total revenue (%) 30.5% 29.2% 26.6% 26.4%

Cash operating expenses growth (%) n/a 4.4% -2.5% n/a


Cash Profit growth (%) n/a 23.7% 15.4% n/a

Source: Connectfinancial, Islandstate and MSF Annual Reports, MSF management and PKFCA analysis

Notes:

1. Proforma income statements are based on the aggregated audited financial statements of Connectfinancial and Islandstate.

2. Significant items include costs associated with the merger of Connectfinancial and Islandstate net of tax (calculated at effective tax rate).

3. Significant items include costs associated with the Transaction, staff redundancies and strategic projects undertaken that are considered one-off net of tax (calculated at effective tax rate).


Despite the negative effects of a decline in non-interest income and an increase in bad debts expense, robust growth in net interest income and an improved cost-to-income ratio, resulted in MSF recording strong growth in Cash Profit in FY08; the first year of merged operations. Cash Profit is commonly reported by Australian financial services businesses and typically reflects net profit after tax (“NPAT”) available to ordinary equity holders excluding significant items and goodwill impairment.

In undertaking our assessment of the Transaction, we have also had regard to MSF’s forecast for FY09.

As noted earlier, the Directors of MSF are of the view that the current economic environment creates significant uncertainty about likely financial performance and that any attempt to provide detailed forecast financial information would be unduly speculative and potentially misleading as it would not be sufficiently reliable or based on sufficiently reasonable grounds to be useful to MSF

165

For

per

sona

l use

onl

y


Members in making their decision as to whether to approve the Transaction. For this reason, we have not included a detailed disclosure of the forecast for FY09 in this Report.

We do note however that the forecast for FY09 is based on actual performance to 31 December 2008 and forecasts for the remainder of the financial year. Due to a slowing in credit growth and declining interest rates, Cash Profit in FY09 is forecast to be lower than FY08.

Set out below is an analysis of the historical financial performance of MSF. Prior to FY08, the analysis relates to the aggregated historical performance of Connectfinancial and Islandstate.

4.7.1 Net Interest Income

Set out below is a summary of MSF’s net interest income for the three years ended 30 June 2008:

Table 4: MSF Net Interest Income

FY06

Proforma1

$000s

FY07

Proforma1

$000s

FY08

Audited

$000s

Interest income 91,424 109,806 132,037

Average interest earning assets2 1,245,263 1,419,022 1,582,254

Average interest return (%) 7.3% 7.7% 8.3%

Interest expense 44,903 58,568 76,772

Average interest bearing liabilities2 1,164,484 1,331,094 1,477,313

Average interest cost (%) 3.9% 4.4% 5.2%

Net interest income 46,521 51,238 55,265

Net interest margin (%)3 3.7% 3.6% 3.5%

Spread (%)4 3.4% 3.3% 3.1%

Source: Connectfinancial, Islandstate and MSF Annual Reports

Notes:1. Based on aggregated figures for Connectfinancial and Islandstate.

2. Based on monthly averages.

3. Net interest income as a percentage of average interest earning assets. 4. Average interest return less average interest cost.

Despite a tightening of the spread, net interest income increased in the three years ended 30 June 2008 due to the growth in MSF’s loan book. The increasing average interest return over the three years ended 30 June 2008 is reflective of increases in the Reserve Bank of Australia’s base lending rate (“Cash Rate”) over the period. The average interest cost increased by more than the average interest return, thereby negatively impacting the spread and net interest margins.

MSF has experienced further contraction in net interest margins in the six months to 31 December 2008 as the Cash Rate has fallen from 7 percent (in September 2008) to 3.25 percent (in February 2009). MSF is forecasting a further contraction in net interest margins in the remainder of FY09.


Set out below is a summary of MSF’s average interest income rate for the three years ended 30 June 2008 segmented by asset type:

Figure 4

MSF Average Interest Income Rate

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

FY06 FY07 FY08

Cash and Liquid Assets Due from other financial institutions

Loans Total


Notes:1. Percentages reflect interest revenue as a percentage of average interest earning assets.

Set out below is a summary of MSF’s average interest expense rate for the three years ended 30 June 2008 segmented by funding type:

Figure 5

MSF Average Interest Expense Rate

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

FY06 FY07 FY08

Deposits Due to other financial institutions

ConQuest notes and bonds on issue Total


Notes:

1. Percentages reflect interest expense as a percentage of average interest bearing liabilities.

166

For

per

sona

l use

onl

y


Set out below is a summary of MSF’s average interest income rate for the three years ended 30 June 2008 segmented by asset type:

Figure 4

MSF Average Interest Income Rate

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

FY06 FY07 FY08

Cash and Liquid Assets Due from other financial institutions

Loans Total


Notes:1. Percentages reflect interest revenue as a percentage of average interest earning assets.

Set out below is a summary of MSF’s average interest expense rate for the three years ended 30 June 2008 segmented by funding type:

Figure 5

MSF Average Interest Expense Rate

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

FY06 FY07 FY08

Deposits Due to other financial institutions

ConQuest notes and bonds on issue Total


Notes:

1. Percentages reflect interest expense as a percentage of average interest bearing liabilities.

167

For

per

sona

l use

onl

y


4.7.2 Non-interest Income

Set out below is a summary of non-interest income for FY07, FY08 and the six months ended 31 December 2008:

Table 5: MSF Non-interest Income

FY07

Proforma1

$000s

FY08

Actual

$000s


2008

Actual

$000s

Loan fees 2,347 2,341 1,046

Other fees 10,471 9,743 4,829

Bad debts recovered 157 229 74

Commissions 7,069 6,589 3,372

Other income 1,134 1,101 478

Total non-interest income 21,178 20,003 9,799

Non-interest income / total revenue (%) 29.2% 26.6% 26.4%


Notes:

1. Based on aggregated figures for Connectfinancial and Islandstate.

The majority of MSF’s non-interest income is derived from lending and other fees associated with its core banking operations.

Commissions include commissions received from MSF’s insurance referral partners and commissions received through MSF’s wealth management operations.

Other income includes dividends received from Credit Union Services Corporation (Australia) Limited (“CUSCAL”). MSF holds commercial shares in CUSCAL, which also provides central banking services to MSF including overdraft and standby facilities, electronic settlement services and access to member services products of member chequing, Visa and Redicard.

The decline in non-interest income together with the continued growth in net interest income has contributed to non-interest income falling from approximately 29.2 percent of total revenue in FY07 to approximately 26.6 percent of total revenue in FY08, marginally lower than the Credit Union Industry average.


4.7.3 Operating Expenses

Set out below is a summary of MSF’s operating expenses for the three years ended 30 June 2008 and the six months ended 31 December 2008:

Table 6: MSF Operating Expenses

FY06

Proforma1

$000s

FY07

Proforma1

$000s

FY08

Actual

$000s

Six Months Ended 31 Dec 2008

Actual

$000s

Personnel costs 21,267 26,063 24,911 13,682

Other expenses 30,676 35,515 30,246 16,049

Total operating expenses 51,943 61,578 55,157 29,731

Less: significant items (before tax) - (7,352) (2,300) (1,547)

Total cash operating expenses 51,943 54,226 52,857 28,184



Notes:


After adjusting for significant items, the cash cost-to-income ratio fell in FY07 and FY08 aided by synergies achieved upon the merger of Connectfinancial and Islandstate. The cost-to-income ratio is forecast to be higher in FY09. MSF’s cost-to-income ratio is broadly in line with the Credit Union Industry average.

4.7.4 Bad and Doubtful Debts

Set out below is a summary of MSF’s bad and doubtful debts expense for the three years ended 30 June 2008 and the six months ended 31 December 2008:

Table 7: MSF Bad and Doubtful Debts

FY06

Proforma1

$000s

FY07

Proforma1

$000s

FY08

Actual

$000s


Actual

$000s

Increase / (decrease) in provision 317 (610) 2,254 557

Bad debts written off directly 901 1,977 1,188 689

Total bad and doubtful debts expense 1,218 1,367 3,442 1,246


Notes:


The level of bad debt provisioning has increased in line with an increase in the level of loans in arrears and is discussed in more detail at Section 4.8.3.

168

For

per

sona

l use

onl

y


4.7.3 Operating Expenses

Set out below is a summary of MSF’s operating expenses for the three years ended 30 June 2008 and the six months ended 31 December 2008:

Table 6: MSF Operating Expenses

FY06

Proforma1

$000s

FY07

Proforma1

$000s

FY08

Actual

$000s


Actual

$000s

Personnel costs 21,267 26,063 24,911 13,682

Other expenses 30,676 35,515 30,246 16,049

Total operating expenses 51,943 61,578 55,157 29,731

Less: significant items (before tax) - (7,352) (2,300) (1,547)

Total cash operating expenses 51,943 54,226 52,857 28,184



Notes:


After adjusting for significant items, the cash cost-to-income ratio fell in FY07 and FY08 aided by synergies achieved upon the merger of Connectfinancial and Islandstate. The cost-to-income ratio is forecast to be higher in FY09. MSF’s cost-to-income ratio is broadly in line with the Credit Union Industry average.

4.7.4 Bad and Doubtful Debts

Set out below is a summary of MSF’s bad and doubtful debts expense for the three years ended 30 June 2008 and the six months ended 31 December 2008:

Table 7: MSF Bad and Doubtful Debts

FY06

Proforma1

$000s

FY07

Proforma1

$000s

FY08

Actual

$000s


Actual

$000s

Increase / (decrease) in provision 317 (610) 2,254 557

Bad debts written off directly 901 1,977 1,188 689

Total bad and doubtful debts expense 1,218 1,367 3,442 1,246


Notes:


The level of bad debt provisioning has increased in line with an increase in the level of loans in arrears and is discussed in more detail at Section 4.8.3.

169

For

per

sona

l use

onl

y


4.8 Balance Sheets

Set out below is the proforma balance sheet of MSF as at 30 June 2007, the audited balance sheet as at 30 June 2008 and the balance sheet as at 31 December 2008 which has been subject to independent review by MSF’s auditor:

Table 8: MSF Balance Sheets

As at

30 June 2007

Proforma1

$000s

30 June 2008

Audited

$000s

31 Dec 2008

Reviewed

$000s

ASSETS

Cash and cash equivalents 14,771 8,485 9,685

Available for sale financial assets 144,992 184,324 237,416

Receivables 12,234 5,609 3,818

Loans 1,362,890 1,482,013 1,468,527

Other investments 3,482 3,379 4,130

Property, plant and equipment 9,659 12,201 14,379

Tax assets 3,914 4,081 7,656

Other assets 56 908 2,236

Intangible assets and goodwill 6,440 5,695 2,946

TOTAL ASSETS 1,558,438 1,706,695 1,750,793

LIABILITIES

Deposits 1,036,122 1,217,603 1,305,523

Interest bearing loans and borrowings 393,761 323,445 296,564

Payables and other liabilities 18,313 41,306 22,668

Tax liabilities (100) 1,315 371

Provisions 2,912 2,828 4,986

TOTAL LIABILITIES 1,451,008 1,586,497 1,630,112

NET ASSETS 107,430 120,198 120,682


Notes:

1. Proforma balance sheet is based on the aggregated audited financial statements of Connectfinancial and Islandstate.


We note the following with respect to the MSF balance sheets:

• available for sale financial assets include term deposits, certificates of deposit and other investment securities that are held predominately to invest surplus cash;

• as discussed previously, Connect Asset Management is a wholly-owned subsidiary and accordingly, MSF’s proportion of both securitised loans and securities issued by the ConQuest Trusts are included in the consolidated balance sheet;

• a majority of other investments relate to the commercial shares held in CUSCAL;

• property, plant and equipment includes approximately $7.6 million in land and buildings. This includes MSF’s head office, a branch in Hobart and a now vacant branch in Launceston. The vacant branch in Launceston has since been sold for $560,000;

• intangible assets include goodwill, software and licence fees for MSF’s main banking system; and

• interest bearing loans and borrowings include notes and residential mortgage backed securities issued by the ConQuest Trusts.


Set out below are further details regarding the financial position of MSF. Prior to FY08, the analysis relates to the aggregated financial position of Connectfinancial and Islandstate.

4.8.1 Loans

Set out below is a summary of MSF’s loan book from 30 June 2007 to 31 December 2008 segmented by product type:

Table 9: MSF Loan Book

As at

30 June 2007

Proforma1

$000s

30 June 2008

Actual

$000s

31 Dec 2008

Actual

$000s

Residential 1,069,713 1,195,103 1,186,935

Personal 140,067 142,180 140,361

Commercial 50,012 47,615 47,188

Revolving credit 104,459 100,730 98,215

Gross loan receivables 1,364,251 1,485,628 1,472,699

Provision (1,361) (3,615) (4,172)

Net loan receivables 1,362,890 1,482,013 1,468,527

Growth in gross loan receivables (%) 15.7% 8.9% -1.7%2


Notes:

1. Based on aggregated figures for Connectfinancial and Islandstate. 2. Annualised.

Table 10: MSF Loan Book – Product Type Percentages

As at

30 June 2007

Proforma1

$000s

30 June 2008

Actual

$000s

31 Dec 2008

Actual

$000s

Residential 78.4% 80.4% 80.6%

Personal 10.3% 9.6% 9.5%

Commercial 3.7% 3.2% 3.2%

Revolving credit 7.6% 6.8% 6.7%

Gross loan receivables 100% 100% 100%

Provision as a percentage of gross loan receivables (%) 0.10% 0.24% 0.28%


Notes:


MSF recorded growth in total loans in FY07 and FY08 broadly in line with private sector credit growth in Australia over the same period. Total loans decreased in the six months ended 31 December 2008 as credit growth declined significantly Australia wide. MSF’s growth in total loans has been relatively consistent with the Credit Union Industry average.

Aided by a buoyant housing market, residential lending recorded the strongest growth in FY07 and FY08, while total commercial loans actually declined over the period. The commercial loan portfolio largely comprises loans to small businesses and a majority of the loans are secured over commercial property or the personal assets of the borrower. MSF policy dictates that commercial lending is restricted to 15 percent of on balance sheet loans.

170

For

per

sona

l use

onl

y


Set out below are further details regarding the financial position of MSF. Prior to FY08, the analysis relates to the aggregated financial position of Connectfinancial and Islandstate.

4.8.1 Loans

Set out below is a summary of MSF’s loan book from 30 June 2007 to 31 December 2008 segmented by product type:

Table 9: MSF Loan Book

As at

30 June 2007

Proforma1

$000s

30 June 2008

Actual

$000s

31 Dec 2008

Actual

$000s

Residential 1,069,713 1,195,103 1,186,935

Personal 140,067 142,180 140,361

Commercial 50,012 47,615 47,188

Revolving credit 104,459 100,730 98,215

Gross loan receivables 1,364,251 1,485,628 1,472,699

Provision (1,361) (3,615) (4,172)

Net loan receivables 1,362,890 1,482,013 1,468,527

Growth in gross loan receivables (%) 15.7% 8.9% -1.7%2


Notes:

1. Based on aggregated figures for Connectfinancial and Islandstate. 2. Annualised.

Table 10: MSF Loan Book – Product Type Percentages

As at

30 June 2007

Proforma1

$000s

30 June 2008

Actual

$000s

31 Dec 2008

Actual

$000s

Residential 78.4% 80.4% 80.6%

Personal 10.3% 9.6% 9.5%

Commercial 3.7% 3.2% 3.2%

Revolving credit 7.6% 6.8% 6.7%

Gross loan receivables 100% 100% 100%

Provision as a percentage of gross loan receivables (%) 0.10% 0.24% 0.28%


Notes:


MSF recorded growth in total loans in FY07 and FY08 broadly in line with private sector credit growth in Australia over the same period. Total loans decreased in the six months ended 31 December 2008 as credit growth declined significantly Australia wide. MSF’s growth in total loans has been relatively consistent with the Credit Union Industry average.

Aided by a buoyant housing market, residential lending recorded the strongest growth in FY07 and FY08, while total commercial loans actually declined over the period. The commercial loan portfolio largely comprises loans to small businesses and a majority of the loans are secured over commercial property or the personal assets of the borrower. MSF policy dictates that commercial lending is restricted to 15 percent of on balance sheet loans.

171

For

per

sona

l use

onl

y


A majority of personal loans are provided for asset purchases such as motor vehicles, boats and home renovations, while the remainder are predominately provided for debt consolidation purposes.

In the six months to 31 December 2008, mortgage brokers originated approximately 22 percent of net loan settlements, down from approximately 28 percent in FY08. As at 31 December 2008, mortgage broker originated loans comprised approximately 24 percent of the total loan portfolio. As a result of a change in MSF strategy, combined with changes in the commission structure paid to brokers, there has been a fall in mortgage broker originated loans. MSF does not expect these proportions to change significantly in the short to medium term.

A majority of MSF’s loan book is comprised of residential lending and a significant portion of loans have a Loan to Valuation Ratio (“LVR”) under 80 percent.

Mortgage secured loans are generally restricted to a maximum LVR of 80 percent. Lending beyond an LVR of 80 percent to a maximum LVR of 90 percent generally requires Lenders Mortgage Insurance. Mortgage secured loans to purchase land are permitted to a LVR of 100 percent.

4.8.2 Securitisation

During FY08 MSF securitised residential mortgage insured home loans amounting to approximately $75 million. No loans were securitised in the six months ended 31 December 2008.

4.8.3 Provisioning

The provision for doubtful debts has increased from 0.10 percent of total loans as at 30 June 2007 to 0.28 percent of total loans as at 31 December 2008. MSF has increased the provision to reflect a general deterioration in economic conditions and an increase in account balances in arrears (loans where payments of principal or interest are at least 30 days in arrears). MSF have forecast further slight increases in the level of provisioning for the remainder of FY09.

4.8.4 Funding Mix

Set out below is a summary of MSF’s funding mix from 30 June 2007 to 31 December 2008:

Table 11: MSF Funding Mix

As at

30 June 2007

Proforma1

(millions)

30 June 2008

Actual

(millions)

31 Dec 2008

Actual

(millions)

Member deposits:

At call2 503 500 567

Fixed term2 533 718 739

Total member deposits 1,036 1,218 1,306

Borrowings3 394 323 297

Total funding 1,430 1,541 1,603

Growth in member deposits (%) 8.6% 17.6% 14.4%4

Member deposits / total funding (%) 72.4% 79.0% 81.5%


Notes:


2. Includes Member Shares. 3. Includes Conquest and rmbs notes.

4. Annualised.


As at 31 December 2008, over 80 percent of MSF’s funding is sourced from member deposits. Total growth in member deposits has outpaced the growth in the loan book over the two and half years to 31 December 2008, particularly in the last six months which may be due to the introduction of the Federal Government Guarantee. MSF relies heavily on growing member deposits in order to fund expansions of the loan book.

Borrowings relate predominately to MSF’s securitisation activities. Notably, MSF has no reliance on funding from volatile overseas markets.

4.8.5 Capital Adequacy

Set out below is a summary of MSF’s capital adequacy ratio as at 30 June 2008 and 31 December 2008:

Table 12: MSF Capital Adequacy Ratio

As at

30 June 2008 31 Dec 2008

Risk weighted assets ($millions) 798.6 798.2

Tier 1 Capital ratio (%) 13.0% 14.0%

Total Capital ratio (%) 13.6% 14.3%


While APRA requires a minimum capital ratio of 8 percent, MSF’s internal policy requires a minimum capital ratio of 12 percent. As with other credit unions, MSF relies heavily on retained earnings to maintain its Tier 1 capital.

172

For

per

sona

l use

onl

y


As at 31 December 2008, over 80 percent of MSF’s funding is sourced from member deposits. Total growth in member deposits has outpaced the growth in the loan book over the two and half years to 31 December 2008, particularly in the last six months which may be due to the introduction of the Federal Government Guarantee. MSF relies heavily on growing member deposits in order to fund expansions of the loan book.

Borrowings relate predominately to MSF’s securitisation activities. Notably, MSF has no reliance on funding from volatile overseas markets.

4.8.5 Capital Adequacy

Set out below is a summary of MSF’s capital adequacy ratio as at 30 June 2008 and 31 December 2008:

Table 12: MSF Capital Adequacy Ratio

As at

30 June 2008 31 Dec 2008

Risk weighted assets ($millions) 798.6 798.2

Tier 1 Capital ratio (%) 13.0% 14.0%

Total Capital ratio (%) 13.6% 14.3%


While APRA requires a minimum capital ratio of 8 percent, MSF’s internal policy requires a minimum capital ratio of 12 percent. As with other credit unions, MSF relies heavily on retained earnings to maintain its Tier 1 capital.

173

For

per

sona

l use

onl

y


5 INDUSTRY REVIEW – TPX

TPX’s activities may be characterised as encompassing aspects of the following:

• funds management;

• financial planning and advisory services; and

• trustee and executor services.

As such, TPX’s activities may be regarded as being (in part) affected by expected conditions in the following industry sectors:

• funds management sector in Australia; and

• financial planning and investment advisory sector in Australia.

In this Section, we set out an overview of current and expected conditions in the funds management and financial planning and investment advisory sectors. The overview set out below is based on market research reports prepared by various industry analyst and research bodies. The review is not intended to comprise a comprehensive review of industry conditions, but rather seeks to provide a review of general conditions to which TPX may be exposed over the foreseeable future.

We have not undertaken a separate review of the trustee and executor services sector as TPX revenues from these services are limited.

5.1 Funds Management Sector

The funds management sector comprises entities mainly engaged in earning revenue from the management of investment funds or unit trusts and other investment products. An additional feature can be the provision of administration services for retail and wholesale clients. Industry participants earn revenue in the form of management and administration commissions and fees, based principally on the overall value of funds under management or administration.

Market size

As at June 2008, investment managers in Australia had approximately $1.18 trillion in total FUM – approximately 60 percent of this amount was in non-superannuation funds with the balance being in superannuation funds.

Sources of funds

The major holdings of funds in the sector are as follows:

• Public unit trusts and other trusts – comprising listed and unlisted property trusts and equity trusts. These funds comprise approximately 38 percent of FUM and are principally affected by rises and falls in the value of underlying properties and equities.

• Life insurance offices – comprise approximately 19 percent of FUM, with approximately 90 percent coming from superannuation assets.

• Government sources – contribute approximately 14 percent of total FUM.

• Other sources – comprising general insurance funds, cash management trusts and overseas sources.

Geographic spread

New South Wales and Victoria are Australia's major financial services centres with good access to skilled labour, extensive telecommunications infrastructure, and a desirable social and climatic environment. In addition, Sydney and Melbourne are well located in time zones that straddle the US, European and Asian markets.

The spread of fund managers in 2008 between all states was as follows:


Figure 6

Funds Management – Geographic Spread 2008

Source: IBISWorld Report

Demand determinants

The sector is subject to a number of influences including the following:

• Household income and the amount of income available for investment purposes.

• Complexity and range of investment markets and products make managed funds an attractive and easier investment vehicle.

• Availability of services and investment products available to individuals, such as margin lending, warrants and derivatives.

• Attractiveness of the equities market compared to alternative investments.

Basis of competition

Competition in this industry is generally regarded as medium, but increasing.

Competition occurs on the basis of the following:

• Fees – in the form of entry fees, management and administration fees, costs associated with switching between funds and, when money is withdrawn from the fund, exit fees.

• Risk/return profile – including investment styles and the flexibility of the products.

• Performance – performance information is widely available and used to promote funds.

• Distribution channels - fund managers distribute their retail products largely through financial planners and financial institutions. The ease with which these advisers can be accessed is a key focus of competition.

• Other factors – such as brand, product range, and geographic/regional identity.

Barriers to entry

Barriers to entry are estimated as medium but increasing. The principal barriers to entry are:

• Cost of establishment and branding.

• Hiring and training staff and with the necessary skill.

• Difficulty in attracting funds without demonstrated past performance.

• Developing strong relationships with other financial institutions.

• Costs associated with satisfying regulatory requirements, such as holding an AFSL.

174

For

per

sona

l use

onl

y


Figure 6

Funds Management – Geographic Spread 2008


Demand determinants

The sector is subject to a number of influences including the following:

• Household income and the amount of income available for investment purposes.

• Complexity and range of investment markets and products make managed funds an attractive and easier investment vehicle.

• Availability of services and investment products available to individuals, such as margin lending, warrants and derivatives.

• Attractiveness of the equities market compared to alternative investments.


Competition in this industry is generally regarded as medium, but increasing.

Competition occurs on the basis of the following:

• Fees – in the form of entry fees, management and administration fees, costs associated with switching between funds and, when money is withdrawn from the fund, exit fees.

• Risk/return profile – including investment styles and the flexibility of the products.

• Performance – performance information is widely available and used to promote funds.

• Distribution channels - fund managers distribute their retail products largely through financial planners and financial institutions. The ease with which these advisers can be accessed is a key focus of competition.

• Other factors – such as brand, product range, and geographic/regional identity.

Barriers to entry

Barriers to entry are estimated as medium but increasing. The principal barriers to entry are:

• Cost of establishment and branding.

• Hiring and training staff and with the necessary skill.

• Difficulty in attracting funds without demonstrated past performance.

• Developing strong relationships with other financial institutions.

• Costs associated with satisfying regulatory requirements, such as holding an AFSL.

Qld, 15.1%

WA, 11.4%

SA, 6.0%Tas, 1.6% ACT, 1.5% NT, 1.2%

NSW, 35.0%

Vic, 28.2%

175

For

per

sona

l use

onl

y


Regulation

Regulation of the sector is generally regarded as high and has been steady to increasing over recent years. Regulatory requirements cover licensing to training of staff and principally arise from the following:

• Managed Investments Act.

• Investment and Financial Services Association.

• AFSL requirements.

• ASIC.

Other factors

Concentration is estimated as medium but increasing. The industry is regarded as being in a growth stage. Capital intensity is medium, as is the rate of technological change and volatility. Globalisation is increasing as international participants are attracted and international investments becoming increasingly available.

Current industry conditions

The funds management sector has performed strongly over recent years. However, the subprime crisis has established uncertainty within investors through the decline in asset values and stock markets worldwide. Investors have reacted by redeeming funds, and have reduced the flow of funds to new investment products which has lowered Industry revenue. These conditions are expected to continue throughout 2009.

Figures which outline the decline in current Industry conditions include the following:

• an expected decline in real revenue growth of 11.2 percent in the year leading up to June 2009 for financial planning and investment advice; and

• for the same period funds management is expected to decline by 10.6 percent, which will establish real Industry revenue of an estimated $3.6 billion. Funds management has not been below this level since FY04.

Industry revenue stems largely from fees and commissions established from the level of investment advice and financial planning services conducted, as well as the amount of FUM. As such, the Industry will most likely see improvements when the level of uncertainty described in the aforementioned diminishes.

Industry Outlook

Overall, it is expected that the recent decline in FUM and thus revenue within the funds management sector will reverse over the next five years with FY14 total revenues expected to reach $5.99 billion, representing an annual growth rate of 10.7 percent, as follows:


Figure 7

Funds Management Revenue

‐20

‐15

‐10

‐5

0

5

10

15

20

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Gro

wth

(%)

Re

ven

ue

($M

illio

ns)


Notes:

1. Revenue at constant prices.

5.2 Financial Planning and Advisory Sector

The financial planning and advisory sector comprises participants principally providing customised investment advice to clients on a fee for service or commission basis. The services typically include financial planning advice, wealth management and investment counselling to meet the goals and needs of specific clients.

Many of the characteristics of the funds management sector apply equally to the financial planning and advisory sector.

