FD prospectus number 6 by Simon Welch

Prospectus and Investment Statement Finance Direct Limited

22 September 2009 - Prospectus No 6

Important Information Engaging an investment advisor

(The information in this section is required under the Securities Act 1978).

Investment decisions are very important. They often have long-term consequences. Read all documents carefully. Ask questions. Seek advice before committing yourself.

An investment adviser must give you a written statement that contains information about the adviser and his or her ability to give advice. You are strongly encouraged to read that document and consider the information in it when deciding whether or not to engage an adviser.

Choosing an investment

Tell the adviser what the purpose of your investment is. This is important because different investments are suitable for different purposes, and carry different levels of risk.

When deciding whether to invest, consider carefully the answers to the following questions that can be found on the pages noted below:

The written statement should contain important information about the adviser, including:

• What sort of investment is this?

• relevant experience and qualifications, and whether dispute resolution facilities are available to you; and

• Who is involved in providing it for me?

• what types of investments the adviser gives advice about; and

• How much do I pay?

• What are the charges?

• whether the advice is limited to investments offered by 1 or more particular financial institutions; and

• What returns will I get?

• What are my risks?

• Can the investment be altered?

• How do I cash in my investment?

information that may be relevant to the adviser’s character, including certain criminal convictions, bankruptcy, any adverse findings by a court against the adviser in a professional capacity, and whether the adviser has been expelled from, or prohibited from joining, a professional body; and

• any relationships likely to give rise to a conflict of interest.

• Who do I contact with enquiries about my investment?

• Is there anyone to whom I can complain if I have problems with the investment?

• What other information can I obtain about this investment?

•

In addition to the information in this document, important information can be found in the current registered prospectus for the investment. You are entitled to a copy of that prospectus on request. *

The adviser must also tell you about fees and remuneration before giving advice about an investment. The information about fees and remuneration must include: • the nature and level of the fees you will be charged for receiving the advice; and • whether the adviser will or may receive a commission or other benefit from advising you. An investment adviser commits an offence if he or she does not provide you with the information required.

* This is the wording required by Schedule 3D of the Securities Regulations 1983 which contemplates a separate investment statement and prospectus. For this Offer the two documents have been combined and accordingly the prospectus available on request is identical to this document.

Contents Page

Chairman’s Letter

Introducing the Board of Directors

The Business of Finance Direct Limited

How to Invest

Financial Statements

Auditors’ Report

Trustee’s Statement

Statutory Information

Investment Statement - Answers to Important Questions 56 Reserve Bank of New Zealand Amendment Act 2008

Index of Statutory Information

Glossary

Directory

REGISTRATION

RESTRICTION ON THE DISTRIBUTION

NO STOCK EXCHANGE LISTING

This Prospectus is dated 22 September 2009.

OF THE PROSPECTUS

Listing of the Securities is not being sought on a recognised stock exchange.

A copy of this Prospectus, duly signed and having attached thereto copies of the documents required by section 41 of the Securities Act 1978, including Auditor’s Report and material contracts (if any) have been delivered for registration to the Registrar of Companies at Auckland, New Zealand.

This Prospectus is intended for use only in connection with the Offer in New Zealand. This Prospectus must not be distributed or given to any person outside New Zealand in circumstances in which the distribution or use of this Prospectus would be unlawful.

DEFINED TERMS

Capitalised terms used in this Prospectus have a special meaning and are defined in the Glossary of this Prospectus.

All legislation referred to herein may be viewed online at www.legislation.govt.nz.

This Prospectus is an important document and should be read in its entirety. If you have any questions about any part of this Prospectus, you should obtain the advice of your solicitor, accountant or other financial adviser.

Investment Statement & Prospectus No 6

PAGE 1

Prospectus

Chairman’s Letter 22 September 2009

Dear Investor We are very pleased to invite you to participate in this sixth issue of Debenture Stock by Finance Direct Limited. The Company has grown steadily since 1999 by offering competitively priced, flexible products, and by providing a speed of service not always met by other lending institutions. The Company attracts its customers through a network of introducers and TV, press, internet and radio advertising. The Company has always adopted a conservative approach to lending, and any loans that do not meet the Company’s strict lending criteria are brokered to a more appropriate lender thus minimising the risk to the Company. Loans which are brokered to other financial institutions are on a non-recourse basis meaning that the Company has no residual credit risk liability to those financial institutions in the event of a default by the respective borrower. This successful formula has helped Finance Direct Limited broker and arrange over $100 million worth of loans since its inception. On 12 November 2008, Finance Direct Limited received approval under the Crown Deed of Guarantee Scheme (CDGS). The current scheme will expire on 12 October 2010. On 25 August 2009, details of an extension to the scheme through to 31 December 2011 were released. The scheme was implemented at a time of considerable uncertainty and lack of confidence in the New Zealand finance sector. This has improved in the past six months. Different conditions apply to the extension and the Company is currently considering its options. The Company places a very strong focus on liquidity, through the continuous monitoring of cash flows and matching the maturity profiles of financial assets and financial liabilities. The CDGS provided the Company with the opportunity to grow its secured Loans and Advances and Debenture Stock at a rapid rate. At the date of this Prospectus, the Company’s secured Loans and Advances have increased to just under $8 million and its Debenture Stock has increased to just over $6 million. On 3 December 2008, NZF Group Limited increased its controlling stake in Finance Direct Limited from 51% to 70%. * NZF Group Limited is publicly listed on the NZX and has the extra capital, business expertise and substantial distribution network that will allow Finance Direct Limited to grow and achieve our goals. NZF Group Limited now provides management support services to our investors as well as providing company accounting and administration support. This enables us to tap into the resources, knowledge and technology of NZF Group Limited and allow us to focus on the lending and finance broking business. The funds obtained from deposits will allow us to increase our portfolio and seek further growth opportunities as they arise. The Company takes its responsibilities to its investors very seriously and is committed to offering the public an opportunity to invest in a dynamic company offering excellent returns whilst minimising risk. We are hopeful that you will find the returns offered on this investment to be extremely competitive. I encourage you to read this Prospectus and Investment Statement to find out more about Finance Direct Limited and the details of our Debenture Stock Offer. If you require additional explanation of information about the Company or this Prospectus please contact us.

Yours faithfully

Richard Waddel Chairman

NZF Group Limited does not guarantee the Securities being offered under this Offer Document.

PAGE 2

Investment Statement & Prospectus No 6

Introducing the Board of Directors

Prospectus

Finance Direct Limited has a Board of four Directors, comprising one Executive Director who co-founded the business of Finance Direct Limited, and three Non-Executive Directors (including the Chairman of the Board) all of whom have extensive experience in the finance sector, corporate governance and associated matters.

Richard Waddel

Wayne Croad

John Callaghan

Peter Huljich

BCom FCA AF Inst D

DIP BUS FINANCE

BBS

BCom, Dip. NZX, SA Fin.

Chairman and independent

Managing Director

Non-executive director

Non-Executive Director

Director

Wayne is the Managing Director of Finance Direct Limited and has over 18 years experience in the New Zealand banking, finance and insurance industries. As a founding director Wayne has been responsible for the implementation of systems, key appointments, lending standards and the strategic direction of Finance Direct Limited since inception. His background has included senior management positions for both privately held and public companies with responsibility for risk analysis, strategic planning, sales and marketing and general management.

John is the Managing Director of NZF Group Limited, which holds a 70% stake in the Company. John has over 18 years experience in the New Zealand banking and finance industry, initially with the Bank of New Zealand, Business Banking in Auckland and then in the marketing division in Wellington. John then moved to ASB Bank Limited where he undertook credit assessment then residential and commercial lending roles. He also has a high level of experience in property development. He is the founding Managing Director and was responsible for the formation of NZF Money Limited (formerly New Zealand Finance Limited) in 1997 (which company was subsequently acquired by NZF Group Limited in 2004) and its very successful progress to date.

Peter is the Managing Director and Chief Investment Officer of Huljich Wealth Management, one of New Zealand’s leading KiwiSaver providers. Peter is also a Non-Executive Director of NZF Group Limited, which holds a 70% stake in the Company, and Sugar International Limited. Peter has extensive and specialist knowledge of the financial markets with over ten years experience successfully investing in New Zealand, Australia, Europe and the Americas. His understanding of and familiarity of the financial markets compliment the strengths of the current Board.

Richard brings with him a wealth of business experience and knowledge to the Company. His background is in accountancy, business advisory and consulting, and he has held a large number of directorships in private and public companies and Government organisations. Richard was a partner for 34 years in Ernst & Young where he held the position of Chief Executive for a period of 11 years with responsibility for the overall direction, strategic planning and marketing of services for the firm. His current appointments include Chairman of NZF Group Limited, Pharmaceutical Management Agency, Kidicorp Group Limited, Auckland Festival Trust and Aotea Centre Board of Management. Richard is a Fellow of both the Institute of Chartered Accountants and the Institute of Directors.

Investment Statement & Prospectus No 6

PAGE 3

FinancIAL LIFE CYCLE finance direct embraces a “lifecycle” approach to lending. encompassing the full range of personal loans people seek as they mature and seek possessions including vehicle, boat & property enhancement loans.

The Business of Finance Direct Limited (“The Charging Group”) Finance Direct Limited was established in September 1999. To date, the Company has specialised in matching the requirements of its clients with appropriate financiers. With over $100 million in loan business brokered and arranged since inception, the Company has maintained its own small loan book and brokered the remainder of business to other lending institutions. Finance Direct Limited has recognised the competitive advantage it has by being in the position to broker business that does not fall into its own self-imposed lending criteria. On 31 May 2007, Finance Direct Limited and its wholly owned subsidiary Finance Assist Limited amalgamated to become Finance Direct Limited under Part XIII of the Companies Act 1993. Prior to the amalgamation, Finance Assist Limited had primarily been involved in making certain loans and other financial accommodation available to company and individual borrowers. With effect from 31 May 2007, the date of amalgamation, there are no Charging Subsidiaries and the Charging Group therefore consists of the Company only. The Charging Group currently generates its business via introducers, internet advertising and retail advertising in print, radio and television; and lends only on the security of vehicles, PAGE 4

Investment Statement & Prospectus No 6

boats and property. In-depth risk analysis, credit checking and security valuations are obtained on all loans. As a mainstream lender, we position ourselves to attract clientele at the quality end of New Zealand’s loan market with a strong emphasis on speed of service and flexibility. Funds received will be used to support the Charging Group’s lending operations directly to clients of the Charging Group. The Charging Group has adopted strict and conservative lending guidelines and criteria with a view to minimising the credit risk of the Charging Group on each loan which it undertakes. In addition the Charging Group has sought to minimise its credit risk exposure by spreading its loans over a large number of smaller loans rather than focusing on a fewer number of larger transactions. The Charging Group intends to continue this approach in the future to diversify its exposure to individual borrowers. We are pleased to offer a range of attractive rates depending on the term of the investment and believe the offer will not only provide a steady rate of return to Investors but an introduction to a well-managed business with good growth opportunities.

The Debenture Stock is issued pursuant to the terms and with the protections of the Trust Deed. Under the Trust Deed, Covenant Trustee Company Limited (“the Trustee”) has been appointed to act on behalf of all Debenture Stock holders.

Trust Deed Security Under the Trust Deed, the Charging Group have given a first ranking floating charge over all of their assets and undertakings to secure repayment of the principal amounts invested in Debenture Stock and all interest on the Debenture Stock.

Restrictions on the Company The Trust Deed imposes a number of financial limitations, restrictive covenants and general covenants on the Company (referred to as the “Charging Group” or the “Borrowing Group”), including:

(c) A restriction on the Charging Group carrying on any business other than the provision of financial accommodation and financial services or acquiring any assets other than assets used in such business; (d) A restriction on the Charging Group allowing the amount owing to the Charging Group under financing receivables by any one debtor or related group of debtors to exceed 10% of Total Tangible Assets. Further details of these restrictions and covenants are provided on pages 51 and 52 of this document.

Reporting Requirements To ensure that the Trustee is adequately informed, the Trust Deed requires that the Company must provide the following information to the Trustee: •

(a) Each of the Company and the other Charging Group Members covenant with the Trustee that none of them will at any time after the date of the Trust Deed:

Annual audited financial statements, accompanied by an auditor’s report;

•

Half-yearly audited financial statements, accompanied by an auditor’s report;

•

Where the Total Tangible Assets are less than $8,000,000, permit the Total Liabilities to exceed 86% of the Total Tangible Assets;

•

Further financial statements and reports when the Trustee considers that special circumstances have arisen which warrant such request;

•

Where the Total Tangible Assets are $8,000,000 or more but less than $15,000,000, permit the Total Liabilities to exceed 88% of the Total Tangible Assets;

•

Copies of all reports, notices and other material sent by the Company to its shareholders or to the holders of Securities;

•

Where the Total Tangible Assets are $15,000,000 or more, permit the Total Liabilities to exceed 90% of the Total Tangible Assets;

•

Borrow or raise any money on the security of any Prior Security Interest when the aggregate of all principal moneys then secured by existing Prior Security Interests plus the moneys so proposed to be borrowed or raised and secured would exceed 2% of Total Tangible Assets.

Quarterly directors’ certificates in the form prescribed by the Trust Deed (and otherwise as required by the Securities Regulations) and a liquidity report also in the form prescribed by the Trust Deed;

•

Monthly directors’ statements and reports on asset quality, reinvestment rates, breaches of financial covenants (if any) and liquidity to comply with additional reporting requirements required by the Securities Regulations;

•

Reporting as per the requirements set out by the Reserve Bank of New Zealand pursuant to the Reserve Bank of New Zealand Amendment Act 2008 and its regulations (as permitted by the Reserve Bank);

•

A copy of the monthly management accounts of the Company; and

•

Notice of proceedings which materially and adversely affect the Company.

(b) A restriction on the Charging Group entering into any Related Party Transactions except in the ordinary course of business and where the terms thereof are evidenced in writing and the consideration therefore is on the basis of an arms length transaction as between two unrelated parties contracting in an open market, provided however that in any twelve month period the aggregate Value of Related Party Transactions entered into or remaining outstanding shall not exceed 2% of Total Tangible Assets as at the end of that twelve month period;

Investment Statement & Prospectus No 6

PAGE 5

Prospectus

Security for your Investment

Summary Financial Information The following amounts have been taken from the audited financial statements of the Charging Group for the years ended 31 March 2005 to 31 March 2009. 31/03/2009 31/03/2008 31/03/2007 NZ IFRS NZ IFRS NZ IFRS $’000 $’000 $’000

Total Gross Operating Income

31/03/2007 Previous NZ GAAP $’000

31/03/2006 Previous NZ GAAP $’000

31/03/2005 Previous NZ GAAP $’000

1,724

2,253

2,507

2,516

2,595

1,770

Interest Paid

350

445

497

261

(Loss)/Profit Before Income Tax

(28)

316

443

441

248

132

104

149

155

116

(30)

Income Tax Expense (Loss)/Profit After Income Tax Dividend on Preference Shares Cents Per Share Dividend on Ordinary Shares Cents Per Share Retained (Loss)/Profit for the Year

212

294

286

132

210

26.62 (240)

212

294

286

132

Total Assets

6,121

6,247

6,904

6,773

5,835

1,714

Total Tangible Assets

6,121

6,247

6,904

6,773

5,835

1,714

Total Liabilities

4,530

4,416

5,510

5,352

4,700

981

Total Equity

1,591

1,831

1,394

1,421

1,135

733

Notes

The audited financial statements of the Charging Group were prepared for the first time under NZ IFRS for the year ended 31 March 2008. The NZ IFRS transition date for the Charging Group was 1 April 2006. A net decrease in Total Equity of $35,000 was reflected in the financial statements as at that date following the transition to NZ IFRS. Accordingly, amounts stated in the Summary Financial Information for the three years ended 31 March 2007 are those reported under previous NZ GAAP (NZ accounting standards that applied prior to the adoption of NZ IFRS), with amounts stated for all subsequent periods being those reported under NZ IFRS.

Acquisition of, and subsequent amalgamation with Finance Assist Limited On 31 May 2007, Finance Direct Limited and its wholly owned subsidiary Finance Assist Limited amalgamated to become Finance Direct Limited under Part XIII of the Companies Act 1993. Prior to the amalgamation, Finance Assist Limited had primarily been involved in making certain loans and other financial accommodation available to company and individual borrowers.

