Westpac (NZ) Investments Limited

Transcription

1 Westpac (NZ) Investments Limited Annual report for the year ended 30 September 2003

2 Westpac (NZ) Investments Limited Contents 02 Statement of Financial Performance 02 Statement of Movements in Equity 03 Statement of Financial Position 04 Statement of Cash Flows 05 Notes to the Financial Statements 15 Auditors Report 16 Other Information Directory

3 Chairman s report Welcome to our fourth Annual Report, the first under the new company name, Westpac (NZ) Investments Limited. Even though the NZ Class Shares in Westpac (NZ) Investments Limited are not a direct investment in Westpac Banking Corporation, they do provide investors with a stake in the performance in the Westpac Group through dividends related to those paid on Westpac ordinary shares, as well as voting, exchange and support arrangements attached to the shares. This past year has seen Westpac continue to put substantial effort into its key priorities of improving the customer experience and maintaining a focus on organic growth. Here in New Zealand Westpac currently ranks as one of the largest financial service organisations on many measures, including its customer numbers. The core of Westpac s strategy has been to strengthen and deepen the relationships it has with these customers. This is, of course, not to the exclusion of new customers it continues to work at attracting new customers, particularly in the Auckland, migrant, and small to medium business markets. In the Westpac Banking Corporation Annual Report last year, CEO David Morgan outlined the company s vision of Ask Once. This is founded on the simple principle that in a great service organisation a customer should only have to ask once to get the service they deserve. While this does not mean that we will always be able to answer every customer s question immediately, it does mean that one individual will take responsibility to ensure that the customer gets their answer. Over the next few months the results of this work will become increasingly obvious to our customers on this side of the Tasman. I am confident that these initiatives will contribute to Westpac s and hence Westpac (NZ) Investments Limited s ongoing success. Philip Chronican CHAIRMAN Westpac (NZ) Investments Limited Chairman s Report 01

4 Statement of Financial Performance FOR THE YEAR ENDED 30 SEPTEMBER Note $000 $000 Interest income 3 74,279 70,374 Non-interest income 4 70,242 68,734 Operating income 144, ,108 Non-interest expenses 5 (65,492) (52,096) Operating profit before income tax expense 79,029 87,012 Income tax expense 6 (24,910) (29,793) Net surplus for the year 54,119 57,219 The following notes (numbered 1 to 17) form part of and should be read in conjunction with these financial statements. Statement of Movements in Equity FOR THE YEAR ENDED 30 SEPTEMBER Note $000 $000 Balance at beginning of the year 696, ,057 Net surplus for the year 54,119 57,219 Total recognised revenue and expenses for the year 54,119 57,219 NZ Class Shares repurchased as Treasury Stock 12 - (12,208) Dividends paid on NZ Class Shares 10 (45,758) (44,342) Tax credits on supplementary dividends paid Dividends paid on ordinary share capital 10 (6,714) (6,237) Balance at end of the year 698, ,334 The following notes (numbered 1 to 17) form part of and should be read in conjunction with these financial statements. 02

5 Statement of Financial Position AS AT 30 SEPTEMBER Note $000 $000 CURRENT ASSETS Due from related entities cash , ,068 Due from related entities other , ,647 Current income tax receivable 6,761 4,601 Other assets 1,292 12,978 Total current assets 769, ,294 NON CURRENT ASSETS Investment properties and property, plant and equipment 8 89,327 74,074 Future income tax benefit 6 7,800 6,397 Total non current assets 97,127 80,471 Total assets 866, ,765 Less: CURRENT LIABILITIES Creditors Due to related entities other , ,686 Other liabilities Total current liabilities 167, ,431 Net assets 698, ,334 Represented by: EQUITY Ordinary share capital 11 8,000 8,000 NZ Class Shares , ,609 Reserves 13 42,254 42,254 Retained earnings 50,818 48,471 Total equity 698, ,334 The following notes (numbered 1 to 17) form part of and should be read in conjunction with these financial statements. On behalf of the Board Ann Sherry DIRECTOR Philip Chronican CHAIRMAN Authorised for issue on 30 October Westpac (NZ) Investments Limited Financial Statements 03

