Directors Certificate

Transcription

1 Directors Certificate Certificate pursuant to section 37A(1A) of the Securities Act 1978 with respect to Prospectus No.40 of the Company dated 7 October ( the Prospectus ) We, the undersigned Directors of MARAC Finance Limited ( the Company ) hereby certify on behalf of all the Directors of the Company:- 1. THAT the financial position of the Company shown in the balance sheet contained in the Prospectus of the Company has not materially and adversely changed during the period from the date of that balance sheet to the date of this Certificate; and 2. THE Prospectus of the Company is not at the date of this Certificate, false or misleading in a material particular by reason of failing to refer, or give proper emphasis, to adverse circumstances. Accompanying this Certificate are audited financial statements for the six month period from the date of the balance sheet contained in the Prospectus prepared in accordance with section 37A(1A)(d) of the Securities Act Dated the 31st day of March 2009 B.R. IRVINE Director B.J. JOLLIFFE Director (Signed on behalf of all Directors of the Company)

2 Interim Report We see what you see.

3 Contents PAGE interim report 1 Chairman and Managing Director s Report 1 Other Information 1 COPY OF directors certificate 2 ACCOMPANYING THE DIRECTORS CERTIFICATE: Interim Financial Statements 3-31 Auditors Report directory 37 NEW ZEALAND DEPOSIT GUARANTEE SCHEME MARAC Finance Limited has a guarantee under the New Zealand deposit guarantee scheme.* *Further information about the New Zealand deposit guarantee scheme and the most recent audited statement of financial position of the Crown are available, free of charge and at all reasonable times, on the internet site maintained by, or on behalf of, the Treasury at

4 Interim Report to 31 December Chairman and Managing Director s Report MARAC Finance Limited (MARAC) delivered a net operating profit before tax and impaired asset expenses of $19.2m during the six months to 31 December, a decrease of only 13% on the same period last year in a challenging environment. After providing for higher impaired asset expense, net profit after tax was $7.0m compared to $13.5m in the same period last year. This is a solid result given the difficult economic environment MARAC is operating in and is testament to the strength of the business, the brand and the products and services offered. MARAC was the first major finance company to be approved under the New Zealand Deposit Guarantee Scheme. This, along with the retail bond issue raising $104.2m, has seen retail funding grow to $794.1m at December, up from $556.7m at June. Even more pleasing is the increasing level of funds that are invested for terms outside of the guarantee scheme period. Reinvestment rates are at the upper end of MARAC s historical range. The MARAC PIE Fund was launched and has been well received. Liquidity increased to $340.4m at December. Although there is a cost to holding a high level of liquidity, this is a prudent measure in today s market. Finance receivables, comprising 69% business and consumer loans, 11% property investment loans, and 20% property development loans, dropped slightly to $1.3bn, just $42.0m below the levels at June. This is a pleasing outcome in a period of economic downturn. The company continues to identify sound lending opportunities from New Zealand businesses and individuals which meet MARAC s rigorous credit criteria. Access to finance in the current environment is critical to New Zealand businesses and consumers and MARAC will continue to support them during these challenging times. MARAC s dynamic provisioning process identified the need for increased provisions and write offs for impaired assets as would be expected in the current economic environment. The impaired asset expense (the write-off of bad debts plus provisions for doubtful debts less recoveries made) was $9.2m, compared to $1.7m in the same period last year. Non-property related impaired asset expense was $2.9m. In addition during the period, MARAC s ultimate parent company, Pyne Gould Corporation Limited, put in place an underwriting facility of $25.0m to enable MARAC to manage at risk property development loans in a manner that will maximise their realisation in future periods. At 31 December, approximately half of the facility of $25.0m was allocated against specific loans and the balance has been retained as an unallocated collective provision which is considered prudent with the current economic uncertainty. The $25.0m provision represents 9.6% of the overall property development loan book of $260.0m at 31 December. MARAC has maintained its Standard & Poor s investment grade BBB- (Stable) credit rating. Managing Director Following the announcement last October of Brian Jolliffe s decision to step down at the end of the current financial year, the board has commenced a search for a replacement. We expect to be able to provide further information in the next few months. 27 February 2009 Sam Maling Chairman Brian Jolliffe Managing Director Other Information for nzdx listed marac secured bondholders MARAC Finance Limited is a wholly owned subsidiary of MARAC Financial Services Limited. The Company s ultimate parent is NZX-listed Pyne Gould Corporation Limited. MARAC Finance Limited has no subsidiaries or associates. Interest on the Fixed Rate Secured Bonds was paid quarterly on 15 July and 15 October at the 10.50% rate. During the period MARAC paid a final year dividend of $4.0m and a 2009 year interim dividend of $5.0m to its parent company. The revaluation of cash flow hedges was a loss of $7.2m after tax. There were no other unrealised gains resulting from the revaluation of assets. There were no material changes in accounting policies applied in the preparation of the Interim Financial Statements. 1

