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Prospectus and Investment Statement
Finance Direct Limited
22 September 2009 - Prospectus No 6
Important Information
(The information in this section is required under the Securities Act 1978).
Investment decisions are very important. They often have long-term consequences. Read all documents carefully. Ask questions. Seek advice before committing yourself.
Choosing an investment
When deciding whether to invest, consider carefully the answers to the following questions that can be found on the pages noted below:
• Whatsortofinvestmentisthis? 57
• Whoisinvolvedinprovidingitforme? 57
• HowmuchdoIpay? 59
• Whatarethecharges? 60
• WhatreturnswillIget? 60
• Whataremyrisks? 61
• Cantheinvestmentbealtered? 65
• HowdoIcashinmyinvestment? 65
• WhodoIcontactwithenquiries aboutmyinvestment? 66
• IsthereanyonetowhomIcancomplain ifIhaveproblemswiththeinvestment? 66
• WhatotherinformationcanIobtain aboutthisinvestment? 67
Inadditiontotheinformationinthisdocument,importantinformation can be found in the current registered prospectus for the investment. You are entitled to a copy of that prospectus on request. *
Engaging an investment advisor
An investment adviser must give you a written statement that contains information about the adviser and his or her ability to give advice. You are strongly encouraged to read that document and consider the information in it when deciding whether or not to engage an adviser.
Tell the adviser what the purpose of your investment is. This is important because different investments are suitable fordifferentpurposes,andcarrydifferentlevelsofrisk.
The written statement should contain important information about the adviser, including:
• relevantexperienceandqualifications,andwhether dispute resolution facilities are available to you; and
• whattypesofinvestmentstheadvisergivesadviceabout;and
• whethertheadviceislimitedtoinvestmentsofferedby1or moreparticularfinancialinstitutions;and
• informationthatmayberelevanttotheadviser’scharacter, includingcertaincriminalconvictions,bankruptcy,anyadverse findingsbyacourtagainsttheadviserinaprofessional capacity,andwhethertheadviserhasbeenexpelledfrom,or prohibited from joining, a professional body; and
• anyrelationshipslikelytogiverisetoaconflictofinterest.
The adviser must also tell you about fees and remuneration before giving advice about an investment. The information about fees and remuneration must include:
• thenatureandlevelofthefeesyouwillbechargedfor receiving the advice; and
• whethertheadviserwillormayreceiveacommissionor otherbenefitfromadvisingyou.
An investment adviser commits an offence if he or she does not provide you with the information required.
* This is the wording required by Schedule 3D of the Securities Regulations 1983 which contemplates a separate investment statement and prospectus. For this Offer the two documents have been combined and accordingly the prospectus available on request is identical to this document.
PAGE 1Investment Statement & Prospectus No 6
Pro
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This Prospectus is an important document and should be read in its entirety.
If you have any questions about any part of this Prospectus, you should obtain the advice of your solicitor, accountant or other financial adviser.
Page
Chairman’s Letter 2
Introducing the Board of Directors 3
The Business of Finance Direct Limited 4
How to Invest 7
Financial Statements 10
Auditors’ Report 43
Trustee’s Statement 47
Statutory Information 48
Investment Statement - Answers to Important Questions 56
Reserve Bank of New Zealand Amendment Act 2008 68
Index of Statutory Information 69
Glossary 70
Directory 72
Contents
REGISTRATION
This Prospectus is dated
22 September 2009.
A copy of this Prospectus, duly
signed and having attached thereto
copies of the documents required by
section 41 of the Securities Act 1978,
including Auditor’s Report and material
contracts (if any) have been delivered
for registration to the Registrar of
Companies at Auckland, New Zealand.
RESTRICTION ON THE DISTRIBUTION
OF THE PROSPECTUS
This Prospectus is intended for use only
in connection with the Offer in New
Zealand. This Prospectus must not
be distributed or given to any person
outside New Zealand in circumstances
in which the distribution or use of this
Prospectus would be unlawful.
NO STOCK EXCHANGE LISTING
Listing of the Securities is not being
sought on a recognised stock exchange.
DEFINED TERMS
Capitalised terms used in this Prospectus
have a special meaning and are defined
in the Glossary of this Prospectus.
All legislation referred to herein may be
viewed online at www.legislation.govt.nz.
PAGE 2 Investment Statement & Prospectus No 6
22 September 2009
Dear Investor
We are very pleased to invite you to participate in this sixth issue of Debenture Stock by Finance Direct Limited.
The Company has grown steadily since 1999 by offering competitively priced, flexible products, and by providing a speed of service not always met by other lending institutions. The Company attracts its customers through a network of introducers and TV, press, internet and radio advertising.
The Company has always adopted a conservative approach to lending, and any loans that do not meet the Company’s strict lending criteria are brokered to a more appropriate lender thus minimising the risk to the Company. Loans which are brokered to other financial institutions are on a non-recourse basis meaning that the Company has no residual credit risk liability to those financial institutions in the event of a default by the respective borrower. This successful formula has helped Finance Direct Limited broker and arrange over $100 million worth of loans since its inception.
On 12 November 2008, Finance Direct Limited received approval under the Crown Deed of Guarantee Scheme (CDGS). The current scheme will expire on 12 October 2010. On 25 August 2009, details of an extension to the scheme through to 31 December 2011 were released. The scheme was implemented at a time of considerable uncertainty and lack of confidence in the New Zealand finance sector. This has improved in the past six months. Different conditions apply to the extension and the Company is currently considering its options.
The Company places a very strong focus on liquidity, through the continuous monitoring of cash flows and matching the maturity profiles of financial assets and financial liabilities. The CDGS provided the Company with the opportunity to grow its secured Loans and Advances and Debenture Stock at a rapid rate. At the date of this Prospectus, the Company’s secured Loans and Advances have increased to just under $8 million and its Debenture Stock has increased to just over $6 million.
On 3 December 2008, NZF Group Limited increased its controlling stake in Finance Direct Limited from 51% to 70%. * NZF Group Limited is publicly listed on the NZX and has the extra capital, business expertise and substantial distribution network that will allow Finance Direct Limited to grow and achieve our goals. NZF Group Limited now provides management support services to our investors as well as providing company accounting and administration support. This enables us to tap into the resources, knowledge and technology of NZF Group Limited and allow us to focus on the lending and finance broking business.
The funds obtained from deposits will allow us to increase our portfolio and seek further growth opportunities as they arise. The Company takes its responsibilities to its investors very seriously and is committed to offering the public an opportunity to invest in a dynamic company offering excellent returns whilst minimising risk.
We are hopeful that you will find the returns offered on this investment to be extremely competitive.
I encourage you to read this Prospectus and Investment Statement to find out more about Finance Direct Limited and the details of our Debenture Stock Offer. If you require additional explanation of information about the Company or this Prospectus please
contact us.
Yours faithfully
Richard Waddel
Chairman
* NZF Group Limited does not guarantee the Securities being offered under this Offer Document.
Chairman’s Letter
PAGE 3Investment Statement & Prospectus No 6
Pro
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Introducing the Board of Directors
Finance Direct Limited has a Board of four Directors, comprising one Executive Director who co-founded the business of
Finance Direct Limited, and three Non-Executive Directors (including the Chairman of the Board) all of whom have extensive
experience in the finance sector, corporate governance and associated matters.
Richard Waddel BCom FCA AF Inst D
CHAIRMAN AND INDEPENDENT
DIRECTOR
Richard brings with him a
wealth of business experience
and knowledge to the
Company. His background
is in accountancy, business
advisory and consulting, and
he has held a large number
of directorships in private
and public companies and
Government organisations.
Richard was a partner for 34
years in Ernst & Young where
he held the position of Chief
Executive for a period of 11
years with responsibility for
the overall direction, strategic
planning and marketing of
services for the firm. His
current appointments include
Chairman of NZF Group
Limited, Pharmaceutical
Management Agency,
Kidicorp Group Limited,
Auckland Festival Trust and
Aotea Centre Board of
Management. Richard is a
Fellow of both the Institute of
Chartered Accountants and
the Institute of Directors.
NON-EXECUTIvE DIRECTOR
Peter is the Managing
Director and Chief
Investment Officer of Huljich
Wealth Management, one
of New Zealand’s leading
KiwiSaver providers. Peter
is also a Non-Executive
Director of NZF Group
Limited, which holds a 70%
stake in the Company, and
Sugar International Limited.
Peter has extensive and
specialist knowledge of
the financial markets with
over ten years experience
successfully investing in
New Zealand, Australia,
Europe and the Americas.
His understanding of and
familiarity of the financial
markets compliment the
strengths of the current
Board.
Peter Huljich BCom, Dip. NZX, SA Fin.
NON-EXECUTIvE DIRECTOR
John is the Managing
Director of NZF Group
Limited, which holds a 70%
stake in the Company. John
has over 18 years experience
in the New Zealand banking
and finance industry, initially
with the Bank of New
Zealand, Business Banking
in Auckland and then in
the marketing division in
Wellington. John then
moved to ASB Bank Limited
where he undertook credit
assessment then residential
and commercial lending roles.
He also has a high level
of experience in property
development. He is the
founding Managing Director
and was responsible for the
formation of NZF Money
Limited (formerly New
Zealand Finance Limited)
in 1997 (which company
was subsequently acquired
by NZF Group Limited in
2004) and its very successful
progress to date.
John Callaghan
MANAGING DIRECTOR
Wayne is the Managing
Director of Finance Direct
Limited and has over 18
years experience in the New
Zealand banking, finance
and insurance industries. As
a founding director Wayne
has been responsible for the
implementation of systems,
key appointments, lending
standards and the strategic
direction of Finance Direct
Limited since inception. His
background has included
senior management positions
for both privately held
and public companies with
responsibility for risk analysis,
strategic planning, sales
and marketing and general
management.
Wayne Croad DIP BUS FINANCE BBS
PAGE 4 Investment Statement & Prospectus No 6
The Business of Finance Direct Limited (“The Charging Group”)
FINANCIAL LIFE CYCLE
FINANCE DIRECT EMBRACES A “LIFECYCLE” APPROACH TO LENDING.
ENCOMPASSING THE FULL RANGE OF PERSONAL LOANS PEOPLE SEEK
AS THEY MATURE AND SEEK POSSESSIONS INCLUDING vEHICLE, BOAT
& PROPERTY ENHANCEMENT LOANS.
Finance Direct Limited was established in September 1999. To
date, the Company has specialised in matching the requirements
of its clients with appropriate financiers. With over $100 million
in loan business brokered and arranged since inception, the
Company has maintained its own small loan book and brokered
the remainder of business to other lending institutions.
Finance Direct Limited has recognised the competitive
advantage it has by being in the position to broker business that
does not fall into its own self-imposed lending criteria.
On 31 May 2007, Finance Direct Limited and its wholly owned
subsidiary Finance Assist Limited amalgamated to become
Finance Direct Limited under Part XIII of the Companies
Act 1993. Prior to the amalgamation, Finance Assist Limited
had primarily been involved in making certain loans and
other financial accommodation available to company and
individual borrowers. With effect from 31 May 2007, the date
of amalgamation, there are no Charging Subsidiaries and the
Charging Group therefore consists of the Company only.
The Charging Group currently generates its business via
introducers, internet advertising and retail advertising in print,
radio and television; and lends only on the security of vehicles,
boats and property. In-depth risk analysis, credit checking and
security valuations are obtained on all loans. As a mainstream
lender, we position ourselves to attract clientele at the quality
end of New Zealand’s loan market with a strong emphasis on
speed of service and flexibility.
Funds received will be used to support the Charging Group’s
lending operations directly to clients of the Charging Group.
The Charging Group has adopted strict and conservative
lending guidelines and criteria with a view to minimising the
credit risk of the Charging Group on each loan which it
undertakes. In addition the Charging Group has sought to
minimise its credit risk exposure by spreading its loans over a
large number of smaller loans rather than focusing on a fewer
number of larger transactions. The Charging Group intends to
continue this approach in the future to diversify its exposure to
individual borrowers.
We are pleased to offer a range of attractive rates depending
on the term of the investment and believe the offer will not only
provide a steady rate of return to Investors but an introduction
to a well-managed business with good growth opportunities.
PAGE 5Investment Statement & Prospectus No 6
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Security for your InvestmentThe Debenture Stock is issued pursuant to the terms and
with the protections of the Trust Deed. Under the Trust Deed,
Covenant Trustee Company Limited (“the Trustee”) has been
appointed to act on behalf of all Debenture Stock holders.
Trust Deed SecurityUnder the Trust Deed, the Charging Group have given a first
ranking floating charge over all of their assets and undertakings
to secure repayment of the principal amounts invested in
Debenture Stock and all interest on the Debenture Stock.
Restrictions on the CompanyThe Trust Deed imposes a number of financial limitations,
restrictive covenants and general covenants on the Company
(referred to as the “Charging Group” or the “Borrowing
Group”), including:
(a) Each of the Company and the other Charging Group
Members covenant with the Trustee that none of them
will at any time after the date of the Trust Deed:
• WheretheTotalTangibleAssetsarelessthan$8,000,000,
permit the Total Liabilities to exceed 86% of the Total
Tangible Assets;
• WheretheTotalTangibleAssetsare$8,000,000ormore
but less than $15,000,000, permit the Total Liabilities to
exceed 88% of the Total Tangible Assets;
• WheretheTotalTangibleAssetsare$15,000,000or
more, permit the Total Liabilities to exceed 90% of the
Total Tangible Assets;
• BorroworraiseanymoneyonthesecurityofanyPrior
Security Interest when the aggregate of all principal
moneys then secured by existing Prior Security Interests
plus the moneys so proposed to be borrowed or raised
and secured would exceed 2% of Total Tangible Assets.
(b) A restriction on the Charging Group entering into any
Related Party Transactions except in the ordinary course
of business and where the terms thereof are evidenced
in writing and the consideration therefore is on the basis
of an arms length transaction as between two unrelated
parties contracting in an open market, provided however
that in any twelve month period the aggregate Value of
Related Party Transactions entered into or remaining
outstanding shall not exceed 2% of Total Tangible Assets
as at the end of that twelve month period;
(c) A restriction on the Charging Group carrying on
any business other than the provision of financial
accommodation and financial services or acquiring any
assets other than assets used in such business;
(d) A restriction on the Charging Group allowing the amount
owing to the Charging Group under financing receivables
by any one debtor or related group of debtors to exceed
10% of Total Tangible Assets.
Further details of these restrictions and covenants are
provided on pages 51 and 52 of this document.
Reporting RequirementsTo ensure that the Trustee is adequately informed, the Trust
Deed requires that the Company must provide the following
information to the Trustee:
• Annualauditedfinancialstatements,accompaniedbyan
auditor’s report;
• Half-yearlyauditedfinancialstatements,accompaniedby
an auditor’s report;
• Furtherfinancialstatementsandreportswhenthe
Trustee considers that special circumstances have arisen
which warrant such request;
• Copiesofallreports,noticesandothermaterialsentby
the Company to its shareholders or to the holders of
Securities;
• Quarterlydirectors’certificatesintheformprescribed
by the Trust Deed (and otherwise as required by the
Securities Regulations) and a liquidity report also in the
form prescribed by the Trust Deed;
• Monthlydirectors’statementsandreportsonasset
quality, reinvestment rates, breaches of financial covenants
(if any) and liquidity to comply with additional reporting
requirements required by the Securities Regulations;
• Reportingaspertherequirementssetoutbythe
Reserve Bank of New Zealand pursuant to the Reserve
Bank of New Zealand Amendment Act 2008 and its
regulations (as permitted by the Reserve Bank);
• Acopyofthemonthlymanagementaccountsofthe
Company; and
• Noticeofproceedingswhichmateriallyandadversely
affect the Company.
PAGE 6 Investment Statement & Prospectus No 6
Summary Financial InformationThe following amounts have been taken from the audited financial statements of the Charging Group for the years ended
31 March 2005 to 31 March 2009.
31/03/2009 31/03/2008 31/03/2007 31/03/2007 31/03/2006 31/03/2005 Previous Previous Previous NZ IFRS NZ IFRS NZ IFRS NZ GAAP NZ GAAP NZ GAAP $’000 $’000 $’000 $’000 $’000 $’000
Total Gross Operating Income 1,724 2,253 2,507 2,516 2,595 1,770
Interest Paid 350 445 497 497 261 48
(Loss)/Profit Before Income Tax (28) 316 443 441 248 132
Income Tax Expense 2 104 149 155 116 36
(Loss)/Profit After Income Tax (30) 212 294 286 132 96
Dividend on Preference Shares - - - - - -
Cents Per Share - - - - - -
Dividend on Ordinary Shares 210 - - - - -
Cents Per Share 26.62 - - - - -
Retained (Loss)/Profit for the Year (240) 212 294 286 132 96
Total Assets 6,121 6,247 6,904 6,773 5,835 1,714
Total Tangible Assets 6,121 6,247 6,904 6,773 5,835 1,714
Total Liabilities 4,530 4,416 5,510 5,352 4,700 981
Total Equity 1,591 1,831 1,394 1,421 1,135 733
NOTES
The audited financial statements of the Charging Group were prepared for the first time under NZ IFRS for the year ended
31 March 2008. The NZ IFRS transition date for the Charging Group was 1 April 2006. A net decrease in Total Equity of
$35,000 was reflected in the financial statements as at that date following the transition to NZ IFRS. Accordingly, amounts stated
in the Summary Financial Information for the three years ended 31 March 2007 are those reported under previous NZ GAAP
(NZ accounting standards that applied prior to the adoption of NZ IFRS), with amounts stated for all subsequent periods being
those reported under NZ IFRS.
Acquisition of, and subsequent amalgamation with Finance Assist Limited
On 31 May 2007, Finance Direct Limited and its wholly owned subsidiary Finance Assist Limited amalgamated to become
Finance Direct Limited under Part XIII of the Companies Act 1993. Prior to the amalgamation, Finance Assist Limited had
primarily been involved in making certain loans and other financial accommodation available to company and individual
borrowers.
PAGE 7Investment Statement & Prospectus No 6
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How to Invest
Minimum InvestmentInvestors may select the amount the Investor wishes to invest
(“Application Moneys”). The minimum amount that may be
invested however is $1,000. There is no maximum amount
that may be invested.
Application and PaymentIf an Investor wishes to make an Investment, the Investor must:
• CompletetheApplicationFormthataccompaniesthis
Prospectus and Investment Statement.
• AttachachequefortheApplicationMoneysordirect
credit the Application Moneys into our bank account.
• SendtheApplicationFormtogetherwiththeInvestor’s
cheque for the Application Moneys made payable to
“Finance Direct Limited” and crossed “Not Transferable”
for the amount of the Application Moneys shown on
the Application Form to Finance Direct Limited, to any
Primary Market Participant or any agent appointed by
the Company to receive such Application Forms.
Do not forward cash. Payment will only be accepted in
New Zealand currency as follows:
• Personalchequedrawnonandpayableatany
New Zealand bank;
• BankchequeissuedbyandpayableatanyNewZealand
bank;
• BankdraftdrawnonandpayableatanyNewZealand
bank; or
• BydirectcreditinclearedfundsintotheCompany’sbank
account.
Term – Debenture StockThe Debenture Stock will be issued for fixed terms ranging
between 3 months and 5 years. The Investor must select the
appropriate fixed term on the Application Form.
The Company reserves the absolute discretion to repay
the Investment prior to the expiry of the fixed term of the
Investment. Please refer below to the section headed “Early
repayment of the Debenture Stock at the election of the
Company” for further information.
Interest Rate – Debenture StockThe Company will pay the Investor interest on the sum
invested at the fixed rate advertised by the Company for
Investments of that term on the date the application is
received by the Company.
Current interest rates for Debenture Stock are set out on the
rate sheet accompanying the Application Form. From time to
time market conditions alter and interest rates on Debenture
Stock are changed to suit those conditions. Any alteration in
interest rates will not apply to Investments received before
that alteration is made. Once accepted, Debenture Stock
will continue to earn the interest rate agreed on when the
Investment is made and is fully protected from any later
fluctuation.
If the Application Form is received after an interest rate has
been changed the Company will advise the Investor of such
a change and in the event that the Investor does not confirm
within 10 Business Days that the Investor accepts the new
interest rate, the Company will refund the deposit to the
Investor. No interest will be repaid on moneys refunded.
PAGE 8 Investment Statement & Prospectus No 6
Payment of Interest Interest on the Investment may be compounded or paid to
the Investor by direct credit or cheque at the Investor’s option.
The Company pays interest quarterly during the term of the
Investment from the date of the deposit with the Company.