Products and services

The principal products and services provided in the sector and their estimated weighting within the sector are as follows:

Figure 8

Financial Planning and Advisory Sector – Services


176

For

per

sona

l use

onl

y


Figure 7

Funds Management Revenue

‐20

‐15

‐10

‐5

0

5

10

15

20

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Gro

wth

(%)

Re

ven

ue

($M

illio

ns)


Notes:


5.2 Financial Planning and Advisory Sector

The financial planning and advisory sector comprises participants principally providing customised investment advice to clients on a fee for service or commission basis. The services typically include financial planning advice, wealth management and investment counselling to meet the goals and needs of specific clients.

Many of the characteristics of the funds management sector apply equally to the financial planning and advisory sector.

Products and services

The principal products and services provided in the sector and their estimated weighting within the sector are as follows:

Figure 8

Financial Planning and Advisory Sector – Services


Postredundency

advice,3.0%

Investmentadvice, 25.0%

Re�rementplanning, 20.0%

Superannua�onadvice, 20.0%

Tax advice, 10.0%

Salarypackaging, 8.0%

Master trustservices, 8.0%

Estate planning, 6.0%

177

For

per

sona

l use

onl

y


Typical consumers of financial planning and investment advisory services are those aged 35 and over from higher income and socio-economic groups.

Market Size

It is estimated that financial planning and investment advisory revenues are expected to be in the vicinity of $6.27 billion in FY09, an 11.2 percent decline on revenue earned in FY08.

The sector has experienced strong growth over recent years largely as a result of changes to superannuation regulations which have resulted in individuals increasingly seeking financial advice. Strong equity markets, the growing value of funds under advice, and the general trend of an ageing population also assisted growth in this industry.

However the current decline in equity markets and asset values are expected to result in a decline in revenue in FY09.

Demand drivers

The major drivers of demand for financial advice over recent years have been the increasing number of individuals seeking advice on superannuation matters and the significant increase in funds placed in superannuation pursuant to compulsory superannuation and other governmental policies encouraging self funded retirement.

Other demand drivers include:

• Economic activity and household incomes.

• Complexity and range of investment markets and products.

• Proliferation in use of financial planning as a distribution channel for financial products.

• Increased consumer sophistication and awareness.

• Higher levels of mergers and acquisitions and initial public offerings activity.


Historically, where advisory revenues were based primarily on commissions from products, competition was based primarily on factors such as:

• Marketing and strength of brand name.

• Range of products and services available.

• Strength of company and industry research.

• Distribution channels and marketing.

However, independence concerns have resulted in a move towards greater use of the fee-for-service pricing of advice and services. Accordingly, fees are increasingly likely to be based on either a fixed fee or a fee charged by the hour. Whilst this will provides greater transparency in pricing, the fees charged for investment advice are expected to become a greater point of competition.

Barriers to entry

Barriers to entry in this industry are considered medium, but are increasing. The principal barriers to entry include the following:

• Appropriate educational requirements and suitably skilled advisors.

• Obtaining and meeting regulatory requirements (e.g. AFSL, independence).

• Establishing a strong relationship with a financial product supplier.

• High fixed costs at small scale operations.


Regulation

There are relatively high regulatory requirements in the sector, with independence and prudential concerns being prominent. Participants must be licensed and the maintenance of the licence carries a minimum level of fixed costs associated with training staff, monitoring independence, accessing research and ensuring competence.

Other features

Whilst short term market fluctuations have resulted in revenue decreases in particular years, the sector is considered to be in a growth phase driven primarily by the greater emphasis placed on the need to self fund and manage wealth creation for retirement.

Capital intensity is relatively low, though investment in technology systems to manage high numbers of clients and products is a strong factor in attracting qualified advisers.

Sector volatility is low, but a globalisation is evident with the entry of overseas participants drawn by the focus on compulsory superannuation and the resultant pool of funds needing investment.

Industry Outlook

Revenue growth within the sector is expected to be supported by further growth in managed funds (significantly superannuation funds), the development of the range in sophisticated investment products, further development in the array of services performed under wealth management and the continued aging of the Australian population.

After an expected two years of declining revenue, the sector is anticipated to resume positive growth in 2010. Throughout the period leading to FY14 an average revenue growth of 6 percent per year is to be maintained, where revenue is to reach a level of $8.387 billion. This movement is outlined in the following graph:

Figure 9

Financial Planning & Investment Advice Revenue

‐15

‐10

‐5

0

5

10

15

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Gro

wth

(%)

Re

ven

ue

($M

illio

ns)


Notes:


178

For

per

sona

l use

onl

y


Regulation

There are relatively high regulatory requirements in the sector, with independence and prudential concerns being prominent. Participants must be licensed and the maintenance of the licence carries a minimum level of fixed costs associated with training staff, monitoring independence, accessing research and ensuring competence.

Other features

Whilst short term market fluctuations have resulted in revenue decreases in particular years, the sector is considered to be in a growth phase driven primarily by the greater emphasis placed on the need to self fund and manage wealth creation for retirement.

Capital intensity is relatively low, though investment in technology systems to manage high numbers of clients and products is a strong factor in attracting qualified advisers.

Sector volatility is low, but a globalisation is evident with the entry of overseas participants drawn by the focus on compulsory superannuation and the resultant pool of funds needing investment.

Industry Outlook

Revenue growth within the sector is expected to be supported by further growth in managed funds (significantly superannuation funds), the development of the range in sophisticated investment products, further development in the array of services performed under wealth management and the continued aging of the Australian population.

After an expected two years of declining revenue, the sector is anticipated to resume positive growth in 2010. Throughout the period leading to FY14 an average revenue growth of 6 percent per year is to be maintained, where revenue is to reach a level of $8.387 billion. This movement is outlined in the following graph:

Figure 9

Financial Planning & Investment Advice Revenue

‐15

‐10

‐5

0

5

10

15

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Gro

wth

(%)

Re

ven

ue

($M

illio

ns)


Notes:


179

For

per

sona

l use

onl

y


6 PROFILE OF TPX

6.1 Overview

TPX was established in 1887 and is a Tasmanian based provider of financial products and trustee services. TPX was established to provide executor and trustee services for Tasmanians and these remain a core part of its service offering. TPX listed on the ASX in October 1986.

TPX is a trustee company authorised under the Trustee Companies Act 1953 (Tasmania) and also holds an approval from APRA to act as the trustee of superannuation funds as well as holding an AFSL issued by ASIC.

TPX manages over $1 billion in FUM on behalf of investors and has an additional $474 million in FUA through its role as financial advisor, attorney or trustee on behalf of various trusts, estates and other clients.

TPX employs approximately 100 staff and operates ten branches and offices in Tasmania.

TPX also has a 50/50 joint venture with Bendigo and Adelaide Bank called Tasmanian Banking Services (“TBS”), which provides retail banking products and services.

6.2 Operations

The major operations of TPX are summarised below.

6.2.1 Funds Management

Over 50 percent of TPX’s annual revenues comprise management fees derived from its FUM. TPX operates three classes of managed funds; Cash Funds, Income Funds and Investment Growth Funds for which fees are charged based on the level of FUM.

Cash Funds

TPX has three Cash Funds (At Call Fund, Cash Management Fund and Select Term Fund), which invest in short term securities such as bank bills, government and semi-government bonds and other interest bearing securities.

TPX’s At Call Fund and Cash Management Fund are invested in short term securities allowing investors ready access to their money. The Select Term Fund currently invests approximately 30 percent of fund assets in the Cash Management Fund and 70 percent of fund assets in the Long Term Fund (see below). While the Select Term Fund is intended to provide a greater return than the At Call Fund and the Cash Management Fund, investors do not have the same level of access to their money and investment terms range from three to six months.

Income Funds

TPX has four Income Funds (Fixed Term Fund, Long Term Fund, Select Mortgage Fund and Income Plus Fund) invested predominately in first mortgages over Tasmanian rural, commercial and residential real estate and also in short to medium term money market type securities. The Income Plus Fund is predominately invested in high yield debt and fixed interest.

Investment Growth Funds

TPX offers five Investment Growth Funds based on a multi-manager approach which allows TPX to select a combination of specialist investment managers with different styles and philosophies. Investors acquire units in the TPX Funds and not direct interests in the funds managed by the external investment managers.

The Investment Growth Funds are the Balanced Fund, the Equity Fund, Leader Imputation Fund, International Share Fund and Property Fund.


The Balance Fund aims to provide capital growth over the medium to long term together with regular income.

The Equity Fund aims to provide investors with better than market average capital growth over the medium to long term including tax effective income by investing in Australian and International shares.

The Leaders Imputation Fund aims to provide investors with the opportunity for capital growth over the medium to long term together with tax effective dividend income derived from franked dividends by investing in Australian shares.

The International Share Fund aims to achieve returns in excess of the Morgan Stanley Capital World Index (ex Australia) over rolling five year periods by investing in International shares.

The Property Fund aims to provide exposure primarily to listed property trusts, for some tax effective income and capital growth potential over the long term. The Fund aims to provide investors with a total return in excess of the S&P/ASX 200 Property Trust Accumulation Index over a five year period. This Fund may also invest in direct property.

A summary of TPX’s FUM as at years ended 30 June 2003 to 2008 and as at 31 December 2008 is set out below:

Figure 10

TPX Funds Under Management

$1,170$1,247

$1,305$1,379

$1,307$1,211

$1,030

‐0.2

‐0.15

‐0.1

‐0.05

0

0.05

0.1

0

200

400

600

800

1,000

1,200

1,400

1,600

2003 2004 2005 2006 2007 2008 Dec‐08

Gro

wth

(%)

$Mill

ion

s

Year

Source: TPX 2008 Annual Report and 31 December 2008 Half Year Report

6.2.2 Lending, Financial Planning and Trustee Services

Lending

TPX mortgage funds provide first mortgage finance for rural, commercial and business purposes which includes lending against residential, commercial and rural properties.

Financial Planning

TPX offers a range of financial planning services including personal wealth creation advice, wealth protection and retirement planning. The services are provided by a team of nine financial planners and TPX charges a fee based on the complexity of client review and the amount of time spent preparing the review.

180

For

per

sona

l use

onl

y


The Balance Fund aims to provide capital growth over the medium to long term together with regular income.

The Equity Fund aims to provide investors with better than market average capital growth over the medium to long term including tax effective income by investing in Australian and International shares.

The Leaders Imputation Fund aims to provide investors with the opportunity for capital growth over the medium to long term together with tax effective dividend income derived from franked dividends by investing in Australian shares.

The International Share Fund aims to achieve returns in excess of the Morgan Stanley Capital World Index (ex Australia) over rolling five year periods by investing in International shares.

The Property Fund aims to provide exposure primarily to listed property trusts, for some tax effective income and capital growth potential over the long term. The Fund aims to provide investors with a total return in excess of the S&P/ASX 200 Property Trust Accumulation Index over a five year period. This Fund may also invest in direct property.

A summary of TPX’s FUM as at years ended 30 June 2003 to 2008 and as at 31 December 2008 is set out below:

Figure 10

TPX Funds Under Management

$1,170$1,247

$1,305$1,379

$1,307$1,211

$1,030

‐0.2

‐0.15

‐0.1

‐0.05

0

0.05

0.1

0

200

400

600

800

1,000

1,200

1,400

1,600

2003 2004 2005 2006 2007 2008 Dec‐08G

row

th (%

)

$Mill

ion

s

Year


6.2.2 Lending, Financial Planning and Trustee Services

Lending

TPX mortgage funds provide first mortgage finance for rural, commercial and business purposes which includes lending against residential, commercial and rural properties.

Financial Planning

TPX offers a range of financial planning services including personal wealth creation advice, wealth protection and retirement planning. The services are provided by a team of nine financial planners and TPX charges a fee based on the complexity of client review and the amount of time spent preparing the review.

181

For

per

sona

l use

onl

y


Trustee Services

TPX’s trustee services include estate planning, preparation of wills and power of attorneys, estate management, administration under guardianship and administration orders and the provision of funeral bonds.

Estate planning services are provided via consultation with TPX advisers for which a fee is charged which includes the preparation of a will and enduring power of attorney where required.

TPX acts as Executor where appointed to administer and distribute estates to beneficiaries on behalf of clients who have passed away for which TPX charge a fee based on the level of FUA. TPX also provide administration services when appointed as an Administrator by the Guardian and Administration Board for persons who had not previously appointed a power of attorney.

6.2.3 Private Client Services

TPX’s Private Client Services division was established in October 2007 and provides three levels of investment administration and advice as set out below:

• Portfolio Administration Service – This includes investment administration only e.g.: communications with share registries, corporate action processing, investment reporting, taxation reporting, etc. Clients can still obtain external investment advice and fees are charged based on the level of FUA.

• Portfolio Advisory Service – This includes all the services of the portfolio administration service but with the addition of financial advice, e.g.: a dedicated financial planner and account manager, preparation of statements of advice, advice on corporate actions, etc. The client maintains the final say on all investment decisions and fees are charged based on FUA and transaction fees where applicable.

• Portfolio Management Service – This service offering is currently under development and will build on the portfolio administration service and the portfolio advisory service by providing full investment advice within the client’s agreed investment strategy.

6.2.4 Tasmanian Banking Services

TBS is a joint venture owned by TPX and Bendigo and Adelaide Bank which commenced in November 2000. TBS provides Bendigo and Adelaide Bank products and services through a network in Tasmania of nine branches. Six of these branches are shared retail outlets with TPX.

TBS provides certain Bendigo and Adelaide Bank products and services through its branch network. TBS does not operate as a bank and is essentially a marketing/retail front for Bendigo and Adelaide Bank. It also cross sells TPX products and services noted above.

TPX is currently in negotiation to dispose of its 50 percent interest in TBS. While the negotiations are incomplete, TPX has indicated that the estimated proceeds will be in the range of $5 million to $7 million.


6.3 Personnel

Set out below is a summary of the Directors and key management personnel of TPX:

Table 13: TPX Directors and Key Management


Michael Vertigan Non-Executive Chairman

• Former Secretary of the Department of Treasury and Finance in both Tasmania and Victoria.

• TPX Director since July 2004 and Chairman since October 2004. • Dr Vertigan is also current Chair of the Tasmanian Polytechnic, a

Director of Eraring Energy and a Board Member of the Higher Education Endowment Fund.

Mark Scanlon Managing Director • Mr Scanlon has previously held a number of executive positions

in the financial services industry in Tasmania and Victoria. • Appointed Chief Executive Officer of TPX in 2000 and Managing

Director in March 2004. • Mr Scanlon is also Managing Director of TBS, a Director of the

Motor Accidents Insurance Board and the Heart Foundation Tasmania.

Damian Bugg Non-Executive Director

• Former partner of Dobson Mitchell and Allport and was the first Director of Public Prosecutions for Tasmania from 1986 until 1999. Commonwealth Director of Public Prosecutions from 1999 to 2007.

• A Director since 1 February 2008, Mr Bugg is a past President of the Bar Association of Tasmania, past Chairman of the Southern Legal Assistance Scheme, a past member of the Council of the Law Society of Tasmania and a past member of the Council of the Australian Institute of Judicial Administration.

• Mr Bugg is also a member of the Council of the University of Tasmania and was appointed Chancellor of UTas in 2006.

Nicholas d’Antoine Non-Executive Director

• A former grazier with extensive experience in agriculture. • A Director of TPX since 1983, Mr d’Antoine is Chairman of TBS

and holds various private company Directorships.

Clyde Eastaugh Non-Executive Director

• A past member of the Tasmanian Resource Management and Planning Appeals Tribunal, past Chairman of the Tasmanian Gaming Commission, past President of the Australian Property Institute.

• A Director of TPX since 2001, Mr Eastaugh is a Town Planner and Certified Practicing Valuer.

• Mr Eastaugh is also Director of the Tasmanian Community Foundation and a Director of other private companies.

Miles Hampton Non-Executive Director

• Former Managing Director of Roberts Limited and Ruralco Holdings Ltd and a Director of Wentworth Holdings Ltd.

• A Director of TPX since 27 July 2006, Mr Hampton is also a Director of Hobart Regional Water Authority, Forestry Tasmania, Australian Pharmaceutical Industries Ltd, Impact Fertilisers Pty Ltd, UTas Foundation, Tasman Farms Limited and VDL Company Limited.

Ian Mansbridge Non-Executive Director

• Formerly a Director of TBS and Elders Rural Bank Limited. • A Director of TPX since March 2004, Mr Mansbridge is also a

Director of Australian Friendly Society Limited, NSX Ltd, BSX Limited, Water Exchange Limited and Sandhurst Trustees Ltd.

Sarah Merridew Non-Executive Director

• Former partner of Deloitte Touche Tohmatsu from 1993 to 2003, including a period as Managing Partner for Tasmania.

• A Director of TPX since 2001, Mrs Merridew is a Director of the Tasmanian Public Finance Corporation, TBS and is Honorary Treasurer of the Royal Flying Doctor Service (Tasmanian Section) Inc.

Paul Viney Company Secretary • Former General Manager Corporate, Chief Financial Officer and

Company Secretary for Harris & Company Limited, a Director of the Examiner Newspaper Pty Ltd, Group Treasurer of the Australian Cement Group of Companies, Manager Corporate Banking for Tasmania Bank and Assistant Commissioner for Corporate Affairs in Tasmania.

• Appointed Company Secretary and Chief Financial Officer and Secretary of TBS in July 2003.

Source: TPX 2008 Annual Report

182

For

per

sona

l use

onl

y


6.3 Personnel

Set out below is a summary of the Directors and key management personnel of TPX:

Table 13: TPX Directors and Key Management


Michael Vertigan Non-Executive Chairman

• Former Secretary of the Department of Treasury and Finance in both Tasmania and Victoria.

• TPX Director since July 2004 and Chairman since October 2004. • Dr Vertigan is also current Chair of the Tasmanian Polytechnic, a

Director of Eraring Energy and a Board Member of the Higher Education Endowment Fund.

Mark Scanlon Managing Director • Mr Scanlon has previously held a number of executive positions

in the financial services industry in Tasmania and Victoria. • Appointed Chief Executive Officer of TPX in 2000 and Managing

Director in March 2004. • Mr Scanlon is also Managing Director of TBS, a Director of the

Motor Accidents Insurance Board and the Heart Foundation Tasmania.

Damian Bugg Non-Executive Director

• Former partner of Dobson Mitchell and Allport and was the first Director of Public Prosecutions for Tasmania from 1986 until 1999. Commonwealth Director of Public Prosecutions from 1999 to 2007.

• A Director since 1 February 2008, Mr Bugg is a past President of the Bar Association of Tasmania, past Chairman of the Southern Legal Assistance Scheme, a past member of the Council of the Law Society of Tasmania and a past member of the Council of the Australian Institute of Judicial Administration.

• Mr Bugg is also a member of the Council of the University of Tasmania and was appointed Chancellor of UTas in 2006.

Nicholas d’Antoine Non-Executive Director

• A former grazier with extensive experience in agriculture. • A Director of TPX since 1983, Mr d’Antoine is Chairman of TBS

and holds various private company Directorships.

Clyde Eastaugh Non-Executive Director

• A past member of the Tasmanian Resource Management and Planning Appeals Tribunal, past Chairman of the Tasmanian Gaming Commission, past President of the Australian Property Institute.

• A Director of TPX since 2001, Mr Eastaugh is a Town Planner and Certified Practicing Valuer.

• Mr Eastaugh is also Director of the Tasmanian Community Foundation and a Director of other private companies.

Miles Hampton Non-Executive Director

• Former Managing Director of Roberts Limited and Ruralco Holdings Ltd and a Director of Wentworth Holdings Ltd.

• A Director of TPX since 27 July 2006, Mr Hampton is also a Director of Hobart Regional Water Authority, Forestry Tasmania, Australian Pharmaceutical Industries Ltd, Impact Fertilisers Pty Ltd, UTas Foundation, Tasman Farms Limited and VDL Company Limited.

Ian Mansbridge Non-Executive Director

• Formerly a Director of TBS and Elders Rural Bank Limited. • A Director of TPX since March 2004, Mr Mansbridge is also a

Director of Australian Friendly Society Limited, NSX Ltd, BSX Limited, Water Exchange Limited and Sandhurst Trustees Ltd.

Sarah Merridew Non-Executive Director

• Former partner of Deloitte Touche Tohmatsu from 1993 to 2003, including a period as Managing Partner for Tasmania.

• A Director of TPX since 2001, Mrs Merridew is a Director of the Tasmanian Public Finance Corporation, TBS and is Honorary Treasurer of the Royal Flying Doctor Service (Tasmanian Section) Inc.

Paul Viney Company Secretary • Former General Manager Corporate, Chief Financial Officer and

Company Secretary for Harris & Company Limited, a Director of the Examiner Newspaper Pty Ltd, Group Treasurer of the Australian Cement Group of Companies, Manager Corporate Banking for Tasmania Bank and Assistant Commissioner for Corporate Affairs in Tasmania.

• Appointed Company Secretary and Chief Financial Officer and Secretary of TBS in July 2003.

Source: TPX 2008 Annual Report

183

For

per

sona

l use

onl

y


6.4 SWOT Analysis

Set out below is an analysis of the SWOT of TPX:

Table 14: TPX SWOT Analysis

Strengths Weaknesses

• A well established business with known brand name

• Strong branch network and local support in Tasmania

• Strong management team

• History of profitability

• Strong strategic relationships with customers

• Preeminent position relating to trustee services in Tasmania

• Internal control capability without dependence of outsourced function providers

• Good relationship with Bendigo and Adelaide Bank

• Well trained staff

• Online presence for all fund types including mortgage funds

• Strong corporate governance

• Approximately 50 percent of revenue is sensitive to asset price movements

• Not subject to Federal Deposit Guarantee

• Limited geographic presence

• Regulatory compliance in respect of trustee company status

• Subject to fee limits in respect of trustee services

• Only recently developed an online presence

Opportunities Threats

• Further expansion outside Tasmania via development of strategic relationships

• Further cross selling of products to existing client base

• Growth by acquisition

• Loss of confidence by financial planners

• Global financial crisis continuing undermining of confidence in non-bank institutions operating outside of the Federal Deposit Guarantee

Source: TPX management and PKFCA analysis


A summary of TPX’s top 10 shareholders as at 4 June 2009 is set out below:

Table 15: TPX Top 10 Shareholders

Shareholder Number of TPX Shares

Held

% of Total

Issued Shares

Trust Company Fiduciary Services Limited 2,093,344 9.6%

Select Managed Funds Pty Ltd 1,225,960 5.6%

Bendigo Bank Limited 886,490 4.0%

Cogent Nominees Pty Limited 740,888 3.4%

Mr B D Faulkner 678,000 3.1%

UBS Wealth Management Australia Nominees Pty Ltd 548,457 2.5%

Milton Corporation Limited 444,992 2.0%

Mrs W J Faulkner 405,000 1.9%

ANZ Nominees Limited 348,487 1.6%

Mrs J E Evershed 312,160 1.4%

Total top 10 7,683,778 35.1%

Other 14,222,124 64.9%

Total as at the date of this Report 21,905,902 100.0%

Source: TPX

We note the following in relation to the capital structure of TPX:

• the top 10 shareholders accounted for approximately 35 percent of the issued shares;

• the Trustee Companies Act 1953 (Tasmania) currently imposes a 10 percent cap on investment in TPX and has been amended to apply the 10 percent shareholder cap to MyState Limited.


6.6 Income Statements

Set out below are the audited income statements of TPX for the three years ended 30 June 2008 and the income statement for the six months ended 31 December 2008 which has been subject to independent review by TPX’s auditor:

Table 16: TPX Historical Income Statements

FY06

Audited

$000s

FY07

Audited

$000s

FY08

Audited

$000s


2008

Reviewed2

$000s

Revenue

Management fees 12,577 12,412 11,942

Commissions 5,002 4,216 5,386

Other fees 1,752 2,145 2,808

Other revenue 1,020 1,171 957

Total revenue 20,351 19,944 21,093 10,362

Other income1 - 281 - -

Total income 20,351 20,225 21,093 10,362

Operating expenses (10,385) (10,218) (12,098)

Share of profit of equity investee 749 898 1,009 450

EBITDA 10,715 10,905 10,004

Depreciation and amortisation (451) (383) (443)

EBIT 10,264 10,522 9,561

Net interest revenue / (expense) 61 81 65




Total revenue growth (%) n/a -2.0% 5.8%

NPBT growth (%) n/a 2.7% -9.2%

NPBT margin (%) 50.7% 53.2% 45.6% 37.2%

NPAT margin (%) 37.0% 38.9% 33.4% 27.3%

Source: TPX Annual Reports and 31 December 2008 Half Year Report

Notes:

1. Other income refers to profit on disposal of a managed fund investment in FY07. 2. Results are as reported by TPX, i.e. with limited disclosure.

We note the following with respect to the historical financial performance of TPX as set out above:

• revenue is mainly driven by management fees and commissions from fund management and fund advisory activities;

• total revenue has been fairly consistent for the three years ended 30 June 2008. We understand that the revenue is closely linked to underlying assets values, some of which in turn are based on the performance of the financial markets;

• operating expenses whilst at the level of FY06 in FY07, have increased in FY08. This was partially driven by certain significant items, discussed below; and

• earnings margins have fallen in FY08 despite revenue growth of approximately 5.8 percent for the period.

184

For

per

sona

l use

onl

y


6.6 Income Statements

Set out below are the audited income statements of TPX for the three years ended 30 June 2008 and the income statement for the six months ended 31 December 2008 which has been subject to independent review by TPX’s auditor:

Table 16: TPX Historical Income Statements

FY06

Audited

$000s

FY07

Audited

$000s

FY08

Audited

$000s


2008

Reviewed2

$000s

Revenue

Management fees 12,577 12,412 11,942

Commissions 5,002 4,216 5,386

Other fees 1,752 2,145 2,808

Other revenue 1,020 1,171 957

Total revenue 20,351 19,944 21,093 10,362

Other income1 - 281 - -

Total income 20,351 20,225 21,093 10,362

Operating expenses (10,385) (10,218) (12,098)

Share of profit of equity investee 749 898 1,009 450

EBITDA 10,715 10,905 10,004

Depreciation and amortisation (451) (383) (443)

EBIT 10,264 10,522 9,561

Net interest revenue / (expense) 61 81 65




Total revenue growth (%) n/a -2.0% 5.8%

NPBT growth (%) n/a 2.7% -9.2%

NPBT margin (%) 50.7% 53.2% 45.6% 37.2%

NPAT margin (%) 37.0% 38.9% 33.4% 27.3%

Source: TPX Annual Reports and 31 December 2008 Half Year Report

Notes:

1. Other income refers to profit on disposal of a managed fund investment in FY07. 2. Results are as reported by TPX, i.e. with limited disclosure.

We note the following with respect to the historical financial performance of TPX as set out above:

• revenue is mainly driven by management fees and commissions from fund management and fund advisory activities;

• total revenue has been fairly consistent for the three years ended 30 June 2008. We understand that the revenue is closely linked to underlying assets values, some of which in turn are based on the performance of the financial markets;

• operating expenses whilst at the level of FY06 in FY07, have increased in FY08. This was partially driven by certain significant items, discussed below; and

• earnings margins have fallen in FY08 despite revenue growth of approximately 5.8 percent for the period.

185

For

per

sona

l use

onl

y


6.7 Normalisation of Earnings

The reported financial results of TPX for the three years ended 30 June 2008 have been affected by a number of significant items that are regarded as “one-off” in nature.

In order to normalise TPX’s historical earnings we have excluded TPX’s share of profits from TBS, the profit on disposal of a managed fund investment, one-off revenue increases resulting from changes in accounting policy, impairment losses recognised and losses on disposal of plant and equipment.