6 Statement of Cash Flows FOR THE YEAR ENDED 30 SEPTEMBER $000 $000 CASH FLOWS FROM OPERATING ACTIVITIES Interest income received 74,131 70,625 Rental income received 69,866 49,825 Other non-interest income received Rental expense paid (46,504) (25,378) Other non-interest expenses paid (651) (734) Income tax paid (27,645) (21,183) Net cash flows from operating activities 69,226 73,223 CASH FLOWS FROM INVESTING ACTIVITIES Disposal of investment properties, plant and equipment 12,152 35,232 Purchase of plant and equipment (33,274) (23,767) Net cash flows from investing activities (21,122) 11,465 CASH FLOWS FROM FINANCING ACTIVITIES Movement in amounts due to and due from related entities (223) 618 Purchase of NZ Class Shares Treasury Stock - (12,208) Dividends paid on ordinary share capital (6,714) (6,405) Dividends paid on NZ Class Shares (45,758) (44,342) Net cash flows from financing activities (52,695) (62,337) NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (4,591) 22,351 Cash and cash equivalents at beginning of the year 105,068 82,717 Cash and cash equivalents at end of the year 100, ,068 CASH AND CASH EQUIVALENTS COMPRISE: Due from related entities 100, ,068 Cash and cash equivalents at end of the year 100, ,068 RECONCILIATION OF NET SURPLUS FOR THE YEAR TO NET CASH FLOWS FROM OPERATING ACTIVITIES Net surplus for the year 54,119 57,219 Adjustments: Depreciation 16,974 17,489 Loss/(gain) on sale of property, plant and equipment 1,110 (6,252) Movements in tax provisions (2,735) 8,610 Movement in accrued assets (392) (5,314) Movement in accrued liabilities 150 1,471 Net cash flows from operating activities 69,226 73,223 The following notes (numbered 1 to 17) form part of and should be read in conjunction with these financial statements. 04

7 Note 1: Statutory Base Statement of Accounting Policies GENERAL ACCOUNTING POLICIES In these financial statements reference is made to the following reporting groups: Westpac (NZ) Investments Limited (otherwise referred to as the Company ) Westpac Banking Corporation New Zealand Branch (otherwise referred to as the NZ Bank ) refers to the New Zealand operations of Westpac Banking Corporation (trading as Westpac and Westpac Institutional Bank). The Company is registered under the Companies Act 1993 and listed on the New Zealand Exchange on 12 October The Company is an issuer for the purposes of the Financial Reporting Act These financial statements are prepared and presented in accordance with the Financial Reporting Act 1993, and all applicable financial reporting standards and other generally accepted accounting practices in New Zealand. During the year ended 30 September 2003 the Company changed its name from WestpacTrust Investments Limited to Westpac (NZ) Investments Limited. Measurement Base The financial statements are based on the general principles of historical cost accounting, as modified by the revaluation of certain assets. The going concern concept and the accrual basis of accounting have been adopted. All amounts are expressed in New Zealand currency unless otherwise stated. Derivative Financial Instruments PARTICULAR ACCOUNTING POLICIES Derivatives are bilateral contracts or payment exchange agreements whose value derives from the value of an underlying asset, reference rate or index. Derivative financial instruments include forwards, futures, options and swaps. Contracts entered into for hedging purposes are accounted for in a manner consistent with the accounting treatment of the hedged item, either mark to market or accrual as appropriate. Income or expense on derivative financial instruments used to hedge interest rate exposure is recorded on an accrual basis as an adjustment to the yield of the related interest rate exposures over the periods covered by the contracts. If an interest rate contract that is used to hedge interest rate risk is terminated early, any resulting gain or loss is deferred and amortised as an adjustment to the yield of the underlying interest rate exposure over the remaining periods originally covered by the terminated contract. Investment Properties and Property, Plant and Equipment Investment properties, where significant, are revalued annually in accordance with valuation reports of independent valuers, to reflect net current values. In addition, whenever the recoverable value of any individual property is determined to be less than its carrying value, such property is revalued down to the recoverable value. Changes in valuations are recorded in the statement of financial performance. Leasehold improvements, furniture and equipment, motor vehicles and software are valued at cost less depreciation and amounts written off. Depreciation of property plant and equipment other than land is calculated on a straight line basis at rates that will write off the cost of the assets or most recent revaluation, less their residual values, over their estimated useful lives as follows: Freehold improvements... Life of each building assessed every five years and on average this approximates 40 years. Leasehold improvements... Remaining term of lease up to seven years. Furniture... Seven years. Motor vehicles... Seven years. Equipment... Five years. Software... Three years. Gains and losses on disposal of property, plant and equipment are included in operating profit. Operating Leases Properties leased out are included as investment properties, plant and equipment in the statement of financial position. Rental income is recognised on a straight line basis over the life of the lease. Rental expenses also include certain property out-goings. Properties Intended for Sale Properties intended for sale are recorded at the lower of net realisable value at 30 September and net current value at the date the decision is made to sell the property. Westpac (NZ) Investments Limited Financial Statements 05