PAGE 6

Investment Statement & Prospectus No 6

Minimum Investment

Term – Debenture Stock

Investors may select the amount the Investor wishes to invest (“Application Moneys”). The minimum amount that may be invested however is $1,000. There is no maximum amount that may be invested.

The Debenture Stock will be issued for fixed terms ranging between 3 months and 5 years. The Investor must select the appropriate fixed term on the Application Form.

Application and Payment If an Investor wishes to make an Investment, the Investor must: •

Complete the Application Form that accompanies this Prospectus and Investment Statement.

•

Attach a cheque for the Application Moneys or direct credit the Application Moneys into our bank account.

•

Send the Application Form together with the Investor’s cheque for the Application Moneys made payable to “Finance Direct Limited” and crossed “Not Transferable” for the amount of the Application Moneys shown on the Application Form to Finance Direct Limited, to any Primary Market Participant or any agent appointed by the Company to receive such Application Forms.

Do not forward cash. Payment will only be accepted in New Zealand currency as follows: •

Personal cheque drawn on and payable at any New Zealand bank;

•

Bank cheque issued by and payable at any New Zealand bank;

•

Bank draft drawn on and payable at any New Zealand bank; or

•

By direct credit in cleared funds into the Company’s bank account.

The Company reserves the absolute discretion to repay the Investment prior to the expiry of the fixed term of the Investment. Please refer below to the section headed “Early repayment of the Debenture Stock at the election of the Company” for further information.

Interest Rate – Debenture Stock The Company will pay the Investor interest on the sum invested at the fixed rate advertised by the Company for Investments of that term on the date the application is received by the Company. Current interest rates for Debenture Stock are set out on the rate sheet accompanying the Application Form. From time to time market conditions alter and interest rates on Debenture Stock are changed to suit those conditions. Any alteration in interest rates will not apply to Investments received before that alteration is made. Once accepted, Debenture Stock will continue to earn the interest rate agreed on when the Investment is made and is fully protected from any later fluctuation. If the Application Form is received after an interest rate has been changed the Company will advise the Investor of such a change and in the event that the Investor does not confirm within 10 Business Days that the Investor accepts the new interest rate, the Company will refund the deposit to the Investor. No interest will be repaid on moneys refunded.

Investment Statement & Prospectus No 6

PAGE 7

Prospectus

How to Invest

Payment of Interest Interest on the Investment may be compounded or paid to the Investor by direct credit or cheque at the Investor’s option. The Company pays interest quarterly during the term of the Investment from the date of the deposit with the Company. Once the Debenture Stock has been allotted to the Investor for a fixed term, the interest rate at which that Debenture Stock has been issued to the Investor will be fixed during the term of the Investment and will not be varied. The Investor can choose to receive payments of interest in any one of three ways: Compound – Rather than make a quarterly interest payment, the Company will add interest to the Investment automatically and send the Investor a notice of the Investor’s balance. The Investor will then earn interest on the original Investment and on the interest. If the Investor selects “compounding interest option” on the Application Form and then later decides that they would like to receive quarterly payments the Company will change the manner in which payments of interest are made in the future. Quarterly Direct Credit – The Company may pay interest direct to the Investor’s bank account each quarter and mail the Investor an interest advice which shows details of the amount banked. This method avoids any postal delay which may occur if a cheque is mailed to the Investor. Quarterly Cheque – The Company may pay the interest by cheque each quarter. The cheque together with an interest advice is posted to the Investor.

Taxation Under current legislation, the Company is required to deduct Resident Withholding Tax (“RWT”) from interest paid to, or applied for, the benefit of New Zealand resident Investors and Investors who hold secured deposits through a fixed establishment in New Zealand. RWT will not be deducted by the Company where Investors hold a valid Certificate of Exemption that has been supplied to the Company. Investors who supply the Company with their IRD Number must elect a RWT rate currently being 19.5c, 33c or 39c for every $1.00 of interest earned. RWT will be deducted at the rate of 39c for every $1.00 of interest earned where an Investor’s IRD Number is not supplied, as required by current legislation.

PAGE 8

Investment Statement & Prospectus No 6

Non-Resident Withholding Tax (“NRWT”) will be deducted by the Company from interest paid to, or applied for, the benefit of an Investor who is not a tax resident of New Zealand unless the Investor holds secured deposits through a fixed establishment in New Zealand. The rate of NRWT deduction will be dependent upon the Investor’s country of residence. The Company will make the deductions referred to above and as required by applicable legislation unless it is satisfied by the Investor that such deductions are not required by law. The Company has obtained “Approved Issuer” status and has registered the Debenture Stock as “Registered Securities” for the purpose of the approved issuer levy provisions in Part VIII of the Stamp and Cheques Duties Act 1971. The Company may, upon request, subject to being legally entitled so to do, and on any terms it requires, agree to deduct and pay an approved issuer levy (currently 2%) on interest payments made to non-residents in lieu of NRWT. With the tax threshold changes that took effect from 1 October 2008 and the new tax rates effective from 1 April 2009, no changes have yet been made to the RWT tax rates of 19.5% or 33%. Financial institutions have the option of offering a reduced rate of 38% in place of 39% for the 2010 tax year. However, the Company does not currently offer this reduction. Accordingly, an Investor will need to recover any overpaid RWT by filing a tax return. The Government has advised that further consequential changes to the RWT rates on interest will not be fully implemented until there has been further consultation with banks and other financial institutions. That consultation is still in progress at the date of this Prospectus.

New Investment Products The Company reserves the right to offer new investment products, including savings accounts, not specified in this Prospectus, and to offer different interest payment methods to Investors.

Repayment of the Investment Debenture Stock

On maturity, Stockholders will be paid the face value of their Investment together with any interest then due, upon presentation of the relevant documentation to the Company. About 14 days before the date that the Investment is due

If the Investor has no immediate use for the Investment, the Company will, at the Investor’s request accept the Investment for a further period nominated by the Investor at whatever is the current interest rate at that time. The Investor may request that repayment is made. If so, the Investor will need to return the Investment Certificate held in respect of the Investment. Payments will be made to the Investor by cheque or deposited into the Investor’s bank account at the election of the Investor. If at the maturity date the Company has not received any instruction from the Investor regarding either the reinvestment or repayment of the investment the Company may at its sole discretion: •

Hold that investment “at call”, with seven days notice, at the Company’s “at call” rate until it receives the Investor’s instructions;

•

Reinvest the investment for the same term (and the same payment terms) as the original investment of Debenture Stock. The investment will accrue interest at the interest rate applicable to investments of the same term as the investment as at the date of the reinvestment;

•

Repay the investment together with all accrued but unpaid interest by cheque to the Investor’s last known address or by direct credit to the Investor’s last nominated bank account.

Early Repayment – Debenture Stock

The Investor has no right to require the Company to repay the Investment to the Investor prior to the expiry of the fixed term of the Investment. However, the Company reserves the ability at its absolute discretion to permit the early repayment of Debenture Stock before the Maturity Date for the respective Investment in the event of death or financial hardship. Requests for early repayment of Debenture Stock must be made to the Company in writing. In the event that the Company agrees to repay the Investment to the Investor prior to the Maturity Date, the Company reserves the right at its discretion to adjust the interest rate applicable to the Investment for the term upon which those funds have been held by the Company. The Company may also charge an investment break fee set by the Company from time to time.

Early repayment of the Debenture Stock at the election of the Company

The Company reserves the absolute discretion to repay the Investment prior to the expiry of the fixed term of the Investment, provided that the Company: •

Provides the Investor with not less than one months notice of the early repayment in writing to the Investor; and

•

The Company must repay all principal and interest accrued to the date of the early repayment on the date of the early repayment.

Investment Certificate For Debenture Stock, the Company issues a Certificate containing full information about the Investment. This Certificate is the Investor’s record of the terms on which the Investment has been accepted by the Company. When the Investment matures the Investor must return the Certificate to the Company together with the Investor’s instructions for repayment or reinvestment.

Registers and Transfers A Register of the holders of Securities will be maintained by the Company. An Investor may transfer its interest in the Investment at any time (not later than 30 days before Maturity Date) by completion of a Transfer in such form as is customarily used to transfer shares in New Zealand (“Transfer”). More than one person can take ownership of the Investment. The Company is not bound to recognise trusts. Consequently no reference to trusts or trustees should be made in the Transfer. Joint Investment owners will be treated as joint tenants (unless some other form of ownership is indicated) so that on the death of one of them ownership of the Investment will vest automatically with the survivor(s). To be valid the Transfer must be registered with the Company. There is currently no fee payable in respect of the Transfer of the Investment to another person, however, the Company reserves the right to charge a fee in the future.

Market In the opinion of the Company there is no established market for the sale or transfer of the Securities.

Investment Statement & Prospectus No 6

PAGE 9

Prospectus

to mature the Investor will be sent a letter which sets out the options available for reinvestment or repayment of the Investment.

Finance Direct Limited HOME & RENOVATION LOANS ARE POPULAR WITH INDIVIDUAL BORROWERS AND CONTRIBUTE TO THE OPERATIONS OF FINANCE DIRECT.

PAGE 10

Investment Statement & Prospectus No 6

Historical Financial Information

FINANCE DIRECT LIMITED

Income Statement for the year ended 31 March 2009

Note

2009 $â&#x20AC;&#x2122;000

2008 $â&#x20AC;&#x2122;000

Interest income

807

880

Interest expense

(350)

(445)

Net interest income

457

435

Fee and commission income

917

1,368

Fee and commission expense

(139)

(306)

Net fee and commission income

778

1,062

Other income

Total operating income

1,235

1,502

Net impairment losses

(175)

Operating expenses and staff costs

(1,088)

(1,190)

(Loss)/profit before income tax

(28)

316

(2)

(104)

(Loss)/profit for the year

(30)

212

Income tax expense

The attached notes form part of and are to be read in conjunction with the Financial Statements

Investment Statement & Prospectus No 6

PAGE 11

Historical Financial Information

FINANCE DIRECT LIMITED

Statement of Changes in Equity for the year ended 31 March 2009

Note

Share Capital $’000

Retained Earnings $’000

Total Equity $’000

Balance as at 1 April 2007

855

539

1,394

Net profit for the year

212

Redemption of preference shares

(275)

Issue of ordinary shares

500

Dividends

Balance as at 31 March 2008

1,080

751

1,831

Balance as at 1 April 2008

1,080

751

1,831

Net loss for the year

(30)

Dividends

(210)

Balance as at 31 March 2009

1,080

The attached notes form part of and are to be read in conjunction with the Financial Statements

PAGE 12

Investment Statement & Prospectus No 6

511

1,591

FINANCE DIRECT LIMITED

Balance Sheet as at 31 March 2009

Note

2009 $â&#x20AC;&#x2122;000

2008 $â&#x20AC;&#x2122;000

Cash and cash equivalents

1,068

722

Loans and advances to customers

4,906

5,317

Trade and other receivables

Current tax assets

Property, plant and equipment

Deferred tax asset

Other assets

Total assets

6,121

6,247

Liabilities

Trade and other payables

212

163

Loans and borrowings

4,157

4,111

Current tax liabilities

Other liabilities

148

142

Total liabilities

4,530

4,416

Net assets

1,591

1,831

1,080

Equity

Share capital

Retained earnings

511

750

Total equity

1,591

1,831

For and on behalf of the Board of Directors:

John Alan Callaghan

Wayne Darrin Croad

Director

30 June 2009

The attached notes form part of and are to be read in conjunction with the Financial Statements

Investment Statement & Prospectus No 6

PAGE 13

Historical Financial Information

Assets

FINANCE DIRECT LIMITED

Statement of Cashflows for the year ended 31 March 2009

2009 $â&#x20AC;&#x2122;000

2008 $â&#x20AC;&#x2122;000

Cash Flows from Operating Activities

Interest received

807

Interest paid

(350)

(445)

Fee and commission income received

923

1,385

Other income received

880

Payments to suppliers and employees

(1,133)

(1,520)

Taxation received/(paid)

(118)

Net decrease in loans and advances to customers

236

578

Net Cash Flow from Operating Activities

511

765

Cash Flows used in Investing Activities

Purchase of property, plant and equipment

(4)

Sale of property, plant and equipment

Net Cash Flow from Investing Activities

(1)

(12) (12)

Cash Flows from Financing Activities

Net increase/(decrease) in secured debenture stock Issue of ordinary shares Redemption of preference shares

(1,019)

500

(275)

Payment of dividends

(210)

Net Cash Flows from Financing Activities

(164)

(794)

Net increase/(decrease) in cash held

346

(41)

722

763

1,068

722

1,068

722

Cash balance at start of the year

Cash balance at end of the year Made up as follows: Bank accounts The attached notes form part of and are to be read in conjunction with the Financial Statements

PAGE 14

Investment Statement & Prospectus No 6

FINANCE DIRECT LIMITED

Reconciliation of net (loss)/profit with cash flows from operating activities for the year ended 31 March 2009

(Loss)/profit for the year

2009 $â&#x20AC;&#x2122;000

2008 $â&#x20AC;&#x2122;000

(30)

212

Depreciation of property, plant and equipment

Increase/(decrease) in collective and specific loan allowances

175

(4)

Net decrease in loans and advances to customers

236

578

Decrease in accounts receivable and other assets

Increase/(decrease) in accounts payable and other liabilities

(75)

Decrease/(increase) in current tax assets

(28)

(Increase)/decrease in deferred tax asset

(26)

Net Cash Flow from Operating Activities

511

765

Add:

The attached notes form part of and are to be read in conjunction with the Financial Statements

Investment Statement & Prospectus No 6

PAGE 15

Historical Financial Information

Deduct:

FINANCE DIRECT LIMITED

Notes to the Financial Statements for the year ended 31 March 2009

Significant Accounting Policies

(a) General Information The reporting entity is Finance Direct Limited (“the Company”). The comparative period includes the Company and its former wholly owned Charging Subsidiary, Finance Assist Limited, which was amalgamated with the Company on 31 May 2007 and subsequently struck off. The Company is profit oriented and incorporated and domiciled in New Zealand. The Company is a reporting entity for the purposes of the Financial Reporting Act 1993 and its financial statements comply with that Act. The Company is an Issuer as defined by the Securities Act 1978 and the Securities Regulations 1983.

(b) Statement of Compliance The financial statements for the Charging Group have been prepared in accordance with Generally Accepted Accounting Practice in New Zealand (“NZ GAAP”) and the requirements of the Companies Act 1993 and the Financial Reporting Act 1993. They comply with New Zealand equivalents to International Financial Reporting Standards (“NZ IFRS”) and other applicable financial standards, as appropriate for profit-oriented entities. The financial statements comply with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. Standards and interpretations to published standards that are not yet effective At the date of authorisation of these financial statements, certain new standards, amendments and interpretations to existing standards have been issued which were not yet effective at balance sheet date, and which the Charging Group

has not early adopted. The Charging Group has assessed the relevance of all such new standards, interpretations and amendments, has determined that the following may be relevant to its operations, and has concluded as follows: NZ IAS 1 – Presentation of Financial Statements (Amendments effective 1 July 2009) Revised NZ IAS 1 introduces as a new primary financial statement, the “Statement of Comprehensive Income”, which represents changes in equity during a period other than those changes resulting from owners in their capacity as owners. This new statement can be presented as a single Statement of Comprehensive Income (which will effectively combine the Income Statement and all non-owner changes in equity) or a separate Income Statement and Statement of Comprehensive Income. This new standard does not change the recognition, measurement or disclosure of transactions and events that are required by other NZ IFRS’s. The amendments to NZ IAS 1 may result in changes to the additional disclosures in the Charging Group’s financial statements. NZ IFRS 8 – Operating Segments (effective 1 January 2009) NZ IFRS 8 requires an entity to report financial and descriptive information about its reportable segments based on how the business is reported to senior management. Reportable segments are operating segments or aggregations of operating segments that meet specified criteria. Additional entity wide disclosures are required including information about products and services or groups of products and services, analyses of revenues and information about transactions with major customers. The standard does not change the recognition, measurement or disclosure of specific transactions and events that are required by other NZ IFRS’s.