Set out below are the normalised earnings of TPX for the three years ended 30 June 2008:

Table 17: TPX Normalised Earnings

FY06

$000s

FY07

$000s

FY08

$000s


2008

$000s

Reported net profit before tax 10,325 10,603 9,626 3,855

Normalisations

Share of profit of equity investee (TBS) (749) (898) (1,009) (450)

Other income - (281) - -

Revenue increase from changes in accounting policy

- - (542) -

Loss on disposal of plant and equipment 20 6 - -

Impairment loss - - 607 -

Total normalisations (729) (1,173) (944) (450)

Normalised net profit before tax 9,596 9,430 8,682 3,405

Tax (calculated at effective tax rate) (2,604) (2,528) (2,337) (908)

Normalised net profit after tax 6,992 6,902 6,345 2,497

Normalised NPBT growth (%) n/a -1.7% -7.9% n/a

Normalised NPBT margin (%) 47.2% 47.3% 41.2% 32.9%

Normalised NPAT margin (%) 34.4% 34.6% 30.1% 24.1%

Source: TPX management

6.8 Forecast

In undertaking our review of the financial performance of TPX, we have also had regard to the forecast for FY09.

As noted earlier, the Directors of TPX are of the view that the current economic environment creates significant uncertainty about likely financial performance and that any attempt to provide detailed forecast financial information would be unduly speculative and potentially misleading as it would not be sufficiently reliable or based on sufficiently reasonable grounds to be useful to MSF Members in making their decision as to whether to approve the Transaction. For this reason, we have not included a detailed disclosure of the forecast in this Report.

We do note that TPX released profit guidance to the ASX on 9 April 2009 in respect of expectations for the year ending 30 June 2009. This disclosure announced that the Directors of TPX expect profit after tax and before significant items to be in the range of $5.2 million to $5.5 million. This profit guidance includes TPX’s share of profits from TBS.


6.9 Balance Sheet

Set out below are the audited balance sheets of TPX as at 30 June 2007 and 30 June 2008 and the balance sheet as at 31 December 2008 which has been subject to independent review by TPX’s auditor:

Table 18: TPX Balance Sheets

As at

30 June 2007

Audited

$000s

30 June 2008

Audited

$000s

31 December 2008

Reviewed

$000s

Current Assets


Trade and other receivables 2,840 4,052 4,864

Total Current Assets 13,308 12,244 11,719

Non Current Assets

Investment in equity accounted investee 2,200 2,312 1,753

Other financial assets 2,885 2,435 1,977

Deferred tax assets 605 718 878


Goodwill 14,147 15,696 15,696

Other intangible assets 180 487 613

Total Non Current Assets 23,574 25,113 24,507

TOTAL ASSETS 36,882 37,357 36,225

Current Liabilities

Trade and other payables 1,354 1,811 1,183

Current tax payable 759 261 371

Provisions 753 756 691

Total Current Liabilities 2,866 2,828 2,246

Non Current Liabilities

Deferred tax liabilities 146 324 490


Total Non Current Liabilities 480 662 909

TOTAL LIABILITIES 3,346 3,490 3,154

NET ASSETS 33,536 33,867 33,071



We note the following with respect to the TPX balance sheets:

• cash has reduced from approximately $10.5 million as at 30 June 2007 to approximately $6.9 million as at 31 December 2008. We understand that this is a timing issue as the balance as at 30 June 2007 includes funds for the final dividend paid by TPX post 30 June. In addition, other financial assets include cash invested in Cash Funds. We understand that TPX invests surplus cash in Cash Funds and accordingly, the total cash balance as at 31 December 2008 was approximately $8.8 million;

• we have reviewed the unaudited balance sheet as at 30 April 2009 and understand that as at 30 April 2009 TPX had a cash buffer of approximately $3.6 million. Accordingly, this cash buffer is considered surplus to the TPX operations;

186

For

per

sona

l use

onl

y


6.9 Balance Sheet

Set out below are the audited balance sheets of TPX as at 30 June 2007 and 30 June 2008 and the balance sheet as at 31 December 2008 which has been subject to independent review by TPX’s auditor:

Table 18: TPX Balance Sheets

As at

30 June 2007

Audited

$000s

30 June 2008

Audited

$000s

31 December 2008

Reviewed

$000s

Current Assets


Trade and other receivables 2,840 4,052 4,864

Total Current Assets 13,308 12,244 11,719

Non Current Assets

Investment in equity accounted investee 2,200 2,312 1,753

Other financial assets 2,885 2,435 1,977

Deferred tax assets 605 718 878


Goodwill 14,147 15,696 15,696

Other intangible assets 180 487 613

Total Non Current Assets 23,574 25,113 24,507

TOTAL ASSETS 36,882 37,357 36,225

Current Liabilities

Trade and other payables 1,354 1,811 1,183

Current tax payable 759 261 371


Total Current Liabilities 2,866 2,828 2,246

Non Current Liabilities

Deferred tax liabilities 146 324 490


Total Non Current Liabilities 480 662 909

TOTAL LIABILITIES 3,346 3,490 3,154

NET ASSETS 33,536 33,867 33,071



We note the following with respect to the TPX balance sheets:

• cash has reduced from approximately $10.5 million as at 30 June 2007 to approximately $6.9 million as at 31 December 2008. We understand that this is a timing issue as the balance as at 30 June 2007 includes funds for the final dividend paid by TPX post 30 June. In addition, other financial assets include cash invested in Cash Funds. We understand that TPX invests surplus cash in Cash Funds and accordingly, the total cash balance as at 31 December 2008 was approximately $8.8 million;

• we have reviewed the unaudited balance sheet as at 30 April 2009 and understand that as at 30 April 2009 TPX had a cash buffer of approximately $3.6 million. Accordingly, this cash buffer is considered surplus to the TPX operations;

187

For

per

sona

l use

onl

y


• the investment in equity accounted investee represents TPX’s 50 percent interest in TBS;

• other financial assets include a $0.5 million deposit held with Bendigo and Adelaide Bank as collateral for a guarantee provided by Bendigo and Adelaide Bank for the settlement account held by TPX with the Clearing House Electronic Sub register System operated by the ASX;

• goodwill relates to previous acquisitions made by TPX, predominately the 2007 merger with Perpetual Trustees Tasmania Limited. Goodwill increased in FY08 due to the acquisition of a financial planning business;

• other intangible assets include computer software;

• as at 31 December 2008, TPX had no interest bearing debt; and

• we have reviewed the unaudited balance sheet as at 30 April 2009 and note that there have been no significant changes in the financial position of TPX since 31 December 2008.

6.10 TPX Share Trading

PKFCA has considered recent market trading in TPX Shares on the ASX, in particular for the following periods:

• a period of one year prior to the announcement date of the Transaction, i.e. 10 October 2008 (“Announcement Date”) (“Trading Period 1”). We consider that Trading Period 1 represents normal trading in TPX Shares as it excludes any movement in price due to the announcement of the Transaction that may reflect market anticipation of merger synergies; and

• for the period from Announcement Date to the latest practicable date prior to the issue of this Report, being 4 June 2009 (“Trading Period 2”). Trading Period 2 takes into account any synergy benefits anticipated by the market to arise as a result of completing the Transaction. Trading during Trading Period 2 will also reflect the general economic downturn over the period and its affect on the financial markets.

Collectively, the above trading periods are hereinafter referred to as “the Trading Periods”.

In order to assess the reliability of the market price as a basis for valuing TPX, we have considered:

• the liquidity of TPX Shares (that is, the level of trading activity as a percentage of the total quoted shares, and the frequency of trades) over the Trading Periods;

• the “spread” of shareholders and the total number of shares held by individual shareholders, taking into account any trading restrictions applicable to TPX Shares;

• the frequency of unusual and/or abnormal trading;

• the existence of any factors indicative of significant speculative trading; and

• the level of knowledge and information available to buyers and sellers.


The chart below illustrates the daily share prices and trading volumes in TPX Shares over the Trading Periods:

Figure 11

TPX Share Price and Trading Volume History

0

20

40

60

80

100

120

140

160

180

200

220

240

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

Oct-07 Dec-07 Feb-08 Apr-08 Jun-08 Aug-08 Oct-08 Dec-08 Feb-09 Apr-09 Jun-09

(000s)($)

Volume (RHS) Share Price (LHS)

A

B

C

D

E

F

GH

Source: Bloomberg

Notes:

1. Notes A to H indicate the dates of various relevant TPX announcements – see below.

The chart below compares the TPX share price with the All Ordinaries and ASX 200 Financials Indices:

Figure 12

TPX Share Price compared with All Ordinaries and ASX 200 Financials Indices

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00


($)

Share Price All Ordinaries Index S&P/ASX 200 FINANCIALS

Source: Bloomberg

Notable events disclosed by TPX during the Trading Periods which may have impacted share price and trading volumes are set out below:

188

For

per

sona

l use

onl

y


The chart below illustrates the daily share prices and trading volumes in TPX Shares over the Trading Periods:

Figure 11

TPX Share Price and Trading Volume History

0

20

40

60

80

100

120

140

160

180

200

220

240

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00


(000s)($)

Volume (RHS) Share Price (LHS)

A

B

C

D

E

F

GH

Source: Bloomberg

Notes:

1. Notes A to H indicate the dates of various relevant TPX announcements – see below.

The chart below compares the TPX share price with the All Ordinaries and ASX 200 Financials Indices:

Figure 12

TPX Share Price compared with All Ordinaries and ASX 200 Financials Indices

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00


($)


Source: Bloomberg

Notable events disclosed by TPX during the Trading Periods which may have impacted share price and trading volumes are set out below:

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00


($)


189

For

per

sona

l use

onl

y


Table 19: TPX Recent Announcements

Date Chart

Reference Announcement Details

23 October 2007 A TPX acquire Norm Collings & Ellen Burn Financial Services ($55 million FUM)

30 November 2007 B Corporate Governance Award issued to TPX.

26 February 2008 C Release of FY08 first half results, a net profit of $3.57 million.

26 August 2008 D Release of FY08 full year results, a net profit of $7.04 million.

10 October 2008 E Proposal to merge with MSF announced.

21 January 2009 F Updated terms of the Transaction announced.

24 February 2009 G Release of FY09 first half results, a net profit of $2.83 million.

9 April 2009 H Release of FY09 full year guidance, net profit of $5.2 million to $5.5 million.

Source: ASX announcements

PKFCA reviewed the following statistics relating to the trading activity in TPX Shares over the Trading Periods:

• daily high, low and closing prices;

• daily volume; and

• volume weighted average share price (“VWAP”).

The table below summarises trading in TPX Shares over the Trading Periods:

Table 20: TPX Share Price Summary

PeriodHigh

($)

Low

($)

VWAP

($)

Trading Period 1

12 months prior to Announcement Date 6.95 3.73 5.71



1 month prior to Announcement Date 4.60 3.73 4.51

As at Announcement Date 3.73 3.73 3.73

Trading Period 2

1 month after Announcement Date 4.19 3.35 3.77

3 months after Announcement Date 4.19 2.90 3.22

6 months after Announcement Date 4.19 2.70 3.18

Announcement Date to 4 June 2009 4.19 2.60 3.13 As at 4 June 2009 2.75 2.70 2.72

Source: Bloomberg and PKFCA analysis

Notes:

1. The above share prices take into account actual trading days only.

We note the following with respect to the TPX share price over the Trading Periods:

Trading Period 1

• TPX Shares traded from a high of $6.95 in October 2007 to a low of $3.73 in October 2008, reflecting an overall downward trend; and

• the VWAP trended downward from $5.71 in the 12 months prior to Announcement Date to $4.51 in the 1 month prior to Announcement Date.

Trading Period 2

• the highest and lowest share price was $4.19 and $2.60, respectively;

• the day after Announcement Date, the TPX share price rose to a high of $4.19;


• TPX Shares generally traded within a band of $2.70 to $3.50 post Announcement Date (this range reflects trading movements in the midst of the overall downturn in financial markets in October 2008 and current volatile equity markets conditions); and

• the VWAP of TPX Shares on 4 June 2009 (the latest practicable date prior to the issue of this Report) was $2.72.

Overall, the TPX share price displayed a declining trend during the Trading Periods. A decline of approximately 63 percent was observed in TPX’s highest and lowest share price in the Trading Periods.

The table below sets out further details of TPX share trading movements over the Trading Periods:

Table 21: TPX Share Trading Summary

Period

Average

Daily Volume

(shares)

Average

Daily Value

($)

Turnover Average Bid Ask Spread

Trading Period 1 12 months prior to Announcement Date 6,678 38,135 4.8% 5.0% 6 months prior to Announcement Date 6,027 30,403 2.2% 6.0% 3 months prior to Announcement Date 5,743 25,993 1.0% 4.5% 1 month prior to Announcement Date 3,855 17,387 0.3% 5.7% As at Announcement Date 2,149 8,016 0.1% 10.7% Trading Period 2 1 month after Announcement Date 8,229 31,064 0.6% 5.9% 3 months after Announcement Date 13,447 43,362 2.3% 7.2% 6 months after Announcement Date 9,664 30,713 3.1% 7.6% Announcement Date to the 4 June 2009 8,537 26,698 3.6% 7.5% As at 4 June 2009 7,999 21,748 0.4% n/a


We note the following in relation to the above:

• there is relatively low volume in the trading activity of TPX Shares over the Trading Periods. There were only four instances during the Trading Periods where the daily trading volume exceeded 30,000, representing 0.14 percent of the total number of shares on issue at the date of this Report;

• the daily trading volume fluctuated from no trade to a high of 223,394 shares;

• the total traded volume during Trading Period 1 represents only 4.8 percent of the total shares on issue and the total traded volume during Trading Period 2 represents only 3.6 percent of the total shares on issue;

• during Trading Period 1 and Trading Period 2, the average bid-ask spread was 5.0 percent and 7.5 percent respectively. The bid-ask spread generally widened over the Trading Periods with an average spread of 7.5 percent from Announcement Date to 4 June 2009, indicating decreasing liquidity;

• over the Trading Periods, TPX Shares traded on 249 days out of a total of a 416 trading days, i.e. 60 percent of the total;

• the top 10 shareholders comprise approximately 35.1 percent of the total number of shares outstanding, therefore there is a reasonable degree of ‘spread’ in TPX Shareholders;

• TPX is not widely followed by analysts; and

• as noted earlier TPX Shares did not trade for a significant part of the trading days during the Trading Periods.

190

For

per

sona

l use

onl

y


• TPX Shares generally traded within a band of $2.70 to $3.50 post Announcement Date (this range reflects trading movements in the midst of the overall downturn in financial markets in October 2008 and current volatile equity markets conditions); and

• the VWAP of TPX Shares on 4 June 2009 (the latest practicable date prior to the issue of this Report) was $2.72.

Overall, the TPX share price displayed a declining trend during the Trading Periods. A decline of approximately 63 percent was observed in TPX’s highest and lowest share price in the Trading Periods.

The table below sets out further details of TPX share trading movements over the Trading Periods:

Table 21: TPX Share Trading Summary

Period

Average

Daily Volume

(shares)

Average

Daily Value

($)

Turnover Average Bid Ask Spread

Trading Period 1 12 months prior to Announcement Date 6,678 38,135 4.8% 5.0% 6 months prior to Announcement Date 6,027 30,403 2.2% 6.0% 3 months prior to Announcement Date 5,743 25,993 1.0% 4.5% 1 month prior to Announcement Date 3,855 17,387 0.3% 5.7% As at Announcement Date 2,149 8,016 0.1% 10.7% Trading Period 2 1 month after Announcement Date 8,229 31,064 0.6% 5.9% 3 months after Announcement Date 13,447 43,362 2.3% 7.2% 6 months after Announcement Date 9,664 30,713 3.1% 7.6% Announcement Date to the 4 June 2009 8,537 26,698 3.6% 7.5% As at 4 June 2009 7,999 21,748 0.4% n/a


We note the following in relation to the above:

• there is relatively low volume in the trading activity of TPX Shares over the Trading Periods. There were only four instances during the Trading Periods where the daily trading volume exceeded 30,000, representing 0.14 percent of the total number of shares on issue at the date of this Report;

• the daily trading volume fluctuated from no trade to a high of 223,394 shares;


• during Trading Period 1 and Trading Period 2, the average bid-ask spread was 5.0 percent and 7.5 percent respectively. The bid-ask spread generally widened over the Trading Periods with an average spread of 7.5 percent from Announcement Date to 4 June 2009, indicating decreasing liquidity;

• over the Trading Periods, TPX Shares traded on 249 days out of a total of a 416 trading days, i.e. 60 percent of the total;

• the top 10 shareholders comprise approximately 35.1 percent of the total number of shares outstanding, therefore there is a reasonable degree of ‘spread’ in TPX Shareholders;

• TPX is not widely followed by analysts; and

• as noted earlier TPX Shares did not trade for a significant part of the trading days during the Trading Periods.

191

For

per

sona

l use

onl

y


6.11 Conclusion on TPX Share Trading

A summary of our review of TPX share trading is set out below:


• during Trading Period 1 and Trading Period 2, the average bid-ask spread was 5.0 percent and 7.5 percent respectively. The bid-ask spread widened over the Trading Periods, indicating decreasing liquidity. The average bid ask spread over the Trading Periods of approximately 6 percent is significantly higher than that of highly liquid shares, which typically have bid ask spreads of less than 1 percent;

• over the Trading Periods, TPX shares traded on 249 days out of a total of a 416 trading days, i.e. 60 percent of the total;

• the shareholding is not very concentrated as the top 10 shareholders comprise approximately 35.1 percent of the total number of shares outstanding; and

• TPX is not widely covered by analysts.

Based on the foregoing analysis, we consider that there are limitations to using the TPX Share price for the purposes of assessing the fair market value of TPX.


7 PROFILE OF MYSTATE LIMITED

7.1 Overview of MyState Limited

If the Transaction is implemented, MyState Limited will own 100 percent of the issued capital of MSF and TPX. MSF Members will collectively hold 67.5 percent of the issued capital of MyState Limited immediately following the Transaction’s implementation.

7.2 Impact of the Proposed Merger

It is our understanding that the Transaction is intended to result in:

• the creation of a diversified financial services group with the capacity to deliver a greater range of products and services;

• the creation of a bigger company with net assets in excess of $150 million, a customer base of more than 220,000, funds under management, advice and administration of approximately $2 billion and NPAT in excess of $19 million;

• positioning MyState Limited to take advantage of opportunities to expand into existing and new markets;

• the achievement of synergies including cost savings and revenue synergies which are discussed in more detail below;

• both the MSF and TPX brands being maintained;

• the existing head offices of both MSF and TPX being maintained in Hobart and Launceston respectively;

• MyState Limited being Chaired by Dr Vertigan of TPX; and

• the MyState Limited Board initially comprising Dr Vertigan, four additional Directors from TPX and five Directors from MSF;

• a Managing Director being appointed who will also join the MyState Limited Board; and

• the MyState Limited Board being reduced from ten to eight by no later than FY11.

In addition to the above, the Trustee Companies Act 1953 (Tasmania) has been amended and will apply a 10 percent shareholder cap to MyState Limited and therefore prevent any one shareholder from owning more than 10 percent of MyState Limited.

7.3 Potential Synergies and Cost Savings

Both MSF and TPX anticipate that the Transaction will result in significant synergies which include cost savings and revenue synergies. A majority of the cost savings are expected to be realised within three years and range from approximately $3.5 million to $4.5 million before tax per annum in the final year. After adjusting for forecast growth in expenses (i.e.: adjusting from nominal to real dollars), the anticipated cost savings range from approximately $2.93 million to $3.75 million before tax.

The key cost savings anticipated relate predominately to the elimination of duplicated executive, senior management and operational roles, streamlining marketing activities, branch consolidation and a reduction in the size of the Board of Directors.

The anticipated cost savings presented in real dollars represent approximately 4.4 percent to 5.6 percent of the aggregated forecast stand-alone costs (excluding bad debts) of MSF and TPX in FY09.

Potential revenue synergies have been identified as arising from the expanded network and customer base and predominately relate to growth in the business banking and financial planning segments of the Merged Entity. The potential revenue synergies have not been included in our assessment of the Transaction.

192

For

per

sona

l use

onl

y


7 PROFILE OF MYSTATE LIMITED

7.1 Overview of MyState Limited

If the Transaction is implemented, MyState Limited will own 100 percent of the issued capital of MSF and TPX. MSF Members will collectively hold 67.5 percent of the issued capital of MyState Limited immediately following the Transaction’s implementation.

7.2 Impact of the Proposed Merger

It is our understanding that the Transaction is intended to result in:

• the creation of a diversified financial services group with the capacity to deliver a greater range of products and services;

• the creation of a bigger company with net assets in excess of $150 million, a customer base of more than 220,000, funds under management, advice and administration of approximately $2 billion and NPAT in excess of $19 million;

• positioning MyState Limited to take advantage of opportunities to expand into existing and new markets;

• the achievement of synergies including cost savings and revenue synergies which are discussed in more detail below;

• both the MSF and TPX brands being maintained;

• the existing head offices of both MSF and TPX being maintained in Hobart and Launceston respectively;

• MyState Limited being Chaired by Dr Vertigan of TPX; and

• the MyState Limited Board initially comprising Dr Vertigan, four additional Directors from TPX and five Directors from MSF;

• a Managing Director being appointed who will also join the MyState Limited Board; and

• the MyState Limited Board being reduced from ten to eight by no later than FY11.

In addition to the above, the Trustee Companies Act 1953 (Tasmania) has been amended and will apply a 10 percent shareholder cap to MyState Limited and therefore prevent any one shareholder from owning more than 10 percent of MyState Limited.

7.3 Potential Synergies and Cost Savings

Both MSF and TPX anticipate that the Transaction will result in significant synergies which include cost savings and revenue synergies. A majority of the cost savings are expected to be realised within three years and range from approximately $3.5 million to $4.5 million before tax per annum in the final year. After adjusting for forecast growth in expenses (i.e.: adjusting from nominal to real dollars), the anticipated cost savings range from approximately $2.93 million to $3.75 million before tax.

The key cost savings anticipated relate predominately to the elimination of duplicated executive, senior management and operational roles, streamlining marketing activities, branch consolidation and a reduction in the size of the Board of Directors.


Potential revenue synergies have been identified as arising from the expanded network and customer base and predominately relate to growth in the business banking and financial planning segments of the Merged Entity. The potential revenue synergies have not been included in our assessment of the Transaction.

193

For

per

sona

l use

onl

y


Both the timing and extent of the anticipated cost savings and synergy benefits are subject to some degree of risk.


Based on the terms of the Transaction, TPX Shareholders are to receive one MyState Limited ordinary share for every TPX Share held. MSF Members are to receive ordinary shares in MyState Limited such that MSF Members will collectively have a relevant interest in 67.5 percent of the issued capital of MyState Limited.

Based on the number of TPX Shares on issue as at 4 June 2009, the intended capital structure of MyState Limited immediately following implementation of the Transaction is summarised below.

Table 22: Intended Capital Structure

Number

MyState Limited shares to be issued to TPX Shareholders (1 for 1)1 21,905,902

Add: MyState Limited shares to be issued to MSF Members 45,496,873

Total number of MyState Limited shares 67,402,775

Source: TPX 2008 Annual Report and PKFCA analysis

Notes:

1. Based on TPX shares on issue as per Table 15.

Due to the current mutual structure of MSF, the largest shareholders of TPX will remain the largest shareholders of MyState Limited immediately following implementation of the Transaction; however their respective percentage interests will be diluted. MSF Members will remain minority holders, albeit of an enlarged company.

7.5 Franking Credits

As a mutual association, MSF has been unable to pay dividends under the MSF Constitution and has accordingly accumulated significant franking credits. As at 30 June 2008, MSF had approximately $37.3 million in franking credits.

As at 30 June 2008, TPX had franking credits of approximately $7.4 million. However, since 30 June 2008, available franking credits have been impacted by the payment of a fully franked dividend in September 2008 of 17 cents per share and a fully franked dividend of 12.5 cents per share in March 2009.

MSF has advised that based on tax advice received, the franking credits of both MSF and TPX may be available to the Merged Entity.


8 VALUATION METHODOLOGIES

8.1 Introduction

As part of assessing whether the Transaction is in the best interests of MSF Members, PKFCA has assessed the value of:

• MSF on a stand-alone basis;

• TPX on a stand-alone basis; and

• MyState Limited.

Our assessment involves a comparison of the position of MSF Members on a stand-alone basis in the absence of the Transaction with their position as shareholders of MyState Limited.

If the Transaction is approved, MSF Members will be exchanging their minority interests in MSF for minority interests in MyState Limited. As such, our assessment of the value of MSF and TPX has been undertaken on a minority interest basis. In assessing the value of MyState Limited we have included an assessment of whether a premium is reflected in the Transaction.

In arriving at our valuation conclusions for MSF and MyState Limited we considered the following broad categories of valuation methods:

• comparable market transactions;

• capitalisation of future maintainable earnings (“CFME”);

• discounted cash flow (“DCF”); and

• asset-based valuations.

In arriving at our valuation conclusions for TPX we considered all of the above broad categories of valuation methods in addition to the most recent quoted market price of TPX Shares.

Set out in Appendix 3 are further descriptions of valuation methods considered.

Set out below is a discussion of the valuation methods we consider appropriate for the purposes of undertaking our valuation assessment of MSF, TPX and MyState Limited.

8.2 MSF

In our opinion, the most appropriate method with which to value MSF is the CFME method. The CFME method involves the capitalisation of estimated future maintainable earnings by an appropriate multiple and is described in Appendix 3. We selected this method as most appropriate for valuing MSF for the following reasons:

• MSF has an indefinite trading life;

• MSF’s earnings are relatively stable and there is no significant capital expenditure requirement in the short to medium term;

• having reviewed industry and economic factors, our conclusion is that there exists sufficient trends which may support the future earnings and potential earnings growth of MSF;

• banks and financial institutions are conventionally valued using the CFME method; and

• MSF has not prepared long term forecasts from which to apply the DCF method.

To provide additional evidence of value, we have assessed the reasonableness of the primary valuation method used for valuing MSF by reference to the multiple of net tangible assets (“NTA”)method. The multiple of NTA method is a widely used benchmark for valuing banks and financial institutions as the net assets of banks and financial institutions are generally represented by income generating assets. While the multiple of NTA method does not consider earnings and is therefore not sufficiently reliable for use as a primary valuation method, we consider it appropriate as a secondary valuation crosscheck.

194

For

per

sona

l use

onl

y


8 VALUATION METHODOLOGIES

8.1 Introduction

As part of assessing whether the Transaction is in the best interests of MSF Members, PKFCA has assessed the value of:

• MSF on a stand-alone basis;

• TPX on a stand-alone basis; and

• MyState Limited.

Our assessment involves a comparison of the position of MSF Members on a stand-alone basis in the absence of the Transaction with their position as shareholders of MyState Limited.

If the Transaction is approved, MSF Members will be exchanging their minority interests in MSF for minority interests in MyState Limited. As such, our assessment of the value of MSF and TPX has been undertaken on a minority interest basis. In assessing the value of MyState Limited we have included an assessment of whether a premium is reflected in the Transaction.

In arriving at our valuation conclusions for MSF and MyState Limited we considered the following broad categories of valuation methods:

• comparable market transactions;

• capitalisation of future maintainable earnings (“CFME”);

• discounted cash flow (“DCF”); and

• asset-based valuations.

In arriving at our valuation conclusions for TPX we considered all of the above broad categories of valuation methods in addition to the most recent quoted market price of TPX Shares.

Set out in Appendix 3 are further descriptions of valuation methods considered.

Set out below is a discussion of the valuation methods we consider appropriate for the purposes of undertaking our valuation assessment of MSF, TPX and MyState Limited.

