i AUSTRALAN FNANCE & LEASNG LMTED FNANCAL REPORT FOR THE SX MONTHS ENDED 31ST DECEMBER 2011 f ~ t f l J
AUSTRALAN FNANCE & LEASNG LMTED CONTENTS Page Directors' Report 3 Auditor's ndependence Declaration 7 Statement of Comprehensive ncome 8 Statement of Financial Position 9 Statement of Changes in Equity 10 Statement of Cash Flows 11 Notes to the Financial Statements 12 Directors' Declaration 29 Auditor's Report 30
AUSTRALAN FNANCE & LEASNG LMTED DRECTORS' REPORT Your directors' present their report on the company for the six months ended 31st December 2011. Directors. The names of the directors in office during the financial period and at the date of this report are: Robert Norman David Reid Laurence Best nformation on current directors and company secretary. Robert Norman Executive Director Experience Over 40 years in the Banking and Finance industry, specialising in equipment finance. He also has software design and system implementation experience in small finance companies. David Reid Non - Executive Director Experience Fellow of the nstitute of Company Directors, the Society of Certified Practising Accountants and the nstitute of Chartered Secretaries in Australia. He has over 30 years experience in financial management, specialising in strategic planning, business development, information systems, financial and prudential controls across a wide range of commercial, industrial and professional organisations. i Laurence Best Non-Executive Director and Company Secretary Experience Over 40 years experience in the banking and finance industry, a Senior Associate of the Financial Services nstitute of Australia, a Member of the Australian nstitute of Management and a Member of the Australian nstitute of Company Directors. Mr Best posses a wealth of experience in management and credit acceptance for financial institutions. Directors and company secretary have been in office since the start of the financial year to the date of this report unless otherwise stated. None of the directors hold directorship in any Australian public listed companies during the year. l t 3 f
J AUSTRALAN FNANCE & LEASNG LMTED DRECTORS' REPORT (Continued) 1 j Meetings of the directors. ~ 1 During the financial year, 2 meetings of Directors were held. Attendances were as follows: 1 1 l 1 1 SCHEDULE OF MEETNGS OF DRECTORS Name of Director Meetings eligible to attend Number of meetings attended Robert Norman 2 2 David Reid 2 2 Laurence Best 2 2 J ~ j f Directors' and executive remuneration. a) Salary and/or fees b) Benefits, including statutory and salary-sacrificed superannuation and fringe benefits that comprises the directors' remuneration package 1 The disclosure related to the remuneration of directors and the key management members is given in Note 25 of the financial statements. No part of executive remuneration paid was as the result of meeting company performance 1 targets or budgets. Principal activities. The principal activities of the company during the financial year were one of a provider of equipment finance and mortgage loans. No significant change in the nature of these activities occurred during the period. Review of operations. The net profit before tax amounted to 109,827 and after tax amounted to 51,744 (Dec 2010: Profit both before and after tax was 62,637) reflecting an increase over the previous comparable half-year's result in difficult economic conditions. 4
AUSTRA.AN FNANCE & LEASNG LMTED DRECTORS' REPORT (Continued) Dividends. No dividends were paid during the period. Significant changes in state of affairs. There have been no significant changes in the company's state of affairs during the period. Matters subsequent to the end of the financial year. No matters or circumstances have arisen since the end of the financial period which significantly affected or may significantly affect the operations of the company, its results, or the state of its affairs in future financial years. Future developments. No matters or circumstances have arisen since the end of the financial period which significantly affected or may significantly affect the operations of the economic entity, the results of those operations, or the state of affairs of the economic entity in future financial years. Options No options to shares in the company have been granted during or since the end of the financial period and there were no options outstanding at the date of this report. Environmental ssues. The Company's operations are not regulated by any significant environmental regulation under a law of the Commonwealth or of a state or territory. ndemnifying Officer or Auditor. No indemnities have been given or agreed to be given or insurance premiums paid or agreed to be paid, during or since the end of the financial period, to any person who is or has been an officer or auditor of the company. 5