5 Copy of Directors Certificate Certificate pursuant to section 37A(1A) of the Securities Act 1978 with respect to Prospectus No.40 of the Company dated 7 October ( the Prospectus ) We, the undersigned Directors of MARAC Finance Limited ( the Company ) hereby certify on behalf of all the Directors of the Company:- 1. THAT the financial position of the Company shown in the balance sheet contained in the Prospectus of the Company has not materially and adversely changed during the period from the date of that balance sheet to the date of this Certificate; and 2. THE Prospectus of the Company is not at the date of this Certificate, false or misleading in a material particular by reason of failing to refer, or give proper emphasis, to adverse circumstances. Accompanying this Certificate are audited financial statements for the six month period from the date of the balance sheet contained in the Prospectus prepared in accordance with section 37A(1A)(d) of the Securities Act Dated the 31st day of March 2009 B.R. IRVINE Director B.J. JOLLIFFE Director (Signed on behalf of all Directors of the Company) 2

6 Interim Financial Statements Accompanying the Directors Certificate For the period ended 31 December CONTENTS PAGE Directors Responsibility Statement 4 Interim Income Statement 5 Interim Balance Sheet 6 Interim Statement of Recognised Income and Expense 6 Interim Statement of Cash Flows 7 Notes to the Interim Financial Statements 8-31 Auditor s Report

7 Directors Responsibility Statement The directors are responsible for ensuring that the financial statements give a true and fair view of the financial position of MARAC Finance Limited (the Company ) as at 31 December and its financial performance and cash flows for the period ended on that date. The directors consider that the financial statements of the Company have been prepared using appropriate accounting policies consistently applied and supported by reasonable judgements and estimates and that all the relevant financial reporting and accounting standards have been followed. The directors believe that proper accounting records have been kept which enable, with reasonable accuracy, the determination of the financial position of the Company and facilitate compliance of the financial statements with the Financial Reporting Act The Board of Directors of MARAC Finance Limited authorise the financial statements set out on pages 5 to 31 to be lodged with the Registrar of Companies for the purposes of extending Prospectus No. 40 pursuant to section 37A(1A) of the Securities Act For and on behalf of the Board of Directors of MARAC Finance Limited. B.R. IRVINE Director B.J. JOLLIFFE Director 4

8 Interim Financial Statements For the period ended 31 December Interim income STATEMENT For the period ended 31 December Note Operating revenue Interest revenue 5 87,468 82, ,438 Operating lease revenue 6 5,063 6,476 12,569 Lending and credit fee revenue ,383 Other revenue Total operating revenue 93,593 90, ,252 Direct expenses Interest and funding expense 5 57,599 50, ,637 Operating lease expense 6 3,986 4,857 9,425 Total direct expenses 61,585 55, ,062 Net operating income 32,008 35,136 70,190 Other costs and expenses Selling and administration expenses 7 12,823 13,163 25,815 Impaired asset expense 25 9,186 1,746 5,726 Total other costs and expenses 22,009 14,909 31,541 Profit before tax 9,999 20,227 38,649 Income tax expense 8 3,013 6,693 12,785 Profit for the period 6,986 13,534 25,864 The notes on pages 8 to 31 are an integral part of these financial statements. 5

9 Interim Financial Statements continued For the period ended 31 December INTERIM BALANCE SHEET As at 31 December Note Assets Cash and cash equivalents 28,291 13,150 8,655 Finance receivables 11 1,064,064 1,052,130 1,011,954 Finance receivables - Securitised , , ,532 Operating lease vehicles 12 24,799 33,938 29,719 Other assets 15 26,570 7,317 10,404 Total assets 1,340,096 1,414,723 1,352,264 Liabilities Borrowings , , ,091 Borrowings - Securitised , , ,042 Other liabilities 18 35,152 25,837 28,142 Total liabilities 1,209,273 1,279,965 1,212,275 Equity Share capital 20 20,000 20,000 20,000 Retained earnings and reserves , , ,989 Total equity 130, , ,989 Total equity and liabilities 1,340,096 1,414,723 1,352,264 INTERIM STATEMENT OF RECOGNISED INCOME AND EXPENSE Note For the period ended 31 December Cash flow hedges: - Transfer into the cash flow hedge reserve (10,955) 936 1,822 - Transfer out of the cash flow hedge reserve 738 (437) (3,744) Effective portion of change in fair value 20 (10,217) 499 (1,922) Tax effect of change in cash flow hedges 20 3,065 (165) 157 Net (expense)/income recognised directly in equity (7,152) 334 (1,765) Profit for the period 6,986 13,534 25,864 Total recognised income and expense for the period (166) 13,868 24,099 The notes on pages 8 to 31 are an integral part of these financial statements. 6

10 Interim Financial Statements continued For the period ended 31 December interim STATEMENT OF CASH FLOWS For the period ended 31 December Note Cash flows from operating activities Cash was provided from: Interest received 80,361 83, ,076 Operating lease revenue received 5,141 6,539 12,745 Lending and credit fees received 1, ,310 Total cash provided from operating activities 87,157 90, ,131 Cash was applied to: Payments to suppliers and employees 20,517 13,755 28,745 Interest paid 57,539 50, ,315 Taxation paid 3,747 4,500 12,309 Total cash applied to operating activities 81,803 68, ,369 Net cash flows from operating activities 10 5,354 22,227 42,762 Cash flows from investing activities Cash was provided from: Proceeds from sale of operating lease vehicles 3,497 4,065 7,875 Net decrease in finance receivables 41, Total cash provided from investing activities 45,099 4,065 7,875 Cash was applied to: Net increase in finance receivables - 164, ,458 Purchase of operating lease vehicles 2,409 5,732 9,739 Purchase of office fit-out, equipment and intangible assets Total cash applied to investing activities 2, , ,134 Net cash flows from/(applied to) investing activities 42,359 (166,510) (115,259) Cash flows from financing activities Cash was provided from: Increase in borrowings - 158,343 87,062 Total cash provided from financing activities - 158,343 87,062 Cash was applied to: Dividends paid 9,000-5,000 Decrease in borrowings 19, Total cash applied to financing activities 28,077-5,000 Net cash flows (applied to)/from financing activities (28,077) 158,343 82,062 Net increase in cash held 19,636 14,060 9,565 Opening cash balance/(deficit) 8,655 (910) (910) Closing cash balance 28,291 13,150 8,655 7