Standards and interpretations and amendments to published standards that are not yet effective and/or not relevant: Standard NZ IFRS 1

First Time adoption of New Zealand Equivalents to International Financial Reporting Standards (Restructured)

Effective Date 1 July 2009

NZ IFRS 1/IAS 27 Amendments to Cost of Investment in Subsidiary, Jointly Controlled Entity or Associate

1 January 2009

NZ IFRS 2

Amendments to Share Based Payments:Vesting Conditions and Cancellations

1 January 2009

NZ IFRS 3

Business Combinations (Revised)

NZ IFRS 4

Insurance Contracts (Amendments)

1 January 2009

NZ IAS 1/32

Amends to puttable financial instruments and obligations arising on liquidation

1 January 2009

NZ IAS 23

Borrowing Costs (Revised)

1 January 2009

NZ IAS 39

Amendments to Financial Instruments: Recognition and Measurement - Eligible hedged items

NZ IAS 40

Investment Properties

NZ IFRIC 13

Customer Loyalty Programmes

NZ IFRIC 15

Agreements for the construction of Real Estate

NZ IFRIC 16

Hedges of a Net Investment in a Foreign Operation

NZ IFRIC 17

Distribution of Non-Cash Assets to Owners

PAGE 16

Investment Statement & Prospectus No 6

1 July 2009

1 July 2009 1 January 2009 1 July 2009 1 January 2009 1 October 2008 1 July 2009

(c) Basis of Preparation The financial statements have been prepared on the basis of historical cost. Cost is based on the fair values of the consideration given in exchange for assets. The Charging Group meets the definition of a Financial Institution under NZ IFRS 7 ‘Financial Instruments: Disclosures’ and is subject to the specific additional disclosure requirements applicable to Financial Institutions defined in Appendix E of NZ IFRS 7. The Income Statement discloses the net interest income, net fee and commission income and other income in line with the Income Statement presentation used by other Financial Institutions. The Balance Sheet presentation discloses assets and liabilities in order of their liquidity in line with the Balance Sheet presentation used by other Financial Institutions. Where it is not evident from the financial statement line item, disclosure of the current/non-current split has been made in the relevant note.

(d) Functional and Presentational Currency These financial statements are presented in New Zealand dollars ($), which is the functional currency of the Charging Group. All financial information presented in New Zealand dollars has been rounded to the nearest thousand dollars ($’000).

(e) Basis of Consolidation Subsidiaries

Subsidiaries are entities controlled, either directly or indirectly, by the Company. Control exists when the Company has the power to govern the financial and operating policies of an entity so as to obtain the benefits from its activities.

(f) Segment Reporting

(g) Revenue Recognition of income

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Charging Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:

Prospectus

The Charging Group operates in one industry as a Financial Institution. All operations are carried out within New Zealand.

Interest income and similar expense

For all financial instruments measured at amortised cost, interest income and expense is recorded at the effective interest rate, which is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument, or a shorter period where appropriate, to the net carrying amount of the financial asset or liability. The calculation takes into account all contractual terms of the financial instrument (for example, prepayment options) and includes any fees or incremental costs that are directly attributable to the instrument and are an integral part of the effective interest rate, but not future credit losses. The adjusted carrying amount is calculated based on the original effective interest rate and the change in carrying amount is recorded as interest income or expense. Once the recorded value of a financial asset or a group of financial assets has been reduced due to an impairment loss, interest income continues to be recognised using the original effective interest rate applied to the new carrying amount. The Charging Group recognises interest revenue and establishment fees on an accruals basis when the services are rendered using the effective interest rate method. Fee and commission income

The Charging Group earns fee income from a range of services it provides to customers. Fee income can be divided into the following categories:

Transactions eliminated on consolidation

Intercompany transactions, balances and realised gains and losses on transactions between Charging Group companies are eliminated on consolidation. Unrealised losses on transactions between Charging Group companies are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

Investment Statement & Prospectus No 6

PAGE 17

Historical Financial Information

‘Improvements to IFRS’ was published in May 2008 and contains numerous amendments to IFRS which the International Accounting Standards Board and the Financial Reporting Standards Board of the New Zealand Institute of Chartered Accountants consider non-urgent but necessary. No changes in accounting policies are expected as a result of these amendments.

FINANCE DIRECT LIMITED

Notes to the Financial Statements for the year ended 31 March 2009

Significant Accounting Policies (contâ&#x20AC;&#x2122;d)

(g) Revenue (contâ&#x20AC;&#x2122;d) Lending/Establishment fees

Fees and direct costs relating to loan origination, financing or restructuring and to loan commitments are deferred and amortised to the Income Statement over the life of the loan using the effective interest method. Lending fees not directly related to the origination of a loan are recognised over the period of service. Commissions and other fees

When commissions or fees relate to specific transactions or events, they are recognised in the Income Statement when the service is provided to the customer. When they are charged for services provided over a period, they are recognised in the Income Statement on an accruals basis as the service is provided. Payment protection insurance

The Charging Group acts as an agent for payment protection insurance. Given the agency relationship, under NZ IFRS the income is presented on a net basis rather than on a gross basis. This means that only the commission income is recognised, not the full amount of the insurance premiums offset by the cost to the Charging Group. The Charging Group recognises the estimated liability on payment protection insurance refunds at balance date. The amount of the liability is estimated using historical refund data. This means that only the commission income is recognised, not the full amount of the insurance premiums offset by the cost to the Charging Group. The Charging Group recognises the estimated liability on payment protection insurance refunds at balance date. The amount of the liability is estimated using historical refund data.

(h) Financial Instruments Financial instruments are classified in one of the following categories at initial recognition: Financial Assets at fair value through profit or loss, Available for Sale Financial Assets, Loans and Receivables, Held to Maturity Investments, Financial Liabilities at fair value through profit or loss and Other Financial Liabilities. Furthermore, financial instruments are split between derivative and non-derivative financial instruments.

PAGE 18

Investment Statement & Prospectus No 6

Financial instruments are transacted on a commercial basis to derive an interest yield/cost with terms and conditions having due regard to the nature of the transaction and the risks involved. Some of these categories require measurement at fair value. Where available, quoted market prices are used as a measure of fair value. Bid prices are used to estimate fair values of assets, whereas offer prices are applied to liabilities. Where quoted market prices do not exist, fair values are estimated using present value or other market accepted valuation techniques, using methods and assumptions that are based on market conditions and risks existing as at balance date. Where the Charging Group has assets and liabilities with offsetting market risk, it uses mid-market prices as a basis for establishing fair values for the offsetting risk positions and applies a bid/offer spread adjustment to the net open position as appropriate. If changes in these assumptions to a reasonably possible alternative would result in a significantly different fair value this has been disclosed with a range of possibilities. financial assets and liabilities at fair value through profit or loss

Assets and liabilities in this category are either held for trading or are managed with other assets and liabilities and are accounted for and evaluated on a fair value basis. Fair value reporting of these assets and liabilities reflects the Charging Groupâ&#x20AC;&#x2122;s risk management process, which includes utilising natural offsets where possible and managing overall risks of the portfolio on a trading basis. Upon initial recognition, attributable transaction costs are included in the Income Statement when incurred. Assets and liabilities in this category are subsequently measured at fair value, with any changes recognised in the Income Statement. available for sale financial assets

Assets in this category are measured upon initial recognition at fair value plus transaction costs directly attributable to their acquisition. Subsequently such assets are measured at fair value excluding transaction costs. Assets in this category include:

loans and Receivables

These assets are recorded upon initial recognition at fair value plus transaction costs and are subsequently measured at amortised cost using the effective interest rate method, less impairment. This category of Financial Asset includes: Loans and advances to customers

These are recorded at amortised cost using the effective interest rate method, less impairment. Trade and other receivables

These include accounts receivable and other sundry debtors, less impairment.

(i) Share Capital ordinary shares

Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity.

(j) Property, Plant and Equipment Recognition and measurement

Items of property, plant and equipment are measured at cost less accumulated depreciation and impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset. In the event that settlement of all or part of the purchase consideration is deferred, cost is determined by discounting the amounts payable in the future to their present value as at the date of acquisition.

Assets in this category are recorded upon initial recognition at fair value plus transaction costs and are subsequently measured at amortised cost using the effective interest rate, less impairment.

Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

Other Financial Liabilities

Subsequent costs

This category includes all financial liabilities other than those at fair value through profit or loss. Liabilities in this category are measured at amortised cost using the effective interest rate and include:

The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Charging Group and its cost can be measured reliably. The costs of the day-to-day servicing of property, plant and equipment are recognised in the Income Statement as incurred.

held to maturity investments

Loans and borrowings

All loans and borrowings are initially recognised at cost, being the fair value of the consideration received net of issue costs associated with the borrowing. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate method. Other liabilities

These are recorded at amortised cost. They represent liabilities for goods and services provided to the Charging Group prior to the end of the financial year that are unpaid and arise when the Charging Group becomes obliged to make future payments. These amounts are unsecured.

Depreciation

Depreciation is provided on office furniture and equipment. Depreciation is recognised in the Income Statement to write off the cost of an item of property, plant and equipment, less any residual value, over its expected useful life, at the following rates: Office Furniture and Equipment 11.4% - 60% Diminishing Value The useful lives and residual values are reviewed annually and the depreciation recognised in the Income Statement calculated on a straight line basis would not be materially different from the depreciation recognised using the above rates as allowed by the Income Tax Act 2004.

Investment Statement & Prospectus No 6

PAGE 19

Prospectus

These comprise cash balances and call deposits.

Historical Financial Information

Cash and cash equivalents

FINANCE DIRECT LIMITED

Notes to the Financial Statements for the year ended 31 March 2009

Significant Accounting Policies (cont’d)

(k) Leased Assets Leases in terms of which the Charging Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Other leases are operating leases and are not recognised on the Charging Group’s balance sheet. Operating lease payments are recognised as an expense on a straight line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed.

(l) Asset Quality Past Due Assets

An asset is Past Due when a counterparty has failed to make a payment when contractually due. A 90 Day Past Due Asset is any asset which has not been operated by the counterparty within its key terms for at least 90 days and which is not a restructured asset, other individually impaired asset, or a financial asset acquired through the enforcement of security.

b) the revised terms of the facility are not comparable with the terms of new facilities with comparable risks; and c)

the yield on the asset following restructuring is equal to, or greater than, the Charging Group’s average cost of funds, or that a loss is not otherwise expected to be incurred.

Assets acquired through the enforcement of security are those assets which are legally owned as a result of the enforcement of security. Other impaired assets refers to any credit exposure for which an impairment loss is recognised in accordance with NZ IAS 39 – Financial Instruments: Recognition and Measurement.

(m) Impairment Impairment of Loans and Advances

Losses for impaired loans and advances are recognised immediately when there is objective evidence that impairment of a loan or portfolio of loans has occurred. A loan is considered impaired when management determines that it is probable that all amounts owing in accordance with the terms of the original contract will not be collected. When a loan has been identified as impaired, the carrying amount of the loan is decreased by recording specific allowances for the loss to reduce the loan to its estimated recoverable amount, which is the present value of expected future cash flows including amounts recoverable from guarantees and collateral, discounted at the original effective interest rate of the loan. Impairment losses are calculated on individually significant loans and loans assessed collectively. Losses expected from future events no matter how likely, are not recognised.

Impaired Assets

Individually significant loans

Impaired assets consist of restructured assets, assets acquired through the enforcement of security and other impaired assets.

At each reporting date, the Charging Group reviews individually significant loans for evidence of impairment. All relevant information, including the economic situation, solvency of the customer/guarantor, enforceability of guarantees, current security values and the time value of future cash flows are taken into account in determining individual impairment allowances.

“Restructured asset” means any credit exposure for which: a)

the original terms have been changed to grant the counterparty a concession that would not otherwise have been available, due to the counterparty’s difficulties in complying with the original terms; and

PAGE 20

Investment Statement & Prospectus No 6

At each reporting date, loans that have been individually assessed but no objective evidence of impairment existed and loans that are not considered individually significant are pooled in similar credit risk groups. These groups are then assessed for impairment based on historical loss experience of assets with similar risk characteristics. The historical loss experience is then adjusted for the impact of current observable data. Management regularly reviews and adjusts the methodology and assumptions for impairment testing as improved analysis becomes available to minimise any differences between loss estimates and actual loss experience. Loan write-offs

Loans are normally written off, either partially or in full, when there is no realistic prospect of recovery of these amounts and, for collateralised loans, when the proceeds from realising the security has been received. Impairment of Trade and Other Receivables

The recoverable amount of the Charging Group’s trade and other receivables carried at amortised cost is calculated on an undiscounted basis due to their short term nature. At each reporting date, the Charging Group reviews individually significant trade and other receivables for evidence of impairment. For trade and other receivables which are not significant on an individual basis, collective impairment is assessed on a portfolio basis based on numbers of days overdue, and taking into account the historical loss experience in portfolios with a similar amount of days overdue. Impairment of Non-Financial Assets

The carrying amounts of the Charging Group’s non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the asset’s recoverable amount is estimated. An impairment loss is recognised if the carrying amount of an asset exceeds its recoverable amount. Impairment losses are recognised in the Income Statement. The recoverable amount of an asset is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

(n) Provisions A provision is recognised if, as a result of a past event, the Charging Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at balance sheet date. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision resulting from the passage of time is recognised in finance costs. If economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that recovery will be received and the amount of the receivable can be reliably measured.

(o) Expense Recognition All expenses are recognised in the Income Statement on an accruals basis.

(p) Employee Benefits short-term benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A provision is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Charging Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably. Defined contribution plans

A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution plans are recognised as an employee expense in the Income Statement when they are due.

Investment Statement & Prospectus No 6

PAGE 21

Prospectus

Collectively assessed loans

An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

Historical Financial Information

(m) Impairment (cont’d)

FINANCE DIRECT LIMITED

Notes to the Financial Statements for the year ended 31 March 2009

1. Significant Accounting Policies (contâ&#x20AC;&#x2122;d) (q) Income Tax Income tax expense comprises current and deferred tax. Income tax expense is recognised in the Income Statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of goodwill, the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit, and differences relating to investments in subsidiaries and jointly controlled entities to the extent that they probably will not reverse in the foreseeable future. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. In principle deferred tax liabilities are recognised from taxable temporary timing differences. Deferred tax assets are recognised to the extent that it is probable that future taxable

PAGE 22

Investment Statement & Prospectus No 6

profits will be available against which deductible temporary differences and unused tax losses and tax credits can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Company has a legally enforceable right to offset current tax assets against current tax liabilities.

(r) Cash Flows The Statement of Cash Flows has been prepared using the direct approach. The following are the definitions used in the Statement of Cash Flows: Cash and cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Operating activities are the principal revenue-producing activities of the Charging Group and other activities that are not investing or financing activities. Investing activities are the acquisition and disposal of long-term assets and other investments not included in cash and cash equivalents. Financing activities are activities that result in changes in the size and composition of the contributed equity and borrowings of the Charging Group.

In determining and applying accounting policies, judgement is often required in respect of items where the choice of specific policy, accounting estimate or assumption to be followed could materially affect the reported results or net asset position of the Charging Group should it later be determined that a different choice would be more appropriate. Management considers the accounting estimates and assumptions discussed below to be its critical accounting estimates and, accordingly, provides an explanation of each below. The discussion below should also be read in conjunction with the Charging Group’s disclosure of significant NZ IFRS accounting policies, which is provided in Note 1 to the financial statements, “Significant accounting policies”. Impairment losses on loans and advances

An impairment allowance is established if there is objective evidence that a loan is impaired. A loan is considered impaired when management determines that it is probable that all amounts due according to the original contractual terms will not be collected. When a loan has been identified as impaired, the carrying amount of the loan is decreased by recording specific allowances for the loss to reduce the loan to its estimated recoverable amount, which is the present value of expected future cash flows including amounts recoverable from guarantees and collateral, discounted at the original effective interest rate of the loan.