AUSTRALAN FNANCE & LEASNG.MTED DRECTORS' REPORT (Continued) Proceedings on behalf of the company. No person has applied for leave of Court to bring proceedings on behalf of the company or intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for all or any part of those proceedings. The company was not a party to any such proceedings during the period. Auditor's Declaration A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is enclosed after this directors' report. Signed in accordance with a resolution of the Board of Directors: -- Dated: 2..91'H r Z('t:r:.v/Yf, 'y 2012 6
f f AUSTRA.AN FNANCE & LEASNG LMTED Auditor's ndependence Declaration Under Section 307C of the Corporations Ad 2001 to the Directors of Australian Finance & Leasing Limited. declare that, to the best of my knowledge and belief, during the six months ended 31st December 2011 there have been: no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relations to the audit; and ii no contraventions of any applicable code of professional conduct in relation to the audit. 22nd February 2012 Suite 2, 38 Ross Smith Avenue Frankston Vic 3199 \ 7, f,
AUSTRALAN FNANCE & LEASNG LMTED Statement of Comprehensive ncome ncome Note Dec 2011 Dec 2010 nterest and similar income 906,145 1,045,558 Fee and commission income 61,951 106,243 Bad debts recovered 35,962 Other income: mortgage management fee 42,000 42,000 Sundry income: expenses recovered 36,714 36,382 1,046,810 1,266,145 1 Expenses ; j nterest expenses and similar charges 500,750 583,552 Fee and commission expenses 186 1,101 mpairment losses on loans and advances 28,994 187,029 Employee benefit costs 184,830 176,981 Depreciation and amortisation expenses 11 & 12 35,243 36,551 General administration expenses 186,980 218,294 936,983 1,203,508 Profit (loss) before income tax 109,827 62,637 ncome tax (expense) recovery 4 (58,086) Profit (loss) for the period 51,744 62,637 Other comprehensive income Franking deficit tax expense Other comprehensive income (loss) for the period, net of tax Total comprehensive income (loss) for the period. 51,744 62,637 ============ Profit (loss) attributable to members of the entity 51,744 62,637 ========== Total comprehensive income attributable to members 51,744 62,637 ========= The accompanying notes form part of these financial statements 8 ------------------ 1
AUSTRALAN FNANCE & LEASNG LMTED Statement of Financial Position As at 31st December 2011 ASSETS CURRENT ASSETS Note Dec 2011 June 2011 Cash and cash equivalents 7 1,838,883 2,174,483 Loans and advances 8 6,891,932 6,459,380 Other assets 9 25,058 42,892 TOTAL CURRENT ASSETS 8,755,873 8,676,755 NON-CURRENT ASSETS Loans and advances 8 2,313,765 2,808,398 Deferred tax assets 10 169,186 356,190 Property, plant and equipment 11 86,755 96,692 ntangible assets 12 831,983 862,793 TOTAL NON-CURRENT ASSETS 3,401,689 4,124,073 TOTAL ASSETS 12,157,562 12,800,828 LABLTES CURRENT LABLTES Trade and other payables 13 47,988 85,502 Provisions 14 272,410 500,009 nterest bearing liabilities 15 4,461,374 6,314,743 TOTAL CURRENT LABLTES 4,781,772 6,900,254 NON-CURRENT LABLTES nterest bearing liabilities TOTAL NON-CURRENT LABLTES 15 5,363,965 5,363,965 3,940,493 3,940,493 TOTAL LABLTES 10,145,737 10,840,747 NET ASSETS 2,011,825 1,960,081 The accompanying notes form part of these financial statements 9
AUSTRALAN FNANCE & LEASNG LMTED Statement of Changes in Equity Note ssued Retained Capital Total Capital Earnings Loss Reserve Balance at 1st July 2010 2,952,382 193,076 (540,227) 2,605,231 Profit attributable to members 62,637 62,637 of the entity Total other comprehensive income for the period Subtotal 2,952,382 255,713 (540,227) 2,667,868 1 Dividends paid or provided for (40,000) (40,000) Balance at 31st December 2010 2,952,382 215,713 (540,227) 2,627,868 Balance at 1st July 2011 2,952,382 (452,074) (540,2271 1,960,081 Profit attributable to members 51,744 51744 of the entity Total other comprehensive income for the period Subtotal 2,952,382 (400,330) (540,227) 2,011,825 Dividends paid or provided for k Balance at 31st December 2011 2,952,382 (400,330) (540,227) 2,011,825 The accompanying notes form part of these financial statements r, i l J 10
AUSTRALAN FNANCE & LEASNG LMTED Statement of Cash Flows Note Dec 2011 Dec 2010 Cash Flows from Operating Activities Receipts from customers Proceeds from borrowings (net) Payments to suppliers and employees Loans and advances (net) ncome tax instalment paid (recovered) 1,046,810 1,266,145 (429,897) 856,094 (767,668) 2,191,179 33,087 (2,038,386) 18,545 (18,545) Net cash provided (used) by operating activities 24 (99,123) 2,256,487 Cash Flows from nvesting Activities Payment for plant and equipment Net cash provided by (used in) investing activities Cash Flows From Financing Activities Franking deficit tax paid Dividends paid 14 (236,477) (40,000) Net cash used in financing activities (236,477) (40,000) Net increase (decrease) in cash held (335,600) 2,216,487 Cash at beginning of financial period 2,174,483 1,110,952 Cash at end of financial period 1,838,883 3,327,439 The accompanying notes form part of these financial statements 11