8.2 MSF

In our opinion, the most appropriate method with which to value MSF is the CFME method. The CFME method involves the capitalisation of estimated future maintainable earnings by an appropriate multiple and is described in Appendix 3. We selected this method as most appropriate for valuing MSF for the following reasons:

• MSF has an indefinite trading life;

• MSF’s earnings are relatively stable and there is no significant capital expenditure requirement in the short to medium term;

• having reviewed industry and economic factors, our conclusion is that there exists sufficient trends which may support the future earnings and potential earnings growth of MSF;

• banks and financial institutions are conventionally valued using the CFME method; and

• MSF has not prepared long term forecasts from which to apply the DCF method.

To provide additional evidence of value, we have assessed the reasonableness of the primary valuation method used for valuing MSF by reference to the multiple of net tangible assets (“NTA”)method. The multiple of NTA method is a widely used benchmark for valuing banks and financial institutions as the net assets of banks and financial institutions are generally represented by income generating assets. While the multiple of NTA method does not consider earnings and is therefore not sufficiently reliable for use as a primary valuation method, we consider it appropriate as a secondary valuation crosscheck.

195

For

per

sona

l use

onl

y


8.3 TPX

In our opinion, the most appropriate method with which to value TPX is the CFME method. We selected this method as most appropriate for valuing TPX for the following reasons:

• TPX has an indefinite trading life;

• given the factors noted at Section 6.11, the market price of TPX Shares may not be the best indicator of fair market value;

• TPX’s earnings are relatively stable and there is no significant capital expenditure requirement in the short to medium term;

• having reviewed industry and economic factors, our conclusion is that there exists sufficient trends which may support the future earnings and potential earnings growth of TPX; and

• TPX has not prepared long term forecasts from which to apply the DCF method.

To provide additional evidence of value, we have assessed the reasonableness of the primary valuation method used for valuing TPX by reference to the percentage of funds under management and advice (“FUMA”) method. This method applies an appropriate percentage to the FUMA of the company to arrive at the fair market value. In our opinion, the percentage of FUMA method is appropriate as a secondary valuation crosscheck for the following reasons:

• the fee nature of wealth management businesses implies that the level of revenues are dependent on the level of FUMA; and

• transactional evidence indicates that to some extent industry participants assess the market value of wealth management businesses using a percentage of FUMA approach.

While the percentage of FUMA method does not consider earnings and is therefore not sufficiently reliable for use as a primary valuation method, we consider it appropriate as a secondary valuation crosscheck.

8.4 MyState Limited

In our opinion, the most appropriate method with which to value MyState Limited is a sum-of-the-parts (“SOP”) approach. The SOP approach aggregates the assessed values of MSF and TPX determined using the CFME method and adjusts for anticipated cost savings.


9 VALUATION OF MSF

9.1 Introduction

In undertaking the CFME method to value MSF, PKFCA has:

• estimated the future maintainable earnings (“FME”) of MSF;

• applied to the FME an appropriate earnings capitalisation multiple; and

• considered the value of any surplus assets or liabilities.

Set out below are the key parameters and our considerations with respect to each.

9.2 Future Maintainable Earnings

FME is the assessed level of sustainable earnings, in real terms, that can be expected to be derived by the existing operations of the business regardless of short term economic fluctuations and excludes any one-off profits or losses.

In our opinion, the appropriate earnings to adopt in valuing MSF is Cash Profit, as Cash Profit is commonly used for the purpose of valuing banking businesses where interest income and interest expense is an integral part of the business. As previously stated, Cash Profit is commonly reported by Australian financial services businesses and typically reflects NPAT available to ordinary equity holders excluding significant items and goodwill impairment.

Our estimate of the FME of MSF has been determined after a review of:

• the historical operational and financial performance of MSF for the three years ended 30 June 2008, in particular the earnings for FY07 and FY08 (refer Section 4.7);

• the financial performance of MSF for the six months ended 31 December 2008 (refer Section 4.7);

• MSF management’s view of current and likely future operating conditions and the forecast financial performance of MSF for FY09;

• the effect of changes and trends in the Credit Union and Banking Industries that may impact on earnings (refer Section 3);

• the risk profile of MSF including the analysis of the SWOT of MSF and the effectiveness of MSF’s competitive strategy in managing any threats (refer Section 4.5); and

• discussions with MSF management.

Based on the above, we have estimated the FME of MSF to be in the range of $10.9 million to $11.9 million. Our estimate of FME is based predominately on the annualised Cash Profit for the six months ended 31 December 2008 together with our assessment of MSF’s likely future earnings performance taking into consideration MSF’s most current expectations of future trading conditions, including its forecast for FY09 and expected cost savings in the second half of FY09.

9.3 Capitalisation Multiple

An appropriate capitalisation multiple is usually assessed by collecting market evidence with respect to the earnings multiples of companies that are comparable. Such multiples are derived from:

• share market prices of listed companies;

• prices achieved in mergers and acquisitions of comparable companies; and

• initial public offer (“IPO”) prices of shares in comparable companies (where available).

Set out below are our considerations in respect to each.

196

For

per

sona

l use

onl

y


9 VALUATION OF MSF

9.1 Introduction

In undertaking the CFME method to value MSF, PKFCA has:

• estimated the future maintainable earnings (“FME”) of MSF;





FME is the assessed level of sustainable earnings, in real terms, that can be expected to be derived by the existing operations of the business regardless of short term economic fluctuations and excludes any one-off profits or losses.

In our opinion, the appropriate earnings to adopt in valuing MSF is Cash Profit, as Cash Profit is commonly used for the purpose of valuing banking businesses where interest income and interest expense is an integral part of the business. As previously stated, Cash Profit is commonly reported by Australian financial services businesses and typically reflects NPAT available to ordinary equity holders excluding significant items and goodwill impairment.

Our estimate of the FME of MSF has been determined after a review of:

• the historical operational and financial performance of MSF for the three years ended 30 June 2008, in particular the earnings for FY07 and FY08 (refer Section 4.7);

• the financial performance of MSF for the six months ended 31 December 2008 (refer Section 4.7);

• MSF management’s view of current and likely future operating conditions and the forecast financial performance of MSF for FY09;

• the effect of changes and trends in the Credit Union and Banking Industries that may impact on earnings (refer Section 3);

• the risk profile of MSF including the analysis of the SWOT of MSF and the effectiveness of MSF’s competitive strategy in managing any threats (refer Section 4.5); and

• discussions with MSF management.

Based on the above, we have estimated the FME of MSF to be in the range of $10.9 million to $11.9 million. Our estimate of FME is based predominately on the annualised Cash Profit for the six months ended 31 December 2008 together with our assessment of MSF’s likely future earnings performance taking into consideration MSF’s most current expectations of future trading conditions, including its forecast for FY09 and expected cost savings in the second half of FY09.


An appropriate capitalisation multiple is usually assessed by collecting market evidence with respect to the earnings multiples of companies that are comparable. Such multiples are derived from:

• share market prices of listed companies;

• prices achieved in mergers and acquisitions of comparable companies; and

• initial public offer (“IPO”) prices of shares in comparable companies (where available).

Set out below are our considerations in respect to each.

197

For

per

sona

l use

onl

y


9.3.1 Share Market Trading Multiples

In selecting appropriate comparable companies, PKFCA has had regard to:

• listed Australian building societies;

• listed Australian regional banks; and

• listed Australian major banks.

General comments with respect to the operations of the identified companies are set out in Appendix 4. Stock market trading valuation parameters for the identified companies are set out in Appendix 5. All of our analysis has been performed as at 4 June 2009.

We note the following with respect to the comparable companies identified when compared with the operations of MSF:

• the multiples reflect trades of minority interests and do not include a premium for control;

• both the regional banks and major banks are much larger than MSF in terms of the scale of their operations, assets and profit;

• both the regional banks and major banks serve much larger geographical markets;

• both the regional banks and major banks have more diversified operations including more substantial wealth management operations;

• both building societies operate predominately within the Queensland market;

• the two building societies are the most comparable to MSF in terms of the size of their total assets; and

• the comparable companies have significantly lower capital adequacy ratios than MSF and both building societies had capital adequacy ratios below 11 percent at 31 December 2008.

Our selection of comparable companies has produced:

• historical price earnings (“PE”) multiples that range between 5.7 and 10.7 times, with an average of 9.2 times and a median of 9.9 times; and

• forecast PE multiples than range between 8.5 and 12.8 times, with an average of 10.8 times and a median of 10.7 times.

A listed company’s current share price generally reflects expected future earnings rather than past earnings. In particular we note that:

• the historical PE multiple of Wide Bay includes only six months of profit from the acquisition of Mackay Permanent;

• the historical PE multiple of Bendigo and Adelaide Bank includes only seven months of profit from the acquisition of Adelaide Bank; and

• the historical PE Multiple of Bank of Queensland includes only six months of profit from the acquisition of Home.

It is therefore appropriate to select multiples based on future earnings where possible for the purpose of capitalising earnings.

9.3.2 Merger and Acquisition Multiples

PKFCA has reviewed a number of transactions involving acquisitions of Australian non bank ADIs (building societies and credit unions) and regional banks. A summary of merger and acquisition multiples is set out in Appendix 9. We note the following with respect to merger and acquisition multiples:

• transactions ranged in size significantly from $49.6 million to $12.3 billion;


• acquisition multiples observed for non bank ADIs ranged from 25.6 to 33.1 times historical Cash Profit and 23 to 29.2 times forecast Cash Profit;

• acquisition multiples observed for regional banks ranged from 8.3 to 19 times historical Cash Profit and 9.0 to 16.9 times forecast Cash Profit;

• the higher acquisition multiples observed for non bank ADIs when compared to regional banks may reflect the higher level of synergies expected to be derived from these transactions. We have valued MSF initially on a stand-alone basis excluding potential synergies and as such the acquisition multiples observed may be less relevant;

• the acquisitions of Mackay Permanent and Pioneer Permanent concluded competitive bidding processes. It is not unreasonable to expect that the implied multiples reflected in these acquisitions are higher than those that would be expected in acquisitions for which there existed a limited number of potential acquirers;

• the current environment in the Banking Industry as compared to the environment at the date of each acquisition also needs to be considered. Credit growth has slowed significantly in the latter half of 2008 and is expected to slow further in the short term. In addition, the pressure on net interest margins has increased and asset quality has deteriorated and is expected to deteriorate further. Accordingly, current acquisition multiples could be expected to be significantly below those observed prior to 2008, notwithstanding the individual characteristics of each transaction. This contention is supported by the lower relative multiples implied in the three most recent acquisitions (St George, BankWest and Elders Rural Bank) when compared to the other acquisitions considered; and

• all the acquisition multiples observed (excluding Elders Rural Bank) reflect acquisitions of 100 percent of the business and therefore implicitly include a premium for control. We have valued MSF initially on a minority interest basis and as such the acquisition multiples observed may be less relevant.

9.3.3 Initial Public Offering Multiples

We have reviewed recent IPO activity in Australia in the Banking Industry and note that a majority of our comparable companies have been listed on the ASX for a considerable period of time. We consider the share market trading multiple analysis to be a better reflection of the current environment in the Banking Industry and therefore do not consider there to be any comparable IPOs relevant to our valuation of MSF.

9.3.4 Multiple Applicable to MSF

Based on our analysis of the selected companies and transactions, we have estimated a PE multiple range for MSF of between 10 and 10.5 times the selected FME. In our opinion, this range is appropriate for the following reasons:

• the range includes the average forecast PE multiple of the more closely comparable companies to MSF (Wide Bay and Rock Building Society) of 10.4 times; and

• the range is marginally lower than the average forecast PE multiple of all the comparable companies of 10.8 times, reflecting the differences between MSF and the comparable companies.

Currently, Member Shares are not able to be sold or transferred. Notwithstanding this lack of negotiability, we have selected a multiple range that assesses the value of MSF as if Member Shares were listed. The lack of negotiability is considered further at Sections 11 and 12.

9.4 Surplus Assets

Surplus assets are assets which form part of an entity but do not contribute to the business earnings or cash flow generation capacity of that entity. These are assets that, if sold, would not impact on the revenue or profit generating capacity of the active business undertaking.

198

For

per

sona

l use

onl

y


• acquisition multiples observed for non bank ADIs ranged from 25.6 to 33.1 times historical Cash Profit and 23 to 29.2 times forecast Cash Profit;

• acquisition multiples observed for regional banks ranged from 8.3 to 19 times historical Cash Profit and 9.0 to 16.9 times forecast Cash Profit;

• the higher acquisition multiples observed for non bank ADIs when compared to regional banks may reflect the higher level of synergies expected to be derived from these transactions. We have valued MSF initially on a stand-alone basis excluding potential synergies and as such the acquisition multiples observed may be less relevant;

• the acquisitions of Mackay Permanent and Pioneer Permanent concluded competitive bidding processes. It is not unreasonable to expect that the implied multiples reflected in these acquisitions are higher than those that would be expected in acquisitions for which there existed a limited number of potential acquirers;

• the current environment in the Banking Industry as compared to the environment at the date of each acquisition also needs to be considered. Credit growth has slowed significantly in the latter half of 2008 and is expected to slow further in the short term. In addition, the pressure on net interest margins has increased and asset quality has deteriorated and is expected to deteriorate further. Accordingly, current acquisition multiples could be expected to be significantly below those observed prior to 2008, notwithstanding the individual characteristics of each transaction. This contention is supported by the lower relative multiples implied in the three most recent acquisitions (St George, BankWest and Elders Rural Bank) when compared to the other acquisitions considered; and

• all the acquisition multiples observed (excluding Elders Rural Bank) reflect acquisitions of 100 percent of the business and therefore implicitly include a premium for control. We have valued MSF initially on a minority interest basis and as such the acquisition multiples observed may be less relevant.


We have reviewed recent IPO activity in Australia in the Banking Industry and note that a majority of our comparable companies have been listed on the ASX for a considerable period of time. We consider the share market trading multiple analysis to be a better reflection of the current environment in the Banking Industry and therefore do not consider there to be any comparable IPOs relevant to our valuation of MSF.

9.3.4 Multiple Applicable to MSF

Based on our analysis of the selected companies and transactions, we have estimated a PE multiple range for MSF of between 10 and 10.5 times the selected FME. In our opinion, this range is appropriate for the following reasons:

• the range includes the average forecast PE multiple of the more closely comparable companies to MSF (Wide Bay and Rock Building Society) of 10.4 times; and

• the range is marginally lower than the average forecast PE multiple of all the comparable companies of 10.8 times, reflecting the differences between MSF and the comparable companies.

Currently, Member Shares are not able to be sold or transferred. Notwithstanding this lack of negotiability, we have selected a multiple range that assesses the value of MSF as if Member Shares were listed. The lack of negotiability is considered further at Sections 11 and 12.

9.4 Surplus Assets

Surplus assets are assets which form part of an entity but do not contribute to the business earnings or cash flow generation capacity of that entity. These are assets that, if sold, would not impact on the revenue or profit generating capacity of the active business undertaking.

199

For

per

sona

l use

onl

y


Assets and liabilities which do not form part of the business undertaking must be valued separately. Such assets are considered to be “surplus” to the business undertaking, but nevertheless represent value that should be reflected in the overall value of the entity as they could be sold separately and the cash added to the value of the business.

PKFCA has determined that as at 31 December 2008, MSF had the following surplus assets:

Table 23: MSF Summary of Surplus Assets

Low Value

$000s

High Value

$000s

Property, plant and equipment - former Launceston branch 560 560

Total surplus assets 560 560


The site of a former branch in Launceston was sold subsequent to 31 December 2008 for $560,000 and accordingly the sale proceeds are considered a surplus asset.

We note that MSF owns two buildings in Hobart from which it operates its head office and Hobart branch. Given that the more closely comparable companies also own land and buildings and this may be reflected in their PE multiples, for the purposes of our valuation we have chosen not to treat the land and buildings owned by MSF as surplus assets.

As discussed at Section 7.5, MSF had approximately $37.3 million in franking credits as at 30 June 2008. Under the MSF Constitution, MSF is unable to pay dividends and therefore MSF Members may only access the benefits of such franking credits upon Demutualisation. Given the uncertainty associated with the use of franking credits over the longer term, we have not valued the franking credits as a surplus asset.

9.5 MSF Valuation Summary

PKFCA’s assessed value of MSF is set out below:

Table 24: MSF Valuation Summary

Ref. Low Value High Value

Maintainable Cash Profit ($000s) 9.2 10,900 11,900

PE Multiple (times)1 9.3.4 10.5 10.0

Equity Value - (minority interest basis) (excl. surplus assets) ($000s) 114,450 119,000

Add:

Surplus Assets ($000s) 9.4 560 560

Equity Value – (minority interest basis) ($000s) 115,010 119,560

Source: PKFCA analysis

Notes:

1. We consider the high range of our FME for MSF to have more risk associated with its achievement and as such we have applied the more conservative PE multiple of our estimated multiple range to this estimate.

PKFCA has assessed the value of MSF on a minority interest basis to be in the range of $115 million to $119.6 million with a mid-point of $117.3 million.

Currently, Member Shares are not able to be sold or transferred. This lack of negotiability would ordinarily warrant a discount to the valuation of MSF on a minority interest basis set out above. As previously indicated, we have assessed the value of MSF as if Member Shares were listed and the lack of negotiability is considered further at Sections 11 and 12.


9.6 MSF Valuation Cross Check

In utilising the NTA method as a crosscheck of our primary valuation, PKFCA has:

• determined the NTA multiple implied by our primary valuation; and

• assessed the reasonableness of the implied NTA multiple with reference to the NTA multiples of the comparable listed companies.

Set out below are our considerations with respect to each.

9.6.1 NTA Multiple

Our primary valuation of $115 million to $119.6 million implies an NTA multiple of approximately 1 to 1.1 times MSF’s NTA as at 31 December 2008 of approximately $112.9 million.

9.6.2 Comparable Companies


• historical NTA multiples that range between 1.5 and 2.8 times, with an average of 1.9 times and median of 1.7 times; and

• historical NTA multiples of 2.0 and 1.6 times respectively for the most comparable companies, Wide Bay and Rock Building Society.

The NTA multiple implied by our primary valuation is lower than the range of NTA multiples of the comparable companies and is lower than that of the two most comparable companies.

Notwithstanding this, we consider the NTA multiple implied by our primary valuation to be not unreasonable considering the differences between MSF and the comparable companies noted at Section 9.3.1. In particular we note that MSF has a significantly higher capital adequacy ratio than that of the comparable companies and a cost-to-income ratio that is also significantly higher than a majority of the comparable companies.

As such, in our view the primary valuation is reasonable.

200

For

per

sona

l use

onl

y


9.6 MSF Valuation Cross Check

In utilising the NTA method as a crosscheck of our primary valuation, PKFCA has:

• determined the NTA multiple implied by our primary valuation; and

• assessed the reasonableness of the implied NTA multiple with reference to the NTA multiples of the comparable listed companies.


9.6.1 NTA Multiple

Our primary valuation of $115 million to $119.6 million implies an NTA multiple of approximately 1 to 1.1 times MSF’s NTA as at 31 December 2008 of approximately $112.9 million.



• historical NTA multiples that range between 1.5 and 2.8 times, with an average of 1.9 times and median of 1.7 times; and

• historical NTA multiples of 2.0 and 1.6 times respectively for the most comparable companies, Wide Bay and Rock Building Society.

The NTA multiple implied by our primary valuation is lower than the range of NTA multiples of the comparable companies and is lower than that of the two most comparable companies.

Notwithstanding this, we consider the NTA multiple implied by our primary valuation to be not unreasonable considering the differences between MSF and the comparable companies noted at Section 9.3.1. In particular we note that MSF has a significantly higher capital adequacy ratio than that of the comparable companies and a cost-to-income ratio that is also significantly higher than a majority of the comparable companies.

As such, in our view the primary valuation is reasonable.

201

For

per

sona

l use

onl

y


10 VALUATION OF TPX

10.1 Introduction

In undertaking the CFME method to value TPX, PKFCA has:

• estimated the FME of TPX;





In our opinion, the appropriate earnings to adopt in valuing TPX is NPAT, as NPAT is commonly used for the purpose of valuing banking and financial services businesses.

Our estimate of the FME of TPX has been determined after a review of:

• the historical operational and financial performance of TPX for the three years ended 30 June 2008, in particular the earnings for FY07 and FY08 (refer Section 6.6);

• the financial performance of TPX for the six months ended 31 December 2008 (refer Section 6.6);

• TPX management’s view of current and likely future operating conditions and the forecast financial performance of TPX for FY09;

• the nature and quantum of any adjustments to normalise earnings (refer Section 6.7);

• the effect of changes and trends in the industry that may impact on earnings (refer Section 5);

• the risk profile of TPX including the analysis of the SWOT of TPX and the effectiveness of TPX’s competitive strategy in managing any threats (refer Section 6.4); and

• discussions with TPX management.

Based on the above we have estimated the FME of TPX to be in the range of $4.1 million to $4.4 million. Our estimate of the FME of TPX is based predominately on the annualised NPAT for the six months ended 31 December 2008 (excluding TPX’s share of TBS profits) together with our assessment of TPX’s likely future earnings performance taking into consideration TPX’s most current expectations of future trading conditions, including its forecast for FY09 and guidance released to the ASX on 9 April 2009.

In estimating the FME of TPX, we have deducted a notional rent expense of $0.27 million net of tax to reflect the estimated expense that would have been incurred if TPX did not own the properties in Launceston, Hobart and Burnie which have been valued separately as surplus assets.

In estimating the FME of TPX, we have also deducted TPX’s forecast share of TBS profits as TBS has been treated as a surplus asset.


10.3.1 Share Market Trading Multiples

In selecting appropriate comparable companies, PKFCA has had regard to listed Australian companies that provide integrated wealth management services that incorporate trustee services.

General comments with respect to the operations of the identified companies are set out in Appendix 4. Stock market trading valuation parameters and an analysis of revenues and margins for the identified companies are set out in Appendix 6 and Appendix 7 respectively.


In order to ascertain an appropriate multiple range to apply to TPX we have undertaken a limited review of the individual characteristics of the comparable companies.

Based on our review, we consider the companies most comparable to TPX to be Equity Trustees, Perpetual and Trust Company.

We note the following with respect to the comparable companies identified:

• the multiples reflect trades of minority interests and do not include a premium for control; and

• Equity Trustees is considered most comparable to TPX in terms of its business operations. The key differences between the business operations of Equity Trustees and TPX are that, unlike TPX, Equity Trustees does not have a retail network and TPX’s operations are based in and are predominately focused on Tasmania whereas Equity Trustees is based in Victoria with potential to provide services nationally.

We note that the three most comparable companies have corporate trust (or similar) service areas that generate significantly lower revenues as a percentage of FUA than other service areas. Comments in relation to the corporate trust operations of these three companies are set out below:

• Equity Trustees’ Fund Services division acts as responsible entity and trustee/registered superannuation entity for both managed funds and superannuation funds.

• Perpetual’s Corporate Trust division provides products and services that include trustee services for mortgage backed and other securitisation programs for major banks and non-bank financial institutions; mortgage services, including mortgage preparations, variations and discharges; post settlement servicing; regulatory compliance services for fund managers; custody, unit registry and accounting services for property and mortgage funds; and trusteeships for corporate debt issues, infrastructure projects and other structures.

• Trust Company’s Institutional Services division provides services that include providing property and infrastructure custody, superannuation compliance and trustee services, structured finance trustee services, responsible entity services and REIT trustee services.

Although TPX exhibits some key differences to the companies reviewed, particularly in terms of size, revenue and geographic diversification and the business model employed, the multiples of these companies offer some guidance to the multiple applicable to TPX.


• historical PE multiples that range between 10.8 and 11.5 times, with an average of 11.1 times for the three companies considered most comparable to TPX;

• average and median historical PE multiples for all comparable companies (excluding outliers) of 10.7 and 10.9 times respectively; and

• forecast PE multiples that range between 16.3 and 18.6 times, with an average of 17.1 times for the three companies considered most comparable to TPX.


PKFCA reviewed a number of transactions involving acquisitions of businesses operating in the wealth management industry. A summary of merger and acquisition multiples is set out in Appendix 10. We note the following with respect to merger and acquisition multiples:

• the companies involved in the transactions operated predominantly in the funds management industry and did not have corporate trust (or similar) service areas;

• transactions ranged in size significantly from $4 million to $349 million; and

• limited information on multiples was available however observed multiples ranged from 10 to 11 times forecast NPAT.

202

For

per

sona

l use

onl

y


In order to ascertain an appropriate multiple range to apply to TPX we have undertaken a limited review of the individual characteristics of the comparable companies.

Based on our review, we consider the companies most comparable to TPX to be Equity Trustees, Perpetual and Trust Company.

We note the following with respect to the comparable companies identified:

• the multiples reflect trades of minority interests and do not include a premium for control; and

• Equity Trustees is considered most comparable to TPX in terms of its business operations. The key differences between the business operations of Equity Trustees and TPX are that, unlike TPX, Equity Trustees does not have a retail network and TPX’s operations are based in and are predominately focused on Tasmania whereas Equity Trustees is based in Victoria with potential to provide services nationally.

We note that the three most comparable companies have corporate trust (or similar) service areas that generate significantly lower revenues as a percentage of FUA than other service areas. Comments in relation to the corporate trust operations of these three companies are set out below:

• Equity Trustees’ Fund Services division acts as responsible entity and trustee/registered superannuation entity for both managed funds and superannuation funds.

• Perpetual’s Corporate Trust division provides products and services that include trustee services for mortgage backed and other securitisation programs for major banks and non-bank financial institutions; mortgage services, including mortgage preparations, variations and discharges; post settlement servicing; regulatory compliance services for fund managers; custody, unit registry and accounting services for property and mortgage funds; and trusteeships for corporate debt issues, infrastructure projects and other structures.

• Trust Company’s Institutional Services division provides services that include providing property and infrastructure custody, superannuation compliance and trustee services, structured finance trustee services, responsible entity services and REIT trustee services.

Although TPX exhibits some key differences to the companies reviewed, particularly in terms of size, revenue and geographic diversification and the business model employed, the multiples of these companies offer some guidance to the multiple applicable to TPX.


• historical PE multiples that range between 10.8 and 11.5 times, with an average of 11.1 times for the three companies considered most comparable to TPX;

• average and median historical PE multiples for all comparable companies (excluding outliers) of 10.7 and 10.9 times respectively; and

• forecast PE multiples that range between 16.3 and 18.6 times, with an average of 17.1 times for the three companies considered most comparable to TPX.


PKFCA reviewed a number of transactions involving acquisitions of businesses operating in the wealth management industry. A summary of merger and acquisition multiples is set out in Appendix 10. We note the following with respect to merger and acquisition multiples:

• the companies involved in the transactions operated predominantly in the funds management industry and did not have corporate trust (or similar) service areas;

• transactions ranged in size significantly from $4 million to $349 million; and

• limited information on multiples was available however observed multiples ranged from 10 to 11 times forecast NPAT.

203

For

per

sona

l use

onl

y



We have reviewed recent IPO activity in Australia in the wealth management industry. We note that BT Investment Management Limited undertook an IPO in December 2007, issuing 99 million shares at an issue price of $4.74 each. The multiples implied by this IPO were 13.1 and 10.4 times historical and forecast NPAT respectively.

10.3.4 Multiple Applicable to TPX

In reaching our conclusion on the appropriate earnings multiple range to apply to TPX, we have also considered the following factors:

• Growth opportunities for the business: A company which is expected to grow more strongly will tend to have a higher earnings multiple for a given level of earnings than one which is expected to experience slower growth. During the period from FY06 to FY08, TPX did not experience any significant contraction or growth in revenue, i.e: revenue remained largely static. The comparable companies on average achieved higher historical growth.