Once the Debenture Stock has been allotted to the Investor
for a fixed term, the interest rate at which that Debenture
Stock has been issued to the Investor will be fixed during the
term of the Investment and will not be varied.
The Investor can choose to receive payments of interest in any
one of three ways:
Compound – Rather than make a quarterly interest payment,
the Company will add interest to the Investment automatically
and send the Investor a notice of the Investor’s balance. The
Investor will then earn interest on the original Investment and
on the interest. If the Investor selects “compounding interest
option” on the Application Form and then later decides that
they would like to receive quarterly payments the Company
will change the manner in which payments of interest are
made in the future.
Quarterly Direct Credit – The Company may pay interest
direct to the Investor’s bank account each quarter and mail the
Investor an interest advice which shows details of the amount
banked. This method avoids any postal delay which may occur
if a cheque is mailed to the Investor.
Quarterly Cheque – The Company may pay the interest by
cheque each quarter. The cheque together with an interest
advice is posted to the Investor.
TaxationUnder current legislation, the Company is required to deduct
Resident Withholding Tax (“RWT”) from interest paid to, or
applied for, the benefit of New Zealand resident Investors
and Investors who hold secured deposits through a fixed
establishment in New Zealand. RWT will not be deducted
by the Company where Investors hold a valid Certificate of
Exemption that has been supplied to the Company.
Investors who supply the Company with their IRD Number
must elect a RWT rate currently being 19.5c, 33c or 39c for
every $1.00 of interest earned. RWT will be deducted at
the rate of 39c for every $1.00 of interest earned where an
Investor’s IRD Number is not supplied, as required by current
legislation.
Non-Resident Withholding Tax (“NRWT”) will be deducted by
the Company from interest paid to, or applied for, the benefit
of an Investor who is not a tax resident of New Zealand
unless the Investor holds secured deposits through a fixed
establishment in New Zealand. The rate of NRWT deduction
will be dependent upon the Investor’s country of residence.
The Company will make the deductions referred to above and
as required by applicable legislation unless it is satisfied by the
Investor that such deductions are not required by law.
The Company has obtained “Approved Issuer” status and has
registered the Debenture Stock as “Registered Securities” for
the purpose of the approved issuer levy provisions in Part VIII
of the Stamp and Cheques Duties Act 1971. The Company
may, upon request, subject to being legally entitled so to do,
and on any terms it requires, agree to deduct and pay an
approved issuer levy (currently 2%) on interest payments
made to non-residents in lieu of NRWT.
With the tax threshold changes that took effect from
1 October 2008 and the new tax rates effective from
1 April 2009, no changes have yet been made to the RWT tax
rates of 19.5% or 33%. Financial institutions have the option
of offering a reduced rate of 38% in place of 39% for the 2010
tax year. However, the Company does not currently offer this
reduction. Accordingly, an Investor will need to recover any
overpaid RWT by filing a tax return.
The Government has advised that further consequential
changes to the RWT rates on interest will not be fully
implemented until there has been further consultation with
banks and other financial institutions. That consultation is still
in progress at the date of this Prospectus.
New Investment ProductsThe Company reserves the right to offer new investment
products, including savings accounts, not specified in this
Prospectus, and to offer different interest payment methods
to Investors.
Repayment of the Investment
DEBENTURE STOCK
On maturity, Stockholders will be paid the face value of
their Investment together with any interest then due, upon
presentation of the relevant documentation to the Company.
About 14 days before the date that the Investment is due
PAGE 9Investment Statement & Prospectus No 6
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to mature the Investor will be sent a letter which sets out
the options available for reinvestment or repayment of the
Investment.
If the Investor has no immediate use for the Investment, the
Company will, at the Investor’s request accept the Investment
for a further period nominated by the Investor at whatever is
the current interest rate at that time.
The Investor may request that repayment is made. If so, the
Investor will need to return the Investment Certificate held
in respect of the Investment. Payments will be made to the
Investor by cheque or deposited into the Investor’s bank
account at the election of the Investor.
If at the maturity date the Company has not received any
instruction from the Investor regarding either the reinvestment
or repayment of the investment the Company may at its sole
discretion:
• Holdthatinvestment“atcall”,withsevendaysnotice,at
the Company’s “at call” rate until it receives the Investor’s
instructions;
• Reinvesttheinvestmentforthesameterm(andthesame
payment terms) as the original investment of Debenture
Stock. The investment will accrue interest at the interest
rate applicable to investments of the same term as the
investment as at the date of the reinvestment;
• Repaytheinvestmenttogetherwithallaccruedbut
unpaid interest by cheque to the Investor’s last known
address or by direct credit to the Investor’s last
nominated bank account.
EARLY REPAYMENT – DEBENTURE STOCK
The Investor has no right to require the Company to repay
the Investment to the Investor prior to the expiry of the fixed
term of the Investment. However, the Company reserves
the ability at its absolute discretion to permit the early
repayment of Debenture Stock before the Maturity Date for
the respective Investment in the event of death or financial
hardship. Requests for early repayment of Debenture Stock
must be made to the Company in writing. In the event that
the Company agrees to repay the Investment to the Investor
prior to the Maturity Date, the Company reserves the right
at its discretion to adjust the interest rate applicable to the
Investment for the term upon which those funds have been
held by the Company. The Company may also charge an
investment break fee set by the Company from time to time.
EARLY REPAYMENT OF THE DEBENTURE STOCK AT THE
ELECTION OF THE COMPANY
The Company reserves the absolute discretion to repay
the Investment prior to the expiry of the fixed term of the
Investment, provided that the Company:
• ProvidestheInvestorwithnotlessthanonemonths
notice of the early repayment in writing to the Investor ;
and
• TheCompanymustrepayallprincipalandinterest
accrued to the date of the early repayment on the date
of the early repayment.
Investment CertificateFor Debenture Stock, the Company issues a Certificate
containing full information about the Investment. This
Certificate is the Investor’s record of the terms on which the
Investment has been accepted by the Company. When the
Investment matures the Investor must return the Certificate
to the Company together with the Investor’s instructions for
repayment or reinvestment.
Registers and TransfersA Register of the holders of Securities will be maintained by
the Company.
An Investor may transfer its interest in the Investment at
any time (not later than 30 days before Maturity Date) by
completion of a Transfer in such form as is customarily used to
transfer shares in New Zealand (“Transfer”). More than one
person can take ownership of the Investment. The Company
is not bound to recognise trusts. Consequently no reference
to trusts or trustees should be made in the Transfer. Joint
Investment owners will be treated as joint tenants (unless
some other form of ownership is indicated) so that on the
death of one of them ownership of the Investment will vest
automatically with the survivor(s). To be valid the Transfer
must be registered with the Company. There is currently no
fee payable in respect of the Transfer of the Investment to
another person, however, the Company reserves the right to
charge a fee in the future.
MarketIn the opinion of the Company there is no established market
for the sale or transfer of the Securities.
PAGE 10 Investment Statement & Prospectus No 6
FINANCE DIRECT LIMITED
Historical Financial InformationHOME & RENOvATION
LOANS ARE POPULAR
WITH INDIvIDUAL
BORROWERS AND
CONTRIBUTE TO
THE OPERATIONS OF
FINANCE DIRECT.
PAGE 11Investment Statement & Prospectus No 6
His
tori
cal F
inan
cial
Info
rmat
ion
FINANCE DIRECT LIMITED
Income Statementfor the year ended 31 March 2009
The attached notes form part of and are to be read in conjunction with the Financial Statements
Note 2009 2008 $’000 $’000
Interest income 3 807 880
Interest expense 3 (350) (445)
Net interest income 3 457 435
Fee and commission income 4 917 1,368
Fee and commission expense 4 (139) (306)
Net fee and commission income 4 778 1,062
Other income 5 - 5
Total operating income 1,235 1,502
Net impairment losses 6 (175) 4
Operating expenses and staff costs 7 (1,088) (1,190)
(Loss)/profit before income tax (28) 316
Income tax expense 9 (2) (104)
(Loss)/profit for the year (30) 212
PAGE 12 Investment Statement & Prospectus No 6
FINANCE DIRECT LIMITED
Statement of Changes in Equityfor the year ended 31 March 2009
Share Capital Retained Earnings Total Equity Note $’000 $’000 $’000
Balance as at 1 April 2007 855 539 1,394
Net profit for the year - 212 212
Redemption of preference shares 21 (275) - (275)
Issue of ordinary shares 21 500 - 500
Dividends 11 - - -
Balance as at 31 March 2008 1,080 751 1,831
Balance as at 1 April 2008 1,080 751 1,831
Net loss for the year - (30) (30)
Dividends 11 - (210) (210)
Balance as at 31 March 2009 1,080 511 1,591
The attached notes form part of and are to be read in conjunction with the Financial Statements
PAGE 13Investment Statement & Prospectus No 6
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FINANCE DIRECT LIMITED
Balance Sheetas at 31 March 2009
For and on behalf of the Board of Directors:
John Alan Callaghan Wayne Darrin Croad
Director Director
30 June 2009 30 June 2009
The attached notes form part of and are to be read in conjunction with the Financial Statements
2009 2008 Note $’000 $’000
ASSETS
Cash and cash equivalents 1,068 722
Loans and advances to customers 12 4,906 5,317
Trade and other receivables 13 8 8
Current tax assets - 43
Property, plant and equipment 14 36 50
Deferred tax asset 16 90 64
Other assets 17 13 43
Total assets 6,121 6,247
LIABILITIES
Trade and other payables 18 212 163
Loans and borrowings 19 4,157 4,111
Current tax liabilities 13 -
Other liabilities 20 148 142
Total liabilities 4,530 4,416
Net assets 1,591 1,831
EQUITY
Share capital 21 1,080 1,080
Retained earnings 511 750
Total equity 1,591 1,831
PAGE 14 Investment Statement & Prospectus No 6
FINANCE DIRECT LIMITED
Statement of Cashflowsfor the year ended 31 March 2009
2009 2008 $’000 $’000
CASH FLOWS FROM OPERATING ACTIvITIES
Interest received 807 880
Interest paid (350) (445)
Fee and commission income received 923 1,385
Other income received - 5
Payments to suppliers and employees (1,133) (1,520)
Taxation received/(paid) 28 (118)
Net decrease in loans and advances to customers 236 578
Net Cash Flow from Operating Activities 511 765
CASH FLOWS USED IN INvESTING ACTIvITIES
Purchase of property, plant and equipment (4) (12)
Sale of property, plant and equipment 3 -
Net Cash Flow from Investing Activities (1) (12)
CASH FLOWS FROM FINANCING ACTIvITIES
Net increase/(decrease) in secured debenture stock 46 (1,019)
Issue of ordinary shares - 500
Redemption of preference shares - (275)
Payment of dividends (210) -
Net Cash Flows from Financing Activities (164) (794)
Net increase/(decrease) in cash held 346 (41)
Cash balance at start of the year 722 763
Cash balance at end of the year 1,068 722
Made up as follows:
Bank accounts 1,068 722
The attached notes form part of and are to be read in conjunction with the Financial Statements
PAGE 15Investment Statement & Prospectus No 6
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FINANCE DIRECT LIMITED
Reconciliation of net (loss)/profit with cash flows from operating activitiesfor the year ended 31 March 2009
2009 2008 $’000 $’000
(Loss)/profit for the year (30) 212
ADD:
Depreciation of property, plant and equipment 15 25
Increase/(decrease) in collective and specific loan allowances 175 (4)
DEDUCT:
Net decrease in loans and advances to customers 236 578
Decrease in accounts receivable and other assets 30 43
Increase/(decrease) in accounts payable and other liabilities 55 (75)
Decrease/(increase) in current tax assets 56 (28)
(Increase)/decrease in deferred tax asset (26) 14
Net Cash Flow from Operating Activities 511 765
The attached notes form part of and are to be read in conjunction with the Financial Statements
PAGE 16 Investment Statement & Prospectus No 6
FINANCE DIRECT LIMITED
Notes to the Financial Statements for the year ended 31 March 2009
1. Significant Accounting Policies
(a) General InformationThe reporting entity is Finance Direct Limited (“the Company”). The comparative period includes the Company and its former wholly owned Charging Subsidiary, Finance Assist Limited, which was amalgamated with the Company on 31 May 2007 and subsequently struck off. The Company is profit oriented and incorporated and domiciled in New Zealand. The Company is a reporting entity for the purposes of the Financial Reporting Act 1993 and its financial statements comply with that Act. The Company is an Issuer as defined by the Securities Act 1978 and the Securities Regulations 1983.
(b) Statement of ComplianceThe financial statements for the Charging Group have been
prepared in accordance with Generally Accepted Accounting
Practice in New Zealand (“NZ GAAP”) and the requirements
of the Companies Act 1993 and the Financial Reporting
Act 1993. They comply with New Zealand equivalents to
International Financial Reporting Standards (“NZ IFRS”)
and other applicable financial standards, as appropriate for
profit-oriented entities. The financial statements comply with
International Financial Reporting Standards (“IFRS”) as issued
by the International Accounting Standards Board.
Standards and interpretations to published standards that
are not yet effective
At the date of authorisation of these financial statements, certain new standards, amendments and interpretations to existing standards have been issued which were not yet effective at balance sheet date, and which the Charging Group
has not early adopted. The Charging Group has assessed the relevance of all such new standards, interpretations and amendments, has determined that the following may be relevant to its operations, and has concluded as follows:
NZ IAS 1 – Presentation of Financial Statements
(Amendments effective 1 July 2009)
Revised NZ IAS 1 introduces as a new primary financial statement, the “Statement of Comprehensive Income”, which represents changes in equity during a period other than those changes resulting from owners in their capacity as owners. This new statement can be presented as a single Statement of Comprehensive Income (which will effectively combine the Income Statement and all non-owner changes in equity) or a separate Income Statement and Statement of Comprehensive Income. This new standard does not change the recognition, measurement or disclosure of transactions and events that are required by other NZ IFRS’s. The amendments to NZ IAS 1 may result in changes to the additional disclosures in the Charging Group’s financial statements.
NZ IFRS 8 – Operating Segments (effective 1 January 2009)
NZ IFRS 8 requires an entity to report financial and descriptive information about its reportable segments based on how the business is reported to senior management. Reportable segments are operating segments or aggregations of operating segments that meet specified criteria. Additional entity wide disclosures are required including information about products and services or groups of products and services, analyses of revenues and information about transactions with major customers. The standard does not change the recognition, measurement or disclosure of specific transactions and events that are required by other NZ IFRS’s.
Standard Effective Date
NZ IFRS 1 First Time adoption of New Zealand Equivalents to International Financial Reporting Standards (Restructured) 1 July 2009
NZ IFRS 1/IAS 27 Amendments to Cost of Investment in Subsidiary, Jointly Controlled Entity or Associate 1 January 2009
NZ IFRS 2 Amendments to Share Based Payments: Vesting Conditions and Cancellations 1 January 2009
NZ IFRS 3 Business Combinations (Revised) 1 July 2009
NZ IFRS 4 Insurance Contracts (Amendments) 1 January 2009
NZ IAS 1/32 Amends to puttable financial instruments and obligations arising on liquidation 1 January 2009
NZ IAS 23 Borrowing Costs (Revised) 1 January 2009
NZ IAS 39 Amendments to Financial Instruments: Recognition and Measurement - Eligible hedged items 1 July 2009
NZ IAS 40 Investment Properties 1 January 2009
NZ IFRIC 13 Customer Loyalty Programmes 1 July 2009
NZ IFRIC 15 Agreements for the construction of Real Estate 1 January 2009
NZ IFRIC 16 Hedges of a Net Investment in a Foreign Operation 1 October 2008
NZ IFRIC 17 Distribution of Non-Cash Assets to Owners 1 July 2009
Standards and interpretations and amendments to published standards that are not yet effective and/or not relevant:
PAGE 17Investment Statement & Prospectus No 6
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‘Improvements to IFRS’ was published in May 2008 and
contains numerous amendments to IFRS which the
International Accounting Standards Board and the Financial
Reporting Standards Board of the New Zealand Institute of
Chartered Accountants consider non-urgent but necessary.
No changes in accounting policies are expected as a result of
these amendments.
(c) Basis of PreparationThe financial statements have been prepared on the basis of historical cost. Cost is based on the fair values of the consideration given in exchange for assets.
The Charging Group meets the definition of a Financial Institution under NZ IFRS 7 ‘Financial Instruments: Disclosures’ and is subject to the specific additional disclosure requirements applicable to Financial Institutions defined in Appendix E of NZ IFRS 7.
The Income Statement discloses the net interest income, net fee and commission income and other income in line with the Income Statement presentation used by other Financial Institutions.
The Balance Sheet presentation discloses assets and liabilities in order of their liquidity in line with the Balance Sheet presentation used by other Financial Institutions. Where it is not evident from the financial statement line item, disclosure of the current/non-current split has been made in the relevant note.
(d) Functional and Presentational CurrencyThese financial statements are presented in New Zealand
dollars ($), which is the functional currency of the Charging
Group. All financial information presented in New Zealand
dollars has been rounded to the nearest thousand dollars
($’000).
(e) Basis of ConsolidationSUBSIDIARIES
Subsidiaries are entities controlled, either directly or indirectly, by the Company. Control exists when the Company has the power to govern the financial and operating policies of an entity so as to obtain the benefits from its activities.
TRANSACTIONS ELIMINATED ON CONSOLIDATION
Intercompany transactions, balances and realised gains and
losses on transactions between Charging Group companies
are eliminated on consolidation. Unrealised losses on
transactions between Charging Group companies are also
eliminated unless the transaction provides evidence of an
impairment of the asset transferred.
(f) Segment ReportingThe Charging Group operates in one industry as a Financial
Institution. All operations are carried out within New Zealand.
(g) RevenueRECOGNITION OF INCOME
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Charging Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:
INTEREST INCOME AND SIMILAR EXPENSE
For all financial instruments measured at amortised cost,
interest income and expense is recorded at the effective interest rate, which is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument, or a shorter period where appropriate, to the net carrying amount of the financial asset or liability. The calculation takes into account all contractual terms of the financial instrument (for example, prepayment options) and includes any fees or incremental costs that are directly attributable to the instrument and are an integral part of the effective interest rate, but not future credit losses. The adjusted carrying amount is calculated based on the original effective interest rate and the change in carrying amount is recorded as interest income or expense.
Once the recorded value of a financial asset or a group of
financial assets has been reduced due to an impairment loss,
interest income continues to be recognised using the original
effective interest rate applied to the new carrying amount.
The Charging Group recognises interest revenue and
establishment fees on an accruals basis when the services are
rendered using the effective interest rate method.
FEE AND COMMISSION INCOME
The Charging Group earns fee income from a range of
services it provides to customers. Fee income can be divided
into the following categories:
PAGE 18 Investment Statement & Prospectus No 6
FINANCE DIRECT LIMITED
Notes to the Financial Statements for the year ended 31 March 2009
1. Significant Accounting Policies (cont’d)
(g) Revenue (cont’d)LENDING/ESTABLISHMENT FEES
Fees and direct costs relating to loan origination, financing
or restructuring and to loan commitments are deferred and
amortised to the Income Statement over the life of the loan
using the effective interest method. Lending fees not directly
related to the origination of a loan are recognised over the
period of service.
COMMISSIONS AND OTHER FEES
When commissions or fees relate to specific transactions or events, they are recognised in the Income Statement when the service is provided to the customer. When they are charged for services provided over a period, they are recognised in the Income Statement on an accruals basis as the service is provided.
PAYMENT PROTECTION INSURANCE
The Charging Group acts as an agent for payment protection insurance. Given the agency relationship, under NZ IFRS the income is presented on a net basis rather than on a gross basis. This means that only the commission income is recognised, not the full amount of the insurance premiums offset by the cost to the Charging Group. The Charging Group recognises the estimated liability on payment protection insurance refunds at balance date. The amount of the liability is estimated using historical refund data. This means that only the commission income is recognised, not the full amount of the insurance premiums offset by the cost to the Charging Group. The Charging Group recognises the estimated liability on payment protection insurance refunds at balance date. The amount of the liability is estimated using historical refund data.
(h) Financial InstrumentsFinancial instruments are classified in one of the following
categories at initial recognition: Financial Assets at fair value
through profit or loss, Available for Sale Financial Assets,
Loans and Receivables, Held to Maturity Investments, Financial
Liabilities at fair value through profit or loss and Other
Financial Liabilities. Furthermore, financial instruments are split
between derivative and non-derivative financial instruments.
Financial instruments are transacted on a commercial basis to
derive an interest yield/cost with terms and conditions having
due regard to the nature of the transaction and the risks
involved.
Some of these categories require measurement at fair value.