AUSTRALAN FNANCE & LEASNG LMTED Notes to the Financial Statements The financial statements cover Australian Finance & Leasing Limited as an individual entity. Australian Finance & Leasing is a company limited by shares, incorporated and domiciled in Australia Note 1. Summary of Significant Accounting Policies Basis of Preparation The financial statements are general purpose financial statements that have been prepared in accordance with Australian Accounting Standards and Australian Accounting nterpretations Australian Accounting Standards set out accounting policies that the MSB has concluded would result in financial statements containing relevant and reliable information about transactions, events and conditions. Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with nternational Financial Reporting Standards. Material accounting policies adopted in the preparation of the financial statements are presented below and have been consistently applied unless otherwise stated. The financial statements have been prepared on an accruals basis and are based on historical costs, modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities. (a) ncome Tax The income tax expense (revenue) for the year comprises current income tax expense (income) and deferred tax expense (ncome). Current income tax charged to the profit or loss is the tax payable on taxable income calculated using applicable income tax rates enacted, or substantially enacted, as at reporting date. Current tax liabilities (assets) are therefore measured at the amounts expected to be paid to (recovered from) the relevant taxation authority. Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well as unused tax losses. Current and deferred income tax expense (income) is charged or credited directly to equity instead of the profit or loss when the tax relates to items that are credited or charged directly to equity. Deferred tax assets and liabilities are ascertained based on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets also result where amounts have been fully expensed but future tax deductions are available. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss. i t } 12
AUSTRALAN FNANCE & LEASNG LMTED Notes to the Financial Statements Note 1. Summary of Significant Accounting Policies (Continued) (b) Property, Plant and Equipment. Each class of property, plant and equipment is carried at cost or fair value as indicated less, where applicable, any accumulated depreciation and impairment losses. The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from these assets. The depreciable amount of all fixed assets is depreciated over the asset's useful life to the entity from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements. The estimated useful lives in the current and comparative periods are as follows: Plant and equipment 2-5 years (c) ntangible Assets Goodwill Goodwill represents the difference between the cost of the acquisition and the fair value of the net identifiable assets acquired. Goodwill is stated at cost less any accumulated impairments losses. Goodwill is allocated to cash-generating units and is tested annually for impairment. As from 1st July 2010, accounting for impairment of goodwill has been commenced at the rate of 6.67% per annum. Other intangible assets Other intangible assets that are acquired by the company are stated at costs less accumulated amortisation and impairment losses. These assets are tested annually for impairment. Amortisation Amortisation is charged to the income statement over the estimated useful lives of intangible assets unless such lives are indefinite. Goodwill and other intangible assets are systematically tested for impairment at each reporting date. Other intangible assets are amortised from the date they are available for use. The estimated useful lives in the current and comparative periods are as follows: Software 2-5 years 13