• The size of the business: Larger companies tend to be valued at higher earnings multiples, which reflect the benefits of size in matters such as market power, control over prices and costs, depth of management, diversity of customers, and general operational and financial robustness. In addition, larger listed companies may trade at higher earnings multiples because of the liquidity of the shares and the likelihood of greater interest in the shares from a wider base of investors (e.g. institutions or foreign investors). Many of the comparable companies are considerably larger than TPX. Amongst the three most comparable companies, Equity Trustees and Trust Company are of comparable size to TPX, with Perpetual being significantly larger.

• Comparative performance: TPX’s revenue increased 5.8 percent in FY08 which compared to the average revenue increase for the three most comparable companies of approximately 18.1 percent and the average revenue increase for all comparable companies of approximately 20.6 percent. TPX’s normalised NPBT and NPAT margin were 41.2 percent and 30.1 percent respectively in FY08. This compared to the average NPBT and NPAT margin for the three most comparable companies of 33.6 percent and 24.1 percent respectively and the average NPBT and NPAT margin for all comparable companies of 35.5 percent and 27.7 percent respectively.

• The diversity and quality of earnings: The range of services provided by most of the comparable companies would be considered broadly comparable when compared to those of TPX. However, we note that TPX’s operations are limited to Tasmania whereas the comparable companies in general are more geographically diversified.

• Market position: TPX holds a relatively strong position in the Tasmanian market with a known brand. The comparable companies in general also exhibit this characteristic in the respective markets they operate.

• Key person risk: TPX has a strong and stable senior management team who have stayed with TPX for a number of years.

• The level of gearing: A company which is heavily geared will often trade on a lower earnings multiple than a company which is more conservatively geared, which reflects the greater risk attaching to the earnings of a highly leveraged company. TPX does not have any debt. The comparable companies in general also do not have any net debt (except Perpetual).

Based on our analysis of the selected companies, relevant IPO, mergers and acquisitions and the above analysis, we have estimated a PE multiple range for TPX of between 11.5 and 12 times the selected FME. In our opinion, this range is appropriate as it reflects the nature of the activities performed by TPX relative to the comparable companies, including the size of the business, market position, growth prospects and geographic limitations.


10.4 Surplus Assets

PKFCA has determined that as at 31 December 2008, TPX had the following surplus assets:

• 50 percent interest in TBS;

• cash; and

• land and buildings.

10.4.1 TBS

As noted at Section 6.2.4, we understand that TPX is currently in negotiation to dispose of its 50 percent interest in TBS. While the negotiations are incomplete, TPX has indicated that the estimated proceeds will be in the range of $5 million to $7 million.

In order to be conservative, for the purpose of valuing surplus assets we have adopted a range of $5 million to $5.5 million. Our selected range implies a PE multiple of approximately 5 to 5.5 times TPX’s share of TBS earnings in FY08. The implied PE multiple range of approximately 5 to 5.5 times does not appear unreasonable when compared to the historical PE multiples of the building societies and regional banks set out at Appendix 5 and the historical PE multiple implied in the acquisition of 10 percent of Elders Rural Bank set out at Appendix 9.

10.4.2 Surplus Cash

As noted at Section 6.9, we understand that as at 30 April 2009, TPX had a cash buffer of approximately $3.6 million that could be considered surplus to the operations of TPX. Accordingly, for the purposes of our valuation, we have treated that cash buffer as a surplus asset.

10.4.3 Land and Buildings

We note that TPX owns the land and buildings in Launceston, Hobart and Burnie where its offices are located. Given that our most comparable companies do not own land and buildings (except Trust Company) and this may be reflected in their PE multiples, for the purposes of our valuation we have chosen to treat land and buildings owned by TPX as surplus assets. As set out at Section 10.2, we have included a notional rental expense in our estimation of FME in order to be consistent with the earnings profile of the comparable companies.

We have relied on the most recent valuations, September 2008 for the Launceston and Hobart properties and March 2007 for Burnie, to determine the total value of these properties.

204

For

per

sona

l use

onl

y


10.4 Surplus Assets

PKFCA has determined that as at 31 December 2008, TPX had the following surplus assets:

• 50 percent interest in TBS;

• cash; and

• land and buildings.

10.4.1 TBS

As noted at Section 6.2.4, we understand that TPX is currently in negotiation to dispose of its 50 percent interest in TBS. While the negotiations are incomplete, TPX has indicated that the estimated proceeds will be in the range of $5 million to $7 million.

In order to be conservative, for the purpose of valuing surplus assets we have adopted a range of $5 million to $5.5 million. Our selected range implies a PE multiple of approximately 5 to 5.5 times TPX’s share of TBS earnings in FY08. The implied PE multiple range of approximately 5 to 5.5 times does not appear unreasonable when compared to the historical PE multiples of the building societies and regional banks set out at Appendix 5 and the historical PE multiple implied in the acquisition of 10 percent of Elders Rural Bank set out at Appendix 9.

10.4.2 Surplus Cash

As noted at Section 6.9, we understand that as at 30 April 2009, TPX had a cash buffer of approximately $3.6 million that could be considered surplus to the operations of TPX. Accordingly, for the purposes of our valuation, we have treated that cash buffer as a surplus asset.

10.4.3 Land and Buildings

We note that TPX owns the land and buildings in Launceston, Hobart and Burnie where its offices are located. Given that our most comparable companies do not own land and buildings (except Trust Company) and this may be reflected in their PE multiples, for the purposes of our valuation we have chosen to treat land and buildings owned by TPX as surplus assets. As set out at Section 10.2, we have included a notional rental expense in our estimation of FME in order to be consistent with the earnings profile of the comparable companies.

We have relied on the most recent valuations, September 2008 for the Launceston and Hobart properties and March 2007 for Burnie, to determine the total value of these properties.

205

For

per

sona

l use

onl

y


10.4.4 Conclusion on Surplus Assets

The values of surplus assets are summarised in the table below.

Table 25: TPX Summary of Surplus Assets

Low Value

$000s

High Value

$000s

50 percent interest in TBS 5,000 5,500

Surplus cash 3,600 3,600

Land and buildings 5,055 5,055

Total surplus assets 13,655 14,155

Source: TPX management and PKFCA analysis

10.5 TPX Valuation Summary

PKFCA’s assessed value of TPX is set out below:

Table 26: TPX Valuation Summary


Maintainable NPAT ($000s) 10.2 4,100 4,400

PE Multiple (times)1 10.3.4 12.0 11.5

Equity Value (minority interest basis) (excl. surplus assets) ($000s) 49,200 50,600

Add:

Surplus Assets($000s) 10.4 13,655 14,155

Equity Value - minority interest basis ($000s) 62,855 64,755


Notes:

1. We consider the high range of our FME for TPX to have more risk associated with its achievement and as such we have applied the more conservative PE multiple of our estimated multiple range to this estimate.

PKFCA has assessed the value of TPX on a minority interest basis to be in the range of $62.9 million to $64.8 million, with a mid-point of $63.8 million.

10.6 TPX Valuation Cross Check

In utilising the percentage of FUMA method as a crosscheck to our primary valuation, PKFCA has:

• determined TPX’s FUMA;

• determined the percentage of FUMA implied by our primary valuation; and

• assessed the reasonableness of the implied percentage of FUMA with reference to the percentage of FUMA of the comparable listed companies and the mergers and acquisitions identified at Section 10.3.2.


10.6.1 FUMA

As at 17 February 2009, TPX had just over $1 billion in FUM and approximately $474 million in FUA, i.e. FUMA of approximately $1.474 billion.


10.6.2 Percentage of FUMA

The percentage of FUMA implied by our primary valuation is set out below:

Table 27: TPX Percentage of FUMA


Equity Value – minority interest basis ($millions) 10.5 62.9 64.8

FUMA ($millions) 10.6.1 1,474 1,474

Percentage of FUMA 4.3% 4.4%


Based on the above, the percentage of FUMA implied by our primary valuation is in the range of 4.3 percent to 4.4 percent.


Set out below is a summary of the percentages of FUMA for the three most comparable companies. Details of FUMA of other companies considered in our analysis are noted in Appendix 8.

Table 28: Comparable Companies - FUMA Details

Company Market Cap

(millions)

FUMA

(millions)

% of

FUMA

Perpetual 1,258 32,000 3.9%

Equity Trustees 119 3,572 3.3%

Trust Company 168 3,000 5.6%

Source: Bloomberg and ASX

The overall average and median percentage of FUMA (including companies broadly comparable but excluding outliers) is 3.7 percent and 3.9 percent respectively (refer Appendix 8).

10.6.4 Comparable Market Transactions

As noted at Section 10.3.2, PKFCA has reviewed a number of transactions involving businesses operating in the wealth management industry. Details in relation to these transactions are included in Appendix 10.

We note that the consideration as a percentage of FUMA ranged from 0.9 percent to 21.1 percent for the selected transactions. The average and median (excluding outliers) percentage of FUMA for the selected transactions was 3.4 percent and 3.7 percent respectively.

10.6.5 Conclusion

The percentage of FUMA method provides only a broad crosscheck, due to differences between TPX and the comparable companies and transactions, including, the composition of FUMA and the structure of management fees.

Based on the foregoing analysis, we consider the percentage of FUMA implied by our primary valuation of 4.3 percent to 4.4 percent to be reasonable considering the composition of TPX’s FUMA and the level of management fees.

206

For

per

sona

l use

onl

y


10.6.2 Percentage of FUMA

The percentage of FUMA implied by our primary valuation is set out below:

Table 27: TPX Percentage of FUMA


Equity Value – minority interest basis ($millions) 10.5 62.9 64.8

FUMA ($millions) 10.6.1 1,474 1,474

Percentage of FUMA 4.3% 4.4%


Based on the above, the percentage of FUMA implied by our primary valuation is in the range of 4.3 percent to 4.4 percent.


Set out below is a summary of the percentages of FUMA for the three most comparable companies. Details of FUMA of other companies considered in our analysis are noted in Appendix 8.

Table 28: Comparable Companies - FUMA Details

Company Market Cap

(millions)

FUMA

(millions)

% of

FUMA

Perpetual 1,258 32,000 3.9%




The overall average and median percentage of FUMA (including companies broadly comparable but excluding outliers) is 3.7 percent and 3.9 percent respectively (refer Appendix 8).

10.6.4 Comparable Market Transactions

As noted at Section 10.3.2, PKFCA has reviewed a number of transactions involving businesses operating in the wealth management industry. Details in relation to these transactions are included in Appendix 10.

We note that the consideration as a percentage of FUMA ranged from 0.9 percent to 21.1 percent for the selected transactions. The average and median (excluding outliers) percentage of FUMA for the selected transactions was 3.4 percent and 3.7 percent respectively.

10.6.5 Conclusion

The percentage of FUMA method provides only a broad crosscheck, due to differences between TPX and the comparable companies and transactions, including, the composition of FUMA and the structure of management fees.

Based on the foregoing analysis, we consider the percentage of FUMA implied by our primary valuation of 4.3 percent to 4.4 percent to be reasonable considering the composition of TPX’s FUMA and the level of management fees.

207

For

per

sona

l use

onl

y


11 VALUATION OF MYSTATE LIMITED

11.1 Introduction

In undertaking the SOP method to value MyState Limited, PKFCA has:

• assessed the value of anticipated synergies resulting from the Transaction;

• aggregated the assessed value of MSF and TPX on a minority interest basis as determined above; and

• added to this aggregated value, our assessed value of anticipated synergies to arrive at a valuation conclusion for MyState Limited on a minority interest basis.


11.2 Anticipated Synergies

As set out at Section 7.3, both MSF and TPX anticipate that the Transaction will result in significant synergies that include cost savings and revenue synergies. Cost savings are expected to be realised over a three year period and range from approximately $3.5 million to $4.5 million before tax per annum in the final year. After adjusting for forecast growth in expenses (i.e.: adjusting from nominal to real dollars), the anticipated cost savings range from approximately $2.93 million to $3.75 million before tax.

For the purposes of assessing the value of anticipated synergies, we have used expected synergies arising from cost savings and adopted a range of $2.93 million to $3.75 million before tax. The range selected equates to a range of approximately $2.05 million to $2.63 million after tax.


We do not consider this level of anticipated cost savings to be unreasonable having regard to the respective cost bases of MSF and TPX.

There is significantly more risk associated with the timing and extent of potential revenue synergies and as such we have not adjusted for these in our valuation of MyState Limited.

In assessing the value of anticipated synergies resulting from the Transaction, we have capitalised our range of approximately $2.05 million to $2.63 million after tax at multiples of 10.5 to 11 times. We consider this range to be reflective of the weighted average of the multiples used in our valuation of MSF and TPX set out above.

11.3 Aggregated Value

PKFCA’s assessed value of MyState Limited is set out below:

Table 29: MyState Limited Valuation Summary

Ref. Low Value

$000s

High Value

S000s

Assessed value of MSF (minority interest basis) 9.5 115,010 119,560

Assessed value of TPX (minority interest basis) 10.5 62,855 64,755

Assessed value of anticipated synergies 11.2 22,561 27,563

Assessed value of MyState Limited (minority interest basis) 200,426 211,878



PKFCA has assessed the value of MyState Limited on a minority interest basis to be in the range of $200.4 million to $211.9 million, with a mid-point of $206,2 million.

11.4 Premium

Set out below is a summary of the premium implied by our valuation of MyState Limited:



Assessed value of MyState Limited ($000s) 11.3 200,426 211,878

MSF Members’ share (67.5%) ($000s) 135,288 143,018

Assessed value of MSF ($000s) 9.5 115,010 119,560

Indicative premium (%) 17.6% 19.6%


The assessed value of MyState Limited above indicates that the premium which will be received by MSF Members under the Transaction is in the range of 17.6 percent to 19.6 percent. The premium predominately reflects the cost savings anticipated to result from the Transaction’s implementation. Again however, we note that currently, Member Shares are not able to be sold or transferred. This lack of negotiability would ordinarily warrant a discount to the valuation of MSF as set out above. We have ignored this lack of negotiability in assessing the value of MSF and note that the indicative premium would be considerably higher were this lack of negotiability to be factored in.

208

For

per

sona

l use

onl

y


PKFCA has assessed the value of MyState Limited on a minority interest basis to be in the range of $200.4 million to $211.9 million, with a mid-point of $206,2 million.

11.4 Premium

Set out below is a summary of the premium implied by our valuation of MyState Limited:




MSF Members’ share (67.5%) ($000s) 135,288 143,018




The assessed value of MyState Limited above indicates that the premium which will be received by MSF Members under the Transaction is in the range of 17.6 percent to 19.6 percent. The premium predominately reflects the cost savings anticipated to result from the Transaction’s implementation. Again however, we note that currently, Member Shares are not able to be sold or transferred. This lack of negotiability would ordinarily warrant a discount to the valuation of MSF as set out above. We have ignored this lack of negotiability in assessing the value of MSF and note that the indicative premium would be considerably higher were this lack of negotiability to be factored in.

209

For

per

sona

l use

onl

y


12 EVALUATION

12.1 Fairness

As set out at Section 2.3, our evaluation of the Transaction has included a comparison of the assessed value of the consideration, being 67.5 percent of the issued capital of MyState Limited with the assessed value of MSF on a stand-alone basis.

As each MSF Member currently has a minority interest in MSF and will also have a minority interest in MyState Limited should the MSF Scheme be approved, our assessment has been conducted on a minority interest basis as set out below.

Table 31: Fairness Assessment

Ref Low Value High Value


MSF Members’ share of MyState Limited (67.5%) ($000s) 135,288 143,018




As stipulated in RG 111, an offer is considered to be “fair” if the consideration is equal to or greater than the value of the securities that are subject to the offer. The assessed value of the consideration, being 67.5 percent of the issued capital of MyState Limited, is greater than our assessed range of values for MSF and accordingly, the Transaction is considered to be “fair”.

The premium implied by our assessment is in the range of 17.6 percent to 19.6 percent. As previously indicated, the premium predominately reflects the cost savings anticipated to result from the Transaction’s implementation. Currently, Member Shares are not able to be sold or transferred. This lack of negotiability would ordinarily warrant a discount to the valuation of MSF on a minority interest basis reflected above. As previously indicated, we have assessed the value of MSF as if Member Shares were listed and the lack of negotiability is considered separately below. Accordingly, the indicative premium would be greater than 17.6 percent to 19.6 percent were such a discount to be reflected.

As set out at Section 2.3.1 we consider the Transaction to be more akin to a merger than a control transaction. Accordingly, in assessing the value of MSF on a stand-alone basis, we have not included a premium for control.


12.2 Reasonableness

For the purposes of RG 111, an offer is considered to be “reasonable”, if it is “fair”. However, notwithstanding that the Transaction is “fair”, in accordance with RG 111 we have also considered whether the advantages of the Transaction outweigh any disadvantages of its approval.

In our opinion the Transaction is “reasonable” and therefore is in the best interests of the MSF Members based on the principal advantages, disadvantages and other factors discussed below.

12.2.1 Advantages

Unlocking Value

In accordance with the MSF Constitution and the mutual status of MSF, MSF Members are not entitled to dividends and may only access the accumulated net assets of MSF in the event of


winding up. As such, the value of MSF is only able to be realised by MSF Members through demutualisation, winding up or the receipt of significantly more favourably priced products and services than that available from other financial institutions.

If the Transaction is approved, MSF Members will exchange their Member Shares for ordinary shares in MyState Limited which will be listed on the ASX. MSF Members will have the ability to sell their shares in order to realise their investment and unlock value or hold their shares in order to participate in future dividends and benefit from any capital growth.



Implementation of the Transaction should provide MSF with better access to capital markets through the listing of MyState Limited on the ASX and the increased scale of the business. MSF has historically relied on retained profits as a source of capital and improved access to capital markets will allow MyState Limited to respond more quickly and with more flexibility to strategic opportunities such as expansion or diversification and allow them to compete more effectively with banks and other ADIs.


If the Transaction is approved, MSF Members will receive a direct financial interest in MyState Limited including a direct interest in dividends, the performance of the business and the share price. This is likely to create an increased interest in the performance of Directors and management which in turn may lead to improved Director and management accountability and focus.

12.2.2 Disadvantages




As a mutual, MSF currently operates for the sole benefit of its members who are also customers. Approval and implementation of the Transaction may create divergent interests between maximising profits and therefore shareholder returns and maximising benefits provided to customers. However, as set out above, MSF’s products and services are priced in the context of a very competitive environment and therefore PKFCA does not consider that the pricing or range of products and services would be significantly affected by the Demutualisation.

210

For

per

sona

l use

onl

y


winding up. As such, the value of MSF is only able to be realised by MSF Members through demutualisation, winding up or the receipt of significantly more favourably priced products and services than that available from other financial institutions.

If the Transaction is approved, MSF Members will exchange their Member Shares for ordinary shares in MyState Limited which will be listed on the ASX. MSF Members will have the ability to sell their shares in order to realise their investment and unlock value or hold their shares in order to participate in future dividends and benefit from any capital growth.



Implementation of the Transaction should provide MSF with better access to capital markets through the listing of MyState Limited on the ASX and the increased scale of the business. MSF has historically relied on retained profits as a source of capital and improved access to capital markets will allow MyState Limited to respond more quickly and with more flexibility to strategic opportunities such as expansion or diversification and allow them to compete more effectively with banks and other ADIs.


If the Transaction is approved, MSF Members will receive a direct financial interest in MyState Limited including a direct interest in dividends, the performance of the business and the share price. This is likely to create an increased interest in the performance of Directors and management which in turn may lead to improved Director and management accountability and focus.

12.2.2 Disadvantages




As a mutual, MSF currently operates for the sole benefit of its members who are also customers. Approval and implementation of the Transaction may create divergent interests between maximising profits and therefore shareholder returns and maximising benefits provided to customers. However, as set out above, MSF’s products and services are priced in the context of a very competitive environment and therefore PKFCA does not consider that the pricing or range of products and services would be significantly affected by the Demutualisation.

211

For

per

sona

l use

onl

y


Loss of Mutuality

Some MSF Members may be attracted to the current mutual status of MSF and the associated principles of mutuality such as the consideration of members’ benefits above competing commercial considerations.

Taxation

Implementation of the Transaction and the resulting ownership of MyState Limited ordinary shares may result in taxation implications for MSF Members. MSF Members should seek and rely on their own tax advice.

12.2.3 Alternative Offers

MSF management have indicated that no alternative offers to the Transaction have been received. We note that in excess of five months has elapsed from the date the Transaction was first announced to the date of this Report indicating that an alternative offer is unlikely.

12.2.4 MSF Members Individual Circumstances

PKFCA has not considered the effect of the Transaction on the particular circumstances of individual MSF Members. Some individual MSF Members may place a different emphasis on various aspects of the Transaction from that adopted in this Report. Accordingly, individuals may reach different conclusions as to whether or not the Transaction is in their individual best interests.

The decision of an individual MSF Member in relation to the Transaction may be influenced by their particular circumstances (including their taxation position) and accordingly, MSF Members are advised to seek their own independent advice.

12.3 Conclusion

Based on the above, we conclude that the Transaction is in the best interests of MSF Members.


13 QUALIFICATIONS DECLARATIONS AND CONSENTS

13.1 Qualifications

PKFCA is the licensed corporate advisory arm of PKF East Coast Practice, Chartered Accountants and Business Advisers. PKFCA provides advice in relation to all aspects of valuations and has extensive experience in the valuation of corporate entities and provision of expert reports.

Messrs David Garvey and Domenic Quartullo are the executives of PKFCA primarily responsible for the preparation of this Report.

Mr David Garvey B.Com(Hons), CA, is a Director of PKFCA. Mr Garvey is also a partner of PKF East Coast Practice. Mr Garvey is the Director responsible for this Report.

Mr Garvey has in excess of 15 years experience in the Chartered Accountancy profession and has been involved in specialist corporate advisory services including company valuations, business sales, due diligence investigations, independent experts’ reports as well as other corporate investigations.

Mr Domenic Quartullo BA, LLB, CA, is a Director of PKFCA. Mr Quartullo is also a partner of PKF East Coast Practice. Mr Quartullo has been actively involved in the preparation of this report.

Mr Quartullo has over 23 years experience in Chartered Accountancy and has had extensive experience in the areas of litigation accounting, preparation and review of business feasibility studies, financial investigations, business valuations and due diligence reviews.

Mr Aditya Gupta, MBA, FINSIA, is a Manager of PKFCA and has been actively involved in the preparation of this Report. Mr Gupta has experience in a number of specialist corporate advisory activities such as business valuations, intangible assets valuations, mergers and acquisitions, business recovery and restructuring assignments.

Based on their experience, Messrs Garvey and Quartullo are considered to have the appropriate expertise and professional qualifications to provide the advice offered.

13.2 Independence

PKFCA is not aware of any matter or circumstance that would preclude it from preparing this Report on the grounds of independence under regulatory or professional requirements. In particular, PKFCA has had regard to the provisions of applicable pronouncements and other guidance statements relating to professional independence issued by Australian professional accounting bodies and ASIC.

PKFCA has not held and, at the date of this Report, does not hold any shareholding in, or other relationship with, MSF that could be regarded as capable of affecting its ability to provide an unbiased opinion in relation to the Transaction. PKFCA considers itself to be independent in terms of RG 112 Independence of experts, issued by ASIC.

PKFCA will receive a fee of approximately $130,000, plus GST, which represents the time spent in respect of the preparation of this Report. PKFCA will not receive any fee contingent upon the outcome of the Transaction, and accordingly, does not have any pecuniary or other interests that could reasonably be regarded as being capable of affecting its ability to give an unbiased opinion in relation to the Transaction.

Drafts of this Report were provided to the Directors of both MSF and TPX for review of factual accuracy. Certain changes were made to the Report as a result of the circulation of the draft Reports. However, no changes were made to the methodology, conclusions or recommendations made to the MSF Members as a result of issuing the draft Reports.

212

For

per

sona

l use

onl

y


13 QUALIFICATIONS DECLARATIONS AND CONSENTS

13.1 Qualifications

PKFCA is the licensed corporate advisory arm of PKF East Coast Practice, Chartered Accountants and Business Advisers. PKFCA provides advice in relation to all aspects of valuations and has extensive experience in the valuation of corporate entities and provision of expert reports.

Messrs David Garvey and Domenic Quartullo are the executives of PKFCA primarily responsible for the preparation of this Report.

Mr David Garvey B.Com(Hons), CA, is a Director of PKFCA. Mr Garvey is also a partner of PKF East Coast Practice. Mr Garvey is the Director responsible for this Report.

Mr Garvey has in excess of 15 years experience in the Chartered Accountancy profession and has been involved in specialist corporate advisory services including company valuations, business sales, due diligence investigations, independent experts’ reports as well as other corporate investigations.

Mr Domenic Quartullo BA, LLB, CA, is a Director of PKFCA. Mr Quartullo is also a partner of PKF East Coast Practice. Mr Quartullo has been actively involved in the preparation of this report.

Mr Quartullo has over 23 years experience in Chartered Accountancy and has had extensive experience in the areas of litigation accounting, preparation and review of business feasibility studies, financial investigations, business valuations and due diligence reviews.

Mr Aditya Gupta, MBA, FINSIA, is a Manager of PKFCA and has been actively involved in the preparation of this Report. Mr Gupta has experience in a number of specialist corporate advisory activities such as business valuations, intangible assets valuations, mergers and acquisitions, business recovery and restructuring assignments.

Based on their experience, Messrs Garvey and Quartullo are considered to have the appropriate expertise and professional qualifications to provide the advice offered.

13.2 Independence

PKFCA is not aware of any matter or circumstance that would preclude it from preparing this Report on the grounds of independence under regulatory or professional requirements. In particular, PKFCA has had regard to the provisions of applicable pronouncements and other guidance statements relating to professional independence issued by Australian professional accounting bodies and ASIC.

PKFCA has not held and, at the date of this Report, does not hold any shareholding in, or other relationship with, MSF that could be regarded as capable of affecting its ability to provide an unbiased opinion in relation to the Transaction. PKFCA considers itself to be independent in terms of RG 112 Independence of experts, issued by ASIC.

PKFCA will receive a fee of approximately $130,000, plus GST, which represents the time spent in respect of the preparation of this Report. PKFCA will not receive any fee contingent upon the outcome of the Transaction, and accordingly, does not have any pecuniary or other interests that could reasonably be regarded as being capable of affecting its ability to give an unbiased opinion in relation to the Transaction.

Drafts of this Report were provided to the Directors of both MSF and TPX for review of factual accuracy. Certain changes were made to the Report as a result of the circulation of the draft Reports. However, no changes were made to the methodology, conclusions or recommendations made to the MSF Members as a result of issuing the draft Reports.

213

For

per

sona

l use

onl

y


13.3 Disclaimer

This Report has been prepared at the request of the Directors of MSF and was not prepared for any purpose other than that stated in this Report. This Report has been prepared for the sole benefit of the Directors of MSF and MSF Members entitled to receive a copy of the Information Booklet. Accordingly, this Report and the information contained herein may not be relied upon by anyone other than the Directors of MSF and MSF Members without the written consent of PKFCA. PKFCA accepts no responsibility to any person other than the Directors of MSF and MSF Members.

The statements and opinions contained in this Report are given in good faith and are based upon PKFCA’s consideration and assessment of information provided by the Directors, executives and management of MSF and TPX.