11 Notes to the Interim Financial Statements For the period ended 31 December 1 Reporting entity These financial statements comprise MARAC Finance Limited ( Company ), MARAC ABCP Trust 1 ( Trust ) and Marac Retirement Bonds Superannuation Fund ( Fund ), collectively known as the Group. The assets securitised into the Trust continue to be recognised in the Company s financial statements. Accordingly, as the Company s and Group s financial performance and position are the same in all material respects, a single set of numbers is presented. Reliance is placed on the Group continuing as a going concern. All entities operate and are domiciled in New Zealand. The registered office address is: MARAC House, 35 Teed St, PO Box 9919, Newmarket, Auckland. 2 Basis of preparation The financial statements presented here are for the following periods: At 31 December : 6 month period - Audited At 31 December : 6 month period - Audited At 30 June : 12 month period - Audited (a) Statement of compliance The financial statements have been prepared in accordance with Generally Accepted Accounting Practice in New Zealand (NZ GAAP) for entities adopting the New Zealand equivalents to International Financial Reporting Standards (NZ IFRS), and its interpretations as appropriate to profit-oriented entities. The financial statements also comply with International Financial Reporting Standards ( IFRS ). The Company is a profit-oriented entity. The Company is a reporting entity and an issuer for the purposes of the Financial Reporting Act 1993 and its financial statements comply with that Act. The financial statements have been prepared in accordance with the requirements of the Companies Act 1993 and the Securities Regulations (b) Basis of measurement The financial statements have been prepared on the basis of historical cost, unless stated otherwise. (c) Functional and presentation currency These financial statements are presented in New Zealand dollars which is the Group s functional currency. Unless otherwise indicated, amounts are rounded to the nearest thousand. (d) Estimates, judgements and assumptions The preparation of financial statements requires the use of management judgement, estimates and assumptions that effect the application of accounting policies and reported amounts. Actual results may differ from these judgements. For further information about significant areas of estimation, uncertainty and critical judgements that have the most significant effect on the financial statements refer to note 25 - Credit risk exposure. 3 Significant accounting policies (a) Basis of consolidation Special purpose entities are entities that are created to accomplish a narrow and well-defined objective such as the securitisation of particular assets, or the execution of a specific borrowing or lending transaction. The financial statements of special purpose entities are included in the Group s financial statements where the substance of the relationship is that the Company controls the special purpose entity. (b) Interest Interest income and expense are recognised using the effective interest method in the Income Statement. The effective interest rate is established on initial recognition of the financial assets and liabilities and is not revised subsequently. The calculation of the effective interest rate includes all yield related fees and commissions paid or received that are an integral part of the effective interest rate. Interest on the effective portion of a derivative designated as a cash flow hedge is initially recognised in the hedging reserve. It is released to the Income Statement at the same time as the hedged item. (c) Operating lease revenue and expense Revenue from operating lease vehicles is apportioned over the term of the operating lease on a straight line basis. Operating lease vehicles are depreciated on a straight line basis over their expected life after allowing for any residual values. The estimated lives of operating lease vehicles vary up to 5 years. Vehicles held for sale are not depreciated but are tested for impairment. 8

12 Notes to the Interim Financial Statements continued For the period ended 31 December 3 Significant accounting policies (cont) (d) Fee and commission revenue Fees and commission revenue that is integral to the effective interest rate of a financial asset or liability are included in the measurement of the effective interest rate. Other fees and commission income are recognised as the related services are rendered. (e) Tax Income tax expense for the year 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 period, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous periods. Deferred tax is accounted for using the balance sheet method, providing for temporary differences between the financial reporting carrying amount of assets and liabilities and the amounts used for tax purposes. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse. A deferred tax asset is only recognised to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. (f) Management of capital The Group manages its equity capital to ensure that is has an appropriate base capital to support the risk inherent in its lending assets. (g) Cash and cash equivalents Cash and cash equivalents include notes and coins on hand and unrestricted balances held with banks. Cash and cash equivalents are carried at amortised cost in the Balance Sheet. (h) Derivatives financial instruments Derivative financial instruments are entered into to reduce the exposure to fluctuations in interest rates. The financial instruments are subject to the risk that market values may change subsequent to their acquisition, however such changes would be offset by corresponding, but opposite, effects on the physical items being hedged. Derivatives are initially valued at fair value and subsequently remeasured at fair value. Fair value movements of derivatives that are not designated in a qualifying hedge relationship, are recognised in the Income Statement. Fair value movements of the effective portion of a qualifying hedge derivative, are recognised directly in equity. The amount recognised in equity is transferred to the Income Statement in the same period as the hedged cash flow affects the Income Statement, disclosed in the same line as the hedged item. Any ineffective portion of changes in fair value of the derivative are recognised immediately in the Income Statement. Fair value movements of a derivative designated as a fair value hedge are recognised directly in the Income Statement together with the hedged item. (i) Finance receivables Finance receivables are initially recognised at fair value plus incremental direct transaction costs and are subsequently measured at amortised cost using the effective interest method, less any impairment loss. (j) Financial assets and liabilities Recognition The Group initially recognises loans and advances, deposits, debt securities issued and subordinated liabilities on the date that they are originated. All other financial assets and liabilities (including assets and liabilities designated at fair value through the Income Statement) are initially recognised on the trade date at which the Group becomes a party to the contractual provisions of the instrument. 9