AUSTRALAN FNANCE & LEASNG LMTED Notes to the Financial Statements Note 1. Summary of Significant Accounting Policies (Continued) (d) Loans and Advances Loan and advances consist of direct financing leases, hire purchase contracts and business loans For direct finance leases, the carrying values of the receivable is the present value of the minimum payments receivable plus the present value of any unguaranteed residual value, discounted at the rate implicit in the lease. nterest is accounted for by apportioning the minimum lease payments received between principal and interest. Hire purchase contracts and business loans are accounted for on an actuarial basis. Loans and advances are stated at cost less impairment losses. Bad debts are written off when identified, to the provision for impairment losses if previously recognised, other wise directly to operating expenses. (e) Cash and Cash Equivalents. Cash and cash equivalents comprise cash balances and call deposits. (f) mpairment The carrying amounts of the company's assets, other than deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. f any such indication exists, the asset's recoverable amount is estimated. (g) Calculation of recoverable amount The recoverable amount of the company's loans and advances is calculated as the present value of estimated future cash flows, discounted at the original effective interest rate. Loans and advances with a short duration are not discounted. The impairment of the company's loans and advances is not recognised until objective evidence is available that a loss event has occurred. Loans and advances are individually assessed for impairment. (h) Reversals of impairments An impairment loss in respect of loans and advances is reversed if the subsequent increase in recoverable amount can be related objectively to an event occurring after the impairment toss was recognised. An impairment loss is reversed only to the extent that the asset's carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been determined. An impairment loss in respect of goodwill is not reversed. 14
AUSTRALAN FNANCE & LEASNG LMTED Notes to the Financial Statements Note 1. Summary of Significant Accounting Policies (Continued) (i) Employee benefits Provision is made for the company's liability for employee benefits arising from services rendered by employees to the reporting date. Employee benefits expected to be settled within one year, together with benefits arising from wages and salaries, annual leave, and other leave entitlements have been measured at the amounts expected to be paid when the liability is settled plus related on-costs. Other employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows including related on-costs to be made for those benefits. (j) Provisions A provision is recognised in the statement of financial position when the company has a legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. f the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflect current market assessments of the time value of money and, where appropriate, the risks specific to the liability. (k) Revenue nterest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets Revenue from the rendering of a service is recognised upon delivery of the service to customers. () Critical Accounting Estimates and Judgments The directors evaluate estimates and judgments incorporated into the financial statements based on historical knowledge and best available information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the company. Key Estimates -mpairment Accounting for the impairment of goodwill commenced on 1st July 2010. 15
AUSTRALAN FNANCE & LEASNG LMTED Notes to the Financial Statements Note Dec 2011 Dec 2010 Note 2. Revenue and Other ncome nterest and similar income Fee and commission income Bad debts recovered Other income: mortgage management fee Sundry income: expenses recovered Total Revenue 906,145 1,045,558 61,951 106,243 35,962 42,000 42,000 36,714 36,382 1,046,810 1,266,145 Note 3. Expenses nterest expenses and similar charges 500,750 583,552 mpairment losses on loans and advances 28,994 187,029 Note 4. ncome tax (recovery) expense (a) The components of tax expense comprise Current tax Deferred tax Recoupment of prior year tax losses Under (over) provision in respect of prior years 58,086 58,086 64,720 (64,720) (b) The prima facie tax on profit before income tax is reconciled to the income tax as follows Prima facie tax payable on profit before income tax at 30% (2010: 30%) 32,948 18,791 Add: Tax effect of : Non-allowable items 67,329 45,929 Less: Tax affect of : tems now allowable as deductions Recoupment of prior year tax losses (42,191) (64,720) ncome tax expense (recovery) attributable to entity 58,086 16
AUSTRALAN FNANCE & LEASNG LMTED Notes to the Financial Statements Note 5. Auditor's Remuneration Note Dec 2011 Dec 2010 Remuneration of the auditor: -auditing or reviewing the financial reports - taxation services 13,900 14,250 Note 6. Dividends Distributions paid Unfranked ordinary dividend 40,000 Balance of franking account at period end Total dividends per share for the period (cents per share) 8.54 Note 7. Cash and Cash Equivalents Dec 2011 June 2011 Cash at bank and in hand 1,838,883 2,174,483 Note 8. Loans and Advances Gross receivables Less: ncome and other costs yet to mature Less: Specific provision for doubtful debts Net receivables 9,370,972 (152,775) (12,500) 9,205,697 9,746,548 (263,770) (215,000) 9,267,778 (a) Maturity analysis Not longer than 3 months Longer than 3 but not longer than 12 months Longer than 1 year but not longer than 5 years (b) Specific provision for doubtful debts 4,072,610 2,819,322 2,313,765 9,205,697 1,665,663 4,793,717 2,808,398 9,267,778 Opening balance Doubtful debts provided during the period Bad debts written off to provision Reduction in provision during the period Closing balance 215,000 95,000 120,000 (202,500) 12,500 215,000 17