8 Note 1: Statement of Accounting Policies continued Statement of Cash Flows Basis of Presentation The Statement of Cash Flows has been presented using the direct approach method (as required by the Institute of Chartered Accountants of New Zealand Financial Reporting Standard 10 Statement of Cash Flows ) modified by the netting of certain items as disclosed below. Cash and Cash Equivalents Cash and cash equivalents reflect the balance of cash and liquid assets used in the day-to-day cash management of the Company. Taxation Tax effect accounting has been adopted whereby income tax expense is calculated on pre-tax accounting profits after adjustment for permanent taxation differences and timing differences to the extent the timing differences are not expected to reverse in the foreseeable future. The tax effect of timing differences which are expected to reverse in the foreseeable future are shown in the provision for deferred income tax or future income tax benefits, as applicable, at current taxation rates. The liability method of interperiod allocation of income tax has been applied on a comprehensive basis. Future income tax benefits have been recognised only where the realisation of such benefits in future periods is considered virtually certain. Comparative Figures Certain comparative figures have been restated so as to enhance comparability with the current period. Changes in Accounting Policies There have been no material changes in accounting policies during the period. All accounting policies have been applied on a basis consistent with those used in the previous year. Note 2: Risk Management Risk management of the Company is managed as part of the overall risk management of Westpac Banking Corporation New Zealand Division ( the NZ Banking Group ). This involves comprehensive policies and procedures on the management of credit, market, liquidity and operational risk. Note 3: Interest Income $000 $000 Related entities 74,031 69,900 Other Total interest income 74,279 70,374 Note 4: Non-interest Income Rental income related entities 67,593 64,372 Rental income other parties 2,620 4,009 Other income other parties Total non-interest income 70,242 68,734 06

9 Note 5: Non-Interest Expenses $000 $000 Auditors fees 9 9 Depreciation: Property and freehold improvements Leasehold improvements 9,935 9,866 Furniture and equipment 6,995 7,215 Directors remuneration - - Loss/(gain) on sale of property, plant and equipment 1,110 (6,252) Rental expense 46,761 40,119 Management fee related entities Other Total non-interest expenses 65,492 52,096 An amount of $105,000 (2002: $105,000) was paid during the year to Non-executive Directors of the Company by the NZ Bank. Fees paid to the auditors for other services are borne by the NZ Bank. Note 6: Taxation Income Tax Expense Operating profit before income tax expense 79,029 87,012 Prima facie income tax expense at 33 percent: 26,080 28,714 (Deduct)/add income tax effect of: Non-deductible expenses 19 1,683 Other items (1,189) (604) Income tax expense 24,910 29,793 Comprising: Current income tax 26,313 30,045 Future income tax benefit (1,403) (252) Income tax expense 24,910 29,793 Future Income Tax Benefit Balance at beginning of the year 6,397 6,145 Current year timing differences 1, Balance at end of the year 7,800 6,397 Note 7: Imputation Credit Account Balance at beginning of the year 10,599 12,750 Imputation credits attached to dividends received during the year - 7 Imputation credits attached to dividends paid during the year (24,800) (23,816) Income tax payments during the year 27,645 21,183 Other movements Balance at end of the year 13,692 10,599 Westpac (NZ) Investments Limited Financial Statements 07