13 Notes to the Interim Financial Statements continued For the period ended 31 December 3 Significant accounting policies (cont) (j) Financial assets and liabilities (cont) Derecognition The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability. The Group derecognises a financial liability when its contractual obligations are discharged or cancelled or expire. The Group enters into transactions whereby it transfers assets recognised on its Balance Sheet, but retains either all risks and rewards of the transferred assets or a portion of them. If all or substantially all risks and rewards are retained, then the transferred assets are not derecognised from the Balance Sheet. Transfers of assets with the retention of all or substantially all risks and rewards include, for example, securitised assets and repurchase transactions. Classification Financial assets and liabilities are classified in the following accounting categories: Financial Assets/Liabilities Finance receivables Other financial assets Borrowings Other financial liabilities Derivatives Accounting Category Loans and Receivables Loans and Receivables Other liabilities at amortised cost Other liabilities at amortised cost Held for trading (k) Impaired assets and past due assets Impaired assets are those loans for which the Group has evidence that it has incurred a loss, and will be unable to collect all principal and interest due according to the contractual terms of the loan. These loans are graded 4 to 7 in the Group s internal risk grading system. The term collectively impaired asset refers to an asset where an event has occurred which past history indicates that there is an increased possibility that the Group will not collect all its principal and interest as it falls due. No losses have yet been identified on individual loans within the Group, and history would indicate that only a small portion of these loans will eventually not be recovered. The Group provides fully for its expected losses. Restructured assets are assets where the Group expects to recover all amounts owing although the original terms have been changed due to the counterparty s difficulty in complying with the original terms of the contract and the amended terms are not comparable with similar new lending. Past due but not impaired assets are any assets which have not been operated by the counterparty within its key terms but are not considered to be impaired by the Group. A collective provision for bad and doubtful debts is maintained for all impaired assets graded 4 and above to cover losses incurred but not yet identified in the various portfolios of advances and other lending transactions. The level of collective provision is established having assessed the level of potential credit risk inherent in each loan portfolio based on arrears, historic losses, recovery costs and trends and current economic conditions. Individual provisions are made against impaired assets where full recovery of principal and interest is not considered probable. Individual provisions are identified by reviewing counterparty exposures and the associated risk of loss. These loans are relationshipbased loans and are graded 7 in the Group s internal risk grading system. Bad debts provided for are written off against individual or collective provisions. Amounts required to bring the provisions to their assessed levels are recognised in the Income Statement. Any future recoveries of amounts provided for are taken to the Income Statement. 10

14 Notes to the Interim Financial Statements continued For the period ended 31 December 3 Significant accounting policies (cont) (k) Impaired assets and past due assets (cont) The Group maintains an underwriting agreement with its Ultimate Parent Company to provide security for certain identified and not yet identified losses arising on impaired assets. Where the Group has identified that a provision is required in relation to a particular loan or a group of loans, the existence of the Ultimate Parent Company s underwrite is taken into account in determining the value of the provision. (l) Operating lease vehicles Operating lease vehicles are stated at cost less accumulated depreciation. Current period depreciation and profits or losses on the sale of operating lease vehicles are included as part of the operating lease expense. Depreciation is on a straight line basis, at rates which will write off the cost over their economic lives of up to 5 years. (m) Office fit-out, equipment and depreciation Office fit-out and equipment are recorded at cost less accumulated depreciation and any impairment loss. Depreciation is on a straight line basis, at rates which will write off cost over their estimated economic lives of 3 to 10 years. (n) Intangible assets Software acquired by the Group is stated at cost less accumulated amortisation and any accumulated impairment losses. Subsequent expenditure on software assets is capitalised only when it increases the future economic value of that asset. Amortisation of software is on a straight line basis, at rates which will write off cost over their estimated economic lives of 3 to 4 years. (o) Provisions A provision is recognised if, as a result of a past event, the 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. (p) Employee benefits Annual leave entitlements are accrued at amounts expected to be paid. Long service leave is accrued by calculating the probable future value of entitlements and discounting back to present value. Obligations to defined contribution superannuation schemes are recognised as an expense when the services are provided. (q) Share schemes The Company provides benefits to staff in the form of share based payments, whereby staff provide services in exchange for shares. Currently the Company has the following schemes: General staff share purchase scheme Under this scheme the Company makes available an interest free loan to all staff to enable them to purchase Pyne Gould Corporation Limited ( Ultimate Parent Company ) shares, with the loan repayable over three years. The shares are issued at a price agreed by the directors and held in trust until the end of the loan term and the loan is repaid. As the fair value of the shares approximates the issue price no expense is recognised. Senior staff share schemes Under these schemes the Company undertakes to transfer a specific number of shares to various key staff at a specified future date on that staff member achieving certain criteria. The shares are issued at a price agreed by the directors and held in trust until all the conditions are satisfied. The expected benefit is expensed over the year over which any conditions are required to be met. (r) Borrowings Bank borrowings and debenture stock are initially recognised at fair value including incremental direct transaction costs. They are subsequently measured at amortised cost using the effective interest method. 11