Where available, quoted market prices are used as a measure
of fair value. Bid prices are used to estimate fair values of
assets, whereas offer prices are applied to liabilities. Where
quoted market prices do not exist, fair values are estimated
using present value or other market accepted valuation
techniques, using methods and assumptions that are based on
market conditions and risks existing as at balance date.
Where the Charging Group has assets and liabilities with
offsetting market risk, it uses mid-market prices as a basis
for establishing fair values for the offsetting risk positions and
applies a bid/offer spread adjustment to the net open position
as appropriate.
If changes in these assumptions to a reasonably possible
alternative would result in a significantly different fair value this
has been disclosed with a range of possibilities.
FINANCIAL ASSETS AND LIABILITIES AT FAIR vALUE
THROUGH PROFIT OR LOSS
Assets and liabilities in this category are either held for trading
or are managed with other assets and liabilities and are
accounted for and evaluated on a fair value basis. Fair value
reporting of these assets and liabilities reflects the Charging
Group’s risk management process, which includes utilising
natural offsets where possible and managing overall risks of the
portfolio on a trading basis.
Upon initial recognition, attributable transaction costs are
included in the Income Statement when incurred. Assets and
liabilities in this category are subsequently measured at fair
value, with any changes recognised in the Income Statement.
AvAILABLE FOR SALE FINANCIAL ASSETS
Assets in this category are measured upon initial recognition
at fair value plus transaction costs directly attributable to
their acquisition. Subsequently such assets are measured at
fair value excluding transaction costs. Assets in this category
include:
PAGE 19Investment Statement & Prospectus No 6
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CASH AND CASH EQUIvALENTS
These comprise cash balances and call deposits.
LOANS AND RECEIvABLES
These assets are recorded upon initial recognition at fair value
plus transaction costs and are subsequently measured at
amortised cost using the effective interest rate method, less
impairment. This category of Financial Asset includes:
LOANS AND ADvANCES TO CUSTOMERS
These are recorded at amortised cost using the effective
interest rate method, less impairment.
TRADE AND OTHER RECEIvABLES
These include accounts receivable and other sundry debtors,
less impairment.
HELD TO MATURITY INvESTMENTS
Assets in this category are recorded upon initial recognition
at fair value plus transaction costs and are subsequently
measured at amortised cost using the effective interest rate,
less impairment.
OTHER FINANCIAL LIABILITIES
This category includes all financial liabilities other than those at
fair value through profit or loss. Liabilities in this category are
measured at amortised cost using the effective interest rate
and include:
LOANS AND BORROWINGS
All loans and borrowings are initially recognised at cost,
being the fair value of the consideration received net of issue
costs associated with the borrowing. After initial recognition,
interest-bearing loans and borrowings are subsequently
measured at amortised cost using the effective interest rate
method.
OTHER LIABILITIES
These are recorded at amortised cost. They represent
liabilities for goods and services provided to the Charging
Group prior to the end of the financial year that are unpaid
and arise when the Charging Group becomes obliged to make
future payments. These amounts are unsecured.
(i) Share CapitalORDINARY SHARES
Incremental costs directly attributable to the issue of ordinary
shares are recognised as a deduction from equity.
(j) Property, Plant and Equipment RECOGNITION AND MEASUREMENT
Items of property, plant and equipment are measured at cost
less accumulated depreciation and impairment losses.
Cost includes expenditure that is directly attributable to the
acquisition of the asset. In the event that settlement of all
or part of the purchase consideration is deferred, cost is
determined by discounting the amounts payable in the future
to their present value as at the date of acquisition.
Purchased software that is integral to the functionality of the
related equipment is capitalised as part of that equipment.
When parts of an item of property, plant and equipment have
different useful lives, they are accounted for as separate items
(major components) of property, plant and equipment.
SUBSEQUENT COSTS
The cost of replacing part of an item of property, plant and
equipment is recognised in the carrying amount of the item
if it is probable that the future economic benefits embodied
within the part will flow to the Charging Group and its cost
can be measured reliably. The costs of the day-to-day servicing
of property, plant and equipment are recognised in the Income
Statement as incurred.
DEPRECIATION
Depreciation is provided on office furniture and equipment.
Depreciation is recognised in the Income Statement to write
off the cost of an item of property, plant and equipment, less
any residual value, over its expected useful life, at the following
rates:
Office Furniture and Equipment
11.4% - 60% Diminishing value
The useful lives and residual values are reviewed annually
and the depreciation recognised in the Income Statement
calculated on a straight line basis would not be materially
different from the depreciation recognised using the above
rates as allowed by the Income Tax Act 2004.
PAGE 20 Investment Statement & Prospectus No 6
FINANCE DIRECT LIMITED
Notes to the Financial Statements for the year ended 31 March 2009
1. Significant Accounting Policies (cont’d)
(k) Leased AssetsLeases in terms of which the Charging Group assumes
substantially all the risks and rewards of ownership are
classified as finance leases. Upon initial recognition the leased
asset is measured at an amount equal to the lower of its fair
value and the present value of the minimum lease payments.
Subsequent to initial recognition, the asset is accounted for in
accordance with the accounting policy applicable to that asset.
Minimum lease payments made under finance leases are
apportioned between the finance expense and the reduction
of the outstanding liability. The finance expense is allocated to
each period during the lease term so as to produce a constant
periodic rate of interest on the remaining balance of the
liability.
Other leases are operating leases and are not recognised
on the Charging Group’s balance sheet. Operating lease
payments are recognised as an expense on a straight line basis
over the lease term, except where another systematic basis is
more representative of the time pattern in which economic
benefits from the leased assets are consumed.
(l) Asset QualityPAST DUE ASSETS
An asset is Past Due when a counterparty has failed to make
a payment when contractually due. A 90 Day Past Due Asset
is any asset which has not been operated by the counterparty
within its key terms for at least 90 days and which is not
a restructured asset, other individually impaired asset, or a
financial asset acquired through the enforcement of security.
IMPAIRED ASSETS
Impaired assets consist of restructured assets, assets acquired
through the enforcement of security and other impaired assets.
“Restructured asset” means any credit exposure for which:
a) the original terms have been changed to grant the
counterparty a concession that would not otherwise
have been available, due to the counterparty’s difficulties
in complying with the original terms; and
b) the revised terms of the facility are not comparable with
the terms of new facilities with comparable risks; and
c) the yield on the asset following restructuring is equal
to, or greater than, the Charging Group’s average cost
of funds, or that a loss is not otherwise expected to be
incurred.
Assets acquired through the enforcement of security are those
assets which are legally owned as a result of the enforcement
of security.
Other impaired assets refers to any credit exposure for which
an impairment loss is recognised in accordance with NZ IAS
39 – Financial Instruments: Recognition and Measurement.
(m) ImpairmentIMPAIRMENT OF LOANS AND ADvANCES
Losses for impaired loans and advances are recognised
immediately when there is objective evidence that impairment
of a loan or portfolio of loans has occurred. A loan is
considered impaired when management determines that it
is probable that all amounts owing in accordance with the
terms of the original contract will not be collected. When a
loan has been identified as impaired, the carrying amount of
the loan is decreased by recording specific allowances for the
loss to reduce the loan to its estimated recoverable amount,
which is the present value of expected future cash flows
including amounts recoverable from guarantees and collateral,
discounted at the original effective interest rate of the loan.
Impairment losses are calculated on individually significant
loans and loans assessed collectively. Losses expected from
future events no matter how likely, are not recognised.
INDIvIDUALLY SIGNIFICANT LOANS
At each reporting date, the Charging Group reviews
individually significant loans for evidence of impairment. All
relevant information, including the economic situation, solvency
of the customer/guarantor, enforceability of guarantees,
current security values and the time value of future cash flows
are taken into account in determining individual impairment
allowances.
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(m) Impairment (cont’d)COLLECTIvELY ASSESSED LOANS
At each reporting date, loans that have been individually assessed but no objective evidence of impairment existed and loans that are not considered individually significant are pooled in similar credit risk groups. These groups are then assessed for impairment based on historical loss experience of assets with similar risk characteristics. The historical loss experience is then adjusted for the impact of current observable data.
Management regularly reviews and adjusts the methodology and assumptions for impairment testing as improved analysis becomes available to minimise any differences between loss estimates and actual loss experience.
LOAN WRITE-OFFS
Loans are normally written off, either partially or in full, when
there is no realistic prospect of recovery of these amounts
and, for collateralised loans, when the proceeds from realising
the security has been received.
IMPAIRMENT OF TRADE AND OTHER RECEIvABLES
The recoverable amount of the Charging Group’s trade and other receivables carried at amortised cost is calculated on an undiscounted basis due to their short term nature. At each reporting date, the Charging Group reviews individually significant trade and other receivables for evidence of impairment. For trade and other receivables which are not significant on an individual basis, collective impairment is assessed on a portfolio basis based on numbers of days overdue, and taking into account the historical loss experience in portfolios with a similar amount of days overdue.
IMPAIRMENT OF NON-FINANCIAL ASSETS
The carrying amounts of the Charging Group’s non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the asset’s recoverable amount is estimated.
An impairment loss is recognised if the carrying amount of an asset exceeds its recoverable amount. Impairment losses are recognised in the Income Statement.
The recoverable amount of an asset is the greater of its value in use and its fair value less costs to sell. 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 assessments of the time value of money and the risks specific to the asset.
An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
(n) ProvisionsA provision is recognised if, as a result of a past event, the Charging Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation.
Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at balance sheet date. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the liability.
The increase in the provision resulting from the passage of time is recognised in finance costs. If economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that recovery will be received and the amount of the receivable can be reliably measured.
(o) Expense RecognitionAll expenses are recognised in the Income Statement on an
accruals basis.
(p) Employee BenefitsSHORT-TERM BENEFITS
Short-term employee benefit obligations are measured on an
undiscounted basis and are expensed as the related service is
provided.
A provision is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Charging Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.
DEFINED CONTRIBUTION PLANS
A defined contribution plan is a post-employment benefit plan
under which an entity pays fixed contributions into a separate
entity and will have no legal or constructive obligation to pay
further amounts. Obligations for contributions to defined
contribution plans are recognised as an employee expense in
the Income Statement when they are due.
PAGE 22 Investment Statement & Prospectus No 6
1. Significant Accounting Policies (cont’d)
(q) Income TaxIncome tax expense comprises current and deferred tax.
Income tax expense is recognised in the Income Statement
except to the extent that it relates to items recognised directly
in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income
for the year, using tax rates enacted or substantively enacted
at the reporting date, and any adjustment to tax payable in
respect of previous years.
Deferred tax is recognised using the balance sheet method,
providing for temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes
and the amounts used for taxation purposes. Deferred tax
is not recognised for the following temporary differences:
the initial recognition of goodwill, the initial recognition of
assets or liabilities in a transaction that is not a business
combination and that affects neither accounting nor taxable
profit, and differences relating to investments in subsidiaries
and jointly controlled entities to the extent that they probably
will not reverse in the foreseeable future. Deferred tax is
measured at the tax rates that are expected to be applied to
the temporary differences when they reverse, based on the
laws that have been enacted or substantively enacted by the
reporting date.
In principle deferred tax liabilities are recognised from taxable
temporary timing differences. Deferred tax assets are
recognised to the extent that it is probable that future taxable
profits will be available against which deductible temporary
differences and unused tax losses and tax credits can be
utilised. Deferred tax assets are reviewed at each reporting
date and are reduced to the extent that it is no longer
probable that the related tax benefit will be realised.
Deferred tax assets and liabilities are offset when they relate
to income taxes levied by the same taxation authority and the
Company has a legally enforceable right to offset current tax
assets against current tax liabilities.
(r) Cash FlowsThe Statement of Cash Flows has been prepared using the
direct approach. The following are the definitions used in the
Statement of Cash Flows:
Cash and cash equivalents are short term, highly liquid
investments that are readily convertible to known amounts
of cash and which are subject to an insignificant risk of changes
in value.
Operating activities are the principal revenue-producing
activities of the Charging Group and other activities that are
not investing or financing activities.
Investing activities are the acquisition and disposal of long-term
assets and other investments not included in cash and cash
equivalents.
Financing activities are activities that result in changes in
the size and composition of the contributed equity and
borrowings of the Charging Group.
FINANCE DIRECT LIMITED
Notes to the Financial Statements for the year ended 31 March 2009
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2. Critical Estimates and Judgements used in Applying Accounting PoliciesThe Charging Group prepares its financial statements in
accordance with NZ IFRS, the application of which often
requires judgements to be made by management when
formulating the Charging Group’s financial position and results.
Under NZ IFRS, the Directors are required to adopt those
accounting policies most appropriate to the Charging Group’s
circumstances for the purpose of presenting fairly the Charging
Group’s financial position, financial performance and cash flows.
In determining and applying accounting policies, judgement is
often required in respect of items where the choice of specific
policy, accounting estimate or assumption to be followed could
materially affect the reported results or net asset position of the
Charging Group should it later be determined that a different
choice would be more appropriate.
Management considers the accounting estimates and
assumptions discussed below to be its critical accounting
estimates and, accordingly, provides an explanation of each
below.
The discussion below should also be read in conjunction
with the Charging Group’s disclosure of significant NZ IFRS
accounting policies, which is provided in Note 1 to the financial
statements, “Significant accounting policies”.
IMPAIRMENT LOSSES ON LOANS AND ADvANCES
An impairment allowance is established if there is objective
evidence that a loan is impaired. A loan is considered impaired
when management determines that it is probable that all
amounts due according to the original contractual terms will
not be collected. When a loan has been identified as impaired,
the carrying amount of the loan is decreased by recording
specific allowances for the loss to reduce the loan to its
estimated recoverable amount, which is the present value of
expected future cash flows including amounts recoverable
from guarantees and collateral, discounted at the original
effective interest rate of the loan.
There are two methods used in assessing loans for
impairment, including specific loan assessment and collective
loan assessment. At each reporting date the Charging
Group reviews individually significant loans for evidence of
impairment. All relevant information, including the economic
situation, solvency of the customer/guarantor, enforceability of
guarantees, current security values and the time value of future
cash flows are taken into account in determining individual
allowances.
At each reporting date loans that have been individually
assessed but no objective evidence of impairment existed and
loans that are not considered individually significant are pooled
in similar credit risk groups. These groups are then assessed
for impairment based on historical loss experience of assets
with similar risk characteristics. The historical loss experience is
then adjusted for the impact of current observable data.
Management regularly reviews and adjusts the methodology
and assumptions for impairment testing as improved analysis
becomes available to minimise any differences between loss
estimates and actual loss experience.
FAIR vALUE ESTIMATION
The carrying amounts of loans and advances net of
impairment allowances are assumed to approximate their
fair values. The fair value of financial liabilities is estimated by
discounting the future contractual cash flows at the current
market interest for similar financial instruments.
RECOGNITION OF DEFERRED TAX ASSETS
The recognition of deferred tax assets is based upon whether
it is more likely than not that sufficient and suitable taxable
profits will be available in the future, against which the reversal
of temporary differences can be deducted. Recognition,
therefore, involves judgement regarding the future financial
performance of the Company.
Management believes that sufficient and suitable taxable profits
will be made available by the Company in the future and has
accordingly accounted for a deferred tax asset of $90,000 as at
31 March 2009 (2008: $64,000).
PAGE 24 Investment Statement & Prospectus No 6
FINANCE DIRECT LIMITED
Notes to the Financial Statements for the year ended 31 March 2009
3. Net Interest Income
2009 2008 $’000 $’000
INTEREST INCOME
Loans and advances 725 865
Impaired loans and advances 37 -
Interest from Available for Sale Financial Assets: Cash and short term investments 45 15
Total interest income 807 880
INTEREST EXPENSE
Secured debenture stock 350 429
Related party loans - 12
Other similar charges - 4
Total interest expense 350 445
Net interest income 457 435
4. Net Fee and Commission Income
2009 2008 $’000 $’000
FEE AND COMMISSION INCOME
Lending and credit related fee income 444 507
Brokerage income 216 678
Payment protection insurance commission 257 183
Total fee and commission income 917 1,368
FEE AND COMMISSION EXPENSE
Brokerage and documentation fees 139 306
Total fee and commission expense 139 306
Net fee and commission income 778 1,062
5. Other Income
2009 2008 $’000 $’000
Other sundry income - 5
PAGE 25Investment Statement & Prospectus No 6
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6. Net Impairment Losses
2009 2008 Note $’000 $’000
Movement in collective loan allowance 12 (10) (4)
Movement in specific loan allowance 12 185 -
175 (4)
7. Operating Expenses and Staff Costs
2009 2008 Note $’000 $’000
PROFIT BEFORE INCOME TAX INCLUDES THE FOLLOWING EXPENSES:
Directors’ fees 184 299
Auditors’ remuneration 8 65 42
Depreciation of property, plant and equipment 15 25
Leasing and rental costs 87 84
Personnel costs 179 180
Administrative expenses 558 560
1,088 1,190
KEY MANAGEMENT COMPENSATION INCLUDED IN THE ABOvE:
Short-term employee benefits 175 290
There were no post-employment benefits, other long-term benefits, termination benefits or share based payments made to key
management personnel during the year ended 31 March 2009 (2008: $nil).
8. Auditor’s Remuneration
2009 2008 $’000 $’000
AMOUNTS PAID TO THE AUDITOR FOR:
Audit related services 65 42
Other services - -
Total auditors’ remuneration 65 42
PAGE 26 Investment Statement & Prospectus No 6
FINANCE DIRECT LIMITED
Notes to the Financial Statements for the year ended 31 March 2009
9. Income Tax Expense
Note 2009 2008 $’000 $’000
INCOME TAX
Current period 46 90
Adjustment for prior periods (18) -
28 90
DEFERRED TAX
Origination and reversal of temporary differences 16 (52) 8
Adjustment for prior periods 16 26 -
Decrease in effective tax rate to 30% 16 - 6
(26) 14
Income tax expense reported in Income Statement 2 104
NUMERICAL RECONCILIATION OF INCOME TAX EXPENSE
TO PRIMA FACIE TAX PAYABLE:
(Loss)/profit before income tax expense (28) 316
Tax at the New Zealand tax rate of 30% (2008: 33%) (8) 104
Tax amounts which are not taxable or deductible in calculating taxable income:
Non-taxable income - (7)
Non-deductible expenses 2 1
Adjustment for prior periods 8 -
Deferred tax:
Decrease in effective tax rate to 30% - 6
2 104
10. Imputation Credit AccountThe movements in the Imputation Credit Account in New Zealand were as follows:
2009 2008 $’000 $’000
Opening balance 118 531
Imputation credits lost due to change in shareholdings - (531)
Income tax (received)/paid to IRD (28) 118
Imputation credits attached to dividends paid (31) -
Closing balance 59 118
PAGE 27Investment Statement & Prospectus No 6
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11. Dividends Declared and PaidThe following dividends were declared and paid during the year ended 31 March 2009:
2009 2008 $’000 $’000
Ordinary Shares
Interim dividend for the year ended 31 March 2009 210 -
An interim dividend of 26.62 cents per Ordinary Share was paid on 9 December 2008 (2008: nil).
12. Loans and Advances to Customers
2009 2008 $’000 $’000
Loans and advances to customers 5,137 5,373
Less: Impaired loan allowance (231) (56)
4,906 5,317
IMPAIRED LOAN ALLOWANCE
Collective loan allowance (46) (56)
Specific loan allowance (185) -
Total loan allowance (231) (56)
COLLECTIvE LOAN ALLOWANCE
Opening balance (56) (60)
Movement in collective loan allowance 10 4
Closing balance (46) (56)
SPECIFIC LOAN ALLOWANCE
Opening balance - -
Reversal of specifically impaired assets - -
Addition to specific loan allowance (185) -
Closing balance (185) -
13. Trade and Other Receivables
2009 2008 $’000 $’000
Accounts receivable 8 8
PAGE 28 Investment Statement & Prospectus No 6
FINANCE DIRECT LIMITED
Notes to the Financial Statements for the year ended 31 March 2009
14. Property, Plant and Equipment
Office Furniture & Equipment $’000
COST OR DEEMED COST
Balance at 1 April 2007 123
Additions 12
Balance at 31 March 2008 135
Balance at 1 April 2008 135
Additions 4
Disposals (3)
Balance at 31 March 2009 136
DEPRECIATION AND IMPAIRMENT LOSSES
Balance at 1 April 2007 60
Depreciation charge for the year 25
Balance at 31 March 2008 85
Balance at 1 April 2008 85
Depreciation charge for the year 15
On disposals -
Balance at 31 March 2009 100
CARRYING AMOUNTS
At 31 March 2008 50
At 31 March 2009 36
15. Investment in SubsidiaryAt 31 March 2007, the Company held 100% of the issued share capital of Finance Assist Limited, a Finance Company registered
in New Zealand, which formed part of the Charging Group. On 31 May 2007, Finance Assist Limited was amalgamated with
Finance Direct Limited and subsequently struck off.