AUSTRALAN FNANCE & LEASNG LMTED Notes to the Financial Statements Note Dec 2011 June 2011 Note 8. Loans and Advances (Continued) (c) Classification of credit risk All loans and advances are reviewed and graded according to the anticipated level of credit risk. The classification adopted is described below. Non-accrual loans Without provisions 6,736 With provisions 12,500 215,000 Specific provision for impairment (12,500) (215,000) 6,736 Past due loans Balance 2,171,853 486,864 Definitions "Non-accrual loans" are loans and advances where the recovery of all interest and principal is considered to be reasonably doubtful, and hence provisions for impairment are recognised. "Restructured loans" arise when the borrower is granted a concession due to continuing difficulties in meeting the original terms, and the revised terms are not comparable to new facilities. Loans with revised terms are included in non-accrual loans when impairment provisions are required. "Assets acquired through the enforcement of security" are assets acquired in full or partial settlement of a loan or similar facility through the enforcement of security arrangements. "Past due loans" are loans where payments of principal and/or interest are at least 90 days in arrears. Full recovery of both principal and interest is expected. f an impairment provision is required, the loan is included in non-accrual loans. 18
i~- AUSTRALAN FNANCE & LEASNG LMTED Notes to the Financial Statements Note Dec 2011 June 2011 Note 9. Other Assets Prepayments Sundry debtors ncome tax instalment recoverable 16,355 14,978 8,703 9,369 18,545 25,058 42,892 Note 10. Tax Assets and Liabilities (a) Current tax assets (b) Deferred tax assets Provisions - employee benefits mpairment of receivables Future income tax benefits attributable to tax losses 36,212 33,548 3,750 64,500 129,224 258,142 169,186 356,190 f (c) Deferred tax liabilities Timing differences on leases (d) Reconciliation of movement in tax assets and liabilities charged to 'ncome' Net opening balance of tax assets & liabilities (Charge) credit to income statement Tax refunds received re adjustments to prior years Net closing balance 356,190 722,044 (58,086) (104,714) (128,918) (261,140) 169,186 356,190 (e) Future income tax benefits attributable to tax losses (June 2010) During the year ended 30th June 2010, a review of income tax returns lodged since 30th June 2003 was conducted. The Australian Taxation Office has agreed to allow amended income tax returns to be lodged for 2004,2005,2006,2007,2008 and 2009. The amended tax losses have been included in the calculation of the future income tax benefit. Refunds for the 2004 and 2005 amended income tax returns were received during the six months ended 31st December 2010. Additional refunds relating to the 2004 and 2005 income tax years were received in the six months ended 31st December 2011. t [ ~ t 19 1
, AUSTRALAN FNANCE & LEASNG LMTED Notes to the Financial Statements Note 11. Property, plant & equipment Note Dec 2011 June 2011 Plant & equipment - at cost Less: Accumulated depreciation Total property, plant & equipment 259,885 (173,130) 86,755 322,147 (225,455) 96,692 (a) Movement in carrying amounts Movement in the carrying amounts for each class of property plant and equipment between the beginning and the end of the financial year. Opening balance Additions Disposals: written down value Depreciation expense Closing balance 96,692 (5,504) (4,433) 86,755 108,085 (11,393) 96,692 Note 12. ntangible Assets Software -at cost Accumulated amortisation 108,622 (108,622) 108,622 (108,622) Goodwill - at cost Less: Accumulated impairment losses Reconciliation Opening balance Amortisation expense Closing balance 924,413 (92,430) 831,983 862,793 (30,810) 831,983 924,413 (61,620) 862,793 924,413 (61,620) 862,793 i ; ', f t The goodwill was calculated after accounting for the excess of the purchase price and associated costs to the net tangible assets Total ntangible Assets 831,983 862,793 Note 13. Payables Sundry creditors 47,988 85,502 20