15 Notes to the Interim Financial Statements continued For the period ended 31 December 3 Significant accounting policies (cont) (s) Financial guarantees Financial guarantees (underwrites) given by the Group are accounted for as insurance contracts. The guarantee payment received is initially capitalised and is subsequently amortised on a straight line basis over the life of the guarantee. A liability is recognised when a payment under the guarantee becomes payable. (t) GST As the Group is predominantly involved in providing financial services, only a proportion of GST paid on inputs is recoverable. The non-recoverable proportion of GST is treated as an expense. (u) Statement of Cash Flows The Statement of Cash Flows has been prepared using the direct method modified by the netting of certain cash flows, in order to provide more meaningful disclosure. Cash and cash equivalents consist of cash and liquid assets used in the day to day cash management of the Group. (v) New standards and interpretations not yet adopted There are no new standards or interpretations that have been issued but are not yet effective, that are expected to have a material impact on the reported performance or position of the Group. (w) Changes in accounting policies There have been no changes in accounting policies in the current period. 4 Segmental analysis Segment information is presented in respect of the Group s business segments which are those used for the Group s management and internal reporting structure. There are no significant concentrations of lending in New Zealand. Business segments The Group comprises the following main business segments: Business: Finance of assets into commercial business applications. Consumer: Finance of motor vehicles, boats and leisure assets. Business Consumer Unallocated Total Net interest revenue 22,106 7,763-29,869 Net lease revenue 27 1,050-1,077 Lending and credit fee revenue ,062 Net operating income 22,302 9, ,008 Depreciation and amortisation Other costs and expenses 9,733 4,053 7,717 21,503 Profit before tax 12,569 5,216 (7,786) 9,999 Income tax expense - - 3,013 3,013 Profit for the period 12,569 5,216 (10,799) 6,986 Total assets 926, ,030 44,957 1,340,096 Total liabilities - - 1,209,273 1,209,273 Total equity , ,823 12

16 Notes to the Interim Financial Statements continued For the period ended 31 December 4 Segmental analysis (cont) Business Consumer Unallocated Total Net interest revenue 23,736 8,313-32,049 Net lease revenue 134 1,485-1,619 Lending and credit fee revenue ,468 Net operating income 23,920 10, ,136 Depreciation and amortisation Other costs and expenses 4,732 3,026 6,683 14,441 Profit before tax 19,188 7,479 (6,440) 20,227 Income tax expense - - 6,693 6,693 Profit for the period 19,188 7,479 (13,133) 13,534 Total assets 995, ,764 15,252 1,414,723 Total liabilities - - 1,279,965 1,279,965 Total equity , ,758 Business Consumer Unallocated Total Net interest revenue 45,504 18, ,801 Net lease revenue 71 3, ,144 Lending and credit fee revenue 294 1, ,245 Net operating income 45,869 22,890 1,431 70,190 Depreciation and amortisation Other costs and expenses 11,933 5,416 13,228 30,577 Profit before tax 33,936 17,474 (12,761) 38,649 Income tax expense ,785 12,785 Profit for the year 33,936 17,474 (25,546) 25,864 Total assets 954, ,865 13,641 1,352,264 Total liabilities - - 1,212,275 1,212,275 Total equity , ,989 13

17 Notes to the Interim Financial Statements continued For the period ended 31 December Note 5 Net interest income Interest revenue Finance receivables 87,468 82, ,146 Derivatives held for risk management: - Effective portion of qualifying hedges Other derivatives held for risk management Total interest revenue 87,468 82, ,438 Interest expense Retail debenture stock 31,462 27,672 53,005 Bank and securitised borrowings 25,341 23,165 55,632 Derivatives held for risk management: - Effective portion of qualifying hedges Other derivatives held for risk management Total interest expense 57,599 50, ,637 Net interest income 29,869 32,049 64,801 Included within interest on finance receivables is $631,000 (Dec : $407,000, Jun : $767,000) on individually impaired assets. 6 Net operating lease income Operating lease revenue Lease revenue 5,063 6,476 12,569 Total operating lease revenue 5,063 6,476 12,569 Operating lease expense Depreciation on lease vehicles 3,402 4,354 8,500 Direct lease costs Loss on disposal of lease vehicles Total operating lease expenses 3,986 4,857 9,425 Net operating lease income 1,077 1,619 3,144 7 Selling and administration expenses Personnel expenses 6,943 7,064 14,188 Superannuation Audit fees Other fees paid to auditors - audit related Depreciation - office fit-out and equipment Depreciation - intangible assets Operating lease expense as a lessee Other operating expenses 4,670 4,912 9,254 Total selling and administration expenses 12,823 13,163 25,815 14