PAGE 29Investment Statement & Prospectus No 6
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16. Deferred Tax Asset
2009 2008 Note $’000 $’000
THE BALANCE COMPRISES TEMPORARY DIFFERENCES ATTRIBUTABLE TO:
Collective loan impairment allowance 14 17
Specific loan impairment allowance 56 -
Deferred fee income - 43
Deferred brokerage fees - (13)
Holiday pay accrual 3 4
Other timing differences 17 13
Net deferred tax asset 90 64
MOvEMENTS
Opening balance 64 78
(Charged)/credited to the Income Statement 9 26 (14)
Closing balance 90 64
The reduction in the corporate tax rate from 33% to 30% from 1 April 2008 has been taken into account in calculating the value
of deferred tax as at 31 March 2008 and 31 March 2009.
17. Other Assets
2009 2008 $’000 $’000
Deferred brokerage fees 8 43
Prepaid expenses 5 -
13 43
Current 10 26
Non-Current 3 17
13 43
18. Trade and Other Payables
2009 2008 $’000 $’000
Accounts payable 122 65
Accrued expenses 90 98
212 163
PAGE 30 Investment Statement & Prospectus No 6
FINANCE DIRECT LIMITED
Notes to the Financial Statements for the year ended 31 March 2009
19. Loans and Borrowings
2009 2008 $’000 $’000
Secured debenture stock 4,157 4,111
The debenture stock issued by Finance Direct Limited is secured under a Debenture Stock Trust Deed between Finance Direct
Limited and Covenant Trustee Company Limited as Trustee. The Deed creates a floating charge in favour of the Trustee over all
of the assets and undertakings of the Finance Direct Limited Charging Group.
Finance Direct Limited has a guarantee under the New Zealand Deposit Guarantee Scheme (“Scheme”). The guarantee is for
a two year period from 12 October 2008 to 12 October 2010. Finance Direct Limited has entered into a Deed of Guarantee
with the Crown in respect of the Scheme. The Crown has guaranteed certain deposits under the Scheme. The Crown
guarantee is subject to compliance with a number of requirements including certain reporting obligations, meeting Trust Deed
covenants, complying with prudential directions and restrictions on entering into certain transactions.
Finance Direct Limited has complied with all requirements under the Scheme throughout the period. As a result, there are
no liabilities that rank in priority to qualifying deposits under the Scheme as at 31 March 2009 in the event that Finance Direct
Limited was liquidated. For non-qualifying deposits under the Scheme, liabilities totalling $23,976 (2008: $nil) would rank in
priority as at 31 March 2009 in the event that Finance Direct Limited was liquidated.
20. Other Liabilities
2009 2008 $’000 $’000
Deferred fee income:
Current 85 100
Non-Current 63 42
148 142
21. Share Capital
2009 2009 2008 2008 No. of Shares $’000 No. of Shares $’000
Issued and paid up capital:
Redeemable Preference Shares - - - -
Ordinary Shares 789,157 1,080 789,157 1,080
789,157 1,080 789,157 1,080
PAGE 31Investment Statement & Prospectus No 6
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No Ordinary Shares or Redeemable Preference Shares were issued by the Company during the year ended 31 March 2009. On 2 April 2007, 209,365 Ordinary Shares in the Company were issued for the consideration of $500,000, with the Redeemable Preference Shares subsequently being redeemed at par. All Ordinary Shares are issued and fully paid, have no par value and have an equal right to vote, to dividends and to any surplus on winding up. The Company does not have a total number of authorised shares. Without prejudice to any special rights conferred on the existing Shareholders the Board may issue Shares with, or without, preferred, deferred or other special rights or
restrictions, whether in regard to distributions, voting, return of capital or otherwise.
22. Financial Instruments
Significant accounting policiesDetails of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in Note 1 to the financial statements.
Accounting classifications and fair values The table below sets out the Charging Group’s classification of each class of financial assets and financial liabilities, and their fair values:
2009 2008
Carrying Amount Fair Value Carrying Amount Fair Value $’000 $’000 $’000 $’000
FINANCIAL ASSETS
Available for sale assets:
Cash and cash equivalents 1,068 1,068 722 722
Loans and receivables:
Loans and advances to customers 4,906 4,906 5,317 5,317
Trade and other receivables 8 8 8 8
4,914 4,914 5,325 5,325
Total Financial Assets 5,982 5,982 6,047 6,047
FINANCIAL LIABILITIES
Other amortised cost:
Loans and borrowings 4,157 4,157 4,111 4,111
Trade and other payables 212 212 163 163
4,369 4,369 4,274 4,274
Total Financial Liabilities 4,369 4,369 4,274 4,274
The Charging Group has not classified any assets as Held to Maturity Investments or Financial Assets and Liabilities at fair value
through profit and loss.
PAGE 32 Investment Statement & Prospectus No 6
FINANCE DIRECT LIMITED
Notes to the Financial Statements for the year ended 31 March 2009
22. Financial Instruments (cont’d)
Basis for determining fair values
The following summarises the significant methods and assumptions used in estimating the fair values of financial assets and financial
liabilities reflected in the table above.
Loans and advances to customers
Each loan has particular circumstances, which determine its fair value. The carrying amounts of the loans net of impairment
allowances best represent their fair value.
Loans and borrowings
Fair value is calculated based on the present value of contractual principal and interest cash flows, discounted at the market rate of
interest at the reporting date.
Cash and cash equivalents, trade and other receivables and trade and other payables
Due to their relatively short term nature, the carrying amounts of these items are equivalent to their fair value.
Interest rates used for determining fair value
The following interest rates used to discount estimated cash flows, where applicable, are based on the yield curve as at reporting
date plus an appropriate constant credit spread:
2009 2008
Loans and advances to customers 12.50% - 19.95% 12.50% - 19.95%
Secured debenture stock 5.00% - 12.25% 9.95% - 12.00%
Financial risk management objectives
The Charging Group’s management provides services to the business, co-ordinates access to domestic and international financial
markets, monitors and manages the financial risks relating to the operations of the Charging Group through internal risk reports
which analyse exposures by degree and magnitude of risks. These risks include market risk (including currency risk, fair value
interest rate risk and price risk), credit risk, liquidity risk and cash flow interest rate risk.
Foreign currency risk management
All of the Charging Group’s operations are carried out within New Zealand. As a result, the Charging Group is not exposed to
any direct foreign currency exchange risks.
Interest rate risk management
The Charging Group is exposed to interest rate risk on the amount of its loans and advances to customers and monies owed to
secured debenture stockholders.
Loans and advances to customers are provided at fixed interest rates over the terms of the respective loans, which typically range
for periods between two and five years. Should loans go into default, interest is charged at penalty rates set when the respective
loan agreements are entered into.
PAGE 33Investment Statement & Prospectus No 6
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22. Financial Instruments (cont’d)Interest rates on secured debenture stock are subject to market influences, but are fixed for the duration of the investment term
at the time the relevant investments are made by investors.
Interest rate sensitivity analysisThe sensitivity analyses have been determined based on the exposure to interest rates for both derivatives and non-derivative
instruments at the balance sheet date. For floating rate liabilities, the analysis is prepared assuming the amount of liability
outstanding at the balance sheet date was outstanding for the whole year. A 50 basis point (0.5%) increase or decrease is used
when reporting interest rate risk internally to key management personnel and represents management’s assessment of the
reasonably possible change in interest rates. If interest rates had been 50 basis points higher/lower and all other variables were
held constant, the Charging Group’s loss for the year would decrease/increase by $5,000 (2008: $4,000).
Market riskThe Charging Group has prepared liquidity forecasts which indicate there is sufficient liquidity to meet its commitments. The
forecasts are prepared on the assumption that loan repayments will continue to be received and a level of reinvestment, based
on recent reinvestment rates, will continue to occur.
Credit risk managementCredit risk is the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Charging
Group. Financial instruments which potentially subject the Charging Group to credit risk principally consist of cash and cash
equivalents, loans and advances to customers, and trade and other receivables.
The Charging Group’s cash balances and call deposits are placed with major trading banks with high credit-ratings assigned
by international credit-rating agencies. The Charging Group performs credit evaluations on all customers requiring loans and
advances. The Charging Group requires collateral or other security to support financial instruments with credit risk.
The Charging Group operates a lending policy with various levels of authority depending on the size and loan to value ratio
of the loan, ensuring compliance with all Trust Deed covenants. The Charging Group closely monitors the performance of its
borrowers, the payment of instalments under its loans, and has adopted a formal debt management process to be followed when
a loan falls into arrears.
Risk gradings categorise exposures according to the degree of risk of financial loss faced and focus management on the attendant
risks. Risk grades are used to determine where impairment allowances may be required. The current risk grading framework
consists of three grades reflecting varying degrees of risk of default and the availability of collateral or other credit risk mitigation.
They are as follows:
• Neitherpastdueorimpaired–compliancewithallterms,goodsecurityvalue,noadverseeventsaffectingtheborrower.
• Pastduebutnotimpaired–materialcompliancewithallterms,noconcernsoversecurityvalueorfutureeventsthatmay
affect the borrower.
• Impaired–non-compliancewithtermsorevidenceofimpairmentofsecurityheld,oradverseeventaffectingtheborrower.
The Charging Group implements guidelines on the acceptability of specific classes of collateral or credit risk mitigation. The
principal collateral types for loans and advances to customers are:
• Mortgagesoverproperties.
• GeneralSecurityAgreements.
• Chargesoverbusinessassetsandmotorvehicles.
• Personalguarantees.
PAGE 34 Investment Statement & Prospectus No 6
FINANCE DIRECT LIMITED
Notes to the Financial Statements for the year ended 31 March 2009
22. Financial Instruments (cont’d)Maximum exposure to credit risk is represented by the carrying value of each financial asset in the Balance Sheet which is net of
any impairment allowance. Concentration of credit exposures set out in Note 23 do not take into account the fair value of any
collateral, in the event of counterparties failing to meet their contractual obligations.
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has built an appropriate liquidity
risk management framework for the management of the Charging Group’s short, medium and long-term funding and liquidity
management requirements. The Charging Group manages liquidity risk by maintaining adequate cash reserves, by continuously
monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and financial liabilities.
The tables in Note 24 detail the Charging Group’s expected maturity for its financial assets and the remaining contractual
maturity for its financial liabilities. The tables have been drawn up based on the contractual maturities of the financial assets
except where the Charging Group anticipates that the cash flow will occur in a different period and the cash flows of financial
liabilities based on the earliest date on which the Charging Group can be required to pay.
On 12 November 2008, the Company became an Approved Institution under the New Zealand Deposit Guarantee Scheme. In
order to maintain approved status, the Company has to comply with The Treasury requirements of the Guarantee Scheme. If the
New Zealand Deposit Guarantee Scheme was withdrawn, this would impact on the Company’s liquidity.
Capital managementThe Charging Group considers share capital and retained earnings to be capital for management purposes. In implementing
current capital requirements the Debenture Stock Trust Deed entered into between the Charging Group and Covenant Trustee
Company Limited as Trustee, requires the Charging Group to maintain a prescribed ratio of total liabilities to total tangible assets.
The Trust Deed prescribed ratio is 86% for the Charging Group.
The Charging Group’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and
to sustain future development of the business. The impact of the level of capital on shareholders’ return is also recognised and
the Charging Group recognises the need to maintain a balance between the higher returns that might be possible with greater
gearing and the advantages and security afforded by a sound capital position. The Charging Group also monitors the level of
dividends to ordinary shareholders.
The Charging Group has complied with all Trustee imposed capital requirements throughout the years ended 31 March 2008
and 31 March 2009 and there have been no material changes in the Charging Group’s approach to capital management during
the period.
PAGE 35Investment Statement & Prospectus No 6
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23. Concentration of Credit Exposure
Loans and Advances to CustomersGeographical Concentration of Loans and Advances
2009 2009 2008 2008 % $’000 % $’000
Auckland and Northland 72.41 3,720 71.86 3,861
Bay of Plenty 3.35 172 2.25 121
Central North Island 13.57 697 12.92 694
South Island 3.78 194 5.49 295
Waikato 4.09 210 4.69 252
Wellington 2.80 144 2.79 150
100.00 5,137 100.00 5,373
Collateral held over Loans and Advances
At 31 March 2009, the Charging Group had 374 (2008: 388) open loans with an average balance of $13,738 (2008: $13,848),
which provides a relatively low credit risk. All loans are secured by registered security interests over motor vehicles, boats,
charges over business assets, General Security Agreements, personal guarantees and agreements to mortgage real estate
(secured by caveats over the relevant real estate) owned by borrowers; the majority of which are financed with customers who
are not self-employed.
Concentration of Loans and Advances to Individual Counterparties
Number of Counterparties
2009 2008
% OF SHAREHOLDER FUNDS
10 - 19.99% - -
20 - 29.99% 1 2
Total 1 2
PAGE 36 Investment Statement & Prospectus No 6
FINANCE DIRECT LIMITED
Notes to the Financial Statements for the year ended 31 March 2009
23. Concentration of Credit Exposure (cont’d)
Loans and Advances to Customers (cont’d)Managed Funds, Securitisation, Custodial and Other Fiduciary Activities
The Charging Group has not had any involvement in funds management, securitisation and/or custodial activities.
Funding – Loans and BorrowingsProduct Concentration of Funding
2009 2009 2008 2008 % $’000 % $’000
Secured debenture stock 100.00 4,157 100.00 4,111
Geographical Concentration of Funding
2009 2009 2008 2008 % $’000 % $’000
Auckland and Northland 45.28 1,882 33.34 1,370
Bay of Plenty 1.80 75 2.09 86
Central North Island 10.99 457 2.04 84
Overseas 10.15 422 23.67 973
South Island 19.15 796 21.16 870
Waikato 3.63 151 3.28 135
Wellington 9.00 374 14.42 593
100.00 4,157 100.00 4,111
PAGE 37Investment Statement & Prospectus No 6
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24. Maturity Profile of Financial Assets and Financial Liabilities(a) Interest rate riskThe following tables summarise the Charging Group’s interest rate gap position on the basis of net discounted cash flows:
2009
Weighted Current Non-Current Total
average 0 - 6 7 - 12 1 - 2 2 - 5 5+ effective Months Months Years Years Years interest rate $’000 $’000 $’000 $’000 $’000 $’000 %
FINANCIAL ASSETS
Cash and cash equivalents 3.50 1,068 - - - - 1,068
Loans and advances to customers 16.59 1,159 478 994 2,228 47 4,906
Trade and other receivables - 8 - - - - 8
2,235 478 994 2,228 47 5,982
FINANCIAL LIABILITIES
Trade and other payables - 212 - - - - 212
Secured debenture stock 9.71 1,382 808 1,773 194 - 4,157
1,594 808 1,773 194 - 4,369
2008
Weighted Current Non-Current Total
average 0 - 6 7 - 12 1 - 2 2 - 5 5+ effective Months Months Years Years Years interest rate $’000 $’000 $’000 $’000 $’000 $’000 %
FINANCIAL ASSETS
Cash and cash equivalents 8.25 722 - - - - 722
Loans and advances to customers 16.15 2,067 532 843 1,867 8 5,317
Trade and other receivables - 8 - - - - 8
2,797 532 843 1,867 8 6,047
FINANCIAL LIABILITIES
Trade and other payables - 163 - - - - 163
Secured debenture stock 10.36 1,769 1,389 920 33 - 4,111
1,932 1,389 920 33 - 4,274
PAGE 38 Investment Statement & Prospectus No 6
24. Maturity Profile of Financial Assets and Financial Liabilities (cont’d)
(b) Residual contractual maturities of financial assets and financial liabilities
The following tables show the gross undiscounted cash flows of the Charging Group’s financial assets and financial liabilities
on the basis of their earliest possible contractual maturity and their expected maturity. The Gross nominal inflow/(outflow)
disclosed in the following tables is the contractual, undiscounted cash flow of the financial asset or financial liability.
2009
Gross Nominal 0 – 6 7 – 12 1 – 2 2 – 5 5+ Inflow/ Carrying Months Months Years Years Years (Outflow) Amount $’000 $’000 $’000 $’000 $’000 $’000 $’000
FINANCIAL ASSETS
Cash and cash equivalents 1,068 - - - - 1,068 1,068
Loans and advances to customers 1,965 1,181 1,350 1,264 1 5,761 4,906
Trade and other receivables 8 - - - - 8 8
3,041 1,181 1,350 1,264 1 6,837 5,982
FINANCIAL LIABILITIES
Trade and other payables (212) - - - - (212) (212)
Secured debenture stock (1,537) (916) (1,852) (198) - (4,503) (4,157)
(1,749) (916) (1,852) (198) - (4,715) (4,369)
Total 1,292 265 (502) 1,066 1 2,122 1,613
FINANCE DIRECT LIMITED
Notes to the Financial Statements for the year ended 31 March 2009
The expected maturity of financial assets and financial liabilities differs materially from the contractual maturity in respect of loans
and advances for the Charging Group as at 31 March 2009. The expected maturity of loans and advances and the adjusted
contractual cash flows are as follows:
2009
Gross Nominal 0 – 6 7 – 12 1 – 2 2 – 5 5+ Inflow/ Months Months Years Years Years (Outflow) $’000 $’000 $’000 $’000 $’000 $’000
Loans and advances to customers
(expected) 1,878 1,141 1,307 1,179 1 5,506
Adjusted Total 1,205 225 (545) 981 1 1,867
PAGE 39Investment Statement & Prospectus No 6
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25. Asset Quality
a) Summary of Lending 2009 2008 $’000 $’000
Neither past due nor impaired 4,379 4,882
Past due but not impaired 444 491
Impaired 314 -
Gross loans and advances 5,137 5,373
Less: Impaired loan allowance (231) (56)
Net loans and advances 4,906 5,317
The Charging Group closely monitors the performance of its borrowers and the payment of instalments under its loans. The Board has adopted a formal debt management process to be followed when a loan falls into arrears, which includes specified time driven debt collection procedures, although management may take such actions earlier as circumstances require. Special monitoring of assets occurs when there is a risk of the asset becoming impaired and active management is required to maintain the debt.
2008
Gross Nominal 0 – 6 7 – 12 1 – 2 2 – 5 5+ Inflow/ Carrying Months Months Years Years Years (Outflow) Amount $’000 $’000 $’000 $’000 $’000 $’000 $’000
FINANCIAL ASSETS
Cash and cash equivalents 722 - - - - 722 722
Loans and advances to customers 3,672 898 869 721 1 6,161 5,317
Trade and other receivables 8 - - - - 8 8
4,402 898 869 721 1 6,891 6,047
FINANCIAL LIABILITIES
Trade and other payables (163) - - - - (163) (163)
Secured debenture stock (1,899) (1,444) (983) (33) - (4,359) (4,111)
(2,062) (1,444) (983) (33) - (4,522) (4,274)
Total 2,340 (546) (114) 688 1 2,369 1,773
PAGE 40 Investment Statement & Prospectus No 6
25. Asset Quality (Cont’d)
FINANCE DIRECT LIMITED
Notes to the Financial Statements for the year ended 31 March 2009
b) Loans and Advances Past Due But Not Impaired
2009 2008 $’000 $’000
PAST DUE ASSETS NOT IMPAIRED
At 1 April 2008 491 554
Collected during the year (491) (554)
Additions to Past Due asset status 758 491
Reclassified as Impaired assets (314) -
At 31 March 2009 444 491
2009 2008
Total Instalment Balance Total Instalment Balance Arrears of Loan Arrears of Loan Principal Principal $’000 $’000 $’000 $’000 $’000 $’000
Analysis of Past Due Assets Not Impaired:
0 - 31 Days 236 9 227 390 14 376
32 - 60 Days 121 9 112 13 1 12
61 - 90 Days 82 11 71 - - -
90+ Days 5 3 2 88 75 13
Total Past Due Assets Not Impaired 444 32 412 491 90 401
Past Due Assets Not Impaired represent Loans and Advances to Customers where contractual interest or principal payments are past due but the Charging Group believes that impairment is not appropriate on the basis of the level of security/collateral available and/or the stage of collection of amounts owed to the Charging Group.