At each reporting date loans that have been individually assessed but no objective evidence of impairment existed and loans that are not considered individually significant are pooled in similar credit risk groups. These groups are then assessed for impairment based on historical loss experience of assets with similar risk characteristics. The historical loss experience is then adjusted for the impact of current observable data. Management regularly reviews and adjusts the methodology and assumptions for impairment testing as improved analysis becomes available to minimise any differences between loss estimates and actual loss experience. Fair value estimation

The carrying amounts of loans and advances net of impairment allowances are assumed to approximate their fair values. The fair value of financial liabilities is estimated by discounting the future contractual cash flows at the current market interest for similar financial instruments. Recognition of deferred tax assets

The recognition of deferred tax assets is based upon whether it is more likely than not that sufficient and suitable taxable profits will be available in the future, against which the reversal of temporary differences can be deducted. Recognition, therefore, involves judgement regarding the future financial performance of the Company. Management believes that sufficient and suitable taxable profits will be made available by the Company in the future and has accordingly accounted for a deferred tax asset of $90,000 as at 31 March 2009 (2008: $64,000).

Investment Statement & Prospectus No 6

PAGE 23

Prospectus

The Charging Group prepares its financial statements in accordance with NZ IFRS, the application of which often requires judgements to be made by management when formulating the Charging Group’s financial position and results. Under NZ IFRS, the Directors are required to adopt those accounting policies most appropriate to the Charging Group’s circumstances for the purpose of presenting fairly the Charging Group’s financial position, financial performance and cash flows.

There are two methods used in assessing loans for impairment, including specific loan assessment and collective loan assessment. At each reporting date the Charging Group reviews individually significant loans for evidence of impairment. All relevant information, including the economic situation, solvency of the customer/guarantor, enforceability of guarantees, current security values and the time value of future cash flows are taken into account in determining individual allowances.

Historical Financial Information

Critical Estimates and Judgements used in Applying Accounting Policies

Statutory Information

FINANCE DIRECT LIMITED

Notes to the Financial Statements for the year ended 31 March 2009

Net Interest Income

2009 $’000

2008 $’000

725 37 45 807

865 15 880

Secured debenture stock 350 Related party loans - Other similar charges - Total interest expense 350 Net interest income 457

429 12 4 445

Interest income

Loans and advances Impaired loans and advances Interest from Available for Sale Financial Assets: Cash and short term investments Total interest income Interest expense

435

Net Fee and Commission Income

2009 $’000

2008 $’000

Fee and commission income

Lending and credit related fee income 444 507 Brokerage income 216 678 Payment protection insurance commission 257 183 Total fee and commission income 917 1,368 Fee and commission expense

Brokerage and documentation fees Total fee and commission expense Net fee and commission income

306 306 1,062

2009 $’000

2008 $’000

Other Income

Other sundry income

PAGE 24

139 139 778

Investment Statement & Prospectus No 6

Net Impairment Losses

Movement in collective loan allowance Movement in specific loan allowance

Note

12 12

2009 $’000

2008 $’000

(10) 185 175

(4) (4)

2009 $’000

2008 $’000

184 65 15 87 179 558 1,088

299 42 25 84 180 560 1,190

Prospectus

Note

Profit before income tax includes the following expenses:

Directors’ fees Auditors’ remuneration 8 Depreciation of property, plant and equipment Leasing and rental costs Personnel costs Administrative expenses

Key management compensation included in the above:

Short-term employee benefits

175

290

There were no post-employment benefits, other long-term benefits, termination benefits or share based payments made to key management personnel during the year ended 31 March 2009 (2008: $nil).

Auditor’s Remuneration

2009 $’000

2008 $’000

Amounts paid to the auditor for:

Audit related services Other services Total auditors’ remuneration

65 - 65

Investment Statement & Prospectus No 6

42 42

PAGE 25

Historical Financial Information

7. Operating Expenses and Staff Costs

FINANCE DIRECT LIMITED

Notes to the Financial Statements for the year ended 31 March 2009

Income Tax Expense

Note

2009 $’000

2008 $’000

Income tax

Current period 46 90 Adjustment for prior periods (18) 28 90 Deferred tax Origination and reversal of temporary differences 16 (52) 8 Adjustment for prior periods 16 26 Decrease in effective tax rate to 30% 16 - 6 (26) 14 Income tax expense reported in Income Statement

104

Numerical reconciliation of income tax expense to prima facie tax payable:

(Loss)/profit before income tax expense (28) 316 Tax at the New Zealand tax rate of 30% (2008: 33%) (8) 104 Tax amounts which are not taxable or deductible in calculating taxable income: Non-taxable income - (7) Non-deductible expenses 2 1 Adjustment for prior periods 8 Deferred tax: Decrease in effective tax rate to 30% - 6 2 104

10. Imputation Credit Account The movements in the Imputation Credit Account in New Zealand were as follows:

2009 $’000

Opening balance Imputation credits lost due to change in shareholdings Income tax (received)/paid to IRD Imputation credits attached to dividends paid Closing balance

118 - (28) (31) 59

PAGE 26

Investment Statement & Prospectus No 6

2008 $’000

531 (531) 118 118

11. Dividends Declared and Paid

2009 $’000

2008 $’000

Ordinary Shares Interim dividend for the year ended 31 March 2009

210

2009 $’000

2008 $’000

Prospectus

The following dividends were declared and paid during the year ended 31 March 2009:

An interim dividend of 26.62 cents per Ordinary Share was paid on 9 December 2008 (2008: nil).

Loans and advances to customers Less: Impaired loan allowance

5,137 (231) 4,906

5,373 (56) 5,317

Collective loan allowance (46) Specific loan allowance (185) Total loan allowance (231)

(56) (56)

Impaired loan allowance

Collective loan allowance

Opening balance Movement in collective loan allowance Closing balance

(56) 10 (46)

(60) 4 (56)

- - (185) (185)

Specific loan allowance

Opening balance Reversal of specifically impaired assets Addition to specific loan allowance Closing balance

13. Trade and Other Receivables

Accounts receivable

2009 $’000

2008 $’000

Investment Statement & Prospectus No 6

PAGE 27

Historical Financial Information

12. Loans and Advances to Customers

FINANCE DIRECT LIMITED

Notes to the Financial Statements for the year ended 31 March 2009

14. Property, Plant and Equipment

Office Furniture & Equipment $â&#x20AC;&#x2122;000

Cost or deemed cost

Balance at 1 April 2007 Additions Balance at 31 March 2008 Balance at 1 April 2008 Additions Disposals Balance at 31 March 2009

123 12 135 135 4 (3) 136

Depreciation and impairment losses

Balance at 1 April 2007 Depreciation charge for the year Balance at 31 March 2008 Balance at 1 April 2008 Depreciation charge for the year On disposals Balance at 31 March 2009

60 25 85 85 15 100

Carrying amounts

At 31 March 2008 At 31 March 2009

50 36

15. Investment in Subsidiary At 31 March 2007, the Company held 100% of the issued share capital of Finance Assist Limited, a Finance Company registered in New Zealand, which formed part of the Charging Group. On 31 May 2007, Finance Assist Limited was amalgamated with Finance Direct Limited and subsequently struck off.

PAGE 28

Investment Statement & Prospectus No 6

16. Deferred Tax Asset 2008 $’000

The balance comprises temporary differences attributable to:

Collective loan impairment allowance 14 17 Specific loan impairment allowance 56 Deferred fee income - 43 Deferred brokerage fees - (13) Holiday pay accrual 3 4 Other timing differences 17 13 Net deferred tax asset 90 64 Movements

Opening balance (Charged)/credited to the Income Statement Closing balance

64 26 90

78 (14) 64

The reduction in the corporate tax rate from 33% to 30% from 1 April 2008 has been taken into account in calculating the value of deferred tax as at 31 March 2008 and 31 March 2009.

17. Other Assets

2009 $’000

2008 $’000

Deferred brokerage fees 8 43 Prepaid expenses 5 13 43 Current 10 26 Non-Current 3 17 13 43

18. Trade and Other Payables

2009 $’000

2008 $’000

Accounts payable Accrued expenses

122 90 212

Investment Statement & Prospectus No 6

65 98 163

PAGE 29

Prospectus

2009 $’000

Historical Financial Information

Note

FINANCE DIRECT LIMITED

Notes to the Financial Statements for the year ended 31 March 2009

19. Loans and Borrowings

2009 $’000

2008 $’000

Secured debenture stock

4,157

4,111

The debenture stock issued by Finance Direct Limited is secured under a Debenture Stock Trust Deed between Finance Direct Limited and Covenant Trustee Company Limited as Trustee. The Deed creates a floating charge in favour of the Trustee over all of the assets and undertakings of the Finance Direct Limited Charging Group. Finance Direct Limited has a guarantee under the New Zealand Deposit Guarantee Scheme (“Scheme”). The guarantee is for a two year period from 12 October 2008 to 12 October 2010. Finance Direct Limited has entered into a Deed of Guarantee with the Crown in respect of the Scheme. The Crown has guaranteed certain deposits under the Scheme. The Crown guarantee is subject to compliance with a number of requirements including certain reporting obligations, meeting Trust Deed covenants, complying with prudential directions and restrictions on entering into certain transactions. Finance Direct Limited has complied with all requirements under the Scheme throughout the period. As a result, there are no liabilities that rank in priority to qualifying deposits under the Scheme as at 31 March 2009 in the event that Finance Direct Limited was liquidated. For non-qualifying deposits under the Scheme, liabilities totalling $23,976 (2008: $nil) would rank in priority as at 31 March 2009 in the event that Finance Direct Limited was liquidated.

20. Other Liabilities

2009 $’000

2008 $’000

Deferred fee income: Current Non-Current

85 63 148

100 42 142

21. Share Capital

Issued and paid up capital: Redeemable Preference Shares Ordinary Shares

PAGE 30

Investment Statement & Prospectus No 6

2009 No. of Shares

2009 $’000

2008 No. of Shares

2008 $’000

- 789,157 789,157

- 1,080 1,080

- 789,157 789,157

1,080 1,080

Prospectus

No Ordinary Shares or Redeemable Preference Shares were issued by the Company during the year ended 31 March 2009. On 2 April 2007, 209,365 Ordinary Shares in the Company were issued for the consideration of $500,000, with the Redeemable Preference Shares subsequently being redeemed at par. All Ordinary Shares are issued and fully paid, have no par value and have an equal right to vote, to dividends and to any surplus on winding up. The Company does not have a total number of authorised shares. Without prejudice to any special rights conferred on the existing Shareholders the Board may issue Shares with, or without, preferred, deferred or other special rights or restrictions, whether in regard to distributions, voting, return of capital or otherwise.

22. Financial Instruments Significant accounting policies

Accounting classifications and fair values The table below sets out the Charging Group’s classification of each class of financial assets and financial liabilities, and their fair values:

2009 Carrying Amount $’000

2008 Fair Value $’000

Carrying Amount $’000

Fair Value $’000

Financial Assets

Available for sale assets: Cash and cash equivalents 1,068 1,068 722 722 Loans and receivables: Loans and advances to customers 4,906 4,906 5,317 5,317 Trade and other receivables 8 8 8 8 4,914 4,914 5,325 5,325 Total Financial Assets 5,982 5,982 6,047 6,047 Financial Liabilities

Other amortised cost: Loans and borrowings 4,157 4,157 4,111 4,111 Trade and other payables 212 212 163 163 4,369 4,369 4,274 4,274 Total Financial Liabilities 4,369 4,369 4,274 4,274 The Charging Group has not classified any assets as Held to Maturity Investments or Financial Assets and Liabilities at fair value through profit and loss.

Investment Statement & Prospectus No 6

PAGE 31

Historical Financial Information

Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in Note 1 to the financial statements.

FINANCE DIRECT LIMITED

Notes to the Financial Statements for the year ended 31 March 2009

22. Financial Instruments (contâ&#x20AC;&#x2122;d) Basis for determining fair values The following summarises the significant methods and assumptions used in estimating the fair values of financial assets and financial liabilities reflected in the table above.

Loans and advances to customers Each loan has particular circumstances, which determine its fair value. The carrying amounts of the loans net of impairment allowances best represent their fair value.

Loans and borrowings Fair value is calculated based on the present value of contractual principal and interest cash flows, discounted at the market rate of interest at the reporting date.

Cash and cash equivalents, trade and other receivables and trade and other payables Due to their relatively short term nature, the carrying amounts of these items are equivalent to their fair value.

Interest rates used for determining fair value The following interest rates used to discount estimated cash flows, where applicable, are based on the yield curve as at reporting date plus an appropriate constant credit spread:

2009

2008

Loans and advances to customers 12.50% - 19.95% 12.50% - 19.95% Secured debenture stock 5.00% - 12.25% 9.95% - 12.00%

Financial risk management objectives The Charging Groupâ&#x20AC;&#x2122;s management provides services to the business, co-ordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Charging Group through internal risk reports which analyse exposures by degree and magnitude of risks. These risks include market risk (including currency risk, fair value interest rate risk and price risk), credit risk, liquidity risk and cash flow interest rate risk.

Foreign currency risk management All of the Charging Groupâ&#x20AC;&#x2122;s operations are carried out within New Zealand. As a result, the Charging Group is not exposed to any direct foreign currency exchange risks.

Interest rate risk management The Charging Group is exposed to interest rate risk on the amount of its loans and advances to customers and monies owed to secured debenture stockholders. Loans and advances to customers are provided at fixed interest rates over the terms of the respective loans, which typically range for periods between two and five years. Should loans go into default, interest is charged at penalty rates set when the respective loan agreements are entered into.

PAGE 32

Investment Statement & Prospectus No 6

22. Financial Instruments (cont’d)

Interest rate sensitivity analysis The sensitivity analyses have been determined based on the exposure to interest rates for both derivatives and non-derivative instruments at the balance sheet date. For floating rate liabilities, the analysis is prepared assuming the amount of liability outstanding at the balance sheet date was outstanding for the whole year. A 50 basis point (0.5%) increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates. If interest rates had been 50 basis points higher/lower and all other variables were held constant, the Charging Group’s loss for the year would decrease/increase by $5,000 (2008: $4,000).

Prospectus

Interest rates on secured debenture stock are subject to market influences, but are fixed for the duration of the investment term at the time the relevant investments are made by investors.

The Charging Group has prepared liquidity forecasts which indicate there is sufficient liquidity to meet its commitments. The forecasts are prepared on the assumption that loan repayments will continue to be received and a level of reinvestment, based on recent reinvestment rates, will continue to occur.

Credit risk management Credit risk is the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Charging Group. Financial instruments which potentially subject the Charging Group to credit risk principally consist of cash and cash equivalents, loans and advances to customers, and trade and other receivables. The Charging Group’s cash balances and call deposits are placed with major trading banks with high credit-ratings assigned by international credit-rating agencies. The Charging Group performs credit evaluations on all customers requiring loans and advances. The Charging Group requires collateral or other security to support financial instruments with credit risk. The Charging Group operates a lending policy with various levels of authority depending on the size and loan to value ratio of the loan, ensuring compliance with all Trust Deed covenants. The Charging Group closely monitors the performance of its borrowers, the payment of instalments under its loans, and has adopted a formal debt management process to be followed when a loan falls into arrears. Risk gradings categorise exposures according to the degree of risk of financial loss faced and focus management on the attendant risks. Risk grades are used to determine where impairment allowances may be required. The current risk grading framework consists of three grades reflecting varying degrees of risk of default and the availability of collateral or other credit risk mitigation. They are as follows: •

Neither past due or impaired – compliance with all terms, good security value, no adverse events affecting the borrower.

•

Past due but not impaired – material compliance with all terms, no concerns over security value or future events that may affect the borrower.

•

Impaired – non-compliance with terms or evidence of impairment of security held, or adverse event affecting the borrower.

The Charging Group implements guidelines on the acceptability of specific classes of collateral or credit risk mitigation. The principal collateral types for loans and advances to customers are: •

Mortgages over properties.

•

General Security Agreements.

•

Charges over business assets and motor vehicles.

•

Personal guarantees.

Investment Statement & Prospectus No 6

PAGE 33

Historical Financial Information

Market risk

FINANCE DIRECT LIMITED

Notes to the Financial Statements for the year ended 31 March 2009

22. Financial Instruments (cont’d) Maximum exposure to credit risk is represented by the carrying value of each financial asset in the Balance Sheet which is net of any impairment allowance. Concentration of credit exposures set out in Note 23 do not take into account the fair value of any collateral, in the event of counterparties failing to meet their contractual obligations.