10 Note 8: Property, Plant and Equipment Cost or Accumulated Book Valuation Depreciation Value $000 $000 $000 As at 30 September 2003 Investment properties 1,313-1,313 Freehold improvements 334 (89) 245 Leasehold improvements 127,576 (63,459) 64,117 Furniture and equipment 81,869 (58,217) 23,652 Total investment properties and property, plant and equipment 211,092 (121,765) 89,327 As at 30 September 2002 Investment properties 1,313-1,313 Freehold improvements 334 (45) 289 Leasehold improvements 105,920 (54,871) 51,049 Furniture and equipment 78,623 (57,200) 21,423 Total investment properties and property, plant and equipment 186,190 (112,116) 74,074 Investment properties, where significant, are revalued annually in accordance with valuation reports by the independent registered valuers employed by DTZ Darroch Limited. These valuers are registered with the New Zealand Valuations Board. Valuations are based on the estimated net current value calculated on the assumption that the properties are sold on the open market, subject to existing tenancies and without the benefit of any leaseback contract or similar arrangement in place. The most recent valuation was at 30 September Note 9: Commitments and Contingent Liabilities $000 $000 Commitments for Capital Expenditure Due within one year 2,500 5,800 Lease Commitments (all leases are classified as operating leases) One year or less 30,837 30,044 Between one and two years 25,214 25,576 Between two and five years 49,794 48,746 Over five years 34,186 33,035 Total lease commitments 140, ,401 There were no contingent liabilities as at 30 September 2003 (2002: nil). 08

11 Note 10: Dividends Paid $000 $000 Final dividend paid Ordinary shares 3,219 3,223 Over provision on ordinary shares in prior year - (168) NZ Class Shares 21,602 21,913 NZ Class Shares supplementary dividend ,179 25,472 Interim dividend paid Ordinary shares 3,495 3,182 NZ Class Shares 23,456 21,584 NZ Class Shares supplementary dividend ,293 25,107 Total dividends paid 52,472 50,579 Note 11: Ordinary Share Capital Issued and Paid Up Capital 8,000,000 ordinary shares 8,000 8,000 Each ordinary share is entitled to one vote. Note 12: NZ Class Shares NZ Class Shares issued 609, ,817 NZ Class Shares held as Treasury Stock - (12,208) NZ Class Shares held as Treasury Stock now cancelled (12,208) - Balance at end of the year 597, ,609 On 12 October 1999 the Company listed on the NZ Exchange and issued 54,393,306 NZ Class Shares. A first instalment of $7.20 per NZ Class Share was received on application and a second instalment of $4.75 per NZ Class Share was received on 20 December The NZ Class Shares were recorded at the total of the first instalment and the present value of the second instalment, net of issue costs. As at 30 September 2003 there were 53,694,931 NZ Class Shares on issue (2002: 54,393,306) with no NZ Class Shares held as Treasury Stock (2002: 698,375). Key features of these shares are: Each NZ Class Share is entitled to dividends, if declared. Any dividends paid on the NZ Class Shares will be the New Zealand dollar equivalent of the dividends paid on Westpac Banking Corporation Ordinary Shares (adjusted by the Exchange Fraction, if required). NZ Class Shareholder s voting rights in the Company are limited to voting on major transactions, changes to the constitution where those changes affect the rights of the shares, and voting on special resolutions to terminate or amend the Exchange or Voting Deeds. Westpac (NZ) Investments Limited Financial Statements 09

12 Note 12: NZ Class Shares continued NZ Class Shares are exchangeable into Westpac Banking Corporation Ordinary Shares upon the occurrence of certain events. In particular, in the event of liquidation of the Company, the NZ Class Shares must be exchanged. Once this exchange occurs, the current holders of the NZ Class Shares are not entitled to participate in the residual net assets of the Company in the event of a liquidation. NZ Class Shares held as Treasury Stock have none of the features mentioned above as all their rights and obligations are suspended until they are reissued. As the NZ Class Shares do not have any entitlement to earnings in priority to ordinary shareholders in the Company, earnings of the Company are not attributed to the NZ Class Shareholders in the statement of financial performance. Dividends on the NZ Class Shares are accounted for as distributions when declared. Treasury Stock On 9 May 2002 the Company gave notice that it intended to commence an on-market buy-back of up to 1.5 million NZ Class Shares for a period of six months from 24 May During the buy-back the Company acquired 698,375 NZ Class Shares for a total amount of $12,208,000. These shares were not cancelled immediately and were held as Treasury Stock. As such the Company had the right to reissue these shares at a later date. These shares represented 1.28% of the NZ Class Shares on issue at the commencement of the buy-back. As at 14 August 2002 the share buyback scheme ceased. On 7 May 2003, the Company cancelled the 698,375 NZ Class Shares that were being held as Treasury Stock, reducing the number of shares on issue to 53,694,931. Note 13: Reserves $000 $000 Share premium reserve 42,000 42,000 Property revaluation reserve Capital redemption reserve ,254 42,254 Share premium reserve Balance at the beginning and end of the year 42,000 42,000 Property revaluation reserve Balance at the beginning of the year Transfer from retained earnings on sale of investment properties Balance at the end of the year Capital redemption reserve Balance at the beginning and end of the year 1 1 There were no movements in the share premium reserve and the capital redemption reserve during the year ended 30 September 2003 (2002: nil). 10