PAGE 41Investment Statement & Prospectus No 6
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c) Impaired AssetsAt 31 March 2009, there were no restructured assets, real estate assets or other assets acquired through the enforcement
of security (2008: $nil). The breakdown of the gross amount of other individually impaired loans and advances and individual
impairment allowances is as follows:
2009 2008 $’000 $’000
TOTAL GROSS IMPAIRED ASSETS
At 1 April 2008 - -
Net additions 314 -
Deletions - -
Amounts written off - -
At 31 March 2009 314 -
Individual Allowance for Impairment (185) -
Total Net Impaired Assets 129 -
26. Operating Lease CommitmentsAt 31 March 2009, the Company had non-cancellable operating lease commitments in respect of leasehold property, the total
future minimum payments of which were payable as follows:
2009 2008 $’000 $’000
Less than one year 31 64
Between one and five years - 31
31 95
There are no onerous terms concerning renewal of the above leases.
PAGE 42 Investment Statement & Prospectus No 6
FINANCE DIRECT LIMITED
Notes to the Financial Statements for the year ended 31 March 2009
27. Capital CommitmentsThere were no capital commitments at 31 March 2009 (2008: $nil).
28. Contingent Assets And LiabilitiesThere were no contingent assets or liabilities at 31 March 2009 (2008: $nil).
29. Related Party TransactionsDuring the year ended 31 March 2009, the Company paid intra-group interest of $nil (2008: $12,000) to NZF Group Limited,
the Company’s ultimate parent undertaking, in respect of intra-group indebtedness.
During the year ended 31 March 2009, the Company paid cost sharing fees of $60,000 (2008: $nil) to NZF Money Limited, a
fellow subsidiary undertaking of NZF Group Limited, to cover the cost of shared services and central administration costs.
At 31 March 2009, there were no outstanding balances with related parties (2008: $nil). No amounts owed by related parties
were written off or forgiven during the year (2008: $nil).
30. Subsequent EventsThe Directors are not aware of any matters or circumstances since the end of the reporting period, not otherwise dealt with
within this report or financial statements, that have significantly or may significantly affect the operations of Finance Direct
Limited.
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22 September 2009
Dear Sirs
Audit Opinion on the Financial Statements Included in the Prospectus
We have prepared this report for inclusion in the prospectus to be dated on or around 22 September 2009.
As auditor of Finance Direct Limited, and in accordance with the requirements of the Securities Act 1978, Clause 36 of the Second Schedule of the Securities Regulations 1983 and the Securities Act (Financial Institutions) Exemption Notice 2007, we report as follows:
Audited Financial Statements of Finance Direct Limited
We have audited the financial statements of Finance Direct Limited (“the company”) on pages 11 to 42. These financial statements are required by the Second Schedule of the Securities Regulations 1983 and the Securities Act (Financial Institutions) Exemption Notice 2007. The financial statements provide information about the financial position of the company as at 31 March 2009 and its financial performance and cash flows for the year ended on that date. This information is stated in accordance with the accounting policies set out on pages 16 to 22.
Directors’ Responsibilities
The Directors are responsible for the preparation and presentation of:
a the financial statements which give a true and fair view of the financial position of the company as at 31 March 2009, and its financial performance and cash flows for the year ended on that date as required by the Second Schedule of the Securities Regulations 1983 and the Securities Act (Financial Institutions) Exemption Notice 2007;
b the summary of financial statements of the company for the years ended 31 March 2009, 2008, 2007, 2006 and 2005 as required by clauses 7(2) and 7(3) of the Second Schedule of the Securities Regulations 1983; and
PAGE 44 Investment Statement & Prospectus No 6
c the details and amounts in respect of the ranking of securities of the company as at 31 March 2009 as required by clause 12 of the Second Schedule of the Securities Regulations 1983.
Auditors’ Responsibilities
We are responsible for expressing an independent opinion on the financial statements presented by the Directors and reporting our opinion in accordance with clause 36(1) of the Second Schedule of the Securities Regulations 1983 and the Securities Act (Financial Institutions) Exemption Notice 2007.
We are also responsible for reporting, in accordance with clause 36(1)(g) of the Second Schedule of the Securities Regulations 1983 and the Securities Act (Financial Institutions) Exemption Notice 2007, on:
a the amounts included in the summary of financial statements for the years ended 31 March 2009, 2008, 2007, 2006 and 2005, and
b the details and amounts in respect of the ranking of securities as at 31 March 2009 prepared and presented by the Directors.
This report has been prepared for inclusion in the prospectus for the purpose of meeting the requirements under clause 36(1) of the Second Schedule of the Securities Regulations 1983 and the Securities Act (Financial Institutions) Exemption Notice 2007. We disclaim any assumption of responsibility for reliance on this audit report, or the amounts included in the financial statements, the summary of financial statements or the details and amount in respect of the ranking of securities for any other purpose other than that for which this report has been prepared. In addition, we take no responsibility for, nor do we report on, any aspect of the prospectus not mentioned in this report.
Basis of Opinion on the Financial Statements, the Summary of Financial Statements and the Ranking of Securities
An audit of the financial statements includes examining, on a test basis, evidence relevant to the amounts and disclosures in the financial statements. It also includes assessing:
a the significant estimates and judgements made by the Directors in the preparation of the financial statements; and
b whether the accounting policies used and described on pages 16 to 22 are appropriate to the circumstances of the company, consistently applied and adequately disclosed.
We have conducted our audit in accordance with New Zealand Auditing Standards. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to obtain reasonable assurance that the financial statements are free from material misstatements, whether caused by fraud or error. In forming our opinion, we also evaluated the overall adequacy of the presentation of the information in the financial statements.
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We have also undertaken procedures to provide reasonable assurance that:
a the amounts set out in the summary of financial statements on page 6, pursuant to clauses 7(2) and 7(3) of the Second Schedule of the Securities Regulations 1983, have been correctly taken from the audited financial statements of the company for the years ended 31 March 2009, 2008, 2007, 2006 and 2005; and
b the details and amounts in respect of the ranking of securities on page 51 pursuant to clause 12 of the Second Schedule of the Securities Regulations 1983, have been correctly taken from the audited financial statements of the company as at 31 March 2009.
Unqualified Opinion on the Financial Statements, the Summary of Financial Statements and the Ranking of Securities
We have obtained all the information and explanations we have required.
In our opinion:
a Proper accounting records have been kept by the company as far as appears from our examination of those records;
b The financial statements, on pages 11 to 42 , as required by the Second Schedule of the Securities Regulations 1983 and the Securities Act (Financial Institutions) Exemption Notice 2007, and that are required to be audited, have been drawn up to:
i comply with the Securities Regulations 1983 and the Securities Act (Financial Institutions) Exemption Notice 2007;
ii comply with generally accepted accounting practice in New Zealand; and
iii give a true and fair view of the financial position of the company as at 31 March 2009, and its financial performance and cash flows for the year ended on that date;
c the amounts set out in the summary of financial statements for the company, on page 6 of this prospectus, as required by clauses 7(2) and 7(3) of the Second Schedule of the Securities Regulations 1983 have been correctly taken from the audited financial statements of the company for the years ended 31 March 2009, 2008, 2007, 2006 and 2005; and
PAGE 46 Investment Statement & Prospectus No 6
d the details and amounts set out in respect of the ranking of securities, on page 51 of this prospectus, as required by clause 12 of the Second Schedule of the Securities Regulations 1983, as at 31 March 2009 have been correctly taken from the audited financial statements of the company from which they were extracted.
We completed our work on the audited financial statements of the company for the year ended 31 March 2009 on 30 June 2009 and our unqualified opinion on the financial statements is expressed as at that date.
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PAGE 48 Investment Statement & Prospectus No 6
Statutory Information
The following information is required to be disclosed by the
Second Schedule of the Securities Regulations 1983.
Main Terms of Offer
ISSUER
Finance Direct Limited is the issuer of the Securities which
are offered pursuant to this Prospectus, and has its registered
office at Level 2, Finance Direct House, 88 Broadway,
Newmarket, Auckland.
DESCRIPTION OF SECURITIES
This Prospectus offers up to $15,000,000 of first ranking
Debenture Stock of Finance Direct Limited for subscription.
The securities being offered are secured first ranking
Debenture Stock, subject to the registration of prior charges
and preferential claims. Debenture Stock offered in this
Prospectus are debt securities for the purposes of the
Securities Act 1978. Details of the Trust Deed are set out
in the section entitled “Provisions of Trust Deed and other
restrictions on borrowing group” on pages 51 to 54.
The Debenture Stock shall be issued for fixed terms ranging
between 3 months and 5 years. Fixed interest rates are
applicable to Debenture Stock and will vary depending upon
the fixed term selected. Details of the current fixed interest
rates are available upon request from the Company.
The issue of the Debenture Stock will provide the Company
with funds to on-lend for loan advances and selected
financial transactions including personal loans, hire purchase
arrangements and loan advances to both companies and
individuals.
The obligations of the Company to Investors in respect of the
Debenture Stock are secured by a security interest in all of the
Charging Group’s Personal Property and a charge over the
Charging Group’s Other Property pursuant to a Debenture
Trust Deed granted by the Charging Group in favour of
Covenant Trustee Company Limited. The charge created by
the Trust Deed in respect of the Other Property is a floating
charge over the Other Property in respect of which a fixed
charge is not legally and fully effective and a fixed charge over
all Other Property. Further details of the Trust Deed are
provided on pages 51 to 54 of this Prospectus.
The Debenture Stock issued by the Company is first ranking
because there are no other charges registered over all of the
Company’s assets that rank ahead of the charge granted in
favour of the Trustee pursuant to the Trust Deed except for
permitted prior charges.
The Trust Deed permits the Company to create prior security
interests over any asset to secure any moneys to be borrowed,
raised or otherwise owing in purchasing or acquiring such asset
if at the time of such borrowing the aggregate of all moneys
secured by existing prior security interests together with
the money so proposed to be borrowed or raised or to be
otherwise owing and secured would not exceed 2% of its Total
Tangible Assets. As at 31 March 2009 the aggregate amount of
prior charges ranking ahead of the Debenture Stock currently
outstanding and Debenture Stock being offered was $7,245.
This prior charge comprises a security interest granted by the
Company in favour of Sharp Corporation over certain office
equipment leased by the Company.
Certain creditors will also be given preference over the
holders of Debenture Stock at law. These preferential
creditors and their claims include liquidator’s costs, taxes and
certain payments to employees.
The Debenture Stock ranks equally with all present and future
Debenture Stock issued by the Company. As at 31 March
2009, the total principal amount of Debenture Stock on issue
was $4,156,660.
The minimum amount that may be invested under this Offer
is $1,000.
Further details of the Offer are comprised in the section of
this Prospectus entitled “How to Invest”.
Details of Incorporation of IssuerThe Company was incorporated under the Companies Act
1993 on 23 September 1999. The Company’s registered
number is 981004. The public file relating to the Company’s
incorporation is kept by the Companies Office. Documents
on the public file may be viewed on the Companies Office
website, www.companies.govt.nz, or (in relation to documents
which are not able to be viewed via the internet) upon
request by submitting a search request form which may be
obtained from the Companies Office at:
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Guarantors There are no guaranteeing subsidiaries.
On 12 November 2008, Finance Direct Limited received
approval under the Crown Deed of Guarantee Scheme
(“Scheme”). The Crown has guaranteed certain deposits
under the Scheme for a two year period from 12 October
2008 to 12 October 2010. The Crown guarantee is subject to
compliance by the Company with a number of requirements
including certain reporting obligations, meeting Trust
Deed covenants, complying with prudential directions and
restrictions on entering into certain transactions. A failure to
comply with any of these obligations could result in the Crown
withdrawing its guarantee.
On 25 August 2009, the Crown released details of an
extension to the Scheme through to 31 December 2011.
Different conditions apply to the extension of the Scheme and
there is a risk that the Company may not be able to obtain
extension of its current guarantee beyond 12 October 2010.
The Deed of Guarantee, together with further information
about the Scheme, including the Crown’s most recent audited
statement of financial position is available free of charge on the
Treasury website at www.treasury.govt.nz.
Directorate and Advisers
THE BOARD OF DIRECTORS
The names, addresses and technical or professional
qualifications of the Directors of the Company are stated in
the Directory on page 72.
ADvISERS
The name of the Company’s auditors is stated in the Directory
on page 72.
Grant Thornton has given and has not withdrawn its consent
to be named in this Prospectus as auditor to the Company
and to the issue of this Prospectus with its Auditor’s Report
included in the form and context in which it is included. Grant
Thornton takes no responsibility for, nor has it authorised nor
caused the issue of, any part of this Prospectus except for the
Auditor’s Report.
TRUSTEE
The Trustee is Covenant Trustee Company Limited. The
Trustee’s address is Level 34, Vero Centre, 48 Shortland Street,
Auckland.
The Trustee does not guarantee the repayment of the
Debenture Stock or the payments of interest thereon.
Restrictions on Directors’ Powers The following modifications, exceptions or limitations on
the powers of the Directors of the Company are imposed
by the Companies Act 1993 (the “Act”) or the Company’s
constitution:
• TheDirectorsmaynotdelegatethepowersconferred
on them by the sections of the Act listed in the Second
Schedule of the Act;
• TheDirectorsmaynotauthoriseadividendinrespect
of some but not all shares in a class that is of a greater
value per share in respect of other shares of that class,
otherwise than in proportion to the amount paid on the
share;
• TheDirectorsmaynotauthorisetheentryofthe
Company into a “major transaction” unless the
transaction is approved by, or contingent on approval by,
a special resolution of shareholders of the Company. A
“major transaction” is essentially a transaction, the value
of which exceeds half the value of the Company’s assets
before the transaction.
Description of Activities of Borrowing GroupThe Company was incorporated on 23 September 1999. On
31 May 2007, Finance Direct Limited and its wholly owned
subsidiary Finance Assist Limited amalgamated to become
Finance Direct Limited under Part XIII of the Companies Act
1993. Prior to the amalgamation, Finance Assist Limited had
primarily been involved in making certain loans and other
financial accommodation available to company and individual
borrowers. Subsequent to the amalgamation the combined
business operations of both Finance Direct Limited and
Finance Assist Limited are now undertaken solely by Finance
Direct Limited. A discussion of the activities of Finance Direct
Limited is provided below.
Since the date of incorporation of the Company, the Company
has been establishing itself as a multi-disciplined finance
company. The Company has primarily been involved in
sourcing financial solutions for the Company’s clients, including
• Level18,ASBCentre,135AlbertStreet,Auckland;
• GroundLevel,33BowenStreet,Wellington;or
• 55WordsworthStreet,Sydenham,Christchurch.
Copies of the documents can also be obtained (on payment
of the relevant fee) by telephoning the Companies Office on
0508 266 726.
PAGE 50 Investment Statement & Prospectus No 6
sourcing lenders to make certain financial accommodation
available to clients and in making certain loans and other
financial accommodation to company and individual
borrowers. The Company facilitates the loan advances and
receives remuneration from the client and/or the lender for
the provision of these services.
The Company currently generates its business via introducers,
internet advertising and retail advertising in print, radio and
television, and lends only on the security of vehicles, boats and
property. In-depth risk analysis, credit checking and security
valuations are obtained on all loans. As a mainstream lender,
the Company seeks to position itself to attract clientele at
the quality end of New Zealand’s loan market with a strong
emphasis on speed of service and flexibility.
Further information about the business activities of the
Company are provided in the section entitled “Investment
Statement – Answers to Important Questions” under the
heading “Who is involved in providing it for me?” on page 57.
Nature and use of principal fixed assets
The principal fixed assets of the Charging Group are general
office equipment assets which are charged pursuant to the
Trust Deed. These assets are used by the Company for its
day-to-day operational requirements.
Summary of Financial StatementsThe financial statements in summary form in respect of
the Charging Group as required by clause 7 of the Second
Schedule to the Securities Regulations 1983 is provided on
page 6.
Material ContractsDuring the two years prior to the date of registration of this
Prospectus, the following material contracts were entered into:
• On12November2008,theCompanyenteredintoa
Crown Deed of Guarantee between the Company and
the Crown under which the Crown guarantees certain
deposits for the Company for a two year period from
12 October 2008 to 12 October 2010.
• On27November2008,theCompanyenteredintoa
Supplemental Deed to the Crown Deed of Guarantee
between the Company and the Crown under which the
Crown guarantees certain deposits for the Company for
a two year period from 12 October 2008 to 12 October
2010.
These material contracts are in addition to those previously
registered.
Pending ProceedingsThere are no legal proceedings or arbitrations pending at the date of the registration of this Prospectus that may have a material effect on the Charging Group.
Issue Expenses
ISSUE EXPENSES
Issue expenses, including legal fees, accounting, audit, printing and marketing to be paid by the Company are estimated at $75,000. This amount is exclusive of any commission or brokerage referred to below that may be payable by the Company.
COMMISSION
An Investor is not liable to pay any commission to the Company in respect of the Offer. However, the Company may, in certain circumstances, agree to pay commission or brokerage to Primary Market Participants and to the Company’s agents calculated as a percentage of the amount invested. Brokerage will be paid by the Company in respect of applications accepted that bear the stamp of an approved broker of the Company at the following rates:
Investment Term Brokerage Rate
3 months 0.125%
6 months 0.250%
9 months 0.375%
12 months 0.500%
18 months 0.750%
2 years 1.00%
3 years 1.50%
4 years 2.00%
5 years 2.50%
Brokerage (at the rate prevailing at the time of renewal)
may also be paid by the Company on Investments which
are reinvested, provided that the renewal bears the relevant
broker’s or agent’s stamp.
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Ranking of SecuritiesThe aggregate amount (as at the date of the latest statement
of financial position contained in this Prospectus) of securities
that were secured by a charge over the assets of the
Charging Group that ranked in point of security ahead of the
Debenture Stock was $7,245. This prior charge comprises a
security interest granted by the Company in favour of Sharp
Corporation over certain office equipment leased by the
Company. There were no securities (as at the date of the latest
statement of financial position contained in this Prospectus)
that were secured by a mortgage or charge over the assets
of the Charging Group that ranked in point of security equally
with the Debenture Stock, other than the existing Debenture
Stock currently on issue. As at 31 March 2009, $4,156,660 of
Debenture Stock had been issued.
Preferential claims however rank ahead of the Securities.
These claims include:
• Theclaimsofpreferentialcreditorsgivenpreference
under legislation, including liquidator’s costs, taxes and
certain payments to employees;
• TheTrustee’s,oranyreceiverappointedbytheTrustee,
remuneration, costs, charges, expenses and liabilities.
The Debenture Stock of this issue will rank equally with all
Debenture Stock issued by the Company from time to time
as far as security over the assets and undertakings of the
Company is concerned.
The Charging Group is prohibited from giving any security
interests ranking ahead of, or equally with, the first ranking
security interests given to the Trustee for the benefit of holders
of Debenture Stock under the Trust Deed except for Prior
Security Interests over any asset to secure any moneys to be
borrowed, raised or otherwise owing in purchasing or acquiring
such asset if at the time of such borrowing the aggregate of all
moneys secured by existing Prior Security Interests together
with the money so proposed to be borrowed or raised or to
be otherwise owing and secured would not exceed 2% of the
Total Tangible Assets.
Provisions of Trust Deed and other Restrictions on Borrowing Group
TRUST DEED
The Trust Deed is dated 30 September 2004 and entered
into between the Charging Group and Covenant Trustee
Company Limited.
The Trust Deed provides that the Company may from time
to time borrow or raise money secured by Debenture Stock.
Pursuant to the Trust Deed the Trustee has agreed to act as
trustee for the benefit of the Stockholders on the terms and
conditions and with the powers and authorities contained in
the Trust Deed.
GRANTING OF SECURITY INTEREST
Pursuant to the Trust Deed the Charging Group has granted
to Covenant Trustee Company Limited a security interest in all
of the Charging Group’s Personal Property and a charge over
the Charging Group’s Other Property. The charge created by
the Trust Deed in respect of the Other Property is a floating
charge over Other Property in respect of which a fixed charge
is not legally and fully effective and a fixed charge over all
Other Property.
RESTRICTIONS IN TRUST DEED
Financial limitations
Each of the Company and the other Charging Group
Members covenant with the Trustee that none of them will at
any time after the date of the Trust Deed:
(a) Where the Total Tangible Assets are less than $8,000,000,
permit the Total Liabilities to exceed 86% of the Total
Tangible Assets;
(b) Where the Total Tangible Assets are $8,000,000 or more
but less than $15,000,000, permit the Total Liabilities to
exceed 88% of the Total Tangible Assets;
(c) Where the Total Tangible Assets are $15,000,000 or
more, permit the Total Liabilities to exceed 90% of the
Total Tangible Assets;
(d) Borrow or raise any money on the security of any Prior
Security Interest when the aggregate of all principal
moneys then secured by existing Prior Security Interests
plus the moneys so proposed to be borrowed or raised
and secured would exceed 2% of Total Tangible Assets.
