Financial Report PINs Securities NZ Limited is an unlisted public company, incorporated in Australia Registered Office and Principal Place of Business PINS Securities NZ Limited C/o RBS Group (Australia) Pty Limited 88 Phillip Street Sydney NSW 2000 Page 1
Financial Statements Statement of Comprehensive Income for the half-year ended 31 December 2012 (Previous interim reporting period from 1 July 2011 to 31 December 2011) Income Current Half Year Previous Financial Year Previous Half Year 2012 2012 2011 NZ$ NZ$ NZ$ Movement in assets held at fair value 2,463,298 4,285,053 2,332,803 Other revenue - - - Total income 2,463,298 4,285,053 2,332,803 Expenses Movement in liabilities held at fair value (2,463,298) (4,285,053) (2,332,803) Other expenses - - - Total expenses (2,463,298) (4,285,053) (2,332,803) Profit before income tax expense - - - Income tax expense - - - Total comprehensive income - - - Page 2
Statement of Financial Position as at 31 December 2012 Assets Current Half Year Previous Financial Year Previous Half Year 2012 2012 2011 NZ$ NZ$ NZ$ Cash and cash equivalents 10,637 10,759 10,831 Trade and other receivables 1,068 1,068 1,068 Financial assets 79,909,993 77,446,695 75,494,444 Total Assets 79,921,698 77,458,522 75,506,343 Liabilities Trade and other payables 10,637 10,759 10,831 Packaged Income Notes 79,909,993 77,446,695 75,494,444 Total Liabilities 79,920,630 77,457,454 75,505,275 Net Assets 1,068 1,068 1,068 Equity Capital and other equity instruments 1,068 1,068 1,068 Retained earnings - - - Total Equity 1,068 1,068 1,068 Page 3
Statement of changes in equity for the half-year ended 31 December 2012 (Previous interim reporting period from 1 July 2011 to 31 December 2011) Current Half Year Previous Financial Year Previous Half Year 2012 2012 2011 NZ$ NZ$ NZ$ Total equity at beginning of period 1,068 1,068 1,068 Net earnings for the year - - - Increase in share capital - - - Total Equity at end of period 1,068 1,068 1,068 Page 4
Cash flow statement for the half-year ended 31 December 2012 (Previous interim reporting period from 1 July 2011 to 31 December 2011) Current Half Year Previous Financial Year Previous Half Year 2012 2012 2011 NZ$ NZ$ NZ$ Cash Flows From Operating Activities Interest income received - - - Other expenses paid (122) (194) (122) Net cash provided by operating activities (122) (194) (122) Cash Flows From Investing Activities Net cash used in investing activities - - - Cash Flows From Financing Activities Net cash provided by financing activities - - - Net change in cash and cash equivalents (122) (194) (122) Cash and cash equivalents at beginning of the period 10,759 10,953 10,953 Cash and cash equivalents at end of the financial period 10,637 10,759 10,831 Page 5
1. Summary of Accounting Policies Statement of compliance PINs Securities NZ Limited ('the Company') is an unlisted profit-oriented public company incorporated and domiciled in Australia to issue Packaged Income Notes (PINs Series 2005-1 and PINs Series 2006-1) to investors in New Zealand. The financial statements have been prepared in accordance with the Australian Corporations Act 2001, Accounting Standards and Interpretations, and comply with other requirements of the law. Accounting Standards include Australian equivalents to International Financial Reporting Standards ('A-IFRS'). Compliance with A-IFRS ensures that the financial statements and notes of the Company comply with International Financial Reporting Standards ('IFRS") The financial statements have not been audited. The unaudited half yearly financial statements were authorised for issue by the directors on 8 February 2012. Basis of Preparation The financial statements are prepared under the historical cost convention, except for the revaluation of certain noncurrent assets and financial instruments. Cost is based on the fair values of the consideration given in exchange for the assets. The accounting policies and methods of computation adopted in the preparation of the financial statements for the half year ended 31 December 2012 are consistent with those adopted and disclosed in the Company's financial statements for the financial year ended 30 June 2012 and should be read in conjunction with that report. Significant Accounting Policies Accounting policies are selected and applied in a manner, which ensures that the resulting financial information satisfies the concepts of relevance and reliability, thereby ensuring that the substance of the underlying transactions or other events is reported. The carrying amounts of the financial assets and liabilities are measured at fair value. Refer to Notes 8, 10 and 18 of the Company's 30 June 2012 annual financial statements concerning sources of estimation uncertainty and the methodology for determination of the fair value of assets and liabilities. The following significant accounting policies have been adopted in the preparation and presentation of the financial report: Cash and Cash Equivalents For the purposes of the statement of cash flows, cash and cash equivalents includes deposits held at call with a bank or financial institution with an original maturity of three months or less. Cash equivalents are short-term highly liquid investments that are readily convertible to cash and which are subject to insignificant risk of decrease in value. For the purpose of the statement of financial position, cash comprises cash on hand, cash in banks and investments in money market instruments. Page 6