AUSTRALAN FNANCE & LEASNG LMTED Notes to the Financial Statements Note 14. Provisions Note Dec 2011 June 2011 Franking deficit tax Employee entitlements Reconciliation :Provision for Franking deficit tax Opening balance Less: Franking deficit tax paid Add: Charge to income statement Closing balance 151,704 120,706 272,410 388,181 (236,477) 151,704 388,181 111,828 500,009 388,181 388,181 Reconciliation :Provision for employee entitlements Opening balance Charge to income statement Closing balance 111,828 91,638 8,878 20,190 120,706 111,828 Note 15. nterest-bearing liabilities Notes 9,825,339 10,255,236 The notes are held by persons outside the entity and are secured by floating charges over the assets of the entity. Maturity analysis Not longer than 3 months Longer than 3 and not longer than 12 months Longer than 1 year and not longer than 5 years 934,317 1,892,547 3,527,057 4,422,196 5,363,965 3,940,493 9,825,339 10,255,236 Note 16. ssued Capital 467,955 (June 2011467,955 shares) fully paid ordinary shares 2,952,382 2,952,382 The company has authorised share capital amounting to 1 million ordinary shares of no par value. Ordinary shares participate in dividends and in the proceeds on winding up of the entity in proprtion to the number of shares held. At shareholders meetings each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands. 21
j AUSTRALAN FNANCE & leasng LMTED Notes to the Financial Statements Note Dec 2011 June 2011 Note 16. ssued Capital (Continued) Ordinary shares No. No. At the beginning of the reporting period Shares issued/(cancelled) during the year At the end of the reporting period 467,955 467,955 467,955 467,955 Note 17. Related Party Transactions loan to related entity (as at 31st December 2011 and 30th June 2011) AF&l First Mortgages ltd, a company related by virtue of a common shareholding to, but not a subsidiary of, Australian Finance & leasing ltd, held a loan from Australian Finance & leasing ltd of 769,150 (30th June 2011 804,135.) This loan was made on commercial terms and Australian Finance & leasing ltd, as well as deriving a commercial rate of interest, also realises material other ongoing benefits from the transaction. t was on this basis the loan was considered and approved by the Directors. The loan was documented in accordance with the advice of the company's solicitors and secured by a first charge over the assets of AF&l First Mortgages ltd. Note 18. Contingent Liabilities As at the balance date, a Secured Note Trust Deed is in existence with Permanent Nominees Australia ltd to secure notes issued. Secured Notes issued under the Trust Deed are secured over the whole of the assets and undertakings of the company in favour of The Trust Company (Nominees) limited as Trustee for the Secured Note holders. Note 19. Segment Reporting The company operates in the Australian finance market, providing equipment finance and mortgage loans. All assets and income are located in the Australian geographical segment. Note 20. Capital and leasing Commitments As at reporting date the capital has no capital or leasing commitments. 22
AUSTRALAN FNANCE & LEASNG LMTED, ~ Notes to the Financial Statements Note 21. Financial nstruments (a) nterest rate risk The company's exposure to interest rate risk, which is the risk that a financial instrument's value will fluctuate as a result of changes in market interest rates and the effective weighted average interest rate on those financial assets and financial liabilities, is as follows: Weighted Floating Fixed nterest Rate Maturing Average nterest Effective Rate Within Within nterest 1 Year 1-5 Years Rate % Dec 2011 Financial Assets Cash 4.25 1,838,883 Loans and advances 16.41 6,891,932 2,313,765 Financial liabilities Notes 10.09 4,461,374 5,363,965 June 2011 Financial Assets Cash 4.30 2,174,483 Loans and advances 18.08 6,459,380 2,808,398 Financial liabilities Notes 10.04 6,314,743 3,940,493 (b) Credit risk The maximum exposure to credit risk, excluding the value of any collateral or other security, at reporting date to recognised financial assets is the carrying amount, net of any provisions for doubtful debts, as disclosed in the statement of financial position and notes to the financial statements. The company does not have any material credit risk exposure to any single debtor or group of debtors under financial instruments entered into by the company. 23
AUSTRALAN FNANCE & LEASNG LMTED Notes to the Financial Statements Note 21. Financial nstruments (Continued) (c) Liquidity Risk The company manages liquidity risk by monitoring forecast cash flows and ensuring that adequate unutilised borrowing facilities are maintained (d) Net Fair Value The net fair value of assets and liabilities approximates their carrying value. No financial assets and financial liabilities are readily traded on organised markets in standardised form other than listed investments. Financial assets where the carrying amount exceeds net fair value have not been written down as the principal intends to hold these assets to maturity. The aggregate net fair values and carrying amounts of financial assets and financial liabilities are disclosed in the statement of financial position and in the notes to the financial statements. Note 22. Events after the Reporting Period No matters or circumstances have arisen since the end of the reporting period which significantly affected or may significantly affect the operations of the company, its results, or the state of its affairs in future financial years. Note 23. Basic and Diluted Earnings Per Share Dec 2011 Dec 2010 Net profit (loss) attributable to members of the company 51,744 62,637 Weighted average number of ordinary shares used in calculating basic earnings per share: 467,955 467,955 Basic earning per share 0.111 0.134 There were no options outstanding, or converting preference shares on issue, for the purpose of calculating diluted earnings per share. 24