PAGE 52 Investment Statement & Prospectus No 6
Restrictive Covenants
Each of the Company and the other Charging Group
Members covenant with the Trustee that none of them will,
without the prior written consent of the Trustee:
(a) Own any Real Property or shares or other equity
securities or units in any company, unit trust or other
person except:
(i) Real Property or shares which are held as security
for the provision of financial accommodation, or are
held as a result of enforcing any such security
pending realisation;
(ii) Premises leased and occupied by the Company or
any Charging Group Member for the purposes of its
business; or
(iii) Shares in any other Charging Group Member;
(b) Enter into any Related Party Transaction except in the
ordinary course of business and where the terms thereof
are evidenced in writing and the consideration therefore
is on the basis of an arm’s length transaction as between
two unrelated parties contracting in an open market,
provided however that in any twelve month period the
aggregate Value of Related Party Transactions entered
into or remaining outstanding shall not exceed 2% of
Total Tangible Assets as at the end of that twelve month
period;
(c) Carry on any business other than the provision of
financial accommodation and financial services or acquire
any assets other than assets used in such business;
(d) Allow the amount owing to the Charging Group under
financing receivables by any one debtor or related group
of debtors to exceed 10% of Total Tangible Assets;
(e) Sell or transfer as a going concern, whether by a single
transaction, or any series of transactions whether related
or not, the whole of its undertaking, or any part or parts
thereof comprising more than 25% of Total Tangible
Assets;
(f) Write up the value of any asset in its books of account
beyond the fair market value thereof as approved by the
Auditors at the time of such writing up;
(g) Enter into or make any proposal for a compromise
or amalgamation (other than any amalgamation with
another Charging Group Member, prior written notice of
which has been given to the Trustee); or
(h) Make any distribution other than:
(i) From a Charging Group Member to the Company;
(ii) By way of redemption of Redeemable Shares; or
(iii) By way of dividend out of profits,
and, in any event, no distributions of any kind are to be
made at any time after an Event of Default has occurred
and is continuing.
Covenant Trustee Company Limited does not guarantee the
repayment of the Debenture Stock or the payment of interest
thereon.
Duties of TrusteeThe Trust Deed provides that the Trustee has agreed to act
as trustee for the benefit of the Stockholders on the terms
and conditions and with the powers and authorities contained
in the Trust Deed. The Trustee holds the security interest
in all of the Company’s Personal Property and a charge
over the Company’s Other Property and must consider
regular financial reports furnished by the Company and the
Company’s auditors as set out in the Trust Deed so as to
enable the Trustee to review the Company’s compliance with
its obligations under the Trust Deed.
The Fifth Schedule of the Securities Regulations 1983 requires
that the Trustee shall exercise reasonable diligence to ascertain
whether or not any breach of the terms of the Trust Deed
or of the terms of the Offer of the Securities has occurred
and, except where it is satisfied that the breach will not
materially prejudice the security (if any) of the Securities or
the interests of the holders thereof, shall do all such things as
it is empowered to do to cause any breach of those terms to
be remedied. The Trustee shall exercise reasonable diligence
to ascertain whether or not the assets of the Charging Group
that are or may be available, whether by way of security or
otherwise, are sufficient or likely to be sufficient to discharge
the amounts of the Securities as they become due.
The Trustee does not guarantee the repayment of the
Securities or the payment of interest.
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Reporting RequirementsTo ensure that the Trustee is adequately informed, the Trust
Deed requires that the Company must provide the following
information to the Trustee:
• Annualauditedfinancialstatements,accompanied
by an auditor’s report;
• Half-yearlyauditedfinancialstatements,accompanied
by an auditor’s report;
• Furtherfinancialstatementsandreportswhenthe
Trustee considers that special circumstances have arisen
which warrant such request;
• Copiesofallreports,noticesandothermaterialsent
by the Company to its shareholders or to the holders
of Securities;
• Quarterlydirectors’certificatesintheformprescribed
by the Trust Deed (and otherwise as required by the
Securities Regulations) and a liquidity report also in the
form prescribed by the Trust Deed;
• Monthlydirectors’statementsandreportsonasset
quality, reinvestment rates, breaches of financial covenants
(if any) and liquidity to comply with additional reporting
requirements required by the Securities Regulations;
• Reportingaspertherequirementssetoutbythe
Reserve Bank of New Zealand pursuant to the Reserve
Bank of New Zealand Amendment Act 2008 and its
regulations (as permitted by the Reserve Bank);
• Acopyofthemonthlymanagementaccountsofthe
Company; and
• Noticeofproceedingswhichmateriallyandadversely
affect the Company.
Ranking of Debenture StockThe Debenture Stock being offered under this issue will rank
equally with all existing and further Debenture Stock which
may be issued from time to time pursuant to the provisions of
the Trust Deed.
Enforcement and Meetings
ENFORCEMENT
The Trust Deed provides for various events of default
which include:
• Non-paymentofanyDebentureStockorothermoneys
owing under the Trust Deed on the due date;
• BreachofanyoftheobligationsoftheCompanyorthe
Charging Subsidiaries under the Trust Deed which is not
remedied within 14 days after the Company or Charging
Subsidiary became aware of it;
• Insolvency,creditorenforcementaction,receivership,
dissolution, amalgamation, statutory management or
cessation of business of the Company or any Charging
Subsidiary;
• EnforcementofaPriorSecurityInterest;
• ChangeincontroloftheCompanywithouttheprior
consent of the Trustee.
If an event of default occurs the Trustee may, by notice in
writing to the Company, appoint a receiver and realise the
assets of the Company and Charging Subsidiaries to repay
the Debenture Stock.
MEETINGS OF THE STOCKHOLDERS
Meetings of Stockholders can be called by the Company, the
Trustee or by Stockholders holding not less than 10% of the
aggregate principal amount of the Stock. 14 days’ notice of
each meeting must be given to the Stockholders.
A quorum for passing an Extraordinary Resolution is
Stockholders present in person or by representative, holding
more than 50% of the aggregate principal amount of the Stock.
A quorum for the transaction of any business other than
passing any Extraordinary Resolution is Stockholders present
in person or by representative, holding at least 10% of the
aggregate principal amount of the Stock.
If a quorum is not present at any meeting and the meeting is
adjourned, the Stockholders present in person or by proxy at
the adjourned meeting will constitute a quorum.
The Stockholders have various powers exercisable by
Extraordinary Resolution, including the power to amend the
Trust Deed. An Extraordinary Resolution is a resolution
passed by 75% of the votes cast at the meeting. Each
Stockholder present in person or by proxy at a meeting has
PAGE 54 Investment Statement & Prospectus No 6
one vote or, if a poll is demanded, one vote for every dollar
principal amount of Stock held. Extraordinary Resolutions
bind all Stockholders whether or not they are present at the
meeting or vote for or against the Extraordinary Resolution.
A person appointed by the Trustee will be Chairperson of
the meeting and any director, officer or solicitor of, or person
authorised by, the Company or the Trustee may attend any
meeting and has the right to speak at the meeting.
This summary is not an exhaustive summary of the Trust Deed. You are invited to inspect a copy of the Trust Deed at the registered office of the Company or the offices of the Trustee.
Other Terms of Offer and SecuritiesAll terms of the Offer, and all the terms of the Debenture
Stock being offered, are set out in this Prospectus, other
than those implied by law or set out in a document that
is registered with a public official and is available for public
inspection and is referred to in this Prospectus.
Financial StatementsThe audited financial statements for the Company for the
12 month period ended 31 March 2009 are set out on pages
11 to 42 of this document. The Auditors’ Report in respect of
those financial statements is set out on pages 43 to 46 of this
document. The financial statements include the information
required by clauses 16-32 of the Securities Regulations 1983
and the Securities Act (Financial Institutions) Exemption
Notice 2007.
Places of Inspection of DocumentsThe Constitution of the Company and the material contracts
referred to in this document are kept by the Companies
Office. Documents on the public file may be viewed on the
Companies Office website, www.companies.govt.nz, (or where
those documents are not able to be viewed via the internet)
upon request by submitting a search request form which may
be obtained from the Companies Office at:
• Level18,ASBCentre,135AlbertStreet,Auckland;
• GroundLevel,33BowenStreet,Wellington;or
• 55WordsworthStreet,Sydenham,Christchurch.
Copies of the documents can also be obtained (on payment
of the relevant fee) by telephoning the Companies Office on
0508 266 726.
Other Material MattersThe current average reinvestment rate (i.e. percentage of funds
reinvested at the end of term) for the Debenture Stock for
the quarter ended 31 July 2009 was 39.39%. Reinvestment
rates vary greatly from month to month and are affected by
a variety of market factors including media coverage on the
global credit crisis, public perception of the industry and overall
market confidence. As the rates are primarily driven by these
factors, they often do not provide an accurate indication of
the performance of the Company. Investors are encouraged
to read the financial statements, Chairman’s Letter and other
sections of this Prospectus to obtain a better understanding of
the Company’s performance.
There are no other material matters relating to the Offer of
Debenture Stock under this Prospectus, other than matters set
out elsewhere in the Prospectus, and contracts entered into in
the ordinary course of business of the Company.
PAGE 55Investment Statement & Prospectus No 6
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Richard Alan Waddel Wayne Darrin Croad
Directors’ Statement
The Directors, after due enquiry by them in relation to the
period between 31 March 2009 and the date of registration of
the Prospectus, are of the opinion that no circumstances have
arisen that materially adversely affect the trading or profitability
of the Charging Group, the value of their assets or the ability
of the Charging Group to pay their liabilities due within the
next twelve months.
The Prospectus has been duly signed by each Director of the
Company or by their agents authorised in writing.
DIRECTORS OF FINANCE DIRECT LIMITED
John Alan Callaghan Peter Karl Christopher Huljich
Dir
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PAGE 56 Investment Statement & Prospectus No 6
FINANCE DIRECT LIMITED
Investment Statement - Answers to Important Questions
MOTOR vEHICLE
LOANS MAKE UP
A SIGNIFICANT
PERCENTAGE OF
FINANCE DIRECT
OPERATIONS.
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Investment Statement - Answers to Important Questions
What sort of investment is this?
DEBENTURE STOCK
This Investment Statement offers first ranking Debenture
Stock of Finance Direct Limited, subject to the registration
of prior charges. Debenture Stock offered in this Investment
Statement are debt securities for the purposes of the
Securities Act 1978.
The Debenture Stock shall be issued for fixed terms ranging
between 3 months and 5 years. Fixed interest rates are
applicable to Debenture Stock and will vary depending upon
the fixed term selected. Current interest rates for Debenture
Stock are set out on the rate sheet accompanying the
Application Form.
The issue of the Debenture Stock will provide the Company
with funds to on-lend for selected financial transactions
including operating leases, hire purchase arrangements and
loan advances to both companies and individuals.
The obligations of the Company to Investors in respect of the
Debenture Stock is secured by a first ranking security interest
in all of the Company’s Personal Property and a charge over
the Company’s Other Property pursuant to a Debenture
Trust Deed granted by the Company in favour of Covenant
Trustee Company Limited. The Debenture Stock issued by the
Company is first ranking because there are no other charges
registered over all of the Company’s assets that rank ahead of
the charge granted in favour of the Trustee pursuant to the
Trust Deed except for permitted prior charges.
The Trust Deed permits the Company to create prior security
interests over any asset to secure any moneys to be borrowed,
raised or otherwise owing in purchasing or acquiring such asset
if at the time of such borrowing the aggregate of all moneys
secured by existing prior security interests together with
the money so proposed to be borrowed or raised or to be
otherwise owing and secured would not exceed 2% of its Total
Tangible Assets. As at 31 March 2009, the aggregate amount
of prior charges ranking ahead of the Debenture Stock
currently outstanding and Debenture Stock being offered was
$7,245. This prior charge comprises a security interest granted
by the Company in favour of Sharp Corporation over certain
office equipment leased by the Company.
Certain creditors may also be given preference under the
legislation. These preferential creditors include liquidator’s
costs, taxes and certain payments to employees.
The Debenture Stock ranks equally with all present and future
Debenture Stock issued by the Company. As at 31 March 2009,
the total principal amount of Debenture Stock on issue was
$4,156,660.
The minimum amount that may be invested under this Offer
is $1,000.
NEW INvESTMENT PRODUCTS
Finance Direct Limited reserves the right to offer new
investment products, including savings accounts, not specified
in this Investment Statement, and to offer different interest
payment methods to Investors.
Who is involved in providing it for me?
ISSUER
Finance Direct Limited is the issuer of the Debenture Stock.
The Company’s registered office is Level 2, Finance Direct
House, 88 Broadway, Newmarket, Auckland.
TRUSTEE
The Trustee is Covenant Trustee Company Limited.
The Trustee’s address is Level 34, Vero Centre, 48 Shortland
Street, Auckland.
BUSINESS ACTIvITIES
The Company was incorporated on 23 September 1999. Since
the date of incorporation of the Company, the Company has
been establishing itself as a multi-disciplined finance company.
The Company has primarily been involved in sourcing financial
solutions for the Company’s clients, including sourcing lenders
to make certain financial accommodation available to clients
and in making certain loans and other financial accommodation
to company and individual borrowers. The Company facilitates
the loan advances and receives remuneration from the client
and/or the lender for the provision of these services.
The Company currently generates its business via introducers
and retail advertising in print, radio and television; and lends
only on the security of vehicles, boats and property. In-depth
risk analysis, credit checking and security valuations are obtained
on all loans. As a mainstream lender, the Company seeks to
position itself to attract clientele at the quality end of New
Zealand’s loan market with a strong emphasis on speed of
service and flexibility.
PAGE 58 Investment Statement & Prospectus No 6
CHARGING GROUP’S BUSINESS ACTIvITIES
The Charging Group’s principal activity is the raising of money
from the public by the issue of Debenture Stock and the
advance of that money, together with the Charging Group’s
own funds, to the consumer and retail finance sector. The
Charging Group’s loans can generally be categorised as falling
within the following three categories:
• Toassistconsumerswiththefundingofassetpurchases
(i.e. the purchase of motor vehicles and boats);
• Toassistconsumerswiththerefinancingorconsolidation
of existing indebtedness;
• Securedbusinessandpersonalloans.
The Company commenced business as a broker and financier
in the consumer and retail finance sector in 1999. This lending
comprises the provision of business loans and personal loans
to individual consumers for general purposes or to specifically
assist consumers with the purchase of motor vehicles and
boats. These loans are predominantly secured with registered
security interests over motor vehicles, boats, and agreements
to mortgage real estate (secured by caveats registered over
the relevant real estate) owned by the borrower. This lending
is generally:
• ConcentratedinAucklandandNorthland;
• Representedbyloansmadefortermsof24months(on
average);
• Representedbyloansoflessthan$20,000.
The Company’s loan documentation allows for loans to be
varied during the course of loan facility agreements. This
includes the ability to extend the maturity dates of loans and
the rollover of loans into new agreements, where it is deemed
beneficial to do so. Loan rollovers are considered based on
their individual merits, bearing in mind the current economic
climate and the additional period of time required to achieve
recovery of the loan. All loan rollovers are assessed based on
current credit policy and require in-depth risk analysis, credit
checking, security valuations and third party guarantees (where
applicable) to be provided by borrowers.
The Charging Group does not lend to parties related to the
Charging Group.
BREAKDOWN OF BUSINESS ACTIvITIES
The exposure of the Charging Group to the aforementioned
lending sectors was as follows (as a percentage of the total
receivables owned by the Company as at 31 March 2009):
Consumer loan finance 86%
Business and personal loans 14%
COMPOSITION OF RECEIvABLES BY QUANTUM
At 31 March 2009, the Charging Group had 374 open loans
with an average balance of $13,738. The following table
illustrates the composition of the Charging Group’s loan
receivables by quantum as at 31 March 2009:
Size of loan: Number of loans:
$0 to $10,000 231
$10,001 to $20,000 73
$20,001 to $30,000 31
Greater than $30,001 39
Total 374
NATURE OF SECURITY FOR LOANS
The loans made by the Charging Group are secured by
the following types of security (as a percentage of the total
receivables owned by the Company as at 31 March 2009):
Nature of Security % of total receivables secured
Security interest over motorbike only 0.11%
Security interest over motor vehicle and boat 1.74%
Security interest over property only 12.81%
Security interest over motor vehicle only 30.63%
Security interest over property
and motor vehicle 54.71%
Total 100.00%
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GEOGRAPHICAL EXPOSURE
The majority of loans made by the Charging Group are
made to borrowers residing in Auckland and Northland.
The following table illustrates the geographic location of
the borrowers to whom the Charging Group lends (as a
percentage of the total receivables owned by the Charging
Group as at 31 March 2009):
Location of borrower % of total receivables secured
Auckland and Northland 72.41%
Bay of Plenty 3.35%
Central North Island 13.57%
South Island 3.78%
Waikato 4.09%
Wellington 2.80%
Total 100.00%
TRUST DEED
The Trust Deed is dated 30 September 2004 and entered into
between the Charging Group and Covenant Trustee Company
Limited.
The Trust Deed provides that the Company may from time
to time borrow or raise money secured by Debenture Stock.
Pursuant to the Trust Deed the Trustee has agreed to act as
trustee for the benefit of the Stockholders on the terms and
conditions and with the powers and authorities contained in
the Trust Deed.
GRANTING OF SECURITY INTEREST
Pursuant to the Trust Deed the Charging Group has granted
to Covenant Trustee Company Limited a security interest in all
of the Charging Group’s Personal Property and a charge over
the Charging Group’s Other Property. The charge created by
the Trust Deed in respect of the Other Property is a floating
charge over Other Property in respect of which a fixed charge
is not legally and fully effective and a fixed charge over all
Other Property.
RESTRICTIONS ON BORROWINGS AND OTHER COvENANTS
Details of the financial limitations, restrictive covenants and
general covenants imposed upon the Charging Group by the
Trust Deed are stated on pages 51 and 52.
DUTIES OF TRUSTEE
Details of the duties of the Trustee are stated on page 52.
The Trustee does not guarantee the repayment of the
Securities or the payment of interest.
REPORTING REQUIREMENTS
Details of the reporting requirements of the Charging Group
to the Trustee are stated on page 53.
RANKING OF DEBENTURE STOCK
The Debenture Stock being offered under this issue will rank
equally with all existing and future Debenture Stock which may
be issued from time to time pursuant to the provisions of the
Trust Deed.
This summary is not an exhaustive summary of the Trust Deed.
You are invited to inspect a copy of the Trust Deed at the
registered office of the Company or the offices of the Trustee.
How much do I pay?
MINIMUM INvESTMENT
You may select the amount you wish to invest (“Application
Moneys”). The minimum amount that may be invested
however is $1,000.
APPLICATION AND PAYMENT
If you wish to make an Investment, you must:
• CompletetheApplicationFormthataccompaniesthis
Investment Statement.
• Attachachequefortheamountyouwishtoinvest.
• SendyourApplicationFormtogetherwithyourcheque
made payable to “Finance Direct Limited” and crossed
“Not Transferable” for the amount of the Application
Moneys shown on your Application Form to Finance
Direct Limited, P O Box 17422, Greenlane, Auckland, to
any Primary Market Participant or any agent appointed
by the Company to receive such Application Forms.
DO NOT forward cash. Payment will only be accepted
in New Zealand currency as follows:
• Personalchequedrawnonandpayableatany
New Zealand bank;
• BankchequeissuedbyandpayableatanyNewZealand
bank;
• BankdraftdrawnonandpayableatanyNewZealand
bank; or
• BydirectcreditinclearedfundsintotheCompany’s
bank account.
PAGE 60 Investment Statement & Prospectus No 6
What are the charges?You are not required to pay any fees or charges during the term
of your Investment other than those statutorily imposed (if any)
and the money paid for the Debenture Stock applied for.
The Investor has no right to require the Company to repay
Debenture Stock to the Investor prior to the expiry of the fixed
term of the Debenture Stock (“Maturity Date”). However, the
Company reserves the ability at its absolute discretion to permit
the early repayment of Debenture Stock before the Maturity
Date for the respective Investment in the event of death or
financial hardship. Requests for early repayment of Debenture
Stock must be made to the Company in writing. In the event
that the Company agrees to repay the Debenture Stock to the
Investor prior to the Maturity Date, the Company reserves the
right at its discretion to adjust the interest rate applicable to the
Debenture Stock for the term upon which those funds have
been held by the Company. The Company may also charge an
investment break fee set by the Company from time to time.
CHARGES PAYABLE BY THE ISSUER
The Company is liable to pay fees to the Trustee and may
from time to time pay brokerage to certain financial advisers,
intermediaries and brokers. Further details on brokerage
are set out on page 50 of this Prospectus under the section
headed “Issue Expenses”.