18 Notes to the Interim Financial Statements continued For the period ended 31 December Note 8 Tax Current tax expense Current period 7,515 5,076 12,293 Deferred tax expense Origination and reversal of temporary differences (4,502) 1, Total income tax expense in Income Statement 3,013 6,693 12,785 Reconciliation of effective tax rate Profit before tax 9,999 20,227 38,649 Prima facie tax at 30% for current period and at 33% for prior periods 3,000 6,675 12,754 Plus / (less) tax effect of permanent differences Total income tax expense in Income Statement 3,013 6,693 12,785 9 Imputation credit account Balance at beginning of period 30,231 20,676 20,676 Credits attached to dividends paid (4,433) - (2,463) Tax paid net of refunds 3,167 4,500 12,018 Balance at end of period 28,965 25,176 30, Reconciliation of profit after tax to net cash flows from operating activities Profit for the period 6,986 13,534 25,864 Add / (less) non-cash items: Depreciation 3,908 4,822 9,464 Impaired asset charge 9,186 1,746 5,726 Deferred tax (4,502) 1, Derivatives and accruals (493) 1,395 4,979 Total non-cash items 8,099 9,580 20,661 Add / (less) movements in working capital items: Other assets (8,308) (1,908) (4,570) Current tax Other liabilities (2,478) Total movements in working capital items (10,083) (1,033) (4,066) Add / (less) items classified as investing activities: Loss on disposal of operating lease vehicles Total items classified as investing activities Net cash flows from operating activities 5,354 22,227 42,762 15

19 Notes to the Interim Financial Statements continued For the period ended 31 December Non-securitised Securitised Note 11 Finance receivables Gross finance receivables 25 1,076,575 1,058,914 1,021, , , ,317 Less allowance for impairment 25 (12,511) (6,784) (9,602) (1,290) (977) (785) Total finance receivables 25 1,064,064 1,052,130 1,011, , , ,532 Note 12 Operating lease vehicles Cost Opening balance 46,526 53,469 53,469 Additions 2,519 5,895 10,023 Disposals (9,254) (8,504) (16,966) Closing balance 39,791 50,860 46,526 Accumulated depreciation Opening balance 16,807 16,635 16,635 Depreciation charge for the period 3,402 4,354 8,500 Disposals (5,217) (4,067) (8,328) Closing balance 14,992 16,922 16,807 Opening net book value 29,719 36,834 36,834 Closing net book value 24,799 33,938 29,719 16

20 Notes to the Interim Financial Statements continued For the period ended 31 December Note 13 Office fit-out and equipment Cost Opening balance 3,998 3,511 3,511 Additions Closing balance 4,147 3,803 3,998 Accumulated depreciation Opening balance 2,986 2,578 2,578 Depreciation charge for the period Closing balance 3,214 2,770 2,986 Opening net book value 1, Closing net book value 933 1,033 1, Intangible assets Cost Opening balance 3,730 3,280 3,280 Additions Closing balance 3,912 3,626 3,730 Accumulated depreciation Opening balance 2,981 2,425 2,425 Depreciation charge for the period Closing balance 3,259 2,701 2,981 Opening net book value Closing net book value Other assets Derivative financial assets 16 10, Trade receivables 2,421 3,656 3,175 Prepayments 5, ,599 Office fit - out and equipment ,033 1,012 Intangible assets Investments Deferred tax 19 6, ,791 Total other assets 26,570 7,317 10,404 17

21 Notes to the Interim Financial Statements continued For the period ended 31 December Non-securitised Securitised 16 Derivative financial instruments Assets - Qualifying cashflow hedges Derivatives held for risk management 10, Total derivative financial assets 10, Liabilities - Qualifying cashflow hedges ,170-1,018 Total derivative financial liabilities ,170-1,018 Derivatives consist of interest rate swaps and options held to manage the Group s exposure to interest rate repricing risk on its interest bearing assets and liabilities. The Group uses interest rate swaps to hedge the interest rate risk arising from its floating rate bank debt and designates those swaps as qualifying cashflow hedges. Securitised derivatives are held in the name of the Trust to hedge the interest rate risk arising in the Trust. Note 17 Borrowings Bank borrowings sourced from New Zealand 178, , ,361 Debenture stock sourced from New Zealand 769, , ,336 Debenture stock sourced from overseas 25,013 21,701 23,394 Total non-securitised borrowings 972, , ,091 Securitised bank borrowings from New Zealand 202, , ,042 Total borrowings 1,174,121 1,254,128 1,184,133 The Company has bank facilities totalling $480m (Dec : $400m, Jun : $480m) sourced from five (Dec : four, June : five) international banks. Bank borrowings and debenture stock borrowings rank equally and are secured over the non securitised assets of the Group in terms of a Trust Deed dated 9 March 1984 in favour of The New Zealand Guardian Trust Company Limited as trustee for the stockholders. Investors in MARAC ABCP Trust 1 rank equally with each other and are secured over the securitised assets of the Trust. 18