Liquidity risk management Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has built an appropriate liquidity risk management framework for the management of the Charging Group’s short, medium and long-term funding and liquidity management requirements. The Charging Group manages liquidity risk by maintaining adequate cash reserves, by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and financial liabilities. The tables in Note 24 detail the Charging Group’s expected maturity for its financial assets and the remaining contractual maturity for its financial liabilities. The tables have been drawn up based on the contractual maturities of the financial assets except where the Charging Group anticipates that the cash flow will occur in a different period and the cash flows of financial liabilities based on the earliest date on which the Charging Group can be required to pay. On 12 November 2008, the Company became an Approved Institution under the New Zealand Deposit Guarantee Scheme. In order to maintain approved status, the Company has to comply with The Treasury requirements of the Guarantee Scheme. If the New Zealand Deposit Guarantee Scheme was withdrawn, this would impact on the Company’s liquidity.

Capital management The Charging Group considers share capital and retained earnings to be capital for management purposes. In implementing current capital requirements the Debenture Stock Trust Deed entered into between the Charging Group and Covenant Trustee Company Limited as Trustee, requires the Charging Group to maintain a prescribed ratio of total liabilities to total tangible assets. The Trust Deed prescribed ratio is 86% for the Charging Group. The Charging Group’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The impact of the level of capital on shareholders’ return is also recognised and the Charging Group recognises the need to maintain a balance between the higher returns that might be possible with greater gearing and the advantages and security afforded by a sound capital position. The Charging Group also monitors the level of dividends to ordinary shareholders. The Charging Group has complied with all Trustee imposed capital requirements throughout the years ended 31 March 2008 and 31 March 2009 and there have been no material changes in the Charging Group’s approach to capital management during the period.

PAGE 34

Investment Statement & Prospectus No 6

23. Concentration of Credit Exposure

2009 %

2009 $â&#x20AC;&#x2122;000

Auckland and Northland 72.41 3,720 Bay of Plenty 3.35 172 Central North Island 13.57 697 South Island 3.78 194 Waikato 4.09 210 Wellington 2.80 144 100.00 5,137

2008 %

2008 $â&#x20AC;&#x2122;000

71.86 2.25 12.92 5.49 4.69 2.79 100.00

3,861 121 694 295 252 150 5,373

Collateral held over Loans and Advances At 31 March 2009, the Charging Group had 374 (2008: 388) open loans with an average balance of $13,738 (2008: $13,848), which provides a relatively low credit risk. All loans are secured by registered security interests over motor vehicles, boats, charges over business assets, General Security Agreements, personal guarantees and agreements to mortgage real estate (secured by caveats over the relevant real estate) owned by borrowers; the majority of which are financed with customers who are not self-employed. Concentration of Loans and Advances to Individual Counterparties

Number of Counterparties 2009

2008

% of Shareholder Funds

10 - 19.99% 20 - 29.99% Total

- 1 1

Investment Statement & Prospectus No 6

2 2

PAGE 35

Historical Financial Information

Geographical Concentration of Loans and Advances

Prospectus

Loans and Advances to Customers

FINANCE DIRECT LIMITED

Notes to the Financial Statements for the year ended 31 March 2009

23. Concentration of Credit Exposure (cont’d) Loans and Advances to Customers (cont’d) Managed Funds, Securitisation, Custodial and Other Fiduciary Activities The Charging Group has not had any involvement in funds management, securitisation and/or custodial activities.

Funding – Loans and Borrowings Product Concentration of Funding

Secured debenture stock

2009 %

2009 $’000

2008 %

2008 $’000

100.00

4,157

100.00

4,111

2009 %

2009 $’000

2008 %

2008 $’000

Geographical Concentration of Funding

Auckland and Northland Bay of Plenty Central North Island Overseas South Island Waikato Wellington

PAGE 36

Investment Statement & Prospectus No 6

45.28 1.80 10.99 10.15 19.15 3.63 9.00 100.00

1,882 75 457 422 796 151 374 4,157

33.34 2.09 2.04 23.67 21.16 3.28 14.42 100.00

1,370 86 84 973 870 135 593 4,111

24. Maturity Profile of Financial Assets and Financial Liabilities (a) Interest rate risk

Weighted

2009

Current

Non-Current

Total

average 0-6 7 - 12 1 - 2 2 - 5 5+ effective Months Months Years Years Years interest rate $’000 $’000 $’000 $’000 $’000 %

Prospectus

The following tables summarise the Charging Group’s interest rate gap position on the basis of net discounted cash flows:

$’000

Cash and cash equivalents 3.50 1,068 - - - - Loans and advances to customers 16.59 1,159 478 994 2,228 47 Trade and other receivables - 8 - - - - 2,235 478 994 2,228 47

1,068 4,906 8 5,982

Financial Liabilities

Trade and other payables - Secured debenture stock 9.71

212 1,382 1,594

- 808 808

Weighted

- 1,773 1,773

- 194 194

- - -

212 4,157 4,369

2008

Current

Non-Current

Total

average 0-6 7 - 12 1 - 2 2 - 5 5+ effective Months Months Years Years Years interest rate $’000 $’000 $’000 $’000 $’000 %

$’000

Financial Assets

Cash and cash equivalents 8.25 722 - - Loans and advances to customers 16.15 2,067 532 843 Trade and other receivables - 8 - - 2,797 532 843 Financial Liabilities Trade and other payables - 163 - - Secured debenture stock 10.36 1,769 1,389 920 1,932 1,389 920

- 1,867 - 1,867

- 8 - 8

722 5,317 8 6,047

- 33 33

- - -

163 4,111 4,274

Investment Statement & Prospectus No 6

PAGE 37

Historical Financial Information

Financial Assets

FINANCE DIRECT LIMITED

Notes to the Financial Statements for the year ended 31 March 2009

24. Maturity Profile of Financial Assets and Financial Liabilities (cont’d) (b) Residual contractual maturities of financial assets and financial liabilities The following tables show the gross undiscounted cash flows of the Charging Group’s financial assets and financial liabilities on the basis of their earliest possible contractual maturity and their expected maturity. The Gross nominal inflow/(outflow) disclosed in the following tables is the contractual, undiscounted cash flow of the financial asset or financial liability.

2009

Gross Nominal 0 – 6 7 – 12 1 – 2 2 – 5 5+ Inflow/ Months Months Years Years Years (Outflow) $’000 $’000 $’000 $’000 $’000 $’000

Carrying Amount $’000

Financial Assets

Cash and cash equivalents 1,068 - - - - Loans and advances to customers 1,965 1,181 1,350 1,264 1 Trade and other receivables 8 - - - - 3,041 1,181 1,350 1,264 1

1,068 5,761 8 6,837

1,068 4,906 8 5,982

- (212) - (4,503) - (4,715)

(212) (4,157) (4,369)

Financial Liabilities

Trade and other payables Secured debenture stock Total

(212) (1,537) (1,749)

- (916) (916)

- (1,852) (1,852)

1,292

265

(502)

- (198) (198) 1,066

2,122

1,613

The expected maturity of financial assets and financial liabilities differs materially from the contractual maturity in respect of loans and advances for the Charging Group as at 31 March 2009. The expected maturity of loans and advances and the adjusted contractual cash flows are as follows:

2009

0 – 6 7 – 12 1 – 2 2 – 5 5+ Months Months Years Years Years $’000 $’000 $’000 $’000 $’000

Gross Nominal Inflow/ (Outflow) $’000

Loans and advances to customers (expected)

1,878

1,141

1,307

1,179

5,506

Adjusted Total

1,205

225

(545)

981

1,867

PAGE 38

Investment Statement & Prospectus No 6

2008

Carrying Amount $’000

Financial Assets

Cash and cash equivalents 722 - - - - Loans and advances to customers 3,672 898 869 721 1 Trade and other receivables 8 - - - - 4,402 898 869 721 1

722 6,161 8 6,891

722 5,317 8 6,047

Trade and other payables (163) - - - - (163) Secured debenture stock (1,899) (1,444) (983) (33) - (4,359) (2,062) (1,444) (983) (33) - (4,522) Total 2,340 (546) (114) 688 1 2,369

(163) (4,111) (4,274)

Prospectus

Gross Nominal 0 – 6 7 – 12 1 – 2 2 – 5 5+ Inflow/ Months Months Years Years Years (Outflow) $’000 $’000 $’000 $’000 $’000 $’000

1,773

25. Asset Quality a) Summary of Lending 2009 2008 $’000 $’000

Neither past due nor impaired Past due but not impaired Impaired Gross loans and advances Less: Impaired loan allowance Net loans and advances

4,379 444 314 5,137 (231) 4,906

4,882 491 5,373 (56) 5,317

The Charging Group closely monitors the performance of its borrowers and the payment of instalments under its loans. The Board has adopted a formal debt management process to be followed when a loan falls into arrears, which includes specified time driven debt collection procedures, although management may take such actions earlier as circumstances require. Special monitoring of assets occurs when there is a risk of the asset becoming impaired and active management is required to maintain the debt.

Investment Statement & Prospectus No 6

PAGE 39

Historical Financial Information

Financial Liabilities

FINANCE DIRECT LIMITED

Notes to the Financial Statements for the year ended 31 March 2009

25. Asset Quality (Cont’d) b)

Loans and Advances Past Due But Not Impaired

2009 $’000

2008 $’000

491 (491) 758 (314) 444

554 (554) 491 491

Past Due Assets Not Impaired

At 1 April 2008 Collected during the year Additions to Past Due asset status Reclassified as Impaired assets At 31 March 2009

2009

Total Instalment Arrears $’000 $’000

2008

Balance Total Instalment of Loan Arrears Principal $’000 $’000 $’000

Analysis of Past Due Assets Not Impaired: 0 - 31 Days 236 9 227 390 32 - 60 Days 121 9 112 13 61 - 90 Days 82 11 71 - 90+ Days 5 3 2 88 Total Past Due Assets Not Impaired 444 32 412 491

14 1 - 75 90

Balance of Loan Principal $’000

376 12 13 401

Past Due Assets Not Impaired represent Loans and Advances to Customers where contractual interest or principal payments are past due but the Charging Group believes that impairment is not appropriate on the basis of the level of security/collateral available and/or the stage of collection of amounts owed to the Charging Group.

PAGE 40

Investment Statement & Prospectus No 6

Impaired Assets

At 31 March 2009, there were no restructured assets, real estate assets or other assets acquired through the enforcement of security (2008: $nil). The breakdown of the gross amount of other individually impaired loans and advances and individual impairment allowances is as follows: 2009 2008 $’000 $’000

Prospectus

At 1 April 2008 Net additions Deletions Amounts written off At 31 March 2009 Individual Allowance for Impairment Total Net Impaired Assets

- 314 - - 314

(185)

129

26. Operating Lease Commitments At 31 March 2009, the Company had non-cancellable operating lease commitments in respect of leasehold property, the total future minimum payments of which were payable as follows:

2009 $’000

Less than one year Between one and five years

31 - 31

2008 $’000

64 31 95

There are no onerous terms concerning renewal of the above leases.

Investment Statement & Prospectus No 6

PAGE 41

Historical Financial Information

Total Gross Impaired Assets

FINANCE DIRECT LIMITED

Notes to the Financial Statements for the year ended 31 March 2009

27. Capital Commitments There were no capital commitments at 31 March 2009 (2008: $nil).

28. Contingent Assets And Liabilities There were no contingent assets or liabilities at 31 March 2009 (2008: $nil).

29. Related Party Transactions During the year ended 31 March 2009, the Company paid intra-group interest of $nil (2008: $12,000) to NZF Group Limited, the Companyâ&#x20AC;&#x2122;s ultimate parent undertaking, in respect of intra-group indebtedness. During the year ended 31 March 2009, the Company paid cost sharing fees of $60,000 (2008: $nil) to NZF Money Limited, a fellow subsidiary undertaking of NZF Group Limited, to cover the cost of shared services and central administration costs. At 31 March 2009, there were no outstanding balances with related parties (2008: $nil). No amounts owed by related parties were written off or forgiven during the year (2008: $nil).

30. Subsequent Events The Directors are not aware of any matters or circumstances since the end of the reporting period, not otherwise dealt with within this report or financial statements, that have significantly or may significantly affect the operations of Finance Direct Limited.

PAGE 42

Investment Statement & Prospectus No 6

Prospectus Historical Financial Information Auditors’ Report

22 September 2009 Dear Sirs Audit Opinion on the Financial Statements Included in the Prospectus

We have prepared this report for inclusion in the prospectus to be dated on or around 22 September 2009. As auditor of Finance Direct Limited, and in accordance with the requirements of the Securities Act 1978, Clause 36 of the Second Schedule of the Securities Regulations 1983 and the Securities Act (Financial Institutions) Exemption Notice 2007, we report as follows: Audited Financial Statements of Finance Direct Limited

Statutory Information

We have audited the financial statements of Finance Direct Limited (“the company”) on pages 11 to 42. These financial statements are required by the Second Schedule of the Securities Regulations 1983 and the Securities Act (Financial Institutions) Exemption Notice 2007. The financial statements provide information about the financial position of the company as at 31 March 2009 and its financial performance and cash flows for the year ended on that date. This information is stated in accordance with the accounting policies set out on pages 16 to 22. Directors’ Responsibilities

The Directors are responsible for the preparation and presentation of: a

the financial statements which give a true and fair view of the financial position of the company as at 31 March 2009, and its financial performance and cash flows for the year ended on that date as required by the Second Schedule of the Securities Regulations 1983 and the Securities Act (Financial Institutions) Exemption Notice 2007;

the summary of financial statements of the company for the years ended 31 March 2009, 2008, 2007, 2006 and 2005 as required by clauses 7(2) and 7(3) of the Second Schedule of the Securities Regulations 1983; and

Investment Statement & Prospectus No 6

PAGE 43

the details and amounts in respect of the ranking of securities of the company as at 31Â March 2009 as required by clause 12 of the Second Schedule of the Securities Regulations 1983.

Auditorsâ&#x20AC;&#x2122; Responsibilities

We are responsible for expressing an independent opinion on the financial statements presented by the Directors and reporting our opinion in accordance with clause 36(1) of the Second Schedule of the Securities Regulations 1983 and the Securities Act (Financial Institutions) Exemption Notice 2007. We are also responsible for reporting, in accordance with clause 36(1)(g) of the Second Schedule of the Securities Regulations 1983 and the Securities Act (Financial Institutions) Exemption Notice 2007, on: a

the amounts included in the summary of financial statements for the years ended 31Â March 2009, 2008, 2007, 2006 and 2005, and

the details and amounts in respect of the ranking of securities as at 31 March 2009 prepared and presented by the Directors.

This report has been prepared for inclusion in the prospectus for the purpose of meeting the requirements under clause 36(1) of the Second Schedule of the Securities Regulations 1983 and the Securities Act (Financial Institutions) Exemption Notice 2007. We disclaim any assumption of responsibility for reliance on this audit report, or the amounts included in the financial statements, the summary of financial statements or the details and amount in respect of the ranking of securities for any other purpose other than that for which this report has been prepared. In addition, we take no responsibility for, nor do we report on, any aspect of the prospectus not mentioned in this report. Basis of Opinion on the Financial Statements, the Summary of Financial Statements and the Ranking of Securities

An audit of the financial statements includes examining, on a test basis, evidence relevant to the amounts and disclosures in the financial statements. It also includes assessing: a

the significant estimates and judgements made by the Directors in the preparation of the financial statements; and

whether the accounting policies used and described on pages 16 to 22 are appropriate to the circumstances of the company, consistently applied and adequately disclosed.

We have conducted our audit in accordance with New Zealand Auditing Standards. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to obtain reasonable assurance that the financial statements are free from material misstatements, whether caused by fraud or error. In forming our opinion, we also evaluated the overall adequacy of the presentation of the information in the financial statements.

PAGE 44

Investment Statement & Prospectus No 6

the amounts set out in the summary of financial statements on page 6, pursuant to clauses 7(2) and 7(3) of the Second Schedule of the Securities Regulations 1983, have been correctly taken from the audited financial statements of the company for the years ended 31 March 2009, 2008, 2007, 2006 and 2005; and

the details and amounts in respect of the ranking of securities on page 51 pursuant to clause 12 of the Second Schedule of the Securities Regulations 1983, have been correctly taken from the audited financial statements of the company as at 31 March 2009.