None of the above fees are payable by an Investor and do not
impact upon the amount of returns payable by the Company
on your investment.
What returns will I get?
INTEREST – DEBENTURE STOCK
The returns to an Investor from their investment in Debenture
Stock will be interest on the Debenture Stock. The Company
will pay the Investor interest on the sum invested as
Debenture Stock at the fixed rate advertised by the Company
for Debenture Stock of that term on the date the Application
is received by the Company. Subject to an Investor’s
application being accepted, interest will begin accruing on the
day the application money is received in cleared funds by the
Company. The interest will accrue on a daily basis from that
date (on the basis of a 365 day year) and will be paid at the
intervals and the rates as set out in the Application Form on
which the Investment was made or as otherwise agreed with
the Company.
Current interest rates for Debenture Stock are set out on the
rate sheet accompanying the Application Form. From time to
time market conditions alter and interest rates on Debenture
Stock are changed to suit those conditions. The Company
may vary the interest rates offered at any time. Any alteration
in interest rates will not apply to Investments received before
that alteration is made. Once accepted, Debenture Stock
will continue to earn the interest rate agreed on when the
Investment is made and is fully protected from any later
fluctuation.
If the Application Form is received after an interest rate has
been changed, the Company will advise the Investor of such a
change. In the event that the Investor does not confirm within
10 Business Days that the Investor accepts the new interest
rate, the Company will refund the deposit to the Investor. No
interest will be paid on moneys refunded.
PAYMENT OF INTEREST
The key factors that will determine your returns are:
• Thetermoftheinvestment;
• Theinterestrateapplicabletothetermof
the investment;
• Theinterestpaymentoptionselected.
Interest on the Investment may be compounded or paid to
the Investor by direct credit or cheque at the Investor’s option.
The Company pays interest quarterly during the term of the
Investment from the date of the deposit with the Company.
Once the Debenture Stock has been allotted to the Investor
for a fixed term, the interest rate at which that Debenture
Stock has been issued to the Investor will be fixed during the
term of the Investment and will not be varied.
The amount of returns an Investor will receive is not
quantifiable as at the date of this Investment Statement due to
the options available to the Investor. Nor is it possible to state
the exact dates on which, or the frequency with which, the
returns on your Debenture Stock will be paid. The amount
can be calculated once these options have been selected, and
that amount is enforceable by an Investor.
Because these factors vary between prospective investors, the
Company cannot promise a quantifiable amount of returns in
this Investment Statement.
The Company may adjust the interest rate applicable to any Debenture Stock if the Stockholder seeks early repayment
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in the circumstances set out in the section “What are the Charges?” The new rate will be a rate the Company determines is applicable for the period during which the investment was held. The Company may also charge an investment break fee set by the Company from time to time.
The Investor can choose to receive payments of interest in any
one of three ways:
Compound – Rather than make a quarterly interest payment, the Company will add interest to the investment automatically and send the Investor a notice of the Investor’s balance. The Investor will then earn interest on the original investment and on interest. If the Investor selects “compounding interest option” on the Application Form and then later decides that the Investor would like to receive quarterly payments the Company will change the manner in which payments of interest are made in the future.
Quarterly Direct Credit – The Company may pay interest direct to the Investor’s bank account each quarter and mail the Investor an interest advice which shows details of the amount banked. This method avoids any postal delay which may occur if a cheque is mailed to the Investor.
Quarterly Cheque – The Company may pay the interest by
cheque each quarter. The cheque together with an interest
advice is posted to the Investor.
TAXATION
Under current legislation, the Company is required to deduct Resident Withholding Tax (“RWT”) from interest paid to, or applied for, the benefit of New Zealand resident Investors and Investors who hold secured deposits through a fixed establishment in New Zealand. RWT will not be deducted by the Company where Investors hold a valid Certificate of Exemption that has been supplied to the Company.
Investors who supply the Company with their IRD Number must elect a RWT rate currently being 19.5c, 33c or 39c for every $1.00 of interest earned. RWT will be deducted at the rate of 39c for every $1.00 of interest earned where an Investor’s IRD Number is not supplied, as required by current legislation.
Non-Resident Withholding Tax (“NRWT”) will be deducted by the Company from interest paid to, or applied for, the benefit of an Investor who is not a tax resident of New Zealand unless the Investor holds secured deposits through a fixed establishment in New Zealand. The rate of NRWT deduction will be dependent upon the Investor’s country of residence.
The Company will make the deductions referred to above and as required by applicable legislation unless it is satisfied by the Investor that such deductions are not required by law.
The Company has obtained “Approved Issuer” status and has registered the Debenture Stock as “Registered Securities” for the purpose of the approved issuer levy provisions in Part VIII of the Stamp and Cheques Duties Act 1971. The Company may, upon request, subject to being legally entitled so to do, and on any terms it requires, agree to deduct and pay an approved issuer levy (currently 2%) on interest payments made to non-residents in lieu of NRWT.
With the tax threshold changes that took effect from 1 October 2008 and the new tax rates effective from 1 April 2009, no changes have yet been made to the RWT tax rates of 19.5% or 33%. Financial institutions have the option of offering a reduced rate of 38% in place of 39% for the 2010 tax year. However, the Company does not currently offer this reduction. Accordingly, an Investor will need to recover any overpaid RWT by filing a tax return.
The Government has advised that further consequential changes to the RWT rates on interest will not be fully implemented until there has been further consultation with banks and other financial institutions. That consultation is still in progress at the date of this Prospectus.
The party legally liable to pay the interest and principal
comprising the Investment is Finance Direct Limited.
NEW INvESTMENT PRODUCTS
Finance Direct Limited reserves the right to offer new
investment products, including savings accounts, not specified
in this Investment Statement, and to offer different interest
payment methods to Investors.
What are my risks?The principal risk of your Investment not being recovered in
full by you, or of not receiving the returns stated in the section
entitled “What returns will I get?”, is if the Company becomes
insolvent. This could occur if:
• AsignificantnumberofloansmadebytheCompany
were not repaid and security taken for those loans
proved inadequate for any reason and the Company was
otherwise unable to recover those loans in full from the
borrowers; or
• ThevalueoftheCompany’sassetsfallandthoseassets
were realised for less than the acquisition cost of those
assets;
• TheCompany,becauseofthoseprincipalrisksor
otherwise, is unable to meet its debts as they fall due.
PAGE 62 Investment Statement & Prospectus No 6
GENERAL RISKS
DEBTOR RISK
As with most finance companies, the most significant risk faced
by the Company is the risk that the Company is unable to
recover loans in full from those parties borrowing funds from
the Company.
In light of the fact that the Company:
• Predominantlylendsonthesecurityofmotorvehicles,
boats (which are by their nature depreciating assets) and
agreements to mortgage over real estate (which are in
effect unregistered mortgages often ranking behind first
registered mortgages and/or second mortgages, or other
caveatable interests); and
• Lendsatahigherloantovalueratiothanlargerfinancial
institutions, in respect of the amount that it will lend
against certain assets,
the Company has potentially greater credit risk in the event
that a borrower client defaults under a loan made by the
Company as the Company may not be able to realise sufficient
value from the sale of the assets pledged by the borrower as
security for the loan.
The Company has a number of procedures in place to seek
to reduce the risk of the Company being rendered unable
to recover all the moneys owing to it by a borrower or
borrowers under a loan, including:
• Arigorousloanapplicationandcreditapprovalprocess
that each prospective borrower must complete to the
satisfaction of the Company prior to a loan advance
being made to that prospective borrower;
• EnsuringthattheCompanytakessufficientsecurityto
properly protect its position;
• EnsuringthattheCompanyfollowsstringentpoliciesof
monitoring loan performance, including daily monitoring
of the contractual position of all of the Company’s
debtors with immediate daily personal follow up if
there is a breach of the terms of their loan facility
documentation, followed up with enforcement action if
the breach is not expeditiously remedied;
• Obtainingthirdpartyguaranteesoftheborrower’s
obligations to the Company where appropriate in the
circumstances;
• Ensuringthatloansecuritiesarewithinprudentloanto
valuation ratio percentages;
• EnsuringthatthecovenantsintheDebentureTrustDeed,
pursuant to which Debenture Stock is issued, are met.
In the vast majority of loans made by the Company, the
Company requires that borrowers obtain payment protection
insurance. Under these policies of insurance, the insurer will
generally pay the borrower’s payment instalments as they
fall due under a loan upon the occurrence of death, certain
accidents, sicknesses or redundancy/bankruptcy (if the
borrower is self-employed).
In certain circumstances, the Company will require a
borrower’s obligations to the Company to be guaranteed
by a third party. This will generally only be required where
the security for a loan is owned by a person other than the
borrower, in which case the owner of that property will be
required to guarantee the obligations of the borrower to the
Company. Also, in the case of borrowers under the age of 20,
the Company normally looks for a third party to guarantee the
obligations of that borrower to the Company depending upon
the assessed value of the security given for the respective loan.
CONTINUITY OF SUPPLY
The Company is in the business of lending funds that have
been deposited with it together with other moneys that it
has access to. Some of these secured debenture funds are
received via a number of financial intermediaries. The ability
of the Company to lend relies upon the support of these
intermediaries and the investing public. If for any reason the
continuing support of a number of advisers and financial
intermediaries, or the investing public ceases to occur or were
to significantly reduce, then the Company may not have the
funds available to on-lend to prospective borrowers. This
event may adversely impact upon the growth and financial
performance of the Company.
LIQUIDITY RISK
Liquidity risk is the risk that the Company will not have
sufficient funds to meet its ongoing obligations. A risk exists
that the Company could encounter difficulty in raising funds at
short notice to meet its lending and repayment commitments
due to the Company principally raising funds from the issue of
Debenture Stock. To mitigate this risk, the Company:
• Preparesdetailedfinancialforecastsandholdsregular
management meetings to discuss liquidity management
issues;
• Maintainssufficientliquidfundstomeetitscommitments
based on the forecast financial information;
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• Obtainsexternalexpertadviceasconsideredprudent
from time to time;
• Generallylendsfundsfortermswhichareactually
shorter than most of the terms of its debenture
borrowings.
INTEREST RATE RISK
Interest rate risk arises as a result of mismatches between the
Company’s interest bearing assets (i.e. loans) and its interest
bearing liabilities (i.e. Debenture Stock). Movements in interest
rates may impact upon the Company’s financial results by
affecting interest margins as a result of such mismatches.
The Directors have a number of risk mitigation procedures
in place to seek to reduce the impact of interest rate
movements, including:
• ThefactthattheCompanygenerallylendsfundsfor
terms shorter than most of the terms of its debenture
borrowings means the Company generally knows funding
costs for the duration of any lending at the time it enters
into loan agreements;
• Interestratesformostinvestmentsarefixedfortheterm
of the investment.
BOARD PERFORMANCE
There is a risk that the performance of the Board of Directors
does not meet required standards either individually or
collectively. There is significant responsibility on the Directors
of a finance company to comply with prudent financial and
corporate governance measures, and other legal requirements
and responsibilities. The Company’s Board is aware of these
responsibilities and requirements, and is continuing to develop
its code of governance.
REGULATORY RISK
There could be substantial changes in laws and governmental
policies affecting the Company’s business. One such change
being the Reserve Bank of New Zealand Amendment Act
2008, that directly affects both the regulation and minimal
capital requirements for deposit takers.
COMPETITION
The Company faces the risk of existing or new competitors or
new products eroding the Company’s market share or margins.
LOSS OF KEY PERSONNEL
The Company has spent considerable time and effort in
bringing together individuals into the Company who have the
skills, experience and ability to work together effectively to
achieve superior results. In the normal course of business, the
Company faces the risk of the loss of one or more of those
individuals for a variety of reasons.
MARKET RISK
Market risks include further loss of confidence in the economy
in general possibly leading to a continuation of the recession.
Failure by competitor finance companies could also lead to a
general lack of confidence by investors.
IT RISKS
The Company is dependent on its information technology
(IT) systems to maintain its efficiency and to monitor the
performance of its finance receivables and debenture stock
ledgers. The failure of its IT systems could have a short term,
yet material, adverse impact on the Company’s operations.
The Company is also exposed to the risks of new systems
or upgrades introduced as part of the ongoing improvement
failing to perform to expectations.
LITIGATION RISK
There is a possibility that future litigation could adversely affect
the Company’s financial position. The Company is not aware
of any adverse litigation threatened or pending that may have
an adverse effect on the financial position of the Company as
at the date of this Prospectus.
GUARANTEE RISK
The Crown has guaranteed certain deposits under the
Scheme until 12 October 2010. The Crown guarantee is
subject to compliance by the Company with a number of
requirements including certain reporting obligations, meeting
Trust Deed covenants, complying with prudential directions
and restrictions on entering into certain transactions. There is
a risk that failure to comply with any of these obligations could
result in the Crown withdrawing its guarantee.
On 25 August 2009, the Crown released details of an
extension to the Scheme through to 31 December 2011.
Different conditions apply to the extension of the Scheme and
there is a risk that the Company may not be able to obtain
extension of its current guarantee beyond 12 October 2010.
PAGE 64 Investment Statement & Prospectus No 6
SPECIFIC RISKS
REAL ESTATE AND PROPERTY MARKET
As at 31 March 2009, approximately 68% of the Company’s loans were secured by the Company taking security by way of an agreement to mortgage over real estate owned by the borrower, which agreement is secured by a caveat registered against the certificate of title for the borrower’s property. Generally, the caveat registered to secure the agreement to mortgage will be registered subsequent to a first and/or a second mortgage. As a consequence:
• Intheeventthattheconditionsintherealestatemarket
deteriorated materially causing a depreciation in real
estate values, this may adversely impact on the value of
the security underlying certain of the Company’s loans
which it may realise in the event that it is required to
enforce its security;
• IntheeventtheCompanysoughttoenforceitssecurities
through the registration of a mortgage and the exercise
of the power of sale under that mortgage, then the
Company’s ability to realise the proceeds of sale of the
mortgaged property would be subject to the claims of
any prior ranking secured interest registered over the
mortgaged property in question, i.e. a first or second
mortgage or prior ranking caveat. Subject to the
extent of the borrower’s indebtedness at the time of
enforcement, there may not be sufficient residual funds
available to the Company to repay the indebtedness of
the borrower to the Company.
EXPOSURE TO A PARTICULAR COUNTERPARTY
There is a risk that the Company may become too heavily exposed to one particular borrower. The Company mitigates this risk by ensuring that it is not exposed to one entity for an amount equal to or greater than 10% of the Company’s Total Tangible Assets.
RELATED PARTY LENDING
The Company has a rigid policy of not making loan advances to related parties and accordingly does not consider transactions of this nature to be a risk to the Company.
UNSUCCESSFUL MARKETING
It is possible that the Company’s initiatives to market its financial services to prospective borrowers and its financial investments such as secured debenture stock will fail, or not produce the projected levels, which may have an adverse impact upon the financial position and performance of the Company.
CONSEQUENCES OF INSOLvENCY
You would not be liable to pay any money to any person as a
result of the insolvency of the Company. Your principal risk is
that you could suffer loss of some or all of the interest due to
you, or your original investment, if for any reason the Company
becomes insolvent and is unable to meet its debts as they
fall due. It is possible therefore that on termination of your
investment at any time you may receive less than the amount
of your original investment.
The Debenture Stock being offered under this issue will rank
pari passu (or equally) with all existing and further Debenture
Stock which may be issued pursuant to the Trust Deed. As at
31 March 2009, the aggregate principal amount of Debenture
Stock issued by the Company and which were outstanding
was $4,156,660. The claims on the assets of the Company that
will or may rank ahead of your claim if the Company is put
into liquidation are:
• Claimsbypreferentialcreditors.Preferentialcreditors
are determined by reference to the Companies Act 1993.
They include the fees and expenses incurred by any
liquidator, certain claims by the Company’s employees
for unpaid remuneration, PAYE tax deductions and any
Goods and Services Tax;
• Claimsbyholdersofpriorsecurityinterests.TheTrust
Deed permits the Company to create prior security
interests over any asset to secure any moneys to be
borrowed, raised or otherwise owing in purchasing or
acquiring such asset if at the time of such borrowing
the aggregate of all moneys secured by existing prior
security interests together with the money so proposed
to be borrowed or raised or to be otherwise owing and
secured would not exceed 2% of its Total Tangible Assets.
As at 31 March 2009, the aggregate amount of prior
charges ranking ahead of the Debenture Stock currently
outstanding and Debenture Stock being offered was
$7,245. This prior charge comprises a security interest
granted by the Company in favour of Sharp Corporation
over certain office equipment leased by the Company;
• TheTrustee’s,oranyreceiverappointedbytheTrustee,
remuneration, costs, charges, expenses and liabilities.
The obligations of the Company to Investors in respect of
the Debenture Stock is secured by a security interest in all
of the Company’s Personal Property and a charge over the
Company’s Other Property pursuant to a Debenture Trust
PAGE 65Investment Statement & Prospectus No 6
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Deed granted by the Company in favour of Covenant Trustee
Company Limited (“the Trustee”). The charge created by
the Trust Deed in respect of the Other Property is a floating
charge over the Other Property in respect of which a fixed
charge is not legally and fully effective and a fixed charge over
all Other Property.
The Trustee does not guarantee the repayment of the
Debenture Stock or the payment of interest thereon.
Can the investment be altered?
EARLY REPAYMENT
The Investor has no right to require the Company to repay the Debenture Stock to the Investor prior to the expiry of the fixed term of the investment (“Maturity Date”). However, the Company reserves the ability at its absolute discretion to permit the early repayment of Debenture Stock before the Maturity Date for the respective Debenture Stock in the event of death or financial hardship. Requests for early repayment of Debenture Stock must be made to the Company in writing. In the event that the Company agrees to repay the Debenture Stock to the Investor prior to the Maturity Date, the Company reserves the right, at its discretion, to adjust the interest rate applicable to the Debenture Stock for the term upon which those funds have been held by the Company. The Company may also charge an investment break fee set by the Company from time to time.
EARLY REPAYMENT OF THE DEBENTURE STOCK AT THE
ELECTION OF THE COMPANY
The Company reserves the absolute discretion to repay the Investment prior to the expiry of the fixed term of the Investment, provided that the Company:
• ProvidestheInvestorwithnotlessthanonemonths
notice of the early repayment in writing to the Investor ;
and
• TheCompanymustrepayallprincipalandinterest
accrued to the date of the early repayment on the date
of the early repayment.
TRUST DEED
The Trust Deed which governs the Debenture Stock does provide for the alteration of its terms in certain circumstances (which may include an alteration to the specific terms of the Debenture Stock) with the agreement of the Trustee. The Trustee may only agree to make the proposed alteration if the proposed alteration is:
• IntheopinionoftheTrustee,madetocorrectamanifest
error or is of a formal or technical nature or is necessary
in order to comply with any law or is convenient for
the purposes of obtaining or maintaining a quotation of
the Debenture Stock on any securities exchange and is
not prejudicial to the general interests of the holders of
Debenture Stock; or
• ApprovedbyanExtraordinaryResolutionoftheholders
of Debenture Stock (being a resolution passed by not
less than 75% of the votes given being in favour of the
resolution); or
• IntheopinionoftheTrustee,clearlynotornotlikelyto
become prejudicial to the general interests of the holders
of Debenture Stock.
How do I cash in my investment?
REPAYMENT OF THE INvESTMENT
On Maturity Date, Stockholders will be paid the face value of their Investment together with any interest then due, upon presentation of the relevant documentation to the Company. About 14 days before the date the Investment is due to mature, the Investor will be sent a letter which sets out the options available for reinvestment or repayment of the Investment.
If the Investor has no immediate use for the Investment, the Company will at the Investor’s request accept the Investment for a further period nominated by the Investor at whatever the current interest rate is at that time.
The Investor may request that repayment is made. If so the Investor will need to return the Investment Certificate held in respect of the Debenture Stock. Payments will be made to the Investor by cheque or deposited into the Investor’s bank account at the election of the Investor.
If at the maturity date the Company has not received any instruction from you regarding either the reinvestment or repayment of your investment the Company may at its sole discretion:
• Holdthatinvestment“atcall”,withsevendaysnotice,
at the Company’s “at call” rate until it receives your
instructions;
• Reinvesttheinvestmentforthesameterm(andthesame
payment terms) as the original investment of Debenture
Stock. The investment will accrue interest at the interest
rate applicable to investments of the same term as the
investment as at the date of the reinvestment;
PAGE 66 Investment Statement & Prospectus No 6
• Repayyourinvestmenttogetherwithallaccruedbut
unpaid interest by cheque to your last known address or
by direct credit to your last nominated bank account.