22 Notes to the Interim Financial Statements continued For the period ended 31 December Note 18 Other liabilities Derivative financial liabilities 16 10,170-1,550 Current tax Trade payables 12,884 12,489 13,581 GST payable 7,586 9,587 8,259 Related party payables 2,145 1,581 1,980 Employee benefits 1,418 1,499 2,526 Total other liabilities 35,152 25,837 28, Deferred tax Recognised deferred tax assets and liabilities Office fit-out and equipment Employee entitlements Finance receivables 3,754 2,671 2,965 Derivative assets held for risk management 3, Tax assets 7,871 2,875 3,521 Office fit-out and equipment Intangible assets Operating lease assets 1,506 1,782 1,646 Derivative liabilities held for risk management Tax liabilities 1,578 2,374 1,730 Net tax assets 6, ,791 All deferred tax movements are included in the Income Statement except for those in respect of cashflow hedges which are recognised directly in equity. 20 Capital, Reserves and Retained Earnings Reconciliation of movement in capital, reserves and retained earnings Share capital Opening balance 20,000 20,000 20,000 Closing share capital balance 20,000 20,000 20,000 Cashflow hedging Opening balance (1,765) - - Effective portion of change in fair value (10,217) 499 (1,922) Tax effect of change in cashflow hedges 3,065 (165) 157 Closing cashflow hedging balance (8,917) 334 (1,765) 19

23 Notes to the Interim Financial Statements continued For the period ended 31 December Note 20 Capital, Reserves and Retained Earnings (cont) Reconciliation of movement in capital, reserves and retained earnings (cont) Retained earnings Opening balance 121, , ,890 Profit for the period 6,986 13,534 25,864 Dividends to shareholders (9,000) - (5,000) Closing retained earnings balance 119, , ,754 Retained earnings and Reserves 110, , ,989 Total equity 130, , ,989 Number of shares 000 Number of shares 000 Number of shares 000 Issued shares Opening balance 20,000 20,000 20,000 Closing balance 20,000 20,000 20,000 The shares have equal voting rights and rights to dividends and distributions and do not have a par value. Dividends per share No dividends have been proposed by the directors after the balance sheet date. 21 Special purpose entities MARAC Retirement Bonds Superannuation Fund The Company controls the operations of MARAC Retirement Bonds Superannuation Fund, a superannuation scheme that invests in MARAC Finance Limited debenture stock. All investments in the superannuation scheme are represented by debenture stock as follows: MARAC Retirement Bonds Superannuation Fund 23,365 21,674 21,584 MARAC ABCP Trust 1 Securitisation The Group has securitised a pool of receivables comprising commercial, motor vehicle and marine loans to MARAC ABCP Trust 1 (the Trust ). The Company substantially retains the credit risks and rewards associated with the securitised assets, and continues to recognise these assets and associated borrowings on the Balance Sheet. Despite this presentation in the financial statements, the loans sold to the Trust are set aside for the benefit of investors in the Trust and no longer form part of the Company s assets over which the secured debenture stock offered under the Company s Prospectus is secured. 20

24 Notes to the Interim Financial Statements continued For the period ended 31 December 22 Related party transactions The Company s immediate parent is MARAC Financial Services Limited. The Company s ultimate parent is Pyne Gould Corporation Limited. (a) Transactions with related parties The Group receives financial and administrative assistance, computer services and leased premises from Pyne Gould Corporation Limited. The Group provided administrative assistance to MARAC Securities Limited, MARAC Investments Limited, MARAC Insurance Limited and MARAC Retirement Bonds Superannuation Fund and administrative assistance and underwriting to Nissan Finance New Zealand Limited. During the period Nissan Finance New Zealand Limited, MARAC Securities Limited, MARAC Insurance Limited, and MARAC Retirement Bonds Superannuation Fund invested in MARAC Finance Limited debenture stock. All transactions were conducted on normal commercial terms and conditions, except that the underwrite from Pyne Gould Corporation Limited is at no cost to the Group. Material transactions during the period with related parties were: Management fees revenue received from Nissan Finance New Zealand Limited Management fees revenue received from MARAC Securities Limited Underwriting fee received from Nissan Finance New Zealand Limited Loan fee received from Nissan Finance New Zealand Limited Insurance commission received from MARAC Insurance Limited Transfer of provisional tax paid at fair value - - (170) Management fees, computer services and rent paid to Pyne Gould Corporation Limited (1,096) (673) (1,476) Interest paid on debenture stock held by related parties (1,176) (1,081) (2,197) Compensation of key management personnel of the entity or its parent (570) (858) (1,264) Underwritten amount of finance receivables by Pyne Gould Corporation Limited 25, Total 23,024 (1,663) (3,393) Material transactions outstanding at period end with related parties were: Balances owing to/(owing by): Debenture stock owing to MARAC Insurance Limited 1, ,008 Debenture stock owing to MARAC Securities Limited 843 1, Debenture stock owing to MARAC Retirement Bonds Superannuation Fund 23,365 21,674 21,584 Underwritten amount of finance receivables owing by Pyne Gould Corporation Limited (25,000) - - Total ,255 23,565 All transactions with related parties were at arms length terms and conditions, except for the underwrite from the Ultimate Parent Company. (b) Transactions with Key Management Personnel Key management personnel, being directors of the Company and those staff reporting directly to the managing director and their immediate relatives have transacted with the Company during the period as follows: Debenture Investments by Key Management Personnel Maximum balance 3,331 1,792 1,817 Closing balance 3,074 1,256 1,596 Key management personnel compensation is as follows: Short-term employee benefits ,169 Share-based payments Total ,264 21