Prospectus

We have also undertaken procedures to provide reasonable assurance that:

Unqualified Opinion on the Financial Statements, the Summary of Financial Statements and the Ranking of Securities

Auditorsâ&#x20AC;&#x2122; Report

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;

The financial statements, on pages 11 to 42 , as required by the Second Schedule of the Securities Regulations 1983 and the Securities Act (Financial Institutions) Exemption Notice 2007, and that are required to be audited, have been drawn up to:

i comply with the Securities Regulations 1983 and the Securities Act (Financial Institutions) Exemption Notice 2007;

ii comply with generally accepted accounting practice in New Zealand; and

iii give a true and fair view of the financial position of the company as at 31 March 2009, and its financial performance and cash flows for the year ended on that date; c

the amounts set out in the summary of financial statements for the company, on page 6 of this prospectus, as required by clauses 7(2) and 7(3) of the Second Schedule of the Securities Regulations 1983 have been correctly taken from the audited financial statements of the company for the years ended 31 March 2009, 2008, 2007, 2006 and 2005; and

Investment Statement & Prospectus No 6

PAGE 45

the details and amounts set out in respect of the ranking of securities, on page 51 of this prospectus, as required by clause 12 of the Second Schedule of the Securities Regulations 1983, as at 31 March 2009 have been correctly taken from the audited financial statements of the company from which they were extracted.

We completed our work on the audited financial statements of the company for the year ended 31 March 2009 on 30 June 2009 and our unqualified opinion on the financial statements is expressed as at that date.

PAGE 46

Investment Statement & Prospectus No 6

Prospectus Trusteeâ&#x20AC;&#x2122;s Statement

22 September 2009

Investment Statement & Prospectus No 6

PAGE 47

Statutory Information The following information is required to be disclosed by the Second Schedule of the Securities Regulations 1983.

Main Terms of Offer Issuer

Finance Direct Limited is the issuer of the Securities which are offered pursuant to this Prospectus, and has its registered office at Level 2, Finance Direct House, 88 Broadway, Newmarket, Auckland. Description of Securities

This Prospectus offers up to $15,000,000 of first ranking Debenture Stock of Finance Direct Limited for subscription. The securities being offered are secured first ranking Debenture Stock, subject to the registration of prior charges and preferential claims. Debenture Stock offered in this Prospectus are debt securities for the purposes of the Securities Act 1978. Details of the Trust Deed are set out in the section entitled “Provisions of Trust Deed and other restrictions on borrowing group” on pages 51 to 54. The Debenture Stock shall be issued for fixed terms ranging between 3 months and 5 years. Fixed interest rates are applicable to Debenture Stock and will vary depending upon the fixed term selected. Details of the current fixed interest rates are available upon request from the Company. The issue of the Debenture Stock will provide the Company with funds to on-lend for loan advances and selected financial transactions including personal loans, hire purchase arrangements and loan advances to both companies and individuals. The obligations of the Company to Investors in respect of the Debenture Stock are secured by a security interest in all of the Charging Group’s Personal Property and a charge over the Charging Group’s Other Property pursuant to a Debenture Trust Deed granted by the Charging Group in favour of Covenant Trustee Company Limited. The charge created by the Trust Deed in respect of the Other Property is a floating charge over the Other Property in respect of which a fixed charge is not legally and fully effective and a fixed charge over all Other Property. Further details of the Trust Deed are provided on pages 51 to 54 of this Prospectus.

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Investment Statement & Prospectus No 6

The Debenture Stock issued by the Company is first ranking because there are no other charges registered over all of the Company’s assets that rank ahead of the charge granted in favour of the Trustee pursuant to the Trust Deed except for permitted prior charges. The Trust Deed permits the Company to create prior security interests over any asset to secure any moneys to be borrowed, raised or otherwise owing in purchasing or acquiring such asset if at the time of such borrowing the aggregate of all moneys secured by existing prior security interests together with the money so proposed to be borrowed or raised or to be otherwise owing and secured would not exceed 2% of its Total Tangible Assets. As at 31 March 2009 the aggregate amount of prior charges ranking ahead of the Debenture Stock currently outstanding and Debenture Stock being offered was $7,245. This prior charge comprises a security interest granted by the Company in favour of Sharp Corporation over certain office equipment leased by the Company. Certain creditors will also be given preference over the holders of Debenture Stock at law. These preferential creditors and their claims include liquidator’s costs, taxes and certain payments to employees. The Debenture Stock ranks equally with all present and future Debenture Stock issued by the Company. As at 31 March 2009, the total principal amount of Debenture Stock on issue was $4,156,660. The minimum amount that may be invested under this Offer is $1,000. Further details of the Offer are comprised in the section of this Prospectus entitled “How to Invest”.

Details of Incorporation of Issuer The Company was incorporated under the Companies Act 1993 on 23 September 1999. The Company’s registered number is 981004. The public file relating to the Company’s incorporation is kept by the Companies Office. Documents on the public file may be viewed on the Companies Office website, www.companies.govt.nz, or (in relation to documents which are not able to be viewed via the internet) upon request by submitting a search request form which may be obtained from the Companies Office at:

Ground Level, 33 Bowen Street, Wellington; or

•

55 Wordsworth Street, Sydenham, Christchurch.

The Trustee is Covenant Trustee Company Limited. The Trustee’s address is Level 34, Vero Centre, 48 Shortland Street, Auckland.

Copies of the documents can also be obtained (on payment of the relevant fee) by telephoning the Companies Office on 0508 266 726.

The Trustee does not guarantee the repayment of the Debenture Stock or the payments of interest thereon.

Guarantors

The following modifications, exceptions or limitations on the powers of the Directors of the Company are imposed by the Companies Act 1993 (the “Act”) or the Company’s constitution:

There are no guaranteeing subsidiaries. On 12 November 2008, Finance Direct Limited received approval under the Crown Deed of Guarantee Scheme (“Scheme”). The Crown has guaranteed certain deposits under the Scheme for a two year period from 12 October 2008 to 12 October 2010. The Crown guarantee is subject to compliance by the Company with a number of requirements including certain reporting obligations, meeting Trust Deed covenants, complying with prudential directions and restrictions on entering into certain transactions. A failure to comply with any of these obligations could result in the Crown withdrawing its guarantee. On 25 August 2009, the Crown released details of an extension to the Scheme through to 31 December 2011. Different conditions apply to the extension of the Scheme and there is a risk that the Company may not be able to obtain extension of its current guarantee beyond 12 October 2010. The Deed of Guarantee, together with further information about the Scheme, including the Crown’s most recent audited statement of financial position is available free of charge on the Treasury website at www.treasury.govt.nz.

Directorate and Advisers The Board of Directors

The names, addresses and technical or professional qualifications of the Directors of the Company are stated in the Directory on page 72. Advisers

The name of the Company’s auditors is stated in the Directory on page 72. Grant Thornton has given and has not withdrawn its consent to be named in this Prospectus as auditor to the Company and to the issue of this Prospectus with its Auditor’s Report included in the form and context in which it is included. Grant Thornton takes no responsibility for, nor has it authorised nor caused the issue of, any part of this Prospectus except for the Auditor’s Report.

Restrictions on Directors’ Powers

•

The Directors may not delegate the powers conferred on them by the sections of the Act listed in the Second Schedule of the Act;

•

The Directors may not authorise a dividend in respect of some but not all shares in a class that is of a greater value per share in respect of other shares of that class, otherwise than in proportion to the amount paid on the share;

•

The Directors may not authorise the entry of the Company into a “major transaction” unless the transaction is approved by, or contingent on approval by, a special resolution of shareholders of the Company. A “major transaction” is essentially a transaction, the value of which exceeds half the value of the Company’s assets before the transaction.

Description of Activities of Borrowing Group The Company was incorporated on 23 September 1999. On 31 May 2007, Finance Direct Limited and its wholly owned subsidiary Finance Assist Limited amalgamated to become Finance Direct Limited under Part XIII of the Companies Act 1993. Prior to the amalgamation, Finance Assist Limited had primarily been involved in making certain loans and other financial accommodation available to company and individual borrowers. Subsequent to the amalgamation the combined business operations of both Finance Direct Limited and Finance Assist Limited are now undertaken solely by Finance Direct Limited. A discussion of the activities of Finance Direct Limited is provided below. Since the date of incorporation of the Company, the Company has been establishing itself as a multi-disciplined finance company. The Company has primarily been involved in sourcing financial solutions for the Company’s clients, including

Investment Statement & Prospectus No 6

PAGE 49

Prospectus

•

Trustee

Historical Financial Information

Level 18, ASB Centre, 135 Albert Street, Auckland;

Statutory Information

•

sourcing lenders to make certain financial accommodation available to clients and in making certain loans and other financial accommodation to company and individual borrowers. The Company facilitates the loan advances and receives remuneration from the client and/or the lender for the provision of these services.

•

The Company currently generates its business via introducers, internet advertising and retail advertising in print, radio and television, and lends only on the security of vehicles, boats and property. In-depth risk analysis, credit checking and security valuations are obtained on all loans. As a mainstream lender, the Company seeks to position itself to attract clientele at the quality end of New Zealand’s loan market with a strong emphasis on speed of service and flexibility.

These material contracts are in addition to those previously registered.

Further information about the business activities of the Company are provided in the section entitled “Investment Statement – Answers to Important Questions” under the heading “Who is involved in providing it for me?” on page 57. Nature and use of principal fixed assets The principal fixed assets of the Charging Group are general office equipment assets which are charged pursuant to the Trust Deed. These assets are used by the Company for its day-to-day operational requirements.

Summary of Financial Statements The financial statements in summary form in respect of the Charging Group as required by clause 7 of the Second Schedule to the Securities Regulations 1983 is provided on page 6.

On 27 November 2008, the Company entered into a Supplemental Deed to the Crown Deed of Guarantee between the Company and the Crown under which the Crown guarantees certain deposits for the Company for a two year period from 12 October 2008 to 12 October 2010.

Pending Proceedings There are no legal proceedings or arbitrations pending at the date of the registration of this Prospectus that may have a material effect on the Charging Group.

Issue Expenses Issue expenses

Issue expenses, including legal fees, accounting, audit, printing and marketing to be paid by the Company are estimated at $75,000. This amount is exclusive of any commission or brokerage referred to below that may be payable by the Company. Commission

An Investor is not liable to pay any commission to the Company in respect of the Offer. However, the Company may, in certain circumstances, agree to pay commission or brokerage to Primary Market Participants and to the Company’s agents calculated as a percentage of the amount invested. Brokerage will be paid by the Company in respect of applications accepted that bear the stamp of an approved broker of the Company at the following rates: Investment Term

Brokerage Rate

3 months

0.125%

6 months

0.250%

9 months

0.375%

12 months

0.500%

18 months

0.750%

2 years

1.00%

3 years

1.50%

4 years

2.00%

5 years

2.50%

Material Contracts During the two years prior to the date of registration of this Prospectus, the following material contracts were entered into: •

On 12 November 2008, the Company entered into a Crown Deed of Guarantee between the Company and the Crown under which the Crown guarantees certain deposits for the Company for a two year period from 12 October 2008 to 12 October 2010.

Brokerage (at the rate prevailing at the time of renewal) may also be paid by the Company on Investments which are reinvested, provided that the renewal bears the relevant broker’s or agent’s stamp.

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Investment Statement & Prospectus No 6

Preferential claims however rank ahead of the Securities. These claims include: •

The claims of preferential creditors given preference under legislation, including liquidator’s costs, taxes and certain payments to employees;

•

The Trustee’s, or any receiver appointed by the Trustee, remuneration, costs, charges, expenses and liabilities.

The Debenture Stock of this issue will rank equally with all Debenture Stock issued by the Company from time to time as far as security over the assets and undertakings of the Company is concerned. The Charging Group is prohibited from giving any security interests ranking ahead of, or equally with, the first ranking security interests given to the Trustee for the benefit of holders of Debenture Stock under the Trust Deed except for Prior Security Interests over any asset to secure any moneys to be borrowed, raised or otherwise owing in purchasing or acquiring such asset if at the time of such borrowing the aggregate of all moneys secured by existing Prior Security Interests together with the money so proposed to be borrowed or raised or to be otherwise owing and secured would not exceed 2% of the Total Tangible Assets.

The Trust Deed is dated 30 September 2004 and entered into between the Charging Group and Covenant Trustee Company Limited. The Trust Deed provides that the Company may from time to time borrow or raise money secured by Debenture Stock. Pursuant to the Trust Deed the Trustee has agreed to act as trustee for the benefit of the Stockholders on the terms and conditions and with the powers and authorities contained in the Trust Deed. Granting of Security Interest

Pursuant to the Trust Deed the Charging Group has granted to Covenant Trustee Company Limited a security interest in all of the Charging Group’s Personal Property and a charge over the Charging Group’s Other Property. The charge created by the Trust Deed in respect of the Other Property is a floating charge over Other Property in respect of which a fixed charge is not legally and fully effective and a fixed charge over all Other Property. Restrictions in Trust Deed

Prospectus

Trust Deed

Historical Financial Information

The aggregate amount (as at the date of the latest statement of financial position contained in this Prospectus) of securities that were secured by a charge over the assets of the Charging Group that ranked in point of security ahead of the Debenture Stock was $7,245. This prior charge comprises a security interest granted by the Company in favour of Sharp Corporation over certain office equipment leased by the Company. There were no securities (as at the date of the latest statement of financial position contained in this Prospectus) that were secured by a mortgage or charge over the assets of the Charging Group that ranked in point of security equally with the Debenture Stock, other than the existing Debenture Stock currently on issue. As at 31 March 2009, $4,156,660 of Debenture Stock had been issued.

Provisions of Trust Deed and other Restrictions on Borrowing Group

Financial limitations Each of the Company and the other Charging Group Members covenant with the Trustee that none of them will at any time after the date of the Trust Deed: (a) Where the Total Tangible Assets are less than $8,000,000, permit the Total Liabilities to exceed 86% of the Total Tangible Assets; (b) Where the Total Tangible Assets are $8,000,000 or more but less than $15,000,000, permit the Total Liabilities to exceed 88% of the Total Tangible Assets; (c) Where the Total Tangible Assets are $15,000,000 or more, permit the Total Liabilities to exceed 90% of the Total Tangible Assets; (d) Borrow or raise any money on the security of any Prior Security Interest when the aggregate of all principal moneys then secured by existing Prior Security Interests plus the moneys so proposed to be borrowed or raised and secured would exceed 2% of Total Tangible Assets.

Investment Statement & Prospectus No 6

PAGE 51

Statutory Information

Ranking of Securities

Restrictive Covenants

(h) Make any distribution other than:

Each of the Company and the other Charging Group Members covenant with the Trustee that none of them will, without the prior written consent of the Trustee:

(i) From a Charging Group Member to the Company;

(ii) By way of redemption of Redeemable Shares; or

(iii) By way of dividend out of profits,

and, in any event, no distributions of any kind are to be made at any time after an Event of Default has occurred and is continuing.

(a) Own any Real Property or shares or other equity securities or units in any company, unit trust or other person except:

(i)

(ii) Premises leased and occupied by the Company or any Charging Group Member for the purposes of its business; or

Real Property or shares which are held as security for the provision of financial accommodation, or are held as a result of enforcing any such security pending realisation;

(iii) Shares in any other Charging Group Member;

(b) Enter into any Related Party Transaction except in the ordinary course of business and where the terms thereof are evidenced in writing and the consideration therefore is on the basis of an arm’s length transaction as between two unrelated parties contracting in an open market, provided however that in any twelve month period the aggregate Value of Related Party Transactions entered into or remaining outstanding shall not exceed 2% of Total Tangible Assets as at the end of that twelve month period; (c) Carry on any business other than the provision of financial accommodation and financial services or acquire any assets other than assets used in such business; (d) Allow the amount owing to the Charging Group under financing receivables by any one debtor or related group of debtors to exceed 10% of Total Tangible Assets; (e) Sell or transfer as a going concern, whether by a single transaction, or any series of transactions whether related or not, the whole of its undertaking, or any part or parts thereof comprising more than 25% of Total Tangible Assets; (f) Write up the value of any asset in its books of account beyond the fair market value thereof as approved by the Auditors at the time of such writing up; (g) Enter into or make any proposal for a compromise or amalgamation (other than any amalgamation with another Charging Group Member, prior written notice of which has been given to the Trustee); or

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Investment Statement & Prospectus No 6

Covenant Trustee Company Limited does not guarantee the repayment of the Debenture Stock or the payment of interest thereon.

