Combining Forces

1
Combining Forces
Sheena Lucas, Chairperson Howard Bogach President
Chief Executive Officer Credit Union Central of
Ontario

• Daniel Burns, Chairperson
• Rowland Kelly
• Interim President Chief Executive Officer
• Credit Union Central of British Columbia

2
Canadas Credit Union System
3
Number of Credit Unions in Canada
4
Canadas Credit Union System

• Credit Union Assets/Largest Credit Unions
• Credit Union Assets total 95 billion
• The largest 100 credit unions total 82 billion,
  or 78
• The largest 10 credit unions total 37 billion,
  or 38

5
Financial Services Sector
Within the Financial Services Sector, we are
relative midgets in a land of giants!.
6
Three Tier Structure
498 Local Credit Unions 1,783 Locations 4,990,500
Members
9 Provincial Centrals
1 National Central
7
Central 1 Business Case Concept
8
The Vision

• A single national wholesale financial services
  entity focused on enabling and enhancing the
  competitiveness of Canadas credit unions

9
Benefits of Consolidation

• geographic diversification (bond rating)
• enhanced access to capital markets (larger
  liquidity pool enhances capacity to meet
  requirements of larger members)
• reduced governance/administrative costs
• greater transaction volumes
• Reduction of the number of centrals, expediting
  decision making.

10
The Combination Agreement
11
Purchase / Sale

• BC Central acquires all of CUCOs assets and
  assumes all of its liabilities, at their fair
  market value.
• Transaction reflected in a comprehensive
  Combination Agreement (negotiated over 6 months)

12
Purchase / Sale

• Consideration paid by BC Central for CUCOs
  assets
• Class A Shares and Class E (non-voting)
• assumption by BC Central of CUCOs liabilities
  and
• cash (if necessary).

13
Capital Structure

• Share capital held in proportional to System
  assets
• BC Ontario
• System Assets 37 billion 16.4 billion
• Ratio 69 31

14
Outcomes

• CUCO members accepted into membership in BC
  Central
• Shares of BC Central issued to CUCO
• Post-closing, CUCO distributes Class A Shares and
  Class E Shares to its members, in proportion to
  their investment in CUCO

15
Outcomes

• All CUCO employees become employees of BC
  Central
• All trade functions currently provided by BC
  Central and CUCO will be provided by Central 1
• Provision of trade services in the future will be
  decided by Central 1s member credit unions.

16
Current Status
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Board and Membership Approvals

• CUCO and BC Centrals Boards ratified and
  executed the Combination Agreement in May
• Special General Meetings held June 22, 2007 in
  both BC and Ontario
• Memberships approved Combination Agreement (Ont)
  and Rule changes (BC) by 98

18
Regulatory Change

• Changes to Ontario regulation to permit Ontario
  credit unions to maintain statutory liquidity
  with Central 1
• OIC received June, 2007

19
External Approvals

• Including
• FSCO approval of sale of CUCOs assets to Central
  1 (received in June)
• Competition Bureau approval (received in July)
• FICOM approval of CUCBCs Rule changes (no
  issues)
• Rating agency confirmations
• CPA consent
• Material contracts consent.

20
Closing

• Originally scheduled for October 1, 2007
• THEN
• August, collapse of the Canadian non-bank
  asset-backed CP (ABCP) market
• Significant amount of assets held by the Centrals
  could not be valued.
• RESULT
• Closing delayed to January 1, 2008.

21
Closing

• Board and management remain committed to the
  Vision
• Management teams continue the work of integration
  planning
• In case markets still not normalized by December
  31st, management teams working on acceptable
  work-arounds.

22
Combining Forces

• Questions?