1. Summary of Accounting Policies (continued) Financial Assets Investments are recognised and derecognised on trade date where purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, plus transaction costs, except those financial assets classified as at fair value through profit or loss, which are initially measured at fair value. Financial Assets at fair value through profit or loss The Company has classified certain notes as financial assets at fair value through profit and loss. Financial assets are stated at fair value, with any resultant gain or loss recognised in the Statement of Comprehensive Income. The net gain or loss recognised in the Statement of Comprehensive Income incorporates any interest earned on the financial asset. Fair value is determined in the manner described in note 18 of the Company's 30 June 2012 annual financial statements. Derecognition of financial assets The Company derecognises a financial asset only when the contractual rights to the cash flows from the asset expire or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Company recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Company retains substantially all the risks and rewards of ownership of a transferred financial asset, the Company continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received. Receivables Trade receivables and other receivables are recorded at amortised cost using the effective interest method less impairment. Financial Instruments Issued by the Company Debt Instruments Debt instruments are classified as liabilities in accordance with the substance of the contractual arrangement. Debt instruments are measured at the fair value with any resultant gain or loss recognised in the Statement of Comprehensive Income. The net gain or loss recognised in the Statement of Comprehensive Income incorporates any interest incurred on the financial liability. Fair value is determined in the manner described in note 18 of the Company's 30 June 2012 annual financial statements. The financial assets and financial liabilities are designated as at fair value through profit or loss because they are managed and their performance is evaluated on a fair value basis in accordance with the documented investment strategy. Derecognition of Debt Instruments The group derecognises Debt Instruments when, and only when, the Company's obligations are discharged, cancelled or they expire. Interest and Dividends Interest and dividends are classified as expenses or as distributions of profit consistent with the statement of financial position classification of the related debt or equity instruments or component parts of compound instruments. Page 7
1. Summary of Accounting Policies (continued) Goods and Services Tax Revenues, expenses, liabilities and assets are recognised net of the amount of goods and services tax (GST), except: i. where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the cost of acquisition of an asset or as part of an item of expense; or ii. for receivables and payables which are recognised inclusive of GST. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivable or payables. Cash flows are included in the statement of cash flows on a gross basis. The GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority is classified as operating cash flows. Income Tax Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable profit or loss for the period. It is calculated using tax rates and tax laws that have been enacted or substantively enacted by reporting date. Current tax for current and prior periods is recognised as a liability (or asset) to the extent that it is unpaid (or refundable). Current and deferred tax are recognised as an expense or income in the Statement of Comprehensive Income, except when they relate to items credited or debited directly to equity, in which case the tax is also recognised directly in equity, or where they arise from the initial accounting for a business combination. In the case of a business combination, the tax effect is taken into account in calculating goodwill or in determining the excess of the acquirer s interest in the net fair value of the acquiree s identifiable assets, liabilities and contingent liabilities over the cost of the business combination. Deferred tax is accounted for using the comprehensive balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax base of those items. In principle, deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised to the extent that it is probable that sufficient taxable amounts will be available against which deductible temporary differences or unused tax losses can be utilised. However, deferred tax assets and liabilities are not recognised if the temporary differences giving rise to them arise from the initial recognition of assets and liabilities (other than as a result of a business combination) which affects neither taxable income nor accounting profit. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, branches, associates and joint ventures except where the Company is able to control the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with these investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) when the asset and liability giving rise to them are realised or settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by reporting date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. Page 8
1. Summary of Accounting Policies (continued) Payables Trade payables and other accounts payable are recognised when the Company becomes obliged to make future payments resulting from the purchase of goods and services. Provisions Provisions are recognised when the Company has a present obligation as a result of a past event, the future sacrifice of economic benefits is probable, and the amount of the provision can be measured reliably. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that recovery will be received and the amount of the receivable can be measured reliably. Dividends A provision is recognised for dividends when they have been declared by the directors. No dividends were declared or paid during the half year (2011: Nil). Revenue Recognition Interest revenue is recognised on a time proportionate basis that takes into account the effective yield on the financial asset. Expenses Expenses are accounted for on an accrual basis. Expenses are charged against income however for expenses incurred on the acquisition of a financial instrument that is not carried at fair value through profit or loss are included within the initial carrying amount of that financial instrument. Expenses arising on the disposal of investments are deducted from the disposal proceeds. Functional Currency The Company's functional currency is New Zealand Dollars and the financial statements and notes thereto are duly presented in New Zealand dollars. The Company is based in Australia and operates in the financial services sector where it acts as an issuer of Packaged Income Notes to New Zealand investors only. Adoption of new and revised Accounting Standards In the current period, the Group adopted all mandatory new and amended Standards and interpretations. The Directors anticipate that the adoption in future periods of published standards which are not yet mandatory will have no material financial impact on the financial statements of the Company. All other Standards and Interpretations that have been issued but are not yet effective are not currently applicable to the Company. Critical judgements in applying the entity s accounting policies The following are the critical judgements (apart from those involving estimations, which are dealt with below), that management has made in the process of applying the company s accounting policies and that have the most significant effect on the amounts recognised in the financial statements. Assets and liabilities held at fair value through profit or loss The directors, upon initial recognition, have designated financial assets and financial liabilities at fair value through profit or loss. It is of the opinion of the directors, that this designation results in more relevant information because the investments are managed and their performance is evaluated on a fair value basis in accordance with the documented investment strategy. Page 9
1. Summary of Accounting Policies (continued) Key sources of estimation uncertainty The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. Assets held at fair value through profit or loss To estimate the fair value of each Portfolio Note the Directors have used information and prices released by the calculation agents for each Portfolio Note held. The calculation agents apply valuation techniques commonly used by market practitioners in the structured credit market. Directors have also used other information and their judgement to determine a best estimate of fair value. Details of the assumptions used and the results of sensitivity analyses regarding these assumptions are provided in notes 17 and 18 of the Company's 30 June 2012 annual financial statements. Liabilities held at fair value through profit or loss In the current market conditions the ability to identify observable market data to support the underlying value of each Portfolio Note is limited. To estimate the fair value of each Portfolio Note the Directors have used information and prices released by the calculation agents for each Portfolio Note held. The calculation agents apply valuation techniques commonly used by market practitioners in the structured credit market. Directors have also used other information and their judgement to determine a best estimate of fair value. Details of the assumptions used and the results of sensitivity analyses regarding these assumptions are provided in notes 17 and 18. 2. Additional Information PINs Series 2005-1 During the period PINs Series 2005-1 were debt obligations of the Company, listed on the NZX. The 2005-1 securities matured on 31 January 2013 (see note 3). PINs Series 2006-1 On 22 November 2006, the Company issued a second series of Packaged Income Notes (PINs Series 2006-1) to investors in New Zealand. PINs Series 2006-1 are debt obligations of the Company, listed on the NZX and are interest bearing securities backed by diversified credit and other investments which were designed to pay quarterly interest at a rate of 9.25% per annum, with the repayment of principal by the Company at the end of their term supported by capital protection provided to the Company by Barclays Bank Plc. PINs Series 2006-1 investors are entitled to share in any excess returns on the diversified credit and other investments at the end of their term, with a maximum additional final interest payment to investors of 18.5% of the principal amount of PINs. Interest payments have been deferred and there is not expected to be any further interest (including deferred or bonus interest) paid on PINs Series 2006-1. Page 10
2. Additional Information (continued) Financial Liabilities Reconciliation The following table details the Company s financial liabilities (Packaged Income Notes) as at 31 December 2012: PINs Series 2005-1 PINs Series 2006-1 Total Original Face Value 30,744,000 50,833,000 81,577,000 Cumulative fair value revaluation (note i) (1,076,040) (4,066,640) (5,142,680) NZX listed price on 31 December 2012 29,667,960 46,766,360 76,434,320 Net benefit to referenced financial assets (note ii) 1,017,104 2,458,570 3,475,673 Net assets attributable to noteholders 30,685,064 49,224,930 79,909,993 i) The cumulative fair value revaluation is determined with reference to the last quoted market price of the financial liabilities (Packaged Income notes) listed on the New Zealand Debt Market. ii) The net benefit to referenced financial assets represents the difference between the listed price of the PINs and the fair value of the financial assets attributable to PINs holders. The methodology for determining fair value of financial assets and liabilities is as described in note 18 of the Company's 30 June 2012 annual financial statements. 3. Subsequent Events The PINs Series 2005-1 securities matured on 31 January 2013 with repayment to investors of $1 per PNZFA note. 4. Contact Details Please refer all registry communication to: Link Market Services Limited Level 16, 19 Victoria Street West Auckland 1010 PO Box 91976 Auckland 1142 www.linkmarketservices.co.nz T(NZ) 09 375 5998 International +64 9 375 5998 F +64 9375 5990 E enqiries@linkmarketservices.com Page 11