i,, AUSTRALAN FNANCE & LEASNG LMTED Notes to the Financial Statements Note Dec 2011 Dec 2010 Note 24. Cash Flow nformation Reconciliation of cash flow from operations with profit after tax Profit (loss) after income tax 51,744 62,637 Non-cash flows in profit: - depreciation & amortisation - bad debts written off & impairment losses on loans & advances - GST paid but not recoverable - loss on disposal of fixed assets 35,243 231,494 5,504 36,551 67,029 8,879 Changes in assets and liabilities: - (increase) decrease in receivables - (increase) decrease in other assets - (increase) decrease in deferred tax asset 33,087 17,834 187,004 1,926,232 30,165 261,141 - increase( decrease) in payables - increase( decrease) in interest bearing liabilities - increase (decrease) in provisions - doubtful debts - employee entitlements (37,514) (429,897) (202,500) 8,878 18,123 (276,556) 120,000 2,286 Net cash provided by (used in) operating activities (99,123) 2,256,487 25 1 \
AUSTRALAN FNANCE & LEASNG LMTED Notes to the Financial Statements Note 25. Key Management Personnel Compensation The company's key management personnel in office at any time during the year were: Robert Norman David Reid Laurence Best Managing director - Executive Director - Non-executive Director - Non-executive Remuneration Robert David Laurence Total Six months ended 31st December 2011 Norman Reid Best Short-term employee benefits 121,268 15,000 15,000 151,268 i1 l j Post employment benefits Other long-term benefits Termination benefits 121,268 15,000 15,000 151,268.1, Six months ended 31st December 2010 Short-term employee benefits 96,750 15,000 15,000 126,750 Post employment benefits Other long-term benefits Termination benefits 96,750 15,000 15,000 126,750 Short term benefits includes salary, superannuation and directors fees. Note 26. Company Details The registered office of the company is : Australian Finance & Leasing Ltd 585 Burwood Road Hawthorn Vic 3123 26
1, AUSTRALAN FNANCE &LEASNG LMTED Directors' Declaration The directors of the company declare that: 1. The financial statements and notes are in accordance with the Corporations Act 2001 J and: 1, ' 1 1 j (a) comply with Accounting Standards; and (b) give a true and fair view of the financial position as at 31st December 2011 and of the performance for the six months ended on that date of the company. 2. n the directors' opinion there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable. This declaration is made in accordance with a resolution of the Board of Directors. 1lJJy--./' RObertNOlT\a(l(Director) ~ Dated thisoj9"." day of February 2012. i t l i ' 27,
NDEPENDENT AUDT REPORT TO THE MEMBERS OF AUSTRALAN FNANCE & LEASNG LMTED have audited the financial report of Australian Finance & Leasing Limited for the six months ended 31 st December 2011 comprising the statement of financial position as at 31 st December 2011, and the statement of comprehensive income, statement of changes in equity, and statement of cash flows for the period ended on that date, a summary of significant accounting policies and other explanatory notes and the directors' declaration. Directors Responsibility for the Financial Report The directors of the company are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards (including the Australian Accounting interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the financial report that is free of material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. n Note 1 the directors also state, in accordance with Accounting Standard AASB 101: Presentation of Financial Statements, that compliance with the Australian equivalents to nternational Financial Reporting Standards (FRS) ensures that the financial report, comprising the financial statements and notes complies with FRS. Auditor's Responsibility My responsibility is to express an opinion on the financial report based on my audit. conducted my audit in accordance with Australian Auditing Standards. These Auditing Standards require that comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. n making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. believe that the audit evidence have obtained is sufficient and appropriate to provide a basis for my audit opinion.