Appendix 1 GLOSSARY

Table 32: Glossary

Term Definition

Act Corporations Act 2001

ADI Authorised deposit taking institution


Announcement Date 10 October 2008



ASX Australian Securities Exchange

Banking Industry The banking industry in Australia

Cash Profit NPAT available to ordinary equity holders excluding significant items and goodwill impairment

Cash Rate The Reserve Bank of Australia’s base lending rate

CFME Capitalisation of future maintainable earnings

Connect Asset Management Connect Asset Management Pty Ltd

Connectfinancial Connectfinancial credit union

ConQuest Trusts ConQuest Mortgage Trust and ConQuest 2007-1 Trust

Credit Union Industry The credit union industry in Australia

CUFTAS Credit Union Financial Services (TAS) Pty Ltd

CUSCAL Credit Union Services Corporation (Australia) Limited

DCF Discounted cash flow

Deed of Amendment Deed of Amendment to the MIA dated 21 January 2009

Demutualisation Proposed demutualisation of MSF

EBIT Earnings before interest and tax

EBITDA Earnings before interest, tax, depreciation and amortisation

EPS Earnings per share

EV Enterprise value

Federal Deposit Guarantee Federal Government guarantee arrangement for deposits held with eligible ADIs

FME Future maintainable earnings

Forecasts Forecast information in relation to MSF and TPX for FY09

FOS Financial Ombudsman Service

Foundation MyState Financial Community Foundation Trust

FSG Financial Services Guide

FUA Funds under advice

FUM Funds under management

FUMA Funds under management and advice

FY Financial year

The Gourmet Club The Gourmet Club Pty Ltd

IPO Initial Public Offering

ISFP Island State Financial Planning Pty Ltd

Islandstate Islandstate credit union

LVR Loan to valuation ratio

Member Shares Member shares held in MSF

Merged Entity The combined group comprising MyState Limited, MSF and TPX

MIA Merger Implementation Agreement dated 10 October 2008

MSF Constitution The constitution of MSF

MSF MyState Financial Credit Union of Tasmania Limited

MSF Members Members of MSF eligible to participated in the MSF Scheme

MSF Scheme Proposed scheme of arrangement between MSF and its members

NPBT Net profit before tax

NPAT Net profit after tax

214

For

per

sona

l use

onl

y


Appendix 1 GLOSSARY

Table 32: Glossary

Term Definition

Act Corporations Act 2001

ADI Authorised deposit taking institution


Announcement Date 10 October 2008



ASX Australian Securities Exchange

Banking Industry The banking industry in Australia

Cash Profit NPAT available to ordinary equity holders excluding significant items and goodwill impairment

Cash Rate The Reserve Bank of Australia’s base lending rate

CFME Capitalisation of future maintainable earnings

Connect Asset Management Connect Asset Management Pty Ltd

Connectfinancial Connectfinancial credit union

ConQuest Trusts ConQuest Mortgage Trust and ConQuest 2007-1 Trust

Credit Union Industry The credit union industry in Australia

CUFTAS Credit Union Financial Services (TAS) Pty Ltd

CUSCAL Credit Union Services Corporation (Australia) Limited

DCF Discounted cash flow

Deed of Amendment Deed of Amendment to the MIA dated 21 January 2009

Demutualisation Proposed demutualisation of MSF

EBIT Earnings before interest and tax

EBITDA Earnings before interest, tax, depreciation and amortisation

EPS Earnings per share

EV Enterprise value

Federal Deposit Guarantee Federal Government guarantee arrangement for deposits held with eligible ADIs

FME Future maintainable earnings

Forecasts Forecast information in relation to MSF and TPX for FY09

FOS Financial Ombudsman Service

Foundation MyState Financial Community Foundation Trust

FSG Financial Services Guide

FUA Funds under advice

FUM Funds under management

FUMA Funds under management and advice

FY Financial year

The Gourmet Club The Gourmet Club Pty Ltd

IPO Initial Public Offering

ISFP Island State Financial Planning Pty Ltd

Islandstate Islandstate credit union

LVR Loan to valuation ratio

Member Shares Member shares held in MSF

Merged Entity The combined group comprising MyState Limited, MSF and TPX

MIA Merger Implementation Agreement dated 10 October 2008

MSF Constitution The constitution of MSF

MSF MyState Financial Credit Union of Tasmania Limited

MSF Members Members of MSF eligible to participated in the MSF Scheme

MSF Scheme Proposed scheme of arrangement between MSF and its members

NPBT Net profit before tax

NPAT Net profit after tax

215

For

per

sona

l use

onl

y


Term Definition

NTA Net tangible assets

Part 3 Part 3 of Schedule 8 of the Corporations Regulations 2001

PE multiple Price earnings multiple

PKFCA and we PKF Corporate Advisory (East Coast) Pty Limited

Transaction Proposed demutualisation of MSF and merger with TPX

Regulation 8303 Regulation 8303 of Part 3 of Schedule 8 of the Corporations Regulations 2001

RG 111 ASIC Regulatory Guide 111 Content of Expert Reports

Report The independent expert’s report prepared by PKFCA in relation to the Transaction

Schedule 4 Part 5 of Schedule 4 to the Act

Section 411 Section 411 of the Act

SOP Sum-of-the-parts

SWOT Strengths, Weaknesses, Opportunities and Threats

TBS Tasmanian Banking Services

TPX Tasmanian Perpetual Trustees Limited

TPX Scheme Proposed scheme of arrangement between TPX and its ordinary shareholders

TPX Shares Ordinary shares in TPX

TPX Shareholders Ordinary shareholders in TPX eligible to participate in the TPX Scheme

Trading Period 1 A period of one year prior to the Announcement Date

Trading Period 2 The period from Announcement Date to 4 June 2009

Trading Periods Trading Period 1 and Trading Period 2

VWAP Volume weighted average price

Source: PKFCA


Appendix 2 SOURCES OF INFORMATION

In preparing this Report PKFCA had access to and relied upon the following principal sources of information:

Public information

• Annual Reports of MSF and TPX for FY07 and FY08;

• TPX 31 December 2008 Half Year Report;

• press releases, public announcements (ASX announcements), media and other information in relation to MSF, TPX and the Transaction;

• share market data and related information on TPX shares;

• share market and financial data on selected listed companies engaged in similar activities and industries to MSF and TPX sourced primarily from Bloomberg, the ASX and IBISWorld; and

• publicly available economic and industry information provided by major research bodies and industry participants in relation to the banking and credit union industries.

Non public information

• the Merger Implementation Agreement;

• the Deed of Amendment;

• monthly management accounts for MSF;

• forecast financial information in relation to MSF and TPX for FY09;

• TPX management reports for FY07 and FY08;

• various property valuations for MSF and TPX; and

• various confidential board papers, presentations and business plans for MSF and TPX.

In addition to the above, PKFCA held various interviews with the management, officers and advisers of MSF and TPX. These interviews included discussions regarding the nature of the businesses, operations, financial position, and prospects of MSF and TPX, the Transaction and other related matters.

216

For

per

sona

l use

onl

y


Appendix 2 SOURCES OF INFORMATION

In preparing this Report PKFCA had access to and relied upon the following principal sources of information:

Public information

• Annual Reports of MSF and TPX for FY07 and FY08;

• TPX 31 December 2008 Half Year Report;

• press releases, public announcements (ASX announcements), media and other information in relation to MSF, TPX and the Transaction;

• share market data and related information on TPX shares;

• share market and financial data on selected listed companies engaged in similar activities and industries to MSF and TPX sourced primarily from Bloomberg, the ASX and IBISWorld; and

• publicly available economic and industry information provided by major research bodies and industry participants in relation to the banking and credit union industries.

Non public information

• the Merger Implementation Agreement;

• the Deed of Amendment;

• monthly management accounts for MSF;

• forecast financial information in relation to MSF and TPX for FY09;

• TPX management reports for FY07 and FY08;

• various property valuations for MSF and TPX; and

• various confidential board papers, presentations and business plans for MSF and TPX.

In addition to the above, PKFCA held various interviews with the management, officers and advisers of MSF and TPX. These interviews included discussions regarding the nature of the businesses, operations, financial position, and prospects of MSF and TPX, the Transaction and other related matters.

217

For

per

sona

l use

onl

y


Appendix 3 VALUATION METHODS

In conducting our assessment of the fair market value of MSF, TPX and MyState Limited, the following commonly used business valuation methods have been considered:

Discounted Cash Flow Method

The DCF method is based on the premise that the value of a business or any asset is represented by the present value of its future cash flows. It requires two essential elements:

• the forecast of future cash flows of the business asset for a number of years (usually five to ten years); and

• the discount rate that reflects the riskiness of those cash flows used to discount the forecast cash flows back to net present value (“NPV”).

The DCF method is appropriate where:

• the businesses’ earnings are capable of being forecast for a reasonable period (preferably five to ten years) with reasonable accuracy;

• earnings or cash flows are expected to fluctuate significantly from year to year;

• the business or asset has a finite life;

• the business is in a ”start up” or in early stages of development;

• the business has irregular capital expenditure requirements;

• the business involves infrastructure projects with major capital expenditure requirements; or

• the business is currently making losses but is expected to recover.

Capitalisation of Future Maintainable Earnings Method

This method involves the capitalisation of estimated future maintainable earnings by an appropriate multiple. Maintainable earnings are the assessed sustainable earnings that can be derived by the business and excludes any one-off profits or losses. An appropriate earnings multiple is assessed by reference to market evidence as to the earnings multiples of comparable companies.

This method is suitable for the valuation of businesses with indefinite trading lives and where earnings are relatively stable or a reliable trend in earnings is evident.

Net Realisable Value of Assets

Asset based valuations involve the determination of the fair market value of a business based on the net realisable value (“NRV”) of the assets used in the business.

The NRV of assets method involves:

• separating the business or entity into components which can be readily sold, such as individual business units or collection of individual items of plant and equipment and other assets; and

• ascribing a value to each based on the net amount that could be obtained for this asset if sold.

The NRV of assets can be determined on the basis of:

• orderly realisation: this method estimates fair market value by determining the net assets of the underlying business including an allowance for the reasonable costs of carrying out the sale of assets, taxation charges and the time value of money, assuming the business is wound up in an orderly manner. This is not a valuation on the basis of a forced sale where the assets might be sold at values materially different from their fair market value;

• liquidation: this is a valuation on the basis of a forced sale where the assets might be sold at values materially different from their fair market value; or


• going concern: the net assets on a going concern basis estimates the market value of the net assets but does not take into account any realisation costs. This method is often considered appropriate for the valuation of an investment or property holding company. Adjustments may need to be made to the book value of assets and liabilities to reflect their going concern value.

The NRV of a trading company’s assets will generally provide the lowest possible value for the business. The difference between the value of the company’s identifiable net assets (including identifiable intangibles) and the value obtained by capitalising earnings is attributable to goodwill.

The NRV of assets is relevant where a company is making sustained losses or its earnings are at a level less than the required rate of return, where it is close to liquidation, where it is a holding company, or where all its assets are liquid. It is also relevant to businesses that are being segmented and divested and to value assets that are surplus to the core operating business. The NRV methodology is also used as a check for the value derived using other methods.

These approaches ignore the possibility that the company’s value could exceed the NRV of its assets.

Share Market Trading History

The price at which a company’s shares trade on the ASX is an appropriate basis for a minority interest valuation where:

• the shares trade in an efficient market place where ”willing” buyers and sellers readily trade the company’s shares; and

• the market for the company’s shares is active and liquid.

Constant Growth Dividend Discount Model

The dividend discount model works best for:

• firms with stable growth rates;

• firms that pay out dividends that approximate free cash flow to equity;

• firms with stable leverage; and

• firms where there are significant or unusual limitations on the rights of shareholders.

Special Value

Special value is the amount that a particular potential acquirer may be prepared to pay for a business in excess of the fair market value. This premium represents the value to the particular potential acquirer of potential economies of scale, reduction in competition or other synergies arising from the acquisition of the asset not available to likely purchases generally. Special value is not normally considered in the assessment of fair market value as it relates to the individual circumstances of special purchasers.

218

For

per

sona

l use

onl

y


• going concern: the net assets on a going concern basis estimates the market value of the net assets but does not take into account any realisation costs. This method is often considered appropriate for the valuation of an investment or property holding company. Adjustments may need to be made to the book value of assets and liabilities to reflect their going concern value.

The NRV of a trading company’s assets will generally provide the lowest possible value for the business. The difference between the value of the company’s identifiable net assets (including identifiable intangibles) and the value obtained by capitalising earnings is attributable to goodwill.

The NRV of assets is relevant where a company is making sustained losses or its earnings are at a level less than the required rate of return, where it is close to liquidation, where it is a holding company, or where all its assets are liquid. It is also relevant to businesses that are being segmented and divested and to value assets that are surplus to the core operating business. The NRV methodology is also used as a check for the value derived using other methods.

These approaches ignore the possibility that the company’s value could exceed the NRV of its assets.

Share Market Trading History

The price at which a company’s shares trade on the ASX is an appropriate basis for a minority interest valuation where:

• the shares trade in an efficient market place where ”willing” buyers and sellers readily trade the company’s shares; and

• the market for the company’s shares is active and liquid.

Constant Growth Dividend Discount Model

The dividend discount model works best for:

• firms with stable growth rates;

• firms that pay out dividends that approximate free cash flow to equity;

• firms with stable leverage; and

• firms where there are significant or unusual limitations on the rights of shareholders.

Special Value

Special value is the amount that a particular potential acquirer may be prepared to pay for a business in excess of the fair market value. This premium represents the value to the particular potential acquirer of potential economies of scale, reduction in competition or other synergies arising from the acquisition of the asset not available to likely purchases generally. Special value is not normally considered in the assessment of fair market value as it relates to the individual circumstances of special purchasers.

219

For

per

sona

l use

onl

y


Appendix 4 COMPARABLE COMPANY INFORMATION

Table 33: Comparable Company Information – MSF

Name Description

Building Societies

Wide Bay Australia Limited

Wide Bay Australia Limited (“Wide Bay”) is Queensland’s largest building society and the largest non-bank ADI based north of Brisbane. Wide Bay’s Head Office is located in Bundaberg, however it provides finance, banking and financial services via its network across Brisbane, Sydney, Melbourne, Adelaide and throughout regional Queensland. Wide Bay’s services include providing a range of personal and business lending, banking and insurance products. Wide Bay also provides financial planning advice through Financial Technology Securities Pty Ltd in which it has a 25 percent interest. Wide Bay has a network of over 295 staff, 47 branches and agencies and 46 ATMs.

Rock Building Society Limited

Rock Building Society Limited (“Rock Building Society”) is based in Rockhampton Queensland and has branches and agencies across regional Queensland. Rock Building Society provides retail financial products and services ranging from home loans to savings and cash management accounts and business banking. Rock Building Society also provides insurance products through its insurance brokerage subsidiary RockSure. Rock Building Society operates 10 branches and 15 agencies across Queensland and approximately half its loan customers are located in Queensland.

Regional Banks

Bank of Queensland Limited

Bank of Queensland Limited (“Bank of Queensland”) has over 280 retail branches, 16 business banking centres, 11 equipment finance offices and over 2,500 ATMs throughout Australia and New Zealand. Bank of Queensland’s activities include retail banking, commercial banking and the provision of wealth management services through its subsidiary StateWest Financial Planning Limited in Western Australia and the Genesys network of advisers elsewhere in Australia.

Bendigo and Adelaide Bank Limited

Bendigo and Adelaide Bank Limited (“Bendigo and Adelaide Bank”) was formed in November 2007 as the result of a merger of Bendigo Bank Limited and Adelaide Bank Limited. The Bendigo Bank brand forms the retail arm and provides banking and wealth management services in all states via a network of over 400 branches and 550 ATMs. The merged group also operates substantial wholesale banking businesses in Adelaide Wholesale Mortgages and Adelaide Portfolio Lending. The merged group also provides funds and estate management services through its wholly-owned subsidiary Sandhurst Trustees with $3.5 billion in FUM. The merged group also has joint venture operations in Elders Rural Bank and Tasmanian Banking Services.

Major Banks

Westpac Banking Corporation Limited

Westpac Banking Corporation Limited (“Westpac”) is one of Australia’s largest financial services organisations. Westpac’s core services include retail, business and institutional banking and Westpac has a strategic focus on the Australian and New Zealand market. In late 2008, Westpac merged with St George Bank Limited (“St George”) to become Australia’s leading provider of home lending with around 40,000 employees globally and an Australian network of over 2,700 ATMs and around 1,200 branches.

Commonwealth Bank of Australia Limited

Commonwealth Bank of Australia Limited (“CBA”) is one of Australia’s largest integrated financial service providers. CBA’s services include retail, business and institutional banking, funds management, superannuation, insurance and investment and sharebroking products and services. CBA’s international presence includes banking and insurance operations in New Zealand, Fiji and Indonesia and CBA also has investments in China. CBA’s Australian distribution network includes 1,009 branches, over 3,300 ATMs and they employ more than 38,000 equivalent full time staff.

National Australia Bank Limited

National Australia Bank Limited (“NAB”) is a large integrated financial service provider with operations in Australia, New Zealand, the United Kingdom and America. NAB’s core services include retail, business and private banking and wealth management. NAB’s banking operations include NAB in Australia, Clydesdale Bank and Yorkshire Bank in the UK, Bank of New Zealand in New Zealand and Great Western Bank in the USA. NAB’s wealth management services are provided by MLC in Australia and nabCapital provides institutional banking and capital market services across Australia, New Zealand, Asia, the UK and the USA. NAB’s Australian banking network includes almost 800 branches, 180 business banking centres and 110 regional agribusiness locations.

Australia and New Zealand Banking Group Limited

Australia and New Zealand Banking Group Limited (“ANZ”) is one of Australia’s largest banks and the largest bank in New Zealand. ANZ has also expanded into Asia and has a stated objective of growing its presence in the Asia Pacific region to 20 percent of earnings by 2012. ANZ’s services include retail, commercial and private banking and wealth management services. ANZ employs more than 35,000 people globally.



Table 34: Comparable Company Information - TPX

Name Description

Wealth Management and Trustee Services

Perpetual Limited Perpetual Limited (“Perpetual”) is a financial services company that has two primary activities, wealth management and corporate trust services. Perpetual provides funds management, responsible entity services, trustee services, executor services, financial planning, investment administration, superannuation, custody and registry services.

IOOF Holdings Limited IOOF Holdings Limited (“IOOF”) is a financial services company operating in Australia. The services provided by IOOF include personal superannuation, allocated pension services, employee superannuation retirement services and investment services. In May 2009 IOOF completed a merger with Australian Wealth Management Limited (“Australian Wealth Management”). Australian Wealth Management’s services include master trust, financial planning, brokerage and investment research. Australian Wealth Management also offers trustee, supernnuation and investment administration services.

Equity Trustees Limited

Equity Trustees Limited (“Equity Trustees”) provides personal trust and financial services to customers in Australia. Services include will and estate planning, trustee for settlements, financial guardian, investment and property management and fund investments. Other services provided by Equity Trustees include income tax services, short term share trading and mortgage loans and investments.

Fiducian Portfolio Services Limited

Fiducian Portfolio Services Limited (“Fiducian”) supplies a variety of services in the areas of funds management, client administration, and financial planning. Fiducian provides investment product research, technical research strategies, and asset allocation software.

Plan B Group Holdings Limited

Plan B Group Holdings Limited (“Plan B”) offers wealth management services. Plan B is a fee-based financial advisory firm. Plan B operates in Australia and New Zealand.

Over Fifty Group Limited

Over Fifty Group Limited (“Over Fifty Group”) provides financial services and property investments. Over Fifty Group focuses on Australians over fifty years of age. Over Fifty Group’s financial services include funds management, mortgage and development finance, property investment and development and retail insurance.

Australian Ethical Investment Limited

Australian Ethical Investment Limited (“Australian Ethical Investments”) operates as a fund manager. Australian Ethical Investments manages a portfolio of ethical investments that support society and the environment such as recycling, renewable energy, complementary healthcare, education and bio-diversity.

Tidewater Investments Limited

Tidewater Investments Limited (“Tidewater”) is an investment company incorporated in Australia. Tidewater invests in strategic investments in companies with equity market values below $30 million, which are listed on the ASX, and financial services companies including unlisted boutique fund management companies.

Prime Financial Group Limited

Prime Financial Group Limited (“Prime Financial Group”) is a diversified financial services and advisory company. Prime Financial Group provides financial advice, funds management, corporate advisory and finance.

Trust Company Limited

Trust Company Limited (“Trust Company”) is a corporate trustee for unit trusts, property trusts, debenture and note issues, executor and trustee under wills, trustee of discretionary and testamentary trusts, trustee of perpetual charitable trusts, agent or power of attorney to manage investment portfolios, financial and retirement planning, first mortgage lending and common fund investments.


220

For

per

sona

l use

onl

y


Table 34: Comparable Company Information - TPX

Name Description

Wealth Management and Trustee Services

Perpetual Limited Perpetual Limited (“Perpetual”) is a financial services company that has two primary activities, wealth management and corporate trust services. Perpetual provides funds management, responsible entity services, trustee services, executor services, financial planning, investment administration, superannuation, custody and registry services.

IOOF Holdings Limited IOOF Holdings Limited (“IOOF”) is a financial services company operating in Australia. The services provided by IOOF include personal superannuation, allocated pension services, employee superannuation retirement services and investment services. In May 2009 IOOF completed a merger with Australian Wealth Management Limited (“Australian Wealth Management”). Australian Wealth Management’s services include master trust, financial planning, brokerage and investment research. Australian Wealth Management also offers trustee, supernnuation and investment administration services.

Equity Trustees Limited

Equity Trustees Limited (“Equity Trustees”) provides personal trust and financial services to customers in Australia. Services include will and estate planning, trustee for settlements, financial guardian, investment and property management and fund investments. Other services provided by Equity Trustees include income tax services, short term share trading and mortgage loans and investments.

Fiducian Portfolio Services Limited

Fiducian Portfolio Services Limited (“Fiducian”) supplies a variety of services in the areas of funds management, client administration, and financial planning. Fiducian provides investment product research, technical research strategies, and asset allocation software.

Plan B Group Holdings Limited

Plan B Group Holdings Limited (“Plan B”) offers wealth management services. Plan B is a fee-based financial advisory firm. Plan B operates in Australia and New Zealand.

Over Fifty Group Limited

Over Fifty Group Limited (“Over Fifty Group”) provides financial services and property investments. Over Fifty Group focuses on Australians over fifty years of age. Over Fifty Group’s financial services include funds management, mortgage and development finance, property investment and development and retail insurance.

Australian Ethical Investment Limited

Australian Ethical Investment Limited (“Australian Ethical Investments”) operates as a fund manager. Australian Ethical Investments manages a portfolio of ethical investments that support society and the environment such as recycling, renewable energy, complementary healthcare, education and bio-diversity.

Tidewater Investments Limited

Tidewater Investments Limited (“Tidewater”) is an investment company incorporated in Australia. Tidewater invests in strategic investments in companies with equity market values below $30 million, which are listed on the ASX, and financial services companies including unlisted boutique fund management companies.

Prime Financial Group Limited

Prime Financial Group Limited (“Prime Financial Group”) is a diversified financial services and advisory company. Prime Financial Group provides financial advice, funds management, corporate advisory and finance.

Trust Company Limited

Trust Company Limited (“Trust Company”) is a corporate trustee for unit trusts, property trusts, debenture and note issues, executor and trustee under wills, trustee of discretionary and testamentary trusts, trustee of perpetual charitable trusts, agent or power of attorney to manage investment portfolios, financial and retirement planning, first mortgage lending and common fund investments.


221

For

per

sona

l use

onl

y


Appendix 5 COMPARABLE COMPANY TRADING MULTIPLES – MSF

Table 35: Comparable Company Multiples – MSF

Last Full Year Reporting Date

Market Cap (millions)1

Historical PE Multiple2

Forecast PE Multiple3

Geared Historical NTA

Multiple4

Building Societies

Wide Bay 30 Jun 2008 212 10.0x 10.1x 2.0x

Rock Building Society 30 Jun 2008 46 10.4x 10.7x 1.6x

Average 10.2x 10.4x 1.8x

Regional Banks

Bendigo and Adelaide Bank 30 Jun 2008 1,906 5.7x 8.5x 1.5x

Bank of Queensland 31 Aug 2008 1,531 7.7x 9.0x 1.6x

Major Banks

CBA 30 Jun 2008 55,877 10.3x 12.5x 2.8x

Westpac 30 Sep 2008 55,721 9.7x 12.2x 2.4x

NAB 30 Sep 2008 42,606 9.3x 10.7x 1.7x

ANZ 30 Sep 2008 39,266 10.7x 12.8x 1.7x

Overall average 9.2x 10.8x 1.9x

Overall median 9.9x 10.7x 1.7x


Notes: 1. Represents the market value of ordinary share capital (i.e.: excluding preference or hybrid capital classified as equity) as at 4

June 2009. 2. Based on EPS derived from Cash Profit (net profit after tax, preference or hybrid distributions, impairment of goodwill and

significant items) as at the last full year reporting date.

3. Based on average broker forecasts as published by Bloomberg.

4. Based on NTA (ordinary share capital less intangible assets) as at 31 December 2008, with the exception of Bank of Queensland (28 February 2009) and Westpac, NAB and ANZ which are as at 31 March 2009.


Appendix 6 COMPARABLE COMPANY TRADING MULTIPLES – TPX

Table 36: Comparable Company Multiples - TPX



Historical PE Multiple


Most comparable companies

Perpetual 30 Jun 2008 1,258 11.5x 18.6x

Equity Trustees 30 Jun 2008 119 11.0x 16.3x

Trust Company 28 Feb 2009 168 10.8x 16.3x

Average 11.1x 17.1x

Median 11.0x 16.3x

Other comparable companies

IOOF 30 Jun 2008 974 2.8x* 22.7x*

Fiducian 30 Jun 2008 48 8.0x n/a

Plan B 30 Jun 2008 47 9.3x n/a

Over Fifty Group 30 Jun 2008 24 1.2x* 5.1x*

Australian Ethical Investment 30 Jun 2008 22 13.3x n/a

Tidewater 30 Jun 2008 5 3.2x* n/a

Prime Financial Group 30 Jun 2008 19 2.9x* n/a

Overall average (excluding outliers) 10.7x 17.1x

Overall median (excluding outliers) 10.9x 16.3x


Notes:

1. Represents the market value of ordinary share capital (i.e.: excluding preference or hybrid capital classified as equity) as at 4 June 2009.

2. Based on average broker forecasts as published by Bloomberg. * denotes outlier and is excluded from average and median calculations.

n/a – not available.

222

For

per

sona

l use

onl

y


Appendix 6 COMPARABLE COMPANY TRADING MULTIPLES – TPX

Table 36: Comparable Company Multiples - TPX



Historical PE Multiple



Perpetual 30 Jun 2008 1,258 11.5x 18.6x

Equity Trustees 30 Jun 2008 119 11.0x 16.3x

Trust Company 28 Feb 2009 168 10.8x 16.3x

Average 11.1x 17.1x

Median 11.0x 16.3x


IOOF 30 Jun 2008 974 2.8x* 22.7x*

Fiducian 30 Jun 2008 48 8.0x n/a

Plan B 30 Jun 2008 47 9.3x n/a

Over Fifty Group 30 Jun 2008 24 1.2x* 5.1x*

Australian Ethical Investment 30 Jun 2008 22 13.3x n/a

Tidewater 30 Jun 2008 5 3.2x* n/a

Prime Financial Group 30 Jun 2008 19 2.9x* n/a

Overall average (excluding outliers) 10.7x 17.1x

Overall median (excluding outliers) 10.9x 16.3x


Notes:

1. Represents the market value of ordinary share capital (i.e.: excluding preference or hybrid capital classified as equity) as at 4 June 2009.

2. Based on average broker forecasts as published by Bloomberg. * denotes outlier and is excluded from average and median calculations.

n/a – not available.