13 Note 14: Related Entities The principal related entities of the Company are the members of the NZ Banking Group. NZ BANKING GROUP The NZ Banking Group consists of the New Zealand operations of Westpac Banking Corporation ( NZ Bank ), BLE Capital (NZ) Limited, BT Financial Group (NZ) Limited, its subsidiary BT Funds Management (NZ) Limited, and Westpac Group Investment - NZ - Limited and its subsidiaries. The sole subsidiary of Westpac Group Investment - NZ - Limited is Westpac Holdings - NZ - Limited which in turn has the subsidiaries listed in the table below. Name of Entity Principal Activity Notes Augusta (1962) Limited (formerly Australian Guarantee Corporation (N.Z.) Limited) Augusta Equities Limited (formerly AGC Equities Limited) Westpac Tasman No. 2 Pty Limited Mortgage Services Limited Amalgamated 30 September 2003 into Westpac Holdings- NZ-Limited TBNZ Limited Holding company TBNZ Capital Limited Electric Investment (ANZ) Incorporated * 60 percent owned TBNZ Developments Limited Holding company TBNZ Investments Limited First Data Capital, Inc.* 60 percent owned TBNZ Equity Limited TBNZ Investments (UK) Limited The Home Mortgage Company Limited Residential mortgage company The Warehouse Financial Services Limited Financial services company 51 percent owned Westpac Capital - NZ - Limited Holding company (formerly WestpacTrust Capital - NZ - Limited) Aotearoa Financial Services Limited Non-trading company C.B.A. Finance Nominees Limited Amalgamated 30 September 2003 into Westpac Capital- NZ-Limited Sfaka Investments Limited Systems and Technology Limited Amalgamated 30 September 2003 into Westpac Capital- NZ-Limited Westpac Funds Acceptances - NZ - Limited Westpac Lease Discounting - NZ - Limited Bag Inns Limited Bag Inns Two Limited Bag Inns Three Limited Amalgamated 30 September 2003 into Westpac Lease Discounting- NZ-Limited Toliman Investments Limited Sold 15 November 2002 Westpac Operations Integrated Limited Westpac Financial Synergy Limited BAK Consolidated Holdings Overseas Finance partnership 76 percent owned Partners * Calstock Partners * Finance partnership 67 percent owned NZA Overseas Funding * Finance partnership Purchased 8 August percent owned Willowemoc Partners * Finance partnership 67 percent owned Westpac Overseas Investments Limited (formerly WestpacTrust Overseas Investments Limited) Hudson Loft Finance LLC * Purchased 17 July percent owned Westpac (NZ) Investments Limited Financial Statements 11

14 Note 14: Related Entities continued Name of Entity Principal Activity Notes Westpac Life - NZ - Limited Life insurance company (formerly WestpacTrust Life - NZ- Limited) Westpac Nominees - NZ- Limited Nominee company Westpac Superannuation Nominees - NZ- Limited Nominee company (formerly WestpacTrust Superannuation Nominees - NZ- Limited) Westpac Investment Management - NZ - Limited Investment management company (formerly WestpacTrust Investment Management - NZ - Limited) Westpac Finance Limited Ngauranga Gorge Limited Liquidated 12 July 2002 Yasmin Properties Limited Liquidated 7 August 2002 Westpac (NZ) Investments Limited Property owning and capital (formerly WestpacTrust Investments Limited) funding company WestpacTrust Securities NZ Limited Funding company Pacific Structured Funding NZ Limited Funding company * These subsidiaries represent interests in structured finance arrangements, in which beneficial interests, but no voting rights, are held. The NZ Banking Group also has associate companies. These are Canterbury Technology Park Board (45% owned), Electronic Transaction Services Limited (25% owned) and Visa New Zealand Limited (20% owned). Nature of Transactions Loan finance, current account banking facilities and other financial products are provided by the NZ Bank to the Company on normal commercial terms with the exception of the redeemable preference shares as discussed below. The Company provides loan finance to other members of the NZ Banking Group. Management fees are paid by the Company to the NZ Bank for certain operating costs incurred by the NZ Bank. Rental income is received by the Company from the NZ Bank. Certain redeemable preference shares issued by the Company are classified as amounts due to related entities in the statement of financial position. These redeemable preference shares are not entitled to exercise any voting rights except where the dividend payable is in arrears in which case they bear the same voting rights as ordinary shares. The redeemable preference shares rank ahead of ordinary shares on liquidation of the Company. The redeemable preference shares are entitled to a dividend, payable on 30 September each year, if declared by the Directors of the Company by 5pm on that date. Transactions with related parties are disclosed separately in these financial statements. Guarantee Arrangements The Company and Westpac Capital - NZ - Limited (the NZ Bank guarantors ) have each unconditionally guaranteed the due and punctual payment of the liabilities of Westpac Banking Corporation under debt securities offered to the public (the "NZ Bank guarantees") in respect of which a prospectus was required under the Securities Act 1978 (New Zealand). From 1 July 1996, the NZ Bank was no longer required to issue prospectuses for debt securities under the Securities Act 1978 (New Zealand). Therefore, the NZ Bank guarantees do not relate to debt securities offered after 30 June The Company and Westpac Capital - NZ - Limited both gave notice, on 30 September 1998 and 23 October 1998 respectively, that they were cancelling the NZ Bank guarantees which they gave on 28 September Cancellation became effective from 30 June 1999 and 23 July 1999 respectively for subsequently incurred liabilities. Liabilities existing as at these dates are still covered by the guarantees issued by the NZ Bank guarantors. 12

