Ann: Section 258F Corporations Act Capital Adjust, page-2

re: Ann: Section 258F Corporations Act Capita... I am repeating a tentative concern from another shareholder and good friend of mine concerning the capital reduction.

The removal of over $100m from accumulated losses comes at a price to all future shareholders. Henceforth, COF pays tax on all profits, which enables it to pay fully franked dividends, should it wish to do so. As will be obvious, any asserted benefits of FF dividends from this move does not benefit shareholders fully unless the payout ratio is 100%, and if payout ratio is 100%, debt reduction will be minimal.

I cannot see the wisdom of this decision. The effect of this decision is the unilateral destruction of nearly $30m in shareholder benefits, being the tax saved on being able to offset $100m worth of future profits against accumulated losses. Bear in mind that apart from dividends, excess funds can easily be returned to shareholders via buybacks and even unfranked dividends, without wiping out the benefits of the tax savings from the losses.

A capital reduction, of course, has the benefit of artificially pushing up ROE and ROC. But this is really window dressing.

I will now urge all shareholders to have a look at the remuneration report to check how STI and LTI are calculated. You might just find (and I am speculating) the reason for this decision in there.

Camden55, if you are reading this, I would be very grateful for your comment. Alternatively, you can email me at [email protected]

Regards and happy investing