Duties of Trustee The Trust Deed provides that the Trustee has agreed to act as trustee for the benefit of the Stockholders on the terms and conditions and with the powers and authorities contained in the Trust Deed. The Trustee holds the security interest in all of the Company’s Personal Property and a charge over the Company’s Other Property and must consider regular financial reports furnished by the Company and the Company’s auditors as set out in the Trust Deed so as to enable the Trustee to review the Company’s compliance with its obligations under the Trust Deed. The Fifth Schedule of the Securities Regulations 1983 requires that the Trustee shall exercise reasonable diligence to ascertain whether or not any breach of the terms of the Trust Deed or of the terms of the Offer of the Securities has occurred and, except where it is satisfied that the breach will not materially prejudice the security (if any) of the Securities or the interests of the holders thereof, shall do all such things as it is empowered to do to cause any breach of those terms to be remedied. The Trustee shall exercise reasonable diligence to ascertain whether or not the assets of the Charging Group that are or may be available, whether by way of security or otherwise, are sufficient or likely to be sufficient to discharge the amounts of the Securities as they become due. The Trustee does not guarantee the repayment of the Securities or the payment of interest.

The Trust Deed provides for various events of default which include:

•

Annual audited financial statements, accompanied by an auditor’s report;

•

Non-payment of any Debenture Stock or other moneys owing under the Trust Deed on the due date;

•

Half-yearly audited financial statements, accompanied by an auditor’s report;

•

Further financial statements and reports when the Trustee considers that special circumstances have arisen which warrant such request;

Breach of any of the obligations of the Company or the Charging Subsidiaries under the Trust Deed which is not remedied within 14 days after the Company or Charging Subsidiary became aware of it;

•

Insolvency, creditor enforcement action, receivership, dissolution, amalgamation, statutory management or cessation of business of the Company or any Charging Subsidiary;

•

Enforcement of a Prior Security Interest;

•

Change in control of the Company without the prior consent of the Trustee.

•

Copies of all reports, notices and other material sent by the Company to its shareholders or to the holders of Securities;

•

Reporting as per the requirements set out by the Reserve Bank of New Zealand pursuant to the Reserve Bank of New Zealand Amendment Act 2008 and its regulations (as permitted by the Reserve Bank);

•

A copy of the monthly management accounts of the Company; and

•

Notice of proceedings which materially and adversely affect the Company.

Ranking of Debenture Stock The Debenture Stock being offered under this issue will rank equally with all existing and further Debenture Stock which may be issued from time to time pursuant to the provisions of the Trust Deed.

If an event of default occurs the Trustee may, by notice in writing to the Company, appoint a receiver and realise the assets of the Company and Charging Subsidiaries to repay the Debenture Stock.

Prospectus

Enforcement

Historical Financial Information

To ensure that the Trustee is adequately informed, the Trust Deed requires that the Company must provide the following information to the Trustee:

Enforcement and Meetings

Meetings of the Stockholders

Meetings of Stockholders can be called by the Company, the Trustee or by Stockholders holding not less than 10% of the aggregate principal amount of the Stock. 14 days’ notice of each meeting must be given to the Stockholders. A quorum for passing an Extraordinary Resolution is Stockholders present in person or by representative, holding more than 50% of the aggregate principal amount of the Stock. A quorum for the transaction of any business other than passing any Extraordinary Resolution is Stockholders present in person or by representative, holding at least 10% of the aggregate principal amount of the Stock. If a quorum is not present at any meeting and the meeting is adjourned, the Stockholders present in person or by proxy at the adjourned meeting will constitute a quorum. The Stockholders have various powers exercisable by Extraordinary Resolution, including the power to amend the Trust Deed. An Extraordinary Resolution is a resolution passed by 75% of the votes cast at the meeting. Each Stockholder present in person or by proxy at a meeting has

Investment Statement & Prospectus No 6

PAGE 53

Statutory Information

Reporting Requirements

one vote or, if a poll is demanded, one vote for every dollar principal amount of Stock held. Extraordinary Resolutions bind all Stockholders whether or not they are present at the meeting or vote for or against the Extraordinary Resolution. A person appointed by the Trustee will be Chairperson of the meeting and any director, officer or solicitor of, or person authorised by, the Company or the Trustee may attend any meeting and has the right to speak at the meeting. This summary is not an exhaustive summary of the Trust Deed. You are invited to inspect a copy of the Trust Deed at the registered office of the Company or the offices of the Trustee.

Other Terms of Offer and Securities All terms of the Offer, and all the terms of the Debenture Stock being offered, are set out in this Prospectus, other than those implied by law or set out in a document that is registered with a public official and is available for public inspection and is referred to in this Prospectus.

Financial Statements The audited financial statements for the Company for the 12 month period ended 31 March 2009 are set out on pages 11 to 42 of this document. The Auditors’ Report in respect of those financial statements is set out on pages 43 to 46 of this document. The financial statements include the information required by clauses 16-32 of the Securities Regulations 1983 and the Securities Act (Financial Institutions) Exemption Notice 2007.

Places of Inspection of Documents The Constitution of the Company and the material contracts referred to in this document are kept by the Companies Office. Documents on the public file may be viewed on the Companies Office website, www.companies.govt.nz, (or where those documents are not able to be viewed via the internet) upon request by submitting a search request form which may be obtained from the Companies Office at: •

Level 18, ASB Centre, 135 Albert Street, Auckland;

•

Ground Level, 33 Bowen Street, Wellington; or

•

55 Wordsworth Street, Sydenham, Christchurch.

Copies of the documents can also be obtained (on payment of the relevant fee) by telephoning the Companies Office on 0508 266 726.

Other Material Matters The current average reinvestment rate (i.e. percentage of funds reinvested at the end of term) for the Debenture Stock for the quarter ended 31 July 2009 was 39.39%. Reinvestment rates vary greatly from month to month and are affected by a variety of market factors including media coverage on the global credit crisis, public perception of the industry and overall market confidence. As the rates are primarily driven by these factors, they often do not provide an accurate indication of the performance of the Company. Investors are encouraged to read the financial statements, Chairman’s Letter and other sections of this Prospectus to obtain a better understanding of the Company’s performance. There are no other material matters relating to the Offer of Debenture Stock under this Prospectus, other than matters set out elsewhere in the Prospectus, and contracts entered into in the ordinary course of business of the Company.

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Investment Statement & Prospectus No 6

Directorsâ&#x20AC;&#x2122; Statement

Prospectus

The Directors, after due enquiry by them in relation to the period between 31 March 2009 and the date of registration of the Prospectus, are of the opinion that no circumstances have arisen that materially adversely affect the trading or profitability of the Charging Group, the value of their assets or the ability of the Charging Group to pay their liabilities due within the next twelve months. The Prospectus has been duly signed by each Director of the Company or by their agents authorised in writing.

Wayne Darrin Croad

John Alan Callaghan

Peter Karl Christopher Huljich

Directorsâ&#x20AC;&#x2122;Information Statement Statutory

Richard Alan Waddel

Historical Financial Information

Directors of FINANCE DIRECT LIMITED

Investment Statement & Prospectus No 6

PAGE 55

Finance Direct Limited

Investment Statement - Answers to Important Questions Motor vehicle Loans make up a significant percentage of FINANCE DIRECT OPERATIONS.

PAGE 56

Investment Statement & Prospectus No 6

Debenture Stock

This Investment Statement offers first ranking Debenture Stock of Finance Direct Limited, subject to the registration of prior charges. Debenture Stock offered in this Investment Statement are debt securities for the purposes of the Securities Act 1978.

The Debenture Stock ranks equally with all present and future Debenture Stock issued by the Company. As at 31 March 2009, the total principal amount of Debenture Stock on issue was $4,156,660. The minimum amount that may be invested under this Offer is $1,000. New investment products

The Debenture Stock shall be issued for fixed terms ranging between 3 months and 5 years. Fixed interest rates are applicable to Debenture Stock and will vary depending upon the fixed term selected. Current interest rates for Debenture Stock are set out on the rate sheet accompanying the Application Form.

Finance Direct Limited reserves the right to offer new investment products, including savings accounts, not specified in this Investment Statement, and to offer different interest payment methods to Investors.

The issue of the Debenture Stock will provide the Company with funds to on-lend for selected financial transactions including operating leases, hire purchase arrangements and loan advances to both companies and individuals.

Issuer

The obligations of the Company to Investors in respect of the Debenture Stock is secured by a first ranking security interest in all of the Company’s Personal Property and a charge over the Company’s Other Property pursuant to a Debenture Trust Deed granted by the Company in favour of Covenant Trustee Company Limited. The Debenture Stock issued by the Company is first ranking because there are no other charges registered over all of the Company’s assets that rank ahead of the charge granted in favour of the Trustee pursuant to the Trust Deed except for permitted prior charges. The Trust Deed permits the Company to create prior security interests over any asset to secure any moneys to be borrowed, raised or otherwise owing in purchasing or acquiring such asset if at the time of such borrowing the aggregate of all moneys secured by existing prior security interests together with the money so proposed to be borrowed or raised or to be otherwise owing and secured would not exceed 2% of its Total Tangible Assets. As at 31 March 2009, the aggregate amount of prior charges ranking ahead of the Debenture Stock currently outstanding and Debenture Stock being offered was $7,245. This prior charge comprises a security interest granted by the Company in favour of Sharp Corporation over certain office equipment leased by the Company. Certain creditors may also be given preference under the legislation. These preferential creditors include liquidator’s costs, taxes and certain payments to employees.

Who is involved in providing it for me? Finance Direct Limited is the issuer of the Debenture Stock. The Company’s registered office is Level 2, Finance Direct House, 88 Broadway, Newmarket, Auckland. Trustee

The Trustee is Covenant Trustee Company Limited. The Trustee’s address is Level 34, Vero Centre, 48 Shortland Street, Auckland. Business Activities

The Company was incorporated on 23 September 1999. Since the date of incorporation of the Company, the Company has been establishing itself as a multi-disciplined finance company. The Company has primarily been involved in sourcing financial solutions for the Company’s clients, including sourcing lenders to make certain financial accommodation available to clients and in making certain loans and other financial accommodation to company and individual borrowers. The Company facilitates the loan advances and receives remuneration from the client and/or the lender for the provision of these services. The Company currently generates its business via introducers and retail advertising in print, radio and television; and lends only on the security of vehicles, boats and property. In-depth risk analysis, credit checking and security valuations are obtained on all loans. As a mainstream lender, the Company seeks to position itself to attract clientele at the quality end of New Zealand’s loan market with a strong emphasis on speed of service and flexibility.

Investment Statement & Prospectus No 6

PAGE 57

Investment Statement

What sort of investment is this?

Prospectus

Investment Statement - Answers to Important Questions

Charging Group’s Business Activities

Breakdown of business activities

The Charging Group’s principal activity is the raising of money from the public by the issue of Debenture Stock and the advance of that money, together with the Charging Group’s own funds, to the consumer and retail finance sector. The Charging Group’s loans can generally be categorised as falling within the following three categories:

The exposure of the Charging Group to the aforementioned lending sectors was as follows (as a percentage of the total receivables owned by the Company as at 31 March 2009):

•

To assist consumers with the funding of asset purchases (i.e. the purchase of motor vehicles and boats);

•

To assist consumers with the refinancing or consolidation of existing indebtedness;

•

Secured business and personal loans.

The Company commenced business as a broker and financier in the consumer and retail finance sector in 1999. This lending comprises the provision of business loans and personal loans to individual consumers for general purposes or to specifically assist consumers with the purchase of motor vehicles and boats. These loans are predominantly secured with registered security interests over motor vehicles, boats, and agreements to mortgage real estate (secured by caveats registered over the relevant real estate) owned by the borrower. This lending is generally: •

Concentrated in Auckland and Northland;

•

Represented by loans made for terms of 24 months (on average);

•

Represented by loans of less than $20,000.

The Company’s loan documentation allows for loans to be varied during the course of loan facility agreements. This includes the ability to extend the maturity dates of loans and the rollover of loans into new agreements, where it is deemed beneficial to do so. Loan rollovers are considered based on their individual merits, bearing in mind the current economic climate and the additional period of time required to achieve recovery of the loan. All loan rollovers are assessed based on current credit policy and require in-depth risk analysis, credit checking, security valuations and third party guarantees (where applicable) to be provided by borrowers. The Charging Group does not lend to parties related to the Charging Group.

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Investment Statement & Prospectus No 6

Consumer loan finance

86%

Business and personal loans

14%

Composition of receivables by quantum

At 31 March 2009, the Charging Group had 374 open loans with an average balance of $13,738. The following table illustrates the composition of the Charging Group’s loan receivables by quantum as at 31 March 2009: Size of loan:

Number of loans:

$0 to $10,000

231

$10,001 to $20,000

$20,001 to $30,000

Greater than $30,001

Total

374

Nature of Security for loans

The loans made by the Charging Group are secured by the following types of security (as a percentage of the total receivables owned by the Company as at 31 March 2009): Nature of Security

% of total receivables secured

Security interest over motorbike only

0.11%

Security interest over motor vehicle and boat

1.74%

Security interest over property only

12.81%

Security interest over motor vehicle only

30.63%

Security interest over property and motor vehicle

54.71%

Total

100.00%

Reporting requirements

The majority of loans made by the Charging Group are made to borrowers residing in Auckland and Northland. The following table illustrates the geographic location of the borrowers to whom the Charging Group lends (as a percentage of the total receivables owned by the Charging Group as at 31 March 2009):

Details of the reporting requirements of the Charging Group to the Trustee are stated on page 53.

Auckland and Northland Bay of Plenty Central North Island

% of total receivables secured

72.41% 3.35% 13.57%

South Island

3.78%

Waikato

4.09%

Wellington

2.80%

Total

100.00%

Trust Deed

The Debenture Stock being offered under this issue will rank equally with all existing and future Debenture Stock which may be issued from time to time pursuant to the provisions of the Trust Deed. This summary is not an exhaustive summary of the Trust Deed. You are invited to inspect a copy of the Trust Deed at the registered office of the Company or the offices of the Trustee.

How much do I pay? Minimum Investment

You may select the amount you wish to invest (“Application Moneys”). The minimum amount that may be invested however is $1,000. Application and Payment

If you wish to make an Investment, you must: •

Complete the Application Form that accompanies this Investment Statement.

•

Attach a cheque for the amount you wish to invest.

•

Send your Application Form together with your cheque made payable to “Finance Direct Limited” and crossed “Not Transferable” for the amount of the Application Moneys shown on your Application Form to Finance Direct Limited, P O Box 17422, Greenlane, Auckland, to any Primary Market Participant or any agent appointed by the Company to receive such Application Forms.

DO NOT forward cash. Payment will only be accepted in New Zealand currency as follows:

•

Personal cheque drawn on and payable at any New Zealand bank;

•

Bank cheque issued by and payable at any New Zealand bank;

•

Bank draft drawn on and payable at any New Zealand bank; or

•

By direct credit in cleared funds into the Company’s bank account.