15 Note 15: Credit Risk Credit risk is the potential risk of financial loss resulting from the failure of counterparties to honour fully the terms and conditions of a contract with the Company. The maximum credit risk of financial instruments is considered to be book value. The risk of non-recovery of the assets is considered minimal due to the collateral held or the credit worthiness of the counterparty $000 $000 On-Balance Sheet Credit Exposures consist of: Due from related entities cash 100, ,068 Due from related entities other 660, ,647 Current income tax receivable 6,761 4,601 Other assets 1,292 12,978 Total on-balance sheet credit exposures 769, ,294 Analysis of Credit Exposures by Geographical Areas: Within New Zealand 769, ,294 Total on-balance sheet credit exposures 769, ,294 Analysis of On-Balance Sheet Credit Exposures by Industry and Economic Sector: Government and other public authorities 7,419 6,506 Commercial and financial - - Subtotal 7,419 6,506 Due from related entities 761, ,715 Other assets ,073 Total on-balance sheet credit exposures 769, ,294 Off-Balance Sheet Credit Exposures consist of: Contingent liabilities and commitments 2,500 5,800 Interest rate swaps notional principal 641, ,654 Total off-balance sheet credit exposures 644, ,454 Analysis of Off-Balance Sheet Credit Exposures by Industry and Economic Sector: Commercial and financial 2,500 5,800 Due from related entities 641, ,654 Total off-balance sheet credit exposures 644, ,454 Note 16: Fair Value of Financial Instruments The carrying value of financial instruments is believed to be a reasonable estimate of fair value, except in respect of a debt/equity swap where the fair value cannot be reliably estimated. Under this debt/equity swap between the Company and the NZ Bank, the Company will make floating rate interest payments and will receive payments based on the dividend paid on Westpac Ordinary Shares. The purpose of this swap is to enable the Company to derive an income stream equivalent to the dividend payable on the NZ Class Shares. Westpac (NZ) Investments Limited Financial Statements 13

16 Note 17: Interest Rate Risk Interest rate risk is the risk of earnings loss arising from adverse movements in levels and volatilities of interest rates. The effective interest rates and interest repricing of financial instruments are as follows: 2003 Weighted Between Between Between Average Within 6 Months 1 and 2 and Over Interest Total 6 Months and 1 Year 2 Years 5 Years 5 Years Rate % $000 $000 $000 $000 $000 $000 Financial assets Due from related entities , , Other assets - 8,053 8, Total financial assets 769, , Non-financial assets 97,127 Total assets 866,273 Financial liabilities Due to related entities - 167, , Other liabilities Total financial liabilities 167, , Non-financial liabilities - Total liabilities 167,592 Off-balance sheet financial instruments Net interest rate contracts (principal) (payable)/receivable Financial assets Due from related entities , , Other assets - 17,579 17, Total financial assets 783, , Non-financial assets 80,471 Total assets 863,765 Financial liabilities Due to related entities - 166, , Other liabilities Total financial liabilities 167, , Non-financial liabilities - Total liabilities 167,431 Off-balance sheet financial instruments Net interest rate contracts (principal) (payable)/receivable