25 Notes to the Interim Financial Statements continued For the period ended 31 December 23 Fair Value The following methods and assumptions were used to estimate the fair value of each class of financial asset and liability. Finance receivables The fair value of the Group s finance receivables is calculated using a valuation technique which assumes current market interest rates for loans of a similar nature and term. Other financial assets and liabilities The fair value of all other financial assets and liabilities is considered equivalent to their carrying value due to their short term nature. Derivative items The fair value of interest rate contracts is based on the quoted market prices of these instruments at balance date. Borrowings The fair value of debenture stock, deposits, bank borrowings and other borrowings is based on the current market interest rates payable by the Group for debt of similar maturities. Carrying Value Fair Value Carrying Value Fair Value Carrying Value Fair Value Financial Assets - Finance receivables 1,064,064 1,069,685 1,052,130 1,056,843 1,011,954 1,006,858 - Finance receivables - Securitised 196, , , , , ,526 - Derivative financial assets 10,706 10, Other financial assets 36,276 36,276 17,272 17,272 15,439 15,439 Total assets 1,307,418 1,315,782 1,378,326 1,382,808 1,318,993 1,313,891 Financial Liabilities - Borrowings 972, , , , , ,920 - Borrowings - Securitised 202, , , , , ,042 - Derivative financial liabilities 10,170 10, ,550 1,550 - Other financial liabilities 24,033 24,033 25,156 25,156 26,346 26,346 Total liabilities 1,208,324 1,232,120 1,279,284 1,277,925 1,212,029 1,211, Risk management policies The Group is committed to the management of risk. The primary financial risks are those of credit, liquidity and interest rate. The Group s financial risk management strategy is set by the directors. The Group has put in place management structures and information systems to manage individual financial risks, has separated monitoring tasks where feasible and subjects all accounting systems to regular internal and external audit. 25 Credit risk exposure Credit Risk Management Framework Credit risk is the risk of financial loss to the Group caused by the failure of a customer to meet their contractual obligations that arise from the Group s lending activities. To manage this risk the Credit Committee, which is a sub committee of the Board of Directors ( Board ), has been delegated the task of overseeing a formal credit risk management strategy. The Credit Committee reviews the Group s credit risk exposures and has wide ranging credit policies to manage all aspects of credit risk. 22

26 Notes to the Interim Financial Statements continued For the period ended 31 December 25 Credit risk exposure (cont) Reviewing and Assessing Credit Risk The credit risk management strategies ensure that: - Sector and geographical risks are actively managed. - Industry and product concentrations are actively monitored. - Maximum total exposure to any one debtor is managed. - Changes to credit risk are actively monitored with regular credit reviews. Lending Standards and Processes Credit policies are in place that govern lending standards and criteria for finance products within each business sector. These policies also address credit assessment and risk grading, documentation standards and legal procedures and compliance with regulatory and statutory requirements. The Credit Committee has authority from the Board for approval of all credit exposures. Lending authority has been specifically provided to General Manager Credit, for delegation through the business units under a detailed Delegated Discretionary Lending Authority framework. This includes Lending Guidelines for each business operation together with a review and hindsight structure. Lending Discretions are provided to individual officers with due cognisance of their experience and ability. Larger exposures require approval of senior management, ultimately through to General Manager Credit or the Credit Committee of the Board. Collateral Requirements Although the Group relies primarily on the integrity of borrowers and their ability to make contracted repayments, the Group also requires appropriate collateral for loans. This collateral is usually by way of first charge over the asset financed and generally includes personal guarantees from borrowers and business owners. Because of the wide nature of the collateral held against loans it is impracticable to provide an accurate estimate of their fair value. (a) Credit Impairment Provisioning Credit impairment provisions are made where events have occurred leading to an expectation of reduced future cash flows from certain receivables. These provisions are made in some cases against an individual loan and in other cases on a collective basis. All receivables are monitored and have their risk profile assessed based on observed behaviour of the loan and other factors. This risk profiling is regularly refreshed based on current information. Individual Provisioning For individually significant loans for which the assessed risk grade is considered a potential loss, an individual assessment is made of an appropriate provision for credit impairment. Collective Provisioning For the remainder of the portfolio where no individual provision has been made, collective provisions are assessed with reference to risk profile groupings determined across the various portfolios. These collective provisions are determined with reference to historical data on loss. Other judgemental factors including economic and credit cycle considerations are also taken into account in determining appropriate loss propensities to be applied. In accordance with International Accounting Standards, no provision is applied to loans that are newly written and loans that remain within their contractual terms, except where the Group becomes aware of an individual event that might alter its view of the risk of a particular deal or group of deals. Bad Debts Bad debts provided for are written off against individual or collective provisions. Amounts required to bring the provisions to their assessed levels are recognised in the Income Statement. Any future recoveries of amounts provided for are taken to the Income Statement. Verification In addition to regular internal audit activity in regards to credit standards, the Group employs a comprehensive process of hind sighting loans to ensure that credit policies and the quality of credit processes are maintained. 23