EARLY REPAYMENT
Debenture Stock is issued for fixed terms and for fixed
interest rates during that term. This provides the Company
with certainty in respect of the planning of its business
operations. Accordingly, the Investor has no right to require
the Company to repay the Debenture Stock to the Investor
prior to the expiry of the fixed term of the Debenture Stock.
However, the Company reserves the ability at its absolute
discretion to permit the early repayment of Debenture Stock
before the Maturity Date for the respective Debenture
Stock in the event of death or financial hardship. Requests
for early repayment of Debenture Stock must be made to
the Company in writing. In the event that the Company
agrees to repay the Debenture Stock to the Investor prior
to the Maturity Date, the Company reserves the right, at
its discretion, to adjust the interest rate applicable to the
Debenture Stock for the term upon which those funds have
been held by the Company. The Company may also charge an
investment break fee set by the Company from time to time.
EARLY REPAYMENT OF THE DEBENTURE STOCK AT THE
ELECTION OF THE COMPANY
The Company reserves the absolute discretion to repay
the Investment prior to the expiry of the fixed term of the
Investment, provided that the Company:
• ProvidestheInvestorwithnotlessthanonemonths
notice of the early repayment in writing to the Investor ;
and
• TheCompanymustrepayallprincipalandinterest
accrued to the date of the early repayment on the date
of the early repayment.
RIGHT TO SELL
You may transfer your interest in your Investment at any time
(not later than 30 days before Maturity Date) by completion
of a Transfer in such form as is customarily used to transfer
shares in New Zealand (“Transfer”). More than one person
can take ownership of the Investment. The Company is
not bound to recognise trusts. Consequently no reference
to trusts or trustees should be made in the Transfer. Joint
Investment owners will be treated as joint tenants (unless
some other form of ownership is indicated) so that on the
death of one of them, ownership of the Investment will vest
automatically with the survivor(s). To be valid, the Transfer
must be registered with the Company. There is currently no
fee payable in respect of the Transfer of the Investment to
another person; however, the Company reserves the right to
charge a fee in the future.
MARKET
In the opinion of the Company there is no established market
for the sale or transfer of the Securities.
Who do I contact with enquiries about my investment?Enquiries about your Investment can be addressed to the
Company at:
Managing Director
Finance Direct Limited
Freephone 0800 399 666
Telephone +64 9 529 5399
Facsimile +64 9 529 5509
Freefax 0800 104 200
Email [email protected]
P O Box 17422, Greenlane, Auckland
Is there anyone to whom I can complain if I have problems with the investment?The Company operates an internal complaints procedure to
investigate thoroughly any complaint.
If for any reason you are unhappy with any aspect of your
Investment, you may wish to contact the Managing Director of
the Company; the contact details for which are as follows:
Managing Director
Finance Direct Limited
Freephone 0800 399 666
Telephone +64 9 529 5399
Facsimile +64 9 529 5509
Freefax 0800 104 200
Email [email protected]
P O Box 17422, Greenlane, Auckland
PAGE 67Investment Statement & Prospectus No 6
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You may also contact the Trustee;
the contact details for which are as follows:
Stewart Lockhart
Corporate Business Manager
Covenant Trustee Company Limited
Freephone 0800 268 362
Telephone +64 9 302 0638
Facsimile +64 9 302 1037
Email [email protected]
Level 34, Vero Centre
48 Shortland Street, Auckland
P O Box 4243, Shortland Street Auckland, 1140
Complaints cannot be made to an Ombudsman.
What other information can I obtain about this investment?Other information about the Debenture Stock or the
Company is contained or referred to in the Prospectus and in
the financial statements of the Company.
A copy of the Prospectus and of the most recent financial
statements of the Company can be obtained free of charge at
the registered office of the Company at the address stated in
the Directory.
The Prospectus, the Company’s financial statements, the
Trust Deed, any material contracts required to be registered
under the Securities Regulations 1983, and the Company’s
constitution are filed at the Companies Office of the
Ministry of Economic Development and are available for
public inspection (upon payment of the prescribed fee) by
downloading a copy from the Companies Office website,
www.companies.govt.nz, (or where those documents are not
able to be viewed via the internet) upon request and payment
of the current fee by submitting a search request form which
may be obtained from the Companies Office at:
• Level18,ASBCentre,135AlbertStreet,Auckland;
• GroundLevel,33BowenStreet,Wellington;or
• 55WordsworthStreet,Sydenham,Christchurch.
Copies of the documents can also be obtained (on payment
of the relevant fee) by telephoning the Companies Office on
0508 266 726.
On-request informationA copy of the Trust Deed, Prospectus, most recent financial
statements of the Company required to be registered
under the Financial Reporting Act 1993, together with all
documents that are required to be registered with those
financial statements, Annual Report and the latest Investment
Statement, are available for inspection free of charge at the
registered office of the Company. You can also request at
any time, a copy of the Trust Deed on payment of a fee not
exceeding 50 cents per page. Simply call the Company during
normal business hours.
PAGE 68 Investment Statement & Prospectus No 6
With the passing of the Reserve Bank of New Zealand
Amendment Act 2008, there have been additional regulatory
requirements placed on non bank deposit takers with
various effective dates. There are also additional powers and
obligations for trustees of non bank deposit takers.
Finance Direct Limited is a “deposit taker” as defined under
Section 157C and is, therefore, subject to the requirements of
the Act. A brief summary of the requirements follow:
• Section157I– Deposit taker must have a current credit
rating from an approved rating agency (comes into force
on 1 March 2010).
• UndertheDepositTakers(CreditRatingsMinimum
Threshold) Exemption Notice 2009 (commencement
date 7 August 2009) an exemption is available from
this section if the consolidated liabilities of the
borrowing group of the deposit taker are less than
$20 million. The exemption notice outlines certain
conditions that a deposit taker must comply with in
order to benefit from this class exemption.
Applications for exemption are considered by
Reserve Bank staff. Finance Direct Limited currently
qualifies for this exemption but as at the date of this
Prospectus has not yet made a formal application for
it to the Reserve Bank.
• Section157L– Deposit taker must have at least 2
independent directors on its board (comes into force on
a date yet to be determined).
• FinanceDirectLimitedcurrentlyhas1independent
director as a member of its board.
• Section157M– Deposit taker must have and comply
with a risk management programme (comes into force
on 1 September 2009).
• FinanceDirectLimiteddoeshaveariskmanagement
programme in place which has been provided to and
approved by the Trustee as required by Section
157N and Section 157M(2) of the Act.
• Sections157Pand157S – Regulations may impose
requirements that trust deed sets out a minimum capital
amount and a capital ratio that a deposit taker is required
to maintain (these regulations are not yet in force, but are
currently expected to take effect in late 2010).
• FinanceDirectLimitediscurrentlysubjectto
minimum capital requirements set out in the Trust
Deed. Further information is set out under
“Restrictions on the Company” on page 5.
• Section157V – Regulations may impose requirements
that trust deed includes maximum limit on exposures to
related parties (these regulations are not yet in force, but
are currently expected to take effect in late 2010).
• FinanceDirectLimitedcurrentlyhasarestrictionon
related party lending as set out in “Restrictions on
the Company” on page 5.
• Section157Z– Regulations may impose requirements
that liquidity obligations be included in trust deeds (the
date on which these regulations will take effect is yet to
be determined).
• HowFinanceDirectLimitedcurrentlymanagesits
liquidity is set out under the heading “Liquidity Risk”
in the “General Risks” section on page 62.
• Section157ZD– The Reserve Bank may require
trustee to attest as to deposit taker’s compliance with
requirements.
• Section157ZE– Trustee must report to the Reserve
Bank non-compliance or likely non-compliance by the
deposit taker.
• Section157ZI–157ZJ– Powers of the Reserve Bank to
obtain reports and other information from the deposit
taker.
Deposit takers and trustees which breach their obligations
under the Act may be subject to prosecution, and if convicted,
fines up to a maximum amount of $2,000,000.
The summaries above are not a full representation of the
legal effect of the Reserve Bank of New Zealand Amendment
Act 2008, nor a full description of its terms. At the date of
this Prospectus, Finance Direct Limited is using all reasonable
endeavours to comply with its obligations under the new
legislation as these obligations take effect.
Reserve Bank of New Zealand Amendment Act 2008
PAGE 69Investment Statement & Prospectus No 6
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For the purposes of regulation 5(6) of the Securities Regulations 1983, the matters
required to be stated or contained in this Offer Document by virtue of the Second
Schedule to the Securities Regulations 1983, and the page reference within this Offer
Document in which each matter appears are:
MATTER SECOND SCHEDULE PAGE(S)
Main terms of Offer Clause 1 48
Name and address of offeror Clause 2 N/A
Details of incorporation of issuer Clause 3 48
Guarantors Clause 4 49
Directorate and advisors Clause 5 49
Restrictions on directors’ powers Clause 5A 49
Description of activities of borrowing group Clause 6 49
Summary of financial statements Clause 7 6 and 50
Acquisition of business or subsidiary Clause 8 N/A
Material contracts Clause 9 50
Pending proceedings Clause 10 50
Issue expenses Clause 11 50
Ranking of securities Clause 12 51
Provisions of trust deed and other
restrictions on the borrowing group Clause 13 51
Trustee’s Statement Clause 13(3) 47
Other terms of offer and securities Clause 14 54
Financial statements Clauses 15-32 11-42
Places of inspection of documents Clause 33 54
Other material matters Clause 34 54
Directors’ statement Clause 35 55
Auditors’ report Clause 36 43-46
Index of Statutory Information
PAGE 70 Investment Statement & Prospectus No 6
Glossary
“Act” means the Reserve Bank of New Zealand
Amendment Act 2008.
“Application Form” means the Application Form
accompanying the Investment Statement upon
which applications to invest are required to be
made.
“Business Day” means a day on which the
Company is normally open for business.
“Certificate” means the Debenture Stock
certificate to be issued to an Investor whose
application to invest has been accepted by the
Company.
“Charging Group”, “Borrowing Group” and
“Group” means the Company and its Charging
Subsidiaries (if any) as the context requires.
“Charging Group Member” means each member
of the Charging Group.
“Charging Subsidiaries” has the same meaning
afforded that term in the Trust Deed.
“the Company”, “Finance Direct”, “we”, “us”, “our”
means Finance Direct Limited.
“Crown” means her Majesty the Queen in right of
New Zealand.
“Debenture Stock” means all debenture stock
or other secured indebtedness by whatever name
called, constituted and issued by the Company
pursuant to the Trust Deed from time to time
pursuant to this Prospectus.
“Directors” and “Board” means the board of
directors for the time being of the Company.
“Investor” means a Stockholder.
“Investment” means the subscription for
Debenture Stock in accordance with the terms of
this Prospectus.
“Investment Statement” means the Investment
Statement relating to the issue of Securities which
is comprised within this Offer Document on pages
56 to 69.
“Maturity Date” means the date agreed upon by
the Company and the Investor, upon which date
the Investor’s Investment is due to be repaid to the
Investor.
“NZ GAAP” means generally accepted accounting
practice as defined in section 3 of the Financial
Reporting Act 1993.
“NZ IFRS” means the New Zealand International
Financial Reporting Standards approved by the
Accounting Standards Review Board and forming
part of NZ GAAP.
“Offer” means the offer to subscribe for
Debenture Stock.
“Other Property” means, in relation to any
company, all of its Real Property and all other
present and after-acquired property that is not
Personal Property.
“Personal Property” means, in relation to any
company, all of its present and after-acquired
personal property.
“Prior Security Interest” means any security
interest on the Secured Property, or any part
thereof, ranking in priority to the security interests
in favour of the Trustee created by or pursuant to
the Trust Deed or as the case requires the principal
moneys secured by such security interests.
“Prospectus” means the registered prospectus
relating to the Company and the issue of
Debenture Stock comprised within this document.
“Real Property” means, in relation to any company,
all of its present and after-acquired freehold and
leasehold land, all estates and interests in land and
all buildings, structures and fixtures (including trade
fixtures) for the time being on that land.
“Related Party” means any person, other than a
Charging Group Member, who is:
(a) a company, trust or other person of which
more than 10% of the issued shares, units or
other interests are beneficially owned by the
Company or another Related Party;
(b) a person who has a relevant interest (as
defined in Section 5 of the Securities
Markets Act 1988) in any shares in the
Company, a Subsidiary or any other Charging
Group Member;
(c) a Director or a director of any Subsidiary or
other Charging Group Member;
(d) a Family Member of any person defined in
paragraph (b) or (c) above;
(e) a related company (as defined in section
2(3) of the Companies Act) of any Related
Party;
(f) any trust of which any director or
shareholder of the Company, any Subsidiary
or any other Charging Group Member or
any Family Member of any such director
or shareholder is a trustee, settlor or
beneficiary.
“Related Party Transaction” means any transaction
of any nature between the Company or any other
Charging Group Member and a Related Party
including, but not limited to:
(a) the provision of financial accommodation by
the Company or any other Charging Group
Member to a Related Party;
(b) the investment by the Company or any
other Charging Group Member in the capital
or equity of a Related Party;
(c) the transfer of assets between the Company
or any other Charging Group Member and a
Related Party;
(d) the provision of services by or to the
Company or any other Charging Group
Member to or by a Related Party; and
(e) the giving of a guarantee, indemnity or other
commitment by the Company or any other
Charging Group Member to, at the request
of, or for the benefit of, a Related Party,
but does not include:
(a) the provision of financial accommodation
by a Related Party to a Charging Group
Member on arm’s length commercial terms,
or any payment by a Charging Group
Member to that Related Party of principal,
interest or other moneys in respect of that
financial accommodation in accordance with
those terms;
(b) transactions with a Related Party in relation
to investments of a Charging Group
Member which are, or are to be, held by that
Related Party as nominee or trustee for that
Charging Group Member; or
(c) payment of reasonable salary and other
remuneration benefits to a Related Party
who is employed by a Charging Group
Member;
PAGE 71Investment Statement & Prospectus No 6
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(d) payment of reasonable remuneration
and expenses to a Director for his or her
services as a Director of a Charging Group
Member; or
(e) payment of rental at arm’s length market
rates by the Company to a Related Party in
relation to office accommodation occupied
by the Company.
“Secured Property” means, in relation to any
company, all of its Personal Property and Other
Property, wherever situated.
“Securities” means Debenture Stock.
“Securities Regulations” means the Securities
Regulations 1983 and includes any amendments.
“Stockholders” means the several persons
from time to time entered in the Register of
Stockholders as the holders of Debenture Stock
and includes their personal representatives.
“Tangible Assets” means all assets except deferred
tax assets and assets which according to NZ GAAP
are considered to be intangible assets.
“Total Contingent Liabilities” means, at any time,
the aggregate amount of all Contingent Liabilities
of the Charging Group at that date other than any
Contingent Liability:
(a) that is secured to the Charging Group by a
first ranking security interest over an asset in
all respects acceptable to the Trustee; or
(b) in respect of which the Charging Group has
the benefit of a guarantee or indemnity from
a bank, other financial institution or other
person, in any case having a credit rating or
credit worthiness acceptable to the Trustee.
“Total Liabilities” means, at any time, the
aggregate of:
(a) the amounts of all Liabilities of the Charging
Group as would be disclosed in a statement
of financial position if a statement of financial
position was then prepared;
(b) Total Contingent Liabilities; and
(c) the amount payable on redemption of
redeemable shares,
but does not include the principal amount of
subordinated debt or convertible notes.
“Total Tangible Assets” means, at any time, the
aggregate of:
(a) 80% of the market value, as determined
by the latest market valuation, of any
Real Property and shares or other equity
securities or units in any company, unit trust
or other person; and
(b) the book values of all other Tangible
Assets of the Charging Group as would be
disclosed in a statement of financial position
if a statement of financial position was then
prepared,
adjusted by excluding:
(c) the book values of any Tangible Assets
situated outside New Zealand in respect
of which the Trustee is not satisfied that
there is a valid and effective security interest
in favour of the Trustee enforceable in
accordance with the laws of the place where
the relevant assets are situated; and
(d) 15% of the principal amount of all
development loans outstanding at that time.
“Trust Deed” means the Debenture Trust Deed
entered into between the Company and the
Trustee dated 30 September 2004.
“Trustee” means Covenant Trustee Company
Limited.
“You/your” means the Investor.
PAGE 72 Investment Statement & Prospectus No 6
Directors
Richard Waddel BCom FCA AF Inst D
CHAIRMAN AND INDEPENDENT DIRECTOR
301 Kingsridge Apartments
424 Remuera Road
Remuera
Auckland
Wayne Croad Dip Bus Finance
MANAGING DIRECTOR
7 Tranquility Rise
Mellons Bay
Auckland
John Callaghan BBS
NON-EXECUTIVE DIRECTOR
23 Milton Road
Mt Eden
Auckland
Peter Huljich BCom, Dip. NZX, SA Fin.
NON-EXECUTIVE DIRECTOR
8 Karori Crescent
Orakei
Auckland
Directory
Finance Direct Limited
COMPANY NUMBER
981004
DATE OF INCORPORATION
23 September 1999
REGISTERED OFFICE
Level 2, Finance Direct House
88 Broadway
Newmarket
Auckland
Freephone 0800 399 666
Telephone +64 9 529 5399
Facsimile +64 9 529 5509
Freefax 0800 104 200
Email [email protected]
P O Box 17422, Greenlane, Auckland
THE SECURITIES HOLDERS REGISTER
The register of holders of securities is
kept at
Finance Direct Limited
Level 2, Finance Direct House
88 Broadway
Newmarket
Auckland
TRUSTEE
Covenant Trustee Company Limited
Level 34
Vero Centre
48 Shortland Street
Auckland
AUDITORS
Grant Thornton
152 Fanshawe Street
Auckland
BANKERS
ANZ Bank Limited
154 Kitchener Road
Milford
North Shore City
Ap
pli
cati
on
Fo
rm
Application Form for Secured Debenture Stock
Investor Details
InveStor Mr/Mrs/Miss Firstnamesinfull SurnameMs/Dr/Trustee
JoInt InveStor Mr/Mrs/Miss Firstnamesinfull SurnameMs/Dr/Trustee
CorPorAte nAMe, trUSt nAMe
ResidentialAddress
CityorTown PostCode
DaytimePhoneNo EmailAddress
MailingAddress(ifdifferentfromabove)
Investment Information
Interest payment options
PleASe InDICAte how yoUr IntereSt IS to be PAID
(tICk one box)
Compounding Interest (Quarterly)
Quarterly Cheque
Quarterly direct credit to bank account
Bank Branch
Please note If we do not have your IRD number on file, we
are required to deduct Resident Withholding Tax (‘RWT’) at 39%.
tAx DetAIlS
IRD No.
IRD No.
IRD No.
Please deduct rwt rate at 19.5% 33.0% 39.0% Exempt AIL
the InveStMent MAnAGer
FInAnCe DIreCt lIMIteD
P.o. box 17422, GreenlAne,
AUCklAnD
Investor Date Banked Maturity Date Brokerage Start Date Interest Option Source
brokerS StAMP
Brokers No.
Please Note: 1. Make cheques payable to FINANCE DIRECT LIMITED and cross ‘not negotiable’. 2. Joint applications to be signed by all applicants. 3. If signed by attorney, please attach power of attorney. If signed under power of attorney the attorney hereby declares that they have not had notice of the death of the donor or of the revocation of the power of attorney. 4. All applications including reinvestments will be acknowledged by a letter of confirmation. 5. Further copies of the current registered Prospectus and Investment Statement may be obtained from FINANCE DIRECT LIMITED at the above address.
I/We have received a copy of the Offer Document and I/we irrevocably apply for Debenture Stock as set out in this Application Form (including any lesser amount of Debenture Stock that may be allotted to me/us) upon the terms and conditions comprised within the Offer Document and the Debenture Trust Deed
I/we enclose the sum of $ being payment in full on application
Signature Dated
Signature Dated
4years % $
3years % $
2years % $
18months % $
12months % $
6months % $
3months % $
If you need a specific date, specify your requirements, (not to exceed 5 years)
Specified period % $
If reinvesting tick box and complete reinvestment date
Please tick box if you require additional Application Forms
Number(s)
how DID yoU FInD oUt AboUt thIS InveStMent?
Press Advertising Financial Advisor Personal Referral Existing Investor Other
Having read the current Finance Direct Limited Prospectus and Investment Statement
(“Offer Document”), I/we irrevocably apply for Debenture Stock as set out below,
and upon the terms and conditions comprised within the Offer Document and the
Debenture Trust Deed dated 30 September 2004.
Signatures
terM IntereSt rAte AMoUnt
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