17 PricewaterhouseCoopers 188 Quay Street Private Bag Auckland, New Zealand DX CP24073 Telephone Facsimile Auditors Report to the shareholders of Westpac (NZ) Investments Limited We have audited the financial statements on pages 2 to 14. The financial statements provide information about the past financial performance and cash flows of the Company for the year ended 30 September 2003 and its financial position as at that date. This information is stated in accordance with the accounting policies set out on pages 5 to 6. Directors Responsibilities The Company s Directors are responsible for the preparation and presentation of the financial statements which give a true and fair view of the financial position of the Company as at 30 September 2003 and its financial performance and cash flows for the year ended on that date. Auditors Responsibilities We are responsible for expressing an independent opinion on the financial statements presented by the Directors and reporting our opinion to you. Basis of Opinion An audit 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 are appropriate to the circumstances of the Company, consistently applied and adequately disclosed. We conducted our audit in accordance with generally accepted auditing standards in New Zealand. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary to provide us with sufficient evidence to give 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 information in the financial statements. We carry out other assignments on behalf of the Company in the areas of taxation and accounting advice. In addition, certain partners and employees of our firm may deal with the Company on normal terms within the ordinary course of trading activities of the Company. We have no other interests in the Company. Unqualified Opinion 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; and (b) the financial statements on pages 2 to 14: (i) comply with generally accepted accounting practice in New Zealand; and (ii) give a true and fair view of the financial position of the Company as at 30 September 2003 and its financial performance and cash flows for the year ended on that date. Our audit was completed on 30 October 2003 and our unqualified opinion is expressed as at that date. Chartered Accountants Auckland Westpac (NZ) Investments Limited Financial Statements 15

18 Other Information Principal activity The Company s principal activities during the year were property ownership and capital funding. Entries in the interests register during the year ended 30 September 2003 Ann Sherry Director of: Hargrave Investments Pty Limited Sagitta Wealth Management Limited John Sherry Superannuation Pty Limited (Director/Trustee) Salvation Communications Pty Limited Indigenous Enterprise Partnerships Pty Limited BT Funds Management (NZ) Limited BT Financial Group (NZ) Limited Director of a number of Westpac New Zealand subsidiary companies Harry Price Non-executive Director of IAG NZ Limited and IAG NZ Holdings Limited (appointed 1 July 2003) Peter Wilson Chairman of Global Equities Market Securities Limited (appointed 7 December 2002) Board Member Hill Country Corporation Limited (appointed 1 November 2002) Director of Urbus Properties Limited (appointed 1 January 2003) Philip Chronican John King Millennium Foundation Member of the Council of Auckland College of Education Member of the Council of Business New Zealand Suzanne Suckling Member of Takeovers Panel (appointed 16 December 2002) Farmlands Trading Society Limited (resigned 25 July 2003) Share Dealings During the year, no directors acquired or disposed of equity securities in the Company. Directors Holdings The Directors shareholdings as at 30 September 2003 were as follows: Director No. of shares Class of shares H Price* 7,000 NZ Class S Suckling 1,500 NZ Class P Wilson 4,000 NZ Class J King* 10,000 NZ Class J King** 7,000 NZ Class * as Trustee ** as Trustee no beneficial interest Employees Remuneration There are no employees of the Company that received remuneration or benefits in excess of $100,000 for the relevant period. Directors Remuneration The Non-executive Directors remuneration for the Company was $105,000 (2002: $105,000) and was paid by the NZ Branch of Westpac Banking Corporation. Donations The Company made no donations in the relevant period. 16

19 Directory Directors Philip Chronican (Chairman) Harold Price (Non-executive Director) John King (Non-executive Director) Suzanne Suckling (Non-executive Director) Peter Wilson (Non-executive Director) Michael Pratt (resigned 5 December 2002) Ann Sherry (appointed 5 December 2002) Company Secretary Simon Jensen Share Registry Computershare Investor Services Limited AUCKLAND Solicitors Chapman Tripp AMP Centre, 1 Grey Street WELLINGTON Bankers Westpac Auditors PricewaterhouseCoopers PricewaterhouseCoopers Tower 188 Quay Street AUCKLAND Registered Office Level 15 PricewaterhouseCoopers Tower 188 Quay Street AUCKLAND

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