, ndependence n conducting my audit, have complied with the independence requirements ofthe Corporations Act 2001. confirm that the independence declaration required by the Corporations Act 2001, has been provided to the directors of Australian Finance and Leasing Limited on 28 th February 2012. Audit Opinion n my opinion: (a) the financial report of the company is in accordance with the Corporations Act 2001, including (i) (ii) giving a true and fair view of the company's financial position as at 31 st December 2011, and of its financial performance for the six months ended on that date; and complying with Australian Accounting Standards and the Corporation Regulations 2001; and (b) the financial report also complies with nternational Financial Reporting Standards as disclosed in Note 1. ~.~;~~~~. Chartered Accountant ~ Suite 2, 38 Ross Smith Avenue, Frankston 3199 DatedJ,) February 2012
NDEPENDENT AUDTOR'S ASSURANCE REPORT N RELATON TO BENCHMARK NFORMATON TO THE TRUSTEE FOR SECURED NOTE HOLDERS OF AUSTRALAN FNANCE & LEASNG LMTED have: (a) audited the design and operating effectiveness of certain internal controls over benchmark information appearing in pages 4 to 6 of Prospectus NO.12 of the entity and the quarterly report dated 20 th January 2012 (the Benchmark nformation) to support the opinion below; and (b) reviewed the disclosure of certain Benchmark nformation to support the conclusion below. Directors' responsibilities The directors of the entity are responsible for the preparation and presentation of the Benchmark nformation in accordance with ASC Regulatory Guide 69 Debentures and unsecured notes - improving disclosure for retail investors ("RG 69"). The directors are also responsible for establishing and maintaining internal controls relevant to the preparation and presentation of the Benchmark nformation, and for monitoring compliance with the benchmarks. Auditor's responsibilities Audit ofcontrols over benchmarks My responsibility is to express an opinion on the adequacy of design,and operating effectiveness of the internal controls in relation to the equity ratio of the entity (being the ratio of total equity to the sum of total equity and liabilities) cash flow projections of the entity and lending by the entity that are relevant to achieving the control objectives in the opinion below. My procedures have been conducted in accordance with applicable Standards on Assurance Engagements issued by the Auditing and Assurance Standards Board except that the effect of events occurring after 20 th January 2012 up to the date of this report have not been considered. The Standards on Assurance Engagements require that comply with the relevant ethical requirements relating to assurance engagements and plan and perform the audit to obtain reasonable assurance whether the internal controls have been designed and operated effectively to achieve the control objectives in the opinion below. My procedures have been undertaken to form an opinion whether in all material respects, the internal controls in relation to the equity ratio of the entity, cash flow projections of the entity and lending by the entity were adequately designed and operated effectively to support the opinion below. Because of the inherent limitations of any internal control structure it is possible that fraud or errors may occur and not be detected. have not audited the overall internal
control structure and no opinion is expressed as to its effectiveness. An audit is not designed to detect all weaknesses in control procedures or all instances of noncompliance as it is not performed continuously throughout the period and the tests performed are on a sample basis having regard to the nature and size of the entity. Any projection of the evaluation of internal control procedures to future periods is subject to the risk that the procedures may become inadequate because of changes in conditions, or that the degree of compliance with them may deteriorate. believe that the audit evidence have obtained is sufficient and appropriate to provide a basis for my audit opinion. Review of benchmarks My responsibility is to express a conclusion on certain disclosures in relation to the rollover approach, on lending of funds and the value of property security, based on a review. conducted my review in accordance with applicable Standards on Assurance Engagements, except that the effect of events occurring after 20 th January 2012 up to the date of this report have not been considered. My review was conducted in order to state whether, on the basis of the procedures described, anything has come to my attention that causes me to believe that the matters specified in the conclusion below are not presented, in all material respects, in accordance with the relevant paragraphs of RG69. A review is limited primarily to inquiries of company personnel, review of documented policies, and analytical procedures applied to relevant financial data. A review is substantially less in scope than an audit and consequently does not enable me to obtain assurance that would be aware of all significant matters that might be identified in an audit. Accordingly, do not express an audit opinion on the matters that are subject to a review. believe that the review evidence have obtained is sufficient and appropriate to provide a basis for my review conclusion. Opinion on controls n my opinion, in all material respects, the internal controls of the entity were adequately designed and operated effectively during the period from 18 th July 2011 to 20 th January 2012 to achieve the control objectives below: (a) The equity ratio of the entity was appropriately monitored and there were no instances where the ratio was less than 8%.. (b) The entity had at all times a cash flow projection covering at least the following 3 months in accordance with paragraph 37 of RG 69. r ~
i ~, i (c) The entity had calculated the cash flow projections referred to in (b) on the basis of the assumptions the entity adopted for those projections. (d) Minimum loan to valuation ratios of 80% of the latest complying market valuation for loans were met. (e) The company does not loan to property developers. 1 i Review conclusion Based on my review, which is not an audit, nothing has come to my attention that causes me to believe that the disclosure of; (a) the rollover approach in the Benchmark nformation; and (b) where the entity on-lends funds, policies and other information provided in the Benchmark nformation in relation to loans and lending (including lending to related parties); were not presented, in all material respects, in accordance with paragraphs 45, 52 to 54, and 62 to 63 of RG 69. Restriction on distribution This report has been prepared for the entity for the purpose of providing the report to the trustee for secured notes and the Australian Securities and nvestments Commission ("ASC"). This report is intended solely for the trustees and ASC and should not be distributed to or used by parties other than the trustee or ASC. Date: 28 th February 2012. ~\~. Roslyn Buzza Chartered Accountant Suite 2,38 Ross Smith Avenue, Frankston 3199 Ph 03-97834864 Fax 03-97835634 \