223

For

per

sona

l use

onl

y

MyS

tate

Fin

anci

al C

redi

t Uni

on o

f Tas

man

ia L

imite

d –

Inde

pen

den

t Exp

ert’s

Rep

ort

P

age

86 o

f 93

Ap

pen

dix

7

CO

MP

AR

AB

LE

CO

MP

AN

Y R

EV

EN

UE

AN

D M

AR

GIN

AN

AL

YS

IS -

TP

X

Tab

le 3

7: C

om

par

able

Co

mp

any

Re

ven

ue

and

Mar

gin

An

alys

is -

TP

X

His

tori

cal

(F

Y08

) F

ore

cas

t (F

Y09

)

Mar

ket

Ca

p

(mill

ion

s)1

FY

08 R

eve

nu

e

(mill

ion

s)

Re

ven

ue

Gro

wth

o

ver

FY

07

(%)

NP

BT

Mar

gin

(%)

NP

AT

Mar

gin

(%)

Re

ven

ue

(mill

ion

s)2

NP

AT

Mar

gin

(%)2

Mo

st c

om

par

able

co

mp

anie

s

Per

petu

al

1,25

8

613

12.8

%

25.6

%

17.5

%

369

17.0

%

Equ

ity T

rust

ees

119

38

21.7

%

39.0

%

27.9

%

36

20.2

%

Tru

stC

omp

any

168

66

19.9

%

36.1

%

27.0

%

55

37.2

%

Ave

rag

e18

.1%

33.6

%24

.1%

24.8

%

Oth

er c

om

par

ab

le c

om

pa

nie

s

IOO

F97

4 40

3 9.

4%

33.4

%

18.3

%

168

9.9%

Fid

ucia

n48

287.

6%

32.4

%

22.6

%

n/a

n/a

Pla

n B

4736

8.4%

20

.5%

13

.5%

n/

an/

a

Ove

r F

ifty

Gro

up

2410

7(1

0.7)

%

31.2

%

(149

.3)%

* 45

10.7

%

Aus

tral

ian

Eth

ical

Inve

stm

ent

2214

12.8

%

17.4

%

11.7

%

n/a

n/a

Tid

ew

ater

5

7(3

2.0)

%

64.3

%

63.9

%

n/a

n/a

Prim

e F

inan

cial

Gro

up

19

1215

6.2%

55

.3%

46

.8%

n/

an/

a

Ove

rall

ave

rag

e20

.6%

35.5

%27

.7%

19.0

%

So

urc

e:

Blo

ombe

rg a

nd P

KF

CA

ana

lysi

s

No

tes:

1. R

epre

sent

s th

e m

arke

t val

ue o

f or

dina

ry s

hare

cap

ital (

i.e.:

excl

udin

g pr

efer

ence

or

hyb

rid c

apita

l cla

ssifi

ed a

s eq

uity

) as

at 4

Jun

e 2

009.

2. B

ased

on

aver

age

brok

er f

orec

asts

as

publ

ishe

d b

y B

loom

berg

. N

o av

erag

e b

roke

r fo

reca

sts

wer

e a

vaila

ble

for

NP

BT

in F

Y09

.

* de

note

s ou

tlier

and

is e

xclu

ded

from

ave

rage

and

med

ian

calc

ulat

ion.

n

/a –

not

ava

ilabl

e.


Appendix 8 COMPARABLE COMPANY FUMA ANALYSIS - TPX

Table 38: Comparable Company FUMA Analysis - TPX

Market Cap

(millions)

FUMA

(millions) % of FUMA


Perpetual 1,258 32,0001 3.9%



Average 4.3%


IOOF 974 53,9004 1.8%

Fiducian 48 1,1305 4.3%

Plan B 47 1,7306 2.7%

Over Fifty Group 24 1,9657 1.2%*

Australian Ethical Investment 22 4768 4.6%

Tidewater Investments 5 769 6.5%

Prime Financial Group 19 3,00010 0.6%

Overall average (excluding outliers) 3.7%

Overall median (excluding outliers) 3.9%


Notes:

1. Perpetual had FUMA of approximately $32 billion as at 30 April 2009. This excludes funds under administration (“FUAD”) of approximately $246.4 billion.

2. Equity Trustees had FUM of approximately $3.6 billion as at 31 December 2008. This excludes FUAD of approximately $11.2 billion.

3. Trust Company had FUMA of approximately $3 billion as at 28 February 2009. This excludes FUAD of approximately $123 billion.

4. Based on FUM for IOOF of approximately $23.7 billion and FUMA for Australian Wealth Management of approximately $30.2 billion. This excludes FUAD of approximately $12.6 billion and funds under supervision of approximately $24.7 billion.

5. Fiducian had FUM of approximately $1.13 billion as at 31 December 2008. This excludes FUAD of approximately $964 million.

6. Plan B had FUMA of approximately $1.73 billion as at 31 March 2009. 7. Over Fifty Group had FUM of approximately $1.965 billion as at 31 December 2008. This includes property assets and a reverse

mortgage book and therefore Over Fifty Group has been excluded as an outlier. 8. Australian Ethical Investments had FUM of approximately $476 million as at February 2009.

9. Tidewater Investments had FUM of approximately $76.2 million as at 31 December 2008.

10. Prime Financial Group had FUA of approximately $3 billion as at 30 June 2008. * denotes outlier and is excluded from average and median calculations.

224

For

per

sona

l use

onl

y


Appendix 8 COMPARABLE COMPANY FUMA ANALYSIS - TPX

Table 38: Comparable Company FUMA Analysis - TPX

Market Cap

(millions)

FUMA

(millions) % of FUMA


Perpetual 1,258 32,0001 3.9%



Average 4.3%


IOOF 974 53,9004 1.8%

Fiducian 48 1,1305 4.3%

Plan B 47 1,7306 2.7%

Over Fifty Group 24 1,9657 1.2%*

Australian Ethical Investment 22 4768 4.6%

Tidewater Investments 5 769 6.5%

Prime Financial Group 19 3,00010 0.6%

Overall average (excluding outliers) 3.7%

Overall median (excluding outliers) 3.9%


Notes:

1. Perpetual had FUMA of approximately $32 billion as at 30 April 2009. This excludes funds under administration (“FUAD”) of approximately $246.4 billion.

2. Equity Trustees had FUM of approximately $3.6 billion as at 31 December 2008. This excludes FUAD of approximately $11.2 billion.

3. Trust Company had FUMA of approximately $3 billion as at 28 February 2009. This excludes FUAD of approximately $123 billion.

4. Based on FUM for IOOF of approximately $23.7 billion and FUMA for Australian Wealth Management of approximately $30.2 billion. This excludes FUAD of approximately $12.6 billion and funds under supervision of approximately $24.7 billion.

5. Fiducian had FUM of approximately $1.13 billion as at 31 December 2008. This excludes FUAD of approximately $964 million.

6. Plan B had FUMA of approximately $1.73 billion as at 31 March 2009. 7. Over Fifty Group had FUM of approximately $1.965 billion as at 31 December 2008. This includes property assets and a reverse

mortgage book and therefore Over Fifty Group has been excluded as an outlier. 8. Australian Ethical Investments had FUM of approximately $476 million as at February 2009.

9. Tidewater Investments had FUM of approximately $76.2 million as at 31 December 2008.

10. Prime Financial Group had FUA of approximately $3 billion as at 30 June 2008. * denotes outlier and is excluded from average and median calculations.

225

For

per

sona

l use

onl

y

MyS

tate

Fin

anci

al C

redi

t Uni

on o

f Tas

man

ia L

imite

d –

Inde

pen

den

t Exp

ert’s

Rep

ort

P

age

88 o

f 93

Ap

pen

dix

9

ME

RG

ER

AN

D A

CQ

UIS

ITIO

N IN

FO

RM

AT

ION

– M

SF

Tab

le 3

9: M

erg

er a

nd

Acq

uis

itio

n M

ult

iple

s –

MS

F

PE

Mu

ltip

le

Tar

get

Co

mp

an

y A

cq

uir

ed

by

Eff

ecti

ve D

ate

E

qu

ity

Co

nsi

der

atio

n

(mill

ion

s)

His

tori

cal

1F

ore

cas

t

Gea

red

NT

A

Mu

ltip

le5

Imp

lied

A

cq

uis

itio

n

Pre

miu

m6

No

n-b

an

k A

DIs

Mac

kay

Pe

rman

ent

Wid

e B

ay

Ja

n 20

08

6133

.1x

29.2

x2

3.0x

45

%

Hom

e

Ban

k of

Que

ensl

and

Dec

200

7

596

27.7

x23

.0x3

4.

1x

28%

Pio

neer

Per

man

ent

Ban

k of

Que

ensl

and

Dec

200

6

5025

.6x

23.5

x3

2.5x

45

%

Sta

teW

est

Hom

e

Jul 2

006

241

32.9

xn/

a3.

4xn/

a

Ave

rag

e

29.8

x

25.2

x

3.3x

39%

Reg

ion

al B

an

ks

Eld

ers

Rur

al B

ank

Ben

digo

and

Ade

laid

e B

ank

Jul 2

009

3397

8.

3x

n/a

n/a

n/a

Ban

kWes

t / S

t And

rew

’s

CB

AD

ec 2

008

2,

100

11

.2x

n/a

0.8x

n/a

St G

eorg

e

Wes

tpac

Nov

200

8

12,2

95

9.3x

9.0x

4

2.4x

-1

9%*

Ade

laid

e B

ank

Ben

digo

Ban

k N

ov 2

007

1,

977

19

.0x

16.9

x4

3.2x

25

%

Ave

rag

e

12

.0x

13

.0x

2.

1x

25%

So

urc

e:

Com

pan

y an

nou

ncem

ents

, Blo

ombe

rg a

nd P

KF

CA

ana

lysi

s

No

tes:

1. B

ased

on

hist

oric

al C

ash

Pro

fit.

2. B

ased

on

futu

re m

aint

aina

ble

earn

ings

use

d b

y th

e In

depe

nden

t E

xper

t.

3. B

ased

on

com

pan

y gu

ida

nce

cont

aine

d in

Inde

pen

dent

Exp

ert

Rep

ort.

4. B

ased

on

brok

er c

onse

nsus

fore

cast

s co

ntai

ned

in In

depe

nden

t E

xper

t R

epo

rt.

5. R

epre

sent

s eq

uity

con

side

ratio

n di

vide

d b

y N

TA

. 6.

Rep

rese

nts

pre

miu

m p

aid

base

d on

the

shar

e pr

ice

one

day

prio

r to

firs

t offe

r an

noun

cem

ent.

7. B

ased

on

acq

uisi

tion

of 1

00 p

erce

nt.

* in

dica

tes

an o

utlie

r an

d ha

s be

en e

xclu

ded

from

th

e av

erag

e ca

lcul

atio

n.

n/a

. Not

ava

ilabl

e.


The following summarises each transaction listed in the above table:

• Mackay Permanent

On 10 January 2008 Wide Bay completed the acquisition of Mackay Permanent Building Society Limited (“Mackay Permanent”) for approximately $61.3 million in a combination of cash and Wide Bay shares based on an offer of 0.8 Wide Bay shares and $1 cash or $9.40 cash for every Mackay Permanent share. The acquisition followed a competitive bidding process against Bank of Queensland with Wide Bay initially making an offer that valued Mackay Permanent at approximately $46 million. The final acquisition price represented a 45 percent premium to the closing price one day prior to the date Wide Bay’s first offer was announced. The premium based on the “all cash” offer of $9.40 per share was approximately 34 percent. Mackay Permanent was based in central Queensland and at the time of acquisition had a network of 13 branches and approximately 21,000 members. The acquisition was expected to generate a significant amount of synergies.

• Home

On 18 December 2007 Bank of Queensland completed the acquisition of Home Building Society Limited (“Home”) for approximately $595.9 million in a combination of cash and Bank of Queensland shares based on an offer of 0.844 Bank of Queensland shares and $2.80 cash for every Home share. The acquisition represented a 28 percent premium to the closing price one day prior to the offer announcement. Home was based in Western Australia and at the time of acquisition had a network of 29 branches and around 126,000 customers. In addition to its traditional banking and financial services operations (housing loans, commercial loans, insurance and financial planning), Home operated a property development segment that involved the development, financing and sale of vacant land for residential purposes. Pre-tax synergies of approximately $20 million per annum were expected by the third year following the acquisition.

• Pioneer Permanent

On 5 December 2006 Bank of Queensland completed the acquisition of Pioneer Permanent Building Society Limited (“Pioneer Permanent”) for approximately $49.6 million in a combination of cash and Bank of Queensland shares based on an offer of $4.78 per share inclusive of a $0.51 fully franked dividend. The acquisition followed a competitive bidding process in which Pioneer Permanent had received unsolicited offers from Mackay Permanent, Wide Bay and FirstMac Limited. The final acquisition price represented a 45 percent premium to the closing price one day prior to the date the first offer was announced by Mackay Permanent. Pioneer Permanent was based in Queensland and at the time of acquisition had a network of 15 branches, 30 outlets and 10 exclusive agents. Pre-tax synergies of approximately $7.8 million per annum were expected by the second year following the acquisition.

• StateWest

On 3 July 2006 Home completed the acquisition of StateWest Credit Society Limited (“StateWest”) for approximately $240.5 million in Home shares. StateWest was an unlisted mutual based in Western Australia and at the time of acquisition had a network of 17 branches in the greater Perth Metropolitan area. Pre-tax synergies of approximately $8 million to $10 million per annum were expected following the acquisition.

• Elders Rural Bank

On 7 May 2009 Bendigo and Adelaide Bank announced the acquisition of an additional 10 percent stake in Elders Rural Bank Limited (“Elders Rural Bank”) for approximately $33.9 million. Elders Rural Bank is a joint venture between Bendigo and Adelaide Bank and Elders Limited which specialises in providing banking services to rural and regional Australia. The acquisition, which is subject to regulatory approval, will take Bendigo and Adelaide Bank’s share in Elders Rural Bank to 60 percent and from 1 July 2009 the bank will be known as Rural Bank Limited.

226

For

per

sona

l use

onl

y



• Mackay Permanent

On 10 January 2008 Wide Bay completed the acquisition of Mackay Permanent Building Society Limited (“Mackay Permanent”) for approximately $61.3 million in a combination of cash and Wide Bay shares based on an offer of 0.8 Wide Bay shares and $1 cash or $9.40 cash for every Mackay Permanent share. The acquisition followed a competitive bidding process against Bank of Queensland with Wide Bay initially making an offer that valued Mackay Permanent at approximately $46 million. The final acquisition price represented a 45 percent premium to the closing price one day prior to the date Wide Bay’s first offer was announced. The premium based on the “all cash” offer of $9.40 per share was approximately 34 percent. Mackay Permanent was based in central Queensland and at the time of acquisition had a network of 13 branches and approximately 21,000 members. The acquisition was expected to generate a significant amount of synergies.

• Home

On 18 December 2007 Bank of Queensland completed the acquisition of Home Building Society Limited (“Home”) for approximately $595.9 million in a combination of cash and Bank of Queensland shares based on an offer of 0.844 Bank of Queensland shares and $2.80 cash for every Home share. The acquisition represented a 28 percent premium to the closing price one day prior to the offer announcement. Home was based in Western Australia and at the time of acquisition had a network of 29 branches and around 126,000 customers. In addition to its traditional banking and financial services operations (housing loans, commercial loans, insurance and financial planning), Home operated a property development segment that involved the development, financing and sale of vacant land for residential purposes. Pre-tax synergies of approximately $20 million per annum were expected by the third year following the acquisition.

• Pioneer Permanent

On 5 December 2006 Bank of Queensland completed the acquisition of Pioneer Permanent Building Society Limited (“Pioneer Permanent”) for approximately $49.6 million in a combination of cash and Bank of Queensland shares based on an offer of $4.78 per share inclusive of a $0.51 fully franked dividend. The acquisition followed a competitive bidding process in which Pioneer Permanent had received unsolicited offers from Mackay Permanent, Wide Bay and FirstMac Limited. The final acquisition price represented a 45 percent premium to the closing price one day prior to the date the first offer was announced by Mackay Permanent. Pioneer Permanent was based in Queensland and at the time of acquisition had a network of 15 branches, 30 outlets and 10 exclusive agents. Pre-tax synergies of approximately $7.8 million per annum were expected by the second year following the acquisition.

• StateWest

On 3 July 2006 Home completed the acquisition of StateWest Credit Society Limited (“StateWest”) for approximately $240.5 million in Home shares. StateWest was an unlisted mutual based in Western Australia and at the time of acquisition had a network of 17 branches in the greater Perth Metropolitan area. Pre-tax synergies of approximately $8 million to $10 million per annum were expected following the acquisition.

• Elders Rural Bank

On 7 May 2009 Bendigo and Adelaide Bank announced the acquisition of an additional 10 percent stake in Elders Rural Bank Limited (“Elders Rural Bank”) for approximately $33.9 million. Elders Rural Bank is a joint venture between Bendigo and Adelaide Bank and Elders Limited which specialises in providing banking services to rural and regional Australia. The acquisition, which is subject to regulatory approval, will take Bendigo and Adelaide Bank’s share in Elders Rural Bank to 60 percent and from 1 July 2009 the bank will be known as Rural Bank Limited.

227

For

per

sona

l use

onl

y


• BankWest & St Andrew’s

On 19 December 2008 CBA completed the acquisition of Bank of Western Australia Limited (“BankWest”) and St Andrew’s Australia Pty Ltd (“St Andrew’s”) from HBOS plc for $2.1 billion in cash. BankWest is based in Western Australia and had 118 branches as at 30 June 2008, a majority of those in Western Australia and more than 860,000 customers. The acquisition was expected to deliver annual pre-tax synergies representing 20 percent to 25 percent of BankWest’s cost base.

• St George

On 17 November 2008 Westpac completed a merger with St George by issuing approximately $12.1 billion in Westpac shares to St George shareholders which represented 1.31 new Westpac shares for every ordinary St George share held. St George shareholders also received a special dividend of $0.31 per share. The final acquisition price represented a 19 percent discount to the closing price on the day prior to the offer announcement due predominately to the significant falls in the price of all bank stocks between the date the merger was announced and the date the merger was completed. Based on the closing price of Westpac on the day prior to the offer announcement, the merger represented a 29 percent premium. St George is Australia’s fifth largest bank. The merger was expected to deliver annual pre-tax cost savings representing 20 percent to 25 percent of St George’s cost base by the year ending 30 September 2011.

• Adelaide Bank

On 30 November 2007 Bendigo Bank Limited (“Bendigo Bank”) completed an agreed merger with Adelaide Bank Limited (“Adelaide Bank”) by issuing approximately $1.98 billion in Bendigo Bank shares to Adelaide Bank shareholders which represented 1.075 new Bendigo Bank shares for every ordinary Adelaide Bank share held. The final acquisition price represented a 25 percent premium to the closing price on the day prior to the merger being announced. Adelaide Bank is a South Australian based regional bank with a focus on wholesale banking and had 25 branches at the date the merger was announced. The merger was expected to deliver annual pre-tax cost synergies of approximately $60 million to $65 million.

MyS

tate

Fin

anci

al C

redi

t Uni

on o

f Tas

man

ia L

imite

d –

Inde

pen

den

t Exp

ert’s

Rep

ort

P

age

91 o

f 93

Ap

pen

dix

10

M

ER

GE

R A

ND

AC

QU

ISIT

ION

INF

OR

MA

TIO

N -

TP

X

Tab

le 4

0: M

erg

er a

nd

Acq

uis

itio

n M

ult

iple

s –

TP

X

Tar

get

Co

mp

an

y A

cq

uir

ed

by

An

no

un

cem

en

t D

ate

Eq

uit

y C

on

sid

erat

ion

(m

illio

ns

)

%

Ac

qu

ire

d

FU

MA

(mill

ion

s)

% o

f F

UM

A1

PE

Mu

ltip

le1

Ord

Min

nett

A

ustr

alia

n W

ealth

Man

agem

ent

M

ay

200

8

8370

%

2,50

0

4.8%

11

.0x

Ecl

ipse

Pro

pert

y G

rou

p

Ove

r F

ifty

Gro

up

Apr

200

8

551

%

230

3.8%

10

.0x

Hol

dfas

t Fun

d S

ervi

ces

E

quity

Tru

stee

sM

ar 2

008

4

100%

31

01.

3%

n/a

Lach

lan

Pro

pert

y G

rou

p

Bec

ton

Dec

200

7

6310

0%

450

14.1

%*

n/a

Res

olut

ion

Cap

ital

Pin

nacl

e In

vest

men

t Man

agem

ent

S

ep 2

007

10

40%

2,

900

0.

9%*

n/a

Ligh

thou

se P

artn

ers

HF

A

Jul 2

007

349

100%

9,

763

3.

6%

n/a

Pen

gana

Con

solid

ated

Pre

ss H

oldi

ngs

S

ep 2

006

80

100%

37

821

.1%

* n/

a

Ave

rag

e (e

xclu

din

g o

utl

iers

) 3.

4%

10

.5x

Med

ian

(ex

clu

din

g o

utl

iers

)

3.7

%

10.5

x

So

urc

e:

Rel

evan

t com

pan

y an

noun

cem

ents

and

pre

sent

atio

ns

No

tes:

1. B

ased

on

acq

uisi

tion

of 1

00 p

erce

nt.

* in

dica

tes

an o

utlie

r an

d ha

s be

en e

xclu

ded

from

th

e av

erag

e an

d m

edia

n ca

lcul

atio

ns.

n/a

. Not

ava

ilabl

e.

228

For

per

sona

l use

onl

y

MyS

tate

Fin

anci

al C

redi

t Uni

on o

f Tas

man

ia L

imite

d –

Inde

pen

den

t Exp

ert’s

Rep

ort

P

age

91 o

f 93

Ap

pen

dix

10

M

ER

GE

R A

ND

AC

QU

ISIT

ION

INF

OR

MA

TIO

N -

TP

X

Tab

le 4

0: M

erg

er a

nd

Acq

uis

itio

n M

ult

iple

s –

TP

X

Tar

get

Co

mp

an

y A

cq

uir

ed

by

An

no

un

cem

en

t D

ate

Eq

uit

y C

on

sid

erat

ion

(m

illio

ns

)

%

Ac

qu

ire

d

FU

MA

(mill

ion

s)

% o

f F

UM

A1

PE

Mu

ltip

le1

Ord

Min

nett

A

ustr

alia

n W

ealth

Man

agem

ent

M

ay

200

8

8370

%

2,50

0

4.8%

11

.0x

Ecl

ipse

Pro

pert

y G

rou

p

Ove

r F

ifty

Gro

up

Apr

200

8

551

%

230

3.8%

10

.0x

Hol

dfas

t Fun

d S

ervi

ces

E

quity

Tru

stee

sM

ar 2

008

4

100%

31

01.

3%

n/a

Lach

lan

Pro

pert

y G

rou

p

Bec

ton

Dec

200

7

6310

0%

450

14.1

%*

n/a

Res

olut

ion

Cap

ital

Pin

nacl

e In

vest

men

t Man

agem

ent

S

ep 2

007

10

40%

2,

900

0.

9%*

n/a

Ligh

thou

se P

artn

ers

HF

A

Jul 2

007

349

100%

9,

763

3.

6%

n/a

Pen

gana

Con

solid

ated

Pre

ss H

oldi

ngs

S

ep 2

006

80

100%

37

821

.1%

* n/

a

Ave

rag

e (e

xclu

din

g o

utl

iers

) 3.

4%

10

.5x

Med

ian

(ex

clu

din

g o

utl

iers

)

3.7

%

10.5

x

So

urc

e:

Rel

evan

t com

pan

y an

noun

cem

ents

and

pre

sent

atio

ns

No

tes:

1. B

ased

on

acq

uisi

tion

of 1

00 p

erce

nt.

* in

dica

tes

an o

utlie

r an

d ha

s be

en e

xclu

ded

from

th

e av

erag

e an

d m

edia

n ca

lcul

atio

ns.

n/a

. Not

ava

ilabl

e.

229

For

per

sona

l use

onl

y



• Ord Minnett

On 1 June 2008, Australian Wealth Management acquired a majority interest in Ord Minnett Limited (“Ord Minnett”) for approximately $83 million. The 70 percent stake was acquired through Australian Wealth Management issuing 47.6 million new shares. The new shares issued were escrowed for a three year period, with one third vesting each year. The acquisition was anticipated to deliver significant scale in distribution, client advisors and FUM. Ord Minnett’s history spans almost 150 years. It is a wealth management group incorporating full-service stockbroking, financial planning, portfolio services, funds management and equity capital markets services.

• Eclipse Property Group

On 30 June 2008, Over Fifty Group completed the acquisition of a 51 percent stake in Eclipse Property Group Limited (“Eclipse Property Group”). The acquisition was valued at $4.8 million, comprising $1 million in Over Fifty Group shares and $3.8 million in cash. An option to acquire the remaining 49 percent of Eclipse Property Group is available to Over Fifty Group with the purchase price to be determined based on future performance. The acquisition was priced on a prospective PE ratio of 10 times forecast FY09 earnings and was expected to be EPS positive for Over Fifty Group.

• Holdfast Fund Services

On 31 March 2008 Equity Trustees completed the acquisition of Holdfast Fund Services Pty Ltd (“Holdfast Fund Services”). Holdfast Fund Services holds sponsorship rights that relate to the distribution and marketing of the Equity Trustees Intrinsic Value International Sharemarkets Fund and the Equity Trustees Intrinsic Value International Sharemarkets PLUS Fund. The two funds had a total of approximately $310 million under management as at February 2008. The acquisition was part of Equity Trustees’ growth strategy, which included several bolt-on acquisitions to its superannuation business. Equity Trustees expected the acquisition to add approximately $1 million to EBIT in FY09.

• Lachlan Property Group

On 3 December 2007, Becton Property Group (“Becton”) completed the acquisition of Lachlan Property Group. The transaction enlarged the pool of Becton’s FUM to more than $2 billion. Lachlan Property Group was a Sydney based property funds management group with approximately $450 million of FUM at the time of acquisition. It also managed six unlisted funds with approximately 2,200 investors.

Becton’s acquisition of Lachlan Property Group comprised two parts; $42.4 million for the funds management business and $21 million for units in managed funds. Lachlan Property Group has a strategy of co-investing in the funds that it manages. The units will be acquired by Becton’s managed unlisted funds. The remaining portion of the acquisition price was to be debt funded and was payable in two instalments, approximately 15 percent at signing and the remainder on 31 January 2008.

• Resolution Capital

On 12 September 2007 Pinnacle Investment Management Pty Ltd (“Pinnacle Investment Management”) completed the acquisition of a 40 percent interest in Resolution Capital Limited (“Resolution Capital”), for a total consideration of $10 million. At the end of August 2007, Resolution Capital had $2.9 billion in FUM. Pinnacle Investment Management’s total FUM was estimated to increase by 171 percent to $4.6 billion post acquisition. Given that Wilson HTM Investment Group held 85.5 percent interest in Pinnacle Investment Management, the transaction was expected to boost its FUM to a total of $6.7 billion.


• Lighthouse Partners

On 3 January 2008, HFA Holdings Ltd (“HFA”) completed the acquisition of US Based Lighthouse Partners L.L.C (“Lighthouse Partners”) from SunTrust Banks Inc. through a share purchase agreement. The purchase consideration of approximately $707 million was transacted via a cash component of US$348.5 million and 134.67 million in HFA shares representing approximately 11 times Lighthouse Partner’s estimated FY08 EBITDA.

Post completion, HFA would be an international provider and manager of absolute return-based investment products with total assets under management of approximately US$8 billion.

• Pengana Hedge Funds (now: Magellan Financial group)

On 8 September 2006 Consolidated Press Holdings Pty Ltd completed the acquisition of Pengana Hedge Funds (“Pengana”). Post acquisition, Pengana was to be renamed Magellan Financial Group and operate as a global fund manager and a joint venture partner with hedge fund managers and in private equity projects.

230

For

per

sona

l use

onl

y


• Lighthouse Partners

On 3 January 2008, HFA Holdings Ltd (“HFA”) completed the acquisition of US Based Lighthouse Partners L.L.C (“Lighthouse Partners”) from SunTrust Banks Inc. through a share purchase agreement. The purchase consideration of approximately $707 million was transacted via a cash component of US$348.5 million and 134.67 million in HFA shares representing approximately 11 times Lighthouse Partner’s estimated FY08 EBITDA.

Post completion, HFA would be an international provider and manager of absolute return-based investment products with total assets under management of approximately US$8 billion.

• Pengana Hedge Funds (now: Magellan Financial group)

On 8 September 2006 Consolidated Press Holdings Pty Ltd completed the acquisition of Pengana Hedge Funds (“Pengana”). Post acquisition, Pengana was to be renamed Magellan Financial Group and operate as a global fund manager and a joint venture partner with hedge fund managers and in private equity projects.

231

For

per

sona

l use

onl

y


For

per

sona

l use

onl

y


Appendix 2 - Facility Terms

233

Facility Terms

Appendix 2

For

per

sona

l use

onl

y


Capitalised words are defined in these Facility Terms and the Terms and Conditions for the Share Sale Facility (Facility) included with the Letter and Sell Form sent to Eligible Shareholders.

Am I eligible to participate in the Facility?1.

The Facility is available to Australian shareholders who hold an MSF Member Share as at 5.00pm (Hobart time) on 13 August 2009 (Voting Entitlement Time).

When is the Facility open?2.

The period during which Eligible Shareholders can elect to participate in the Facility will be from 17 July 2009 until 28 August 2009 inclusive (Offer Period).

MSF may extend or shorten the Offer Period or suspend or terminate the Facility at any time up until the close of the Offer Period. If it does so, it will (or MyState Limited will) make an announcement to the ASX either before or as soon as practicable after doing so.

If you participate in the Share Sale Facility, all of the ordinary shares in MyState Limited (MyState Limited Shares) you receive or are entitled to receive (Participating MyState Limited Shares) under the proposed scheme of arrangement between MSF, MyState Limited and the Eligible Shareholders of MSF (MSF Scheme), will be sold during the period commencing on or about 7 September 2009 and ending on 1 October 2009, subject to extension determined by the board of MSF acting in its sole discretion (Facility Trading Period).

Why is MSF arranging the Facility?3.

As announced on 10 October 2008, MSF and Tasmanian Perpetual Trustees Limited (ACN 009 475 629) (TPX) propose to merge to create a leading Tasmanian based diversified financial services group. As part of the proposed merger, TPX is also proposing a scheme of arrangement between TPX, MyState Limited and the eligible shareholders of TPX (TPX Scheme) (the MSF Scheme and TPX Scheme together, Schemes). If the Schemes are implemented and the merger proceeds as planned, MSF and TPX will become wholly owned subsidiaries of MyState Limited and eligible MSF Shareholders will receive MyState Limited Shares. Eligible Shareholders may elect to sell their new MyState Limited Shares through the Share Sale Facility.

The Facility is entirely voluntary. You do not need to sell any MyState Limited Shares. It is entirely your decision.

If you wish to sell your Participating MyState Limited Shares but find the transaction costs prohibitive, or engaging a broker is inconvenient, this Facility may be of interest to you. The Share Sale Facility is free of brokerage fees for Participating Shareholders.

However, please note that none of MyState Limited, MSF, TPX nor any other person involved in the Facility makes any recommendation or gives any advice to you regarding whether to participate in the Facility or in relation to any other matter. If you are in any doubt about whether to participate, please consult your own professional adviser.

How do I participate?4.

As noted above, eligibility to participate in the Facility is determined on the basis of those shareholders with registered addresses in Australia as at the Voting Entitlement Time.

To participate in the Facility, return the form enclosed with the Terms and Conditions for the Share Sale Facility (Sell Form) during the Offer Period.

When will my Sell Form be acted upon?5.

If you choose to participate in the Facility, you cannot specify the date your Sell Form will be acted upon. Your MyState Limited Shares will be sold during the Facility Trading Period provided your correctly completed Sell Form was received by MSF, and accepted in accordance with the relevant Facility Terms and Conditions (attached).

MSF may, in its sole discretion, delay the sale of some or all of the MyState Limited Shares available to be sold, for example, if it considers market conditions to be unsuitable or to avoid an excessive concentration of selling on a particular day.

How will my MyState Limited Shares be 6. sold?

Your MyState Limited Shares may be sold either under a bookbuild process arranged by a broker or on the Australian Securities Exchange in the ordinary course of business (including by crossings or by a broker acting as principal).

FACILITY TERMS MyState Financial Credit Union of Tasmania Limited (ABN 89 067 729 195)(MSF) MSF Share Sale Facility – Questions and Answers

Page 1

For

per

sona

l use

onl

y



235

A bookbuild process will involve a stockbroker engaged by MSF conducting an open tender under which institutional investors and wholesale clients will be invited to submit bids to buy MyState Limited Shares by both price and volume. The broker will agree with MSF a price determined by the bookbuild that clears all of the MyState Limited Shares offered for sale at a price at which all offered shares are sold. Sales or purchases on the Australian Securities Exchange (ASX) would be conducted in the ordinary course of business.

What price will I receive?7.

If you choose to participate in the Facility, you cannot specify the price at which your Sell Form will be acted upon. The price received by you for Participating MyState Limited Shares sold through the Facility will be the average price of all Participating MyState Limited Shares sold through the Facility. However, you should note that that price may be different to the price for MyState Limited Shares appearing in the newspaper or quoted by the ASX on the day that your Sell Form is sent or on any other day, and may not be the best price obtained on the trading day or trading days that your Participating MyState Limited Shares are sold.

The amount of money you receive (if you participate in the Share Sale Facility) for Participating MyState Limited Shares may as a consequence of the averaging mechanism mentioned above be more or less than is received for a like number of MyState Limited Shares by third party brokers engaged by MSF. Please note that none of MyState Limited, MSF nor any other party involved in the Facility gives any assurance as to the price that will be received for Participating MyState Limited Shares under the Facility.

The market price of MyState Limited Shares is subject to change from time to time and the sale proceeds that would be paid to you under the Facility will depend on the sale prices received for the sale of all Participating MyState Limited Shares sold under the Facility and will reflect either prices and volumes bid under the bookbuild facility or the trading conditions during the period in which the sales take place.

The implementation of the Facility may result in a significant number of Participating MyState Limited Shares being offered for sale at the same or within a relatively short time. This could have the effect of depressing the sale price for MyState Limited Shares.

Up-to-date information on the price of MyState Limited Shares can be obtained from a number of sources including daily newspapers and the ASX website at www.asx.com.au.

Who is arranging the Facility?8.

As noted above, MSF is arranging the Facility and if you choose to participate in the Facility you will be appointing MSF to arrange to sell Participating MyState Limited Shares.

At the time your Participating MyState Limited Shares are sold under the Facility, MyState Limited Shares will be quoted on the ASX and MSF cannot trade securities on ASX itself. To enable MSF to provide the Facility to you MSF will engage others on its behalf, including third party brokers, to assist it in implementing the Facility, including selling Participating MyState Limited Shares during the Facility Trading Period.

If you use the Facility, you appoint MSF as your agent to receive Financial Services Guides and other disclosure materials (and any update of those documents) from all relevant entities which may need to provide a Financial Services Guide or other disclosure documents. Certain relevant entities will provide, or have provided, a Financial Services guide to MSF and will provide any updates to MSF. MSF will post the Financial Services Guides and other disclosure documents (and any updates) on its website at mystate.com.au along with the other Facility documents and any new information in relation to the Facility that MSF or any relevant entity wishes to make available.

For

per

sona

l use

onl

y


How does trading my MyState Limited 9. Shares through the Facility compare with trading them on the ASX?

If you are thinking of selling your Participating MyState Limited Shares prior to the end of the Offer Period, then you can do this using the Facility or through your broker on the ASX. Some different features of each method are outlined below:

Selling MyState Limited Shares through the Facility

Selling MyState Limited Shares through your broker on the ASX

You can only sell all of your Participating MyState Limited Shares through the Share Sale Facility.

You can sell all or a portion of your MyState Limited Shares.

To participate, simply complete and return the Sell Form. There is no need to appoint a broker.

If you have never used a broker then you must first appoint one to represent you and establish an account.

You will receive the average price of all Participating MyState Limited Shares sold through the Facility. You cannot set a sale price.

You will receive the market price at the time your transaction request is acted upon – that price may be higher or lower than the average price of all Participating MyState Limited Shares sold through the Facility on the day that your MyState Limited Shares are sold.

The date on which your transaction request is acted upon depends on the operation of the Facility, however, there is no guarantee as to the price achieved through the Facility.

You can control the date on which your transaction request is acted upon through your specific directions given to your broker.

There will be zero brokerage fees for using the Share Sale Facility.

You must pay all brokerage fees that are agreed with your broker (plus any applicable GST).

When will I receive the proceeds from the 10. sale of my Participating MyState Limited Shares?

For Eligible Shareholders participating in the Share Sale Facility (Participating Shareholders), the cheque for your sale proceeds will be posted to you within ten business days after the end of the Facility Trading Period. Cheques will only be made payable to the Participating Shareholder and posted to the Participating Shareholder’s address on the MyState Limited share register and made payable to the name(s) on the share register.

What if there is not a sufficient demand to 11. buy my MyState Limited Shares under the Share Sale Facility?

If there is not a sufficient market demand for MyState Limited Shares, Participating Shareholders submitting Sell Forms will be treated on a pro rata basis. This means that if you lodge your Sell Form during the Offer Period you will have a pro rata number of your MyState Limited Shares sold and you will receive MyState Limited Shares to the extent that you do not receive cash.

Can I withdraw my form?12.

No. When you return your Sell Form, you are irrevocably bound to sell the number of Participating MyState Limited Shares you are entitled to as Scheme consideration.

What are the Australian capital gains tax 13. consequences if I sell my MyState Limited Shares?

The following is a general description of the Australian tax implications of selling Participating MyState Limited Shares through the Facility if you are an Australian resident individual and you have held your MSF Shares on capital account. However, tax law is complex and its operation depends upon your particular circumstances. You should consult your tax adviser before using the Facility.

You may be required to pay tax on the sale of your Participating MyState Limited Shares. Whether you will be required to do this, and how much you must pay, depends on when and how you acquired your Participating MyState Limited Shares and how much you paid for them:

Tax will generally be payable on the sale of your •Participating MyState Limited Shares if the Sale Price exceeds the cost base for your Participating MyState Limited Shares. The cost base of your Participating MyState Limited Shares will be determined by apportioning the cost base of your MSF Shares in accordance with the capital gains tax (CGT) rules in the Income Tax Assessment Act. Australian resident

For

per

sona

l use

onl

y



237

individuals or trusts (other than superannuation funds) who sell Participating MyState Limited Shares may be entitled to reduce any capital gain by 50% where they have held their MSF Shares for at least 12 months. This concessional CGT treatment would not apply to an individual shareholder who buys and sells shares in the ordinary course of business (for example, a share trader) or to a shareholder that is a company. A shareholder which is a qualifying superannuation entity is generally entitled to a CGT discount of one third, instead of 50% of the gain.

Australian residents who choose to sell their MyState •Limited Shares before they have held the MSF Shares for at least 12 months, will not be eligible for concessional CGT treatment

If the Sale Price is less than the amount you paid to •acquire a Participating MyState Limited Share sold through the Facility, you will realise a capital loss. It can offset capital gains you make on the sale of CGT shares or assets (in the same or later years), but is not deductible against your income.

A capital loss available to you from sale of other •assets may be deducted from a gain on sale of your Participating MyState Limited Shares. In cases where concessional CGT treatment is available, the gain is first reduced by the loss before applying the relevant discount.

Will I receive interest on amounts held on 14. my behalf in the nominated account?

No. Interest will not be paid on any balances.

How will the sale of Participating MyState 15. Limited Shares through the Facility affect my entitlement to dividends?

You should note that MyState may declare or pay a dividend during the Offer Period or the Facility Trading Period for the Facility. Any dividend entitlement is valuable and selling your Participating MyState Limited Shares with this entitlement may result in you realising a higher price for your Participating MyState Limited Shares. The MyState Limited Share price may fall when the shares lose the entitlement to the dividend (on the ex-dividend date) reflecting the loss of the value of the final dividend. However, if you sell your Participating MyState Limited Shares after the ex- dividend date, but before it is paid, you will receive the dividend. If you have any doubts about the impact of participating in the Facility if a dividend is declared or paid by MyState, please consult your own professional adviser.

If you are an Australian resident for tax purposes, in order for you to be entitled to the tax credit in respect of a franked dividend, you must hold the MyState Limited Share, without material diminution of risk in relation to that MyState Limited Share, for a period of at least 45 days between the date on which you acquired the MyState Limited Share and the forty-fifth day after the day on which the MyState Limited Share became ex dividend in relation to the relevant dividend. Accordingly, if you acquire a MyState Limited Share more than 45 days before an ex dividend date (and hold the MyState Limited Share without material diminution of risk for at least the 45 days during the ownership period) you will be entitled to the tax credit in respect of a franked dividend in relation to all subsequent dividends. If, however, you acquire MyState Limited Shares less than 45 days before an ex dividend date, you will have to hold those MyState Limited Shares (without material diminution of risk) long enough after the ex dividend date to satisfy the 45 day ownership requirement. In all cases, the dates on which shares are acquired and disposed of are not counted towards satisfaction of the 45 day ownership requirement. If you have any doubts about the impact of participating in the Facility in the context of 45 day ownership requirement, please consult your own professional adviser.

Further information on the MSF Share Sale 16. Facility

For further information call the Member Information Line on 1300 538 803.

For

per

sona

l use

onl

y


Terms and Conditions - Share Sale Facility

Terms of Participation1.

All persons who hold ordinary shares in MyState Financial 1.1

Credit Union of Australia Limited (ABN 89 067 729 195) (MSF) as at 5.00 pm (Hobart time) on 13 August 2009 (Voting Entitlement Time) and have a registered address in Australia (Eligible Shareholders) are entitled to participate in the share sale facility described in these Terms and Conditions (Share Sale Facility) in connection with the MSF Scheme. Participation is voluntary. Applications to participate must be made on the Sell Form.

An Eligible Shareholder who elects to participate in the 1.2

Share Sale Facility (Participating Shareholder) does so on the basis of the Sell Form, these Terms and Conditions and any associated documents provided or made available by MSF to Eligible Shareholders (Facility Documents). Participation is also on the basis that all, and not only some, of the MyState ordinary shares (MyState Limited Shares) distributed or to be distributed to a Participating Shareholder (Participating MyState Limited Shares) will be sold under the Share Sale Facility.

MSF will pay all brokerage and handing fees (and any 1.3

applicable GST) in relation to the sale of Participating MyState Limited Shares through the Share Sale Facility. Any other tax or charges on the sale of the Participating MyState Limited Shares will be for the account of the Participating Shareholder.

Offer Period2.

The Share Sale Facility will operate from 17 July 2009 2.1

to 1 October 2009 inclusive or such shorter or longer period as may be determined by MSF (Offer Period). MSF reserves the right for any reason at any time up until the close of the Offer Period to modify the timetable for, or to terminate or suspend, the Share Sale Facility in its sole discretion. Extension or shortening of the Offer Period, or suspension or termination of the Share Sale Facility, will be announced to the ASX by MSF or MyState Limited.

Roles of MSF 3.

Each Participating Shareholder irrevocably appoints MSF 3.1

to arrange the sale of Participating MyState Limited Shares by the Participating Shareholder in accordance with the Facility Documents. This means that MSF and other entities involved in the Share Sale Facility are not giving, and are not obliged to give, any advice to you. These Terms and Conditions do not constitute advice or a recommendation by any of the above to buy, sell or hold securities in

MyState, nor that the Share Sale Facility or any other facility is the best way to sell your Participating MyState Limited Shares. Accordingly, a Participating Shareholder should ensure that the Share Sale Facility meets the Participating Shareholder’s own objectives, financial situation and needs. Any Eligible Shareholder unsure of what action to take should consult a licensed financial adviser.

MSF will assist in the administration of the Share Sale 3.2

Facility, including the processing of Sell Forms received, issuing transaction confirmations and remitting sale proceeds. MSF will appoint third parties to undertake some or all of this work.

MSF is irrevocably authorised by each Participating 3.3

Shareholder to do all things (including to engage any third party (including brokers) and execute all documents, including to effect any holding adjustment, securities transformation, securities transfer or other transmission or transaction in relation to a Participating Shareholder’s holding of Participating MyState Limited Shares to facilitate the sale of all those Participating MyState Limited Shares under the Share Sale Facility.

Sell Forms4.

To participate in the Share Sale Facility, an Eligible 4.1

Shareholder must complete and sign the Sell Form, and return it to MSF at the address on the Sell Form by 5:00pm (Hobart time) on the last day of the Offer Period or sooner.

Once Participating Shareholders have returned their 4.2

Sell Form they are not permitted to sell any of their Participating MyState Limited Shares outside the Share Sale Facility.

MSF may, in its sole discretion, at any time determine 4.3

that a Sell Form is valid in accordance with the Facility Documents, even if the Sell Form is incomplete, contains errors or is otherwise defective, MSF may correct any error in or omission from a Sell Form and complete the Sell Form by the insertion of any missing details. However, MSF is not under any obligation to accept any Sell Form, whether completed correctly or not.

Sales of Participating MyState Limited Shares5.

MSF will process Sell Forms during the Offer Period. MSF 5.1

will arrange for the sale of the Participating MyState Limited Shares. Participating MyState Limited Shares may be sold under a bookbuild facility arranged by a broker or in one or more trades and on one or more trading days.

If there is not a sufficient market demand for MyState 5.2

Limited Shares, Participating Shareholders submitting Sell Forms will be treated on a pro rata basis. This means that all Participating Shareholders that lodge their Sell Form

For

per

sona

l use

onl

y



239

during the Offer Period will have a pro rata number of their MyState Limited Shares sold and will receive MyState Limited Shares to the extent that they do not receive cash.

Sales of Participating MyState Limited Shares under the 5.3

Share Sale Facility will be made under a bookbuild facility arranged by a broker or on the ASX in the ordinary course of business (including by crossings, pre-arranged trades or by a broker acting as principal). Participating MyState Limited Shares of a Participating Shareholder may be sold at any time during the Facility Trading Period. The sale of Participating MyState Limited Shares may be delayed if MSF considers that market conditions are unsuitable or to avoid an excessive concentration of sales on a particular trading day.

The price that a Participating Shareholder will receive for 5.4

each of its Participating MyState Limited Shares that are sold through the Share Sale Facility will be the average price achieved for the sale of all Participating MyState Limited Shares sold through the Share Sale Facility (Sale Price). The Sale Price will be calculated by MSF in its absolute discretion, and may not be challenged unless there is manifest error.

The Sale Price may be different to the price for MyState 5.5

Limited Shares appearing in the newspaper or quoted by the Australian Securities Exchange on the day that a Participating Shareholder’s Sale Sell Form is sent or on any other day, and may not be the best execution price on the trading day or trading days that the Participating Shareholder’s Participating MyState Limited Shares are sold. None of MSF nor any other person (including any person engaged by MSF to do things on MSF’s behalf) will on any account be liable, and a Participating Shareholder may not bring any claim or action against them, for not having sold Participating MyState Limited Shares at any specific price, in any specific way or on any specific date.

The proceeds of sale of the Participating MyState Limited 5.6

Shares will be transferred as soon as practicable following settlement to an account nominated and maintained by MSF on behalf of Participating Shareholders, for the purpose of effecting payment to the relevant Participating Shareholders.

Payment and Confirmation6.

Sale proceeds will be paid to each Participating 6.1

Shareholder within ten business days of the end of the Facility Trading Period in Australian dollars by cheque made payable to the Participating Shareholder and posted to the Participating Shareholder’s address on the MyState Limited share register and made payable to the name(s)

on the share register, and in all cases at the risk of the Participating Shareholder.

MSF will notify or cause to be notified each Participating 6.2

Shareholder, by way of a transaction confirmation sent to the Participating Shareholder’s address on the MyState share register of the number of the Participating Shareholder’s Participating MyState Limited Shares sold through the Share Sale Facility and the Sale Price for those Participating MyState Limited Shares, within ten business days of the end of the Facility Trading Period.

Warranties and Acknowledgements7.

By signing and returning the Sell Form, a Participating 7.1

Shareholder:

acknowledges that the Participating Shareholder has (a) read, and agrees to, the terms and conditions of the Facility Documents;

acknowledges that the Participating Shareholder (b) is irrevocably bound to sell all of the Participating Shareholder’s Participating MyState Limited Shares through the Share Sale Facility at the Sale Price, and otherwise in accordance with the Facility Documents;

warrants that the Participating Shareholder has not (c) has not previously participated in the Share Sale Facility;

warrants that at the time of executing and returning (d) the Sell Form the Participating Shareholder is, or is entitled to be, the registered holder of the MyState Limited Shares specified in the Sell Form;

warrants (and authorises MSF to warrant on the (e) Participating Shareholder’s behalf) to any buyer of the Participating Shareholder’s Participating MyState Limited Shares through the Share Sale Facility that the buyer will acquire good title to those Participating MyState Limited Shares free from all mortgages, charges, liens, encumbrances (whether legal or equitable), restrictions on transfer of any kind and from any third party rights;

agrees not to sell any of the Participating (f) Shareholder’s Participating MyState Limited Shares to any person once the Sell Form has been executed and returned, and authorises MSF to lock the Participating Shareholder’s holding to prevent transfer of the Participating MyState Limited Shares until they are required for settlement. The Participating Shareholder also authorises the transfer of its Participating MyState Limited Shares for settlement of the sale. Further, if any Participating MyState Limited Shares are sold in breach of this warranty, the Participating Shareholder will be

For

per

sona

l use

onl

y


deemed to have appointed MSF as attorney to arrange for the purchase of MyState Limited Shares in the Participating Shareholder’s name, and at the Participating Shareholder’s expense, to satisfy the Participating Shareholder’s obligations in relation to the sale of its Participating MyState Limited Shares, and will indemnify MSF for all costs incurred by it in connection with any such purchase;

irrevocably authorises MSF to do all things (including (g) to engage any third party (including brokers) and execute all documents, including to effect any holding adjustment, securities transformation, securities transfer or other transmission or transaction in relation to Participating MyState Limited Shares sold or to be sold for a Participating Shareholder under the Share Sale Facility, to arrange the sale of those Participating MyState Limited Shares under the Share Sale Facility;

authorises the transfer of their Participating MyState (h) Limited Shares for settlement of the sale under the Share Sale Facility;

authorises the treatment of the sale proceeds of the (i) MyState Limited Shares in accordance with these Terms and Conditions;

authorises MSF to correct any error in or omission (j) from the Participating Shareholder’s Sell Form and to complete the Sell Form by the insertion of any missing details;

acknowledges that MSF may, in its sole discretion, (k) at any time determine that the Participating Shareholder’s Sell Form is a valid order in accordance with the Facility Documents, even if the Sell Form is incomplete, contains errors or is otherwise defective;

acknowledges that none of MSF nor any other (l) party involved in the Share Sale Facility (including any person engaged by MSF to do things on MSF’s behalf) has any liability, whether direct or indirect, to the Participating Shareholder other than for the payment of any sale proceeds determined and payable in accordance with these Terms and Conditions;

acknowledges that none of MSF nor any other (m) party involved in the Share Sale Facility (including any person engaged by MSF to do things on MSF’s behalf) has provided the Participating Shareholder with any financial product advice, nor has any obligation to provide such advice, concerning the Participating Shareholder’s decision to sell Participating MyState Limited Shares, and that the Participating Shareholder has made its own decision to sell Participating MyState Limited Shares through

the Share Sale Facility based on its consideration of its own objectives, financial situation and needs and its own investigations of the affairs of MyState and its own analysis of the Facility Documents;

acknowledges and agrees that the Share Sale Facility (n) is being arranged by MSF and, to the maximum extent permitted by law, no entity or person engaged by MSF to provide services to MSF in connection with the Share Sale Facility is, in providing those services to MSF:

providing services on behalf of, for or to the (i) Participating Shareholders; or

assuming or accepting any duty or (ii) responsibility to a Participating Shareholder;

acknowledges that MSF will not acquire any legal or (o) beneficial interest in the Participating Shareholder’s Participating MyState Limited Shares in acting under the Share Sale Facility;

accepts the risk associated with payment being (p) dispatched to the Participating Shareholder by cheque to the address shown on the MyState Limited share register;

agrees to appoint MSF as the Participating (q) Shareholder’s agent to receive any notice including the Financial Services Guide or any other disclosure document (and any update of that document) of any relevant entity, that is required to be provided under the Corporations Act; and

acknowledges that the Facility Documents are (r) governed by the laws in force in Victoria,

and otherwise agrees to these Terms and Conditions.

Personal information may be collected on the Sell Form by MSF and/or others involved in the Share Sale Facility for the purpose of the administration of, and the sale of Participating MyState Limited Shares under, the Share Sale Facility. That information may be disclosed between MSF and others involved and their respective related bodies corporate, to external service companies such as mail service providers or brokers or as otherwise required or permitted by law. Please contact MSF for details of your personal information held by it or to correct inaccurate or out of date information.

For

per

sona

l use

onl

y

GL

UE

GL

UE

GL

UE

GL

UE

What you have received with this Information BookletYou should have received the following items with your Information Booklet, as well as a reply paid envelope:

If any of the above items are missing from your pack, please call the Member Information Line on 1300 538 803 (within Australia) or +61 3 9415 4660 (outside Australia).

WHAT TO DO NEXT1. Read this Information Booklet

You should read and carefully consider this Information Booklet to help you make an informed decision.

2. You should vote on the proposal. Voting is easy. You can vote either online, by attending the Meetings or by Proxy.

•Online Go to www.investorvote.com.au, log in and then follow the prompts to cast your vote online.

•AttendingtheMeetings You can vote in person at the General Meeting and MSF Scheme Meeting. The General Meeting will be held on Tuesday, 18 August at 6.00pm at Tattersall’s Park Function Centre, 6 Goodwood Road, Glenorchy, Tasmania. The Scheme Meeting will be held immediately after the General Meeting, but no earlier than 7.00pm.

•VotingbyProxy You can appoint a proxy to vote on your behalf by completing the enclosed proxy forms, and returning them in the reply paid envelope or by fax before 7.00pm 16 August 2009. See Section 2 of this information Booklet for more details on how to vote.



Proxy Form for the General Meeting

Proxy Form for the Scheme Meeting

Sell Form for the Share Sale Facility

For

per

sona

l use

onl

y

StrongerTogether

StrongerTogether

Legal Adviser to MyState Financial

Information Booklet

MyState Financial Credit Union of Tasmania Limited ACN 067 729 195

29 June 2009

THIS IS AN IMPORTANT DOCUMENT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt as to how to deal with this Information Booklet, please consult your legal, financial, taxation or other professional adviser immediately.


YOUR DIRECTORS UNANIMOUSLY RECOMMEND THAT YOU VOTE IN FAVOUR OF THE RESOLUTIONS REQUIRED TO APPROVE THE MSF SCHEME AND THE TRANSACTION IN THE ABSENCE OF A SUPERIOR PROPOSAL.

For a scheme of arrangement between MyState Financial Credit Union of Tasmania Limited ACN 067 729 195 and its members in relation to the proposal to demutualise and to merge with Tasmanian Perpetual Trustees Limited ACN 009 475 629 with MyState Limited ACN 133 623 962 becoming the ultimate listed parent company

For

per

sona

l use

onl

y