Granting of Security Interest

Details of the financial limitations, restrictive covenants and general covenants imposed upon the Charging Group by the Trust Deed are stated on pages 51 and 52. Duties of Trustee

Details of the duties of the Trustee are stated on page 52. The Trustee does not guarantee the repayment of the Securities or the payment of interest. Investment Statement & Prospectus No 6

PAGE 59

Investment Statement

Location of borrower

Ranking of Debenture Stock

Prospectus

Geographical Exposure

What are the charges? You are not required to pay any fees or charges during the term of your Investment other than those statutorily imposed (if any) and the money paid for the Debenture Stock applied for. The Investor has no right to require the Company to repay Debenture Stock to the Investor prior to the expiry of the fixed term of the Debenture Stock (“Maturity Date”). However, the Company reserves the ability at its absolute discretion to permit the early repayment of Debenture Stock before the Maturity Date for the respective Investment in the event of death or financial hardship. Requests for early repayment of Debenture Stock must be made to the Company in writing. In the event that the Company agrees to repay the Debenture Stock to the Investor prior to the Maturity Date, the Company reserves the right at its discretion to adjust the interest rate applicable to the Debenture Stock for the term upon which those funds have been held by the Company. The Company may also charge an investment break fee set by the Company from time to time. Charges payable by the Issuer

The Company is liable to pay fees to the Trustee and may from time to time pay brokerage to certain financial advisers, intermediaries and brokers. Further details on brokerage are set out on page 50 of this Prospectus under the section headed “Issue Expenses”. None of the above fees are payable by an Investor and do not impact upon the amount of returns payable by the Company on your investment.

What returns will I get? Interest – Debenture Stock

The returns to an Investor from their investment in Debenture Stock will be interest on the Debenture Stock. The Company will pay the Investor interest on the sum invested as Debenture Stock at the fixed rate advertised by the Company for Debenture Stock of that term on the date the Application is received by the Company. Subject to an Investor’s application being accepted, interest will begin accruing on the day the application money is received in cleared funds by the Company. The interest will accrue on a daily basis from that date (on the basis of a 365 day year) and will be paid at the intervals and the rates as set out in the Application Form on which the Investment was made or as otherwise agreed with the Company.

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Investment Statement & Prospectus No 6

Current interest rates for Debenture Stock are set out on the rate sheet accompanying the Application Form. From time to time market conditions alter and interest rates on Debenture Stock are changed to suit those conditions. The Company may vary the interest rates offered at any time. Any alteration in interest rates will not apply to Investments received before that alteration is made. Once accepted, Debenture Stock will continue to earn the interest rate agreed on when the Investment is made and is fully protected from any later fluctuation. If the Application Form is received after an interest rate has been changed, the Company will advise the Investor of such a change. In the event that the Investor does not confirm within 10 Business Days that the Investor accepts the new interest rate, the Company will refund the deposit to the Investor. No interest will be paid on moneys refunded. Payment of Interest

The key factors that will determine your returns are: •

The term of the investment;

•

The interest rate applicable to the term of the investment;

•

The interest payment option selected.

Interest on the Investment may be compounded or paid to the Investor by direct credit or cheque at the Investor’s option. The Company pays interest quarterly during the term of the Investment from the date of the deposit with the Company. Once the Debenture Stock has been allotted to the Investor for a fixed term, the interest rate at which that Debenture Stock has been issued to the Investor will be fixed during the term of the Investment and will not be varied. The amount of returns an Investor will receive is not quantifiable as at the date of this Investment Statement due to the options available to the Investor. Nor is it possible to state the exact dates on which, or the frequency with which, the returns on your Debenture Stock will be paid. The amount can be calculated once these options have been selected, and that amount is enforceable by an Investor. Because these factors vary between prospective investors, the Company cannot promise a quantifiable amount of returns in this Investment Statement. The Company may adjust the interest rate applicable to any Debenture Stock if the Stockholder seeks early repayment

Compound – Rather than make a quarterly interest payment, the Company will add interest to the investment automatically and send the Investor a notice of the Investor’s balance. The Investor will then earn interest on the original investment and on interest. If the Investor selects “compounding interest option” on the Application Form and then later decides that the Investor would like to receive quarterly payments the Company will change the manner in which payments of interest are made in the future. Quarterly Direct Credit – The Company may pay interest direct to the Investor’s bank account each quarter and mail the Investor an interest advice which shows details of the amount banked. This method avoids any postal delay which may occur if a cheque is mailed to the Investor. Quarterly Cheque – The Company may pay the interest by cheque each quarter. The cheque together with an interest advice is posted to the Investor. Taxation

Under current legislation, the Company is required to deduct Resident Withholding Tax (“RWT”) from interest paid to, or applied for, the benefit of New Zealand resident Investors and Investors who hold secured deposits through a fixed establishment in New Zealand. RWT will not be deducted by the Company where Investors hold a valid Certificate of Exemption that has been supplied to the Company. Investors who supply the Company with their IRD Number must elect a RWT rate currently being 19.5c, 33c or 39c for every $1.00 of interest earned. RWT will be deducted at the rate of 39c for every $1.00 of interest earned where an Investor’s IRD Number is not supplied, as required by current legislation. Non-Resident Withholding Tax (“NRWT”) will be deducted by the Company from interest paid to, or applied for, the benefit of an Investor who is not a tax resident of New Zealand unless the Investor holds secured deposits through a fixed establishment in New Zealand. The rate of NRWT deduction will be dependent upon the Investor’s country of residence. The Company will make the deductions referred to above and as required by applicable legislation unless it is satisfied by the Investor that such deductions are not required by law.

Prospectus

The Investor can choose to receive payments of interest in any one of three ways:

The Company has obtained “Approved Issuer” status and has registered the Debenture Stock as “Registered Securities” for the purpose of the approved issuer levy provisions in Part VIII of the Stamp and Cheques Duties Act 1971. The Company may, upon request, subject to being legally entitled so to do, and on any terms it requires, agree to deduct and pay an approved issuer levy (currently 2%) on interest payments made to non-residents in lieu of NRWT. With the tax threshold changes that took effect from 1 October 2008 and the new tax rates effective from 1 April 2009, no changes have yet been made to the RWT tax rates of 19.5% or 33%. Financial institutions have the option of offering a reduced rate of 38% in place of 39% for the 2010 tax year. However, the Company does not currently offer this reduction. Accordingly, an Investor will need to recover any overpaid RWT by filing a tax return. The Government has advised that further consequential changes to the RWT rates on interest will not be fully implemented until there has been further consultation with banks and other financial institutions. That consultation is still in progress at the date of this Prospectus. The party legally liable to pay the interest and principal comprising the Investment is Finance Direct Limited. New Investment Products

What are my risks? The principal risk of your Investment not being recovered in full by you, or of not receiving the returns stated in the section entitled “What returns will I get?”, is if the Company becomes insolvent. This could occur if: •

A significant number of loans made by the Company were not repaid and security taken for those loans proved inadequate for any reason and the Company was otherwise unable to recover those loans in full from the borrowers; or

•

The value of the Company’s assets fall and those assets were realised for less than the acquisition cost of those assets;

•

The Company, because of those principal risks or otherwise, is unable to meet its debts as they fall due.

Investment Statement & Prospectus No 6

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Investment Statement

in the circumstances set out in the section “What are the Charges?” The new rate will be a rate the Company determines is applicable for the period during which the investment was held. The Company may also charge an investment break fee set by the Company from time to time.

General Risks

•

Debtor Risk

As with most finance companies, the most significant risk faced by the Company is the risk that the Company is unable to recover loans in full from those parties borrowing funds from the Company. In light of the fact that the Company: •

•

Predominantly lends on the security of motor vehicles, boats (which are by their nature depreciating assets) and agreements to mortgage over real estate (which are in effect unregistered mortgages often ranking behind first registered mortgages and/or second mortgages, or other caveatable interests); and Lends at a higher loan to value ratio than larger financial institutions, in respect of the amount that it will lend against certain assets,

the Company has potentially greater credit risk in the event that a borrower client defaults under a loan made by the Company as the Company may not be able to realise sufficient value from the sale of the assets pledged by the borrower as security for the loan. The Company has a number of procedures in place to seek to reduce the risk of the Company being rendered unable to recover all the moneys owing to it by a borrower or borrowers under a loan, including:

Ensuring that the covenants in the Debenture Trust Deed, pursuant to which Debenture Stock is issued, are met.

In the vast majority of loans made by the Company, the Company requires that borrowers obtain payment protection insurance. Under these policies of insurance, the insurer will generally pay the borrower’s payment instalments as they fall due under a loan upon the occurrence of death, certain accidents, sicknesses or redundancy/bankruptcy (if the borrower is self-employed). In certain circumstances, the Company will require a borrower’s obligations to the Company to be guaranteed by a third party. This will generally only be required where the security for a loan is owned by a person other than the borrower, in which case the owner of that property will be required to guarantee the obligations of the borrower to the Company. Also, in the case of borrowers under the age of 20, the Company normally looks for a third party to guarantee the obligations of that borrower to the Company depending upon the assessed value of the security given for the respective loan. Continuity of Supply

The Company is in the business of lending funds that have been deposited with it together with other moneys that it has access to. Some of these secured debenture funds are received via a number of financial intermediaries. The ability of the Company to lend relies upon the support of these intermediaries and the investing public. If for any reason the continuing support of a number of advisers and financial intermediaries, or the investing public ceases to occur or were to significantly reduce, then the Company may not have the funds available to on-lend to prospective borrowers. This event may adversely impact upon the growth and financial performance of the Company.

•

A rigorous loan application and credit approval process that each prospective borrower must complete to the satisfaction of the Company prior to a loan advance being made to that prospective borrower;

•

Ensuring that the Company takes sufficient security to properly protect its position;

•

Ensuring that the Company follows stringent policies of monitoring loan performance, including daily monitoring of the contractual position of all of the Company’s debtors with immediate daily personal follow up if there is a breach of the terms of their loan facility documentation, followed up with enforcement action if the breach is not expeditiously remedied;

•

Obtaining third party guarantees of the borrower’s obligations to the Company where appropriate in the circumstances;

•

Prepares detailed financial forecasts and holds regular management meetings to discuss liquidity management issues;

•

Ensuring that loan securities are within prudent loan to valuation ratio percentages;

•

Maintains sufficient liquid funds to meet its commitments based on the forecast financial information;

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Investment Statement & Prospectus No 6

liquidity risk

Liquidity risk is the risk that the Company will not have sufficient funds to meet its ongoing obligations. A risk exists that the Company could encounter difficulty in raising funds at short notice to meet its lending and repayment commitments due to the Company principally raising funds from the issue of Debenture Stock. To mitigate this risk, the Company:

•

Generally lends funds for terms which are actually shorter than most of the terms of its debenture borrowings.

Interest Rate Risk

Interest rate risk arises as a result of mismatches between the Company’s interest bearing assets (i.e. loans) and its interest bearing liabilities (i.e. Debenture Stock). Movements in interest rates may impact upon the Company’s financial results by affecting interest margins as a result of such mismatches. The Directors have a number of risk mitigation procedures in place to seek to reduce the impact of interest rate movements, including: •

•

The fact that the Company generally lends funds for terms shorter than most of the terms of its debenture borrowings means the Company generally knows funding costs for the duration of any lending at the time it enters into loan agreements; Interest rates for most investments are fixed for the term of the investment.

Board Performance

There is a risk that the performance of the Board of Directors does not meet required standards either individually or collectively. There is significant responsibility on the Directors of a finance company to comply with prudent financial and corporate governance measures, and other legal requirements and responsibilities. The Company’s Board is aware of these responsibilities and requirements, and is continuing to develop its code of governance. Regulatory Risk

There could be substantial changes in laws and governmental policies affecting the Company’s business. One such change being the Reserve Bank of New Zealand Amendment Act 2008, that directly affects both the regulation and minimal capital requirements for deposit takers.

achieve superior results. In the normal course of business, the Company faces the risk of the loss of one or more of those individuals for a variety of reasons. market risk

Market risks include further loss of confidence in the economy in general possibly leading to a continuation of the recession. Failure by competitor finance companies could also lead to a general lack of confidence by investors.

Prospectus

Obtains external expert advice as considered prudent from time to time;

IT Risks

The Company is dependent on its information technology (IT) systems to maintain its efficiency and to monitor the performance of its finance receivables and debenture stock ledgers. The failure of its IT systems could have a short term, yet material, adverse impact on the Company’s operations. The Company is also exposed to the risks of new systems or upgrades introduced as part of the ongoing improvement failing to perform to expectations. Litigation Risk

There is a possibility that future litigation could adversely affect the Company’s financial position. The Company is not aware of any adverse litigation threatened or pending that may have an adverse effect on the financial position of the Company as at the date of this Prospectus. guarantee Risk

The Crown has guaranteed certain deposits under the Scheme until 12 October 2010. The Crown guarantee is subject to compliance by the Company with a number of requirements including certain reporting obligations, meeting Trust Deed covenants, complying with prudential directions and restrictions on entering into certain transactions. There is a risk that failure to comply with any of these obligations could result in the Crown withdrawing its guarantee. On 25 August 2009, the Crown released details of an extension to the Scheme through to 31 December 2011. Different conditions apply to the extension of the Scheme and there is a risk that the Company may not be able to obtain extension of its current guarantee beyond 12 October 2010.

Competition

The Company faces the risk of existing or new competitors or new products eroding the Company’s market share or margins. Loss of Key Personnel

The Company has spent considerable time and effort in bringing together individuals into the Company who have the skills, experience and ability to work together effectively to

Investment Statement & Prospectus No 6

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Investment Statement

•

Specific risks Real Estate and Property Market

As at 31 March 2009, approximately 68% of the Company’s loans were secured by the Company taking security by way of an agreement to mortgage over real estate owned by the borrower, which agreement is secured by a caveat registered against the certificate of title for the borrower’s property. Generally, the caveat registered to secure the agreement to mortgage will be registered subsequent to a first and/or a second mortgage. As a consequence: •

In the event that the conditions in the real estate market deteriorated materially causing a depreciation in real estate values, this may adversely impact on the value of the security underlying certain of the Company’s loans which it may realise in the event that it is required to enforce its security;

•

In the event the Company sought to enforce its securities through the registration of a mortgage and the exercise of the power of sale under that mortgage, then the Company’s ability to realise the proceeds of sale of the mortgaged property would be subject to the claims of any prior ranking secured interest registered over the mortgaged property in question, i.e. a first or second mortgage or prior ranking caveat. Subject to the extent of the borrower’s indebtedness at the time of enforcement, there may not be sufficient residual funds available to the Company to repay the indebtedness of the borrower to the Company.

Consequences of insolvency

You would not be liable to pay any money to any person as a result of the insolvency of the Company. Your principal risk is that you could suffer loss of some or all of the interest due to you, or your original investment, if for any reason the Company becomes insolvent and is unable to meet its debts as they fall due. It is possible therefore that on termination of your investment at any time you may receive less than the amount of your original investment. The Debenture Stock being offered under this issue will rank pari passu (or equally) with all existing and further Debenture Stock which may be issued pursuant to the Trust Deed. As at 31 March 2009, the aggregate principal amount of Debenture Stock issued by the Company and which were outstanding was $4,156,660. The claims on the assets of the Company that will or may rank ahead of your claim if the Company is put into liquidation are: •

Claims by preferential creditors. Preferential creditors are determined by reference to the Companies Act 1993. They include the fees and expenses incurred by any liquidator, certain claims by the Company’s employees for unpaid remuneration, PAYE tax deductions and any Goods and Services Tax;

•

Claims by holders of prior security interests. The Trust Deed permits the Company to create prior security interests over any asset to secure any moneys to be borrowed, raised or otherwise owing in purchasing or acquiring such asset if at the time of such borrowing the aggregate of all moneys secured by existing prior security interests together with the money so proposed to be borrowed or raised or to be otherwise owing and secured would not exceed 2% of its Total Tangible Assets. As at 31 March 2009, the aggregate amount of prior charges ranking ahead of the Debenture Stock currently outstanding and Debenture Stock being offered was $7,245. This prior charge comprises a security interest granted by the Company in favour of Sharp Corporation over certain office equipment leased by the Company;

Unsuccessful Marketing

•

It is possible that the Company’s initiatives to market its financial services to prospective borrowers and its financial investments such as secured debenture stock will fail, or not produce the projected levels, which may have an adverse impact upon the financial position and performance of the Company.

The Trustee’s, or any receiver appointed by the Trustee, remuneration, costs, charges, expenses and liabilities.

The obligations of the Company to Investors in respect of the Debenture Stock is secured by a security interest in all of the Company’s Personal Property and a charge over the Company’s Other Property pursuant to a Debenture Trust

Exposure to a particular counterparty

There is a risk that the Company may become too heavily exposed to one particular borrower. The Company mitigates this risk by ensuring that it is not exposed to one entity for an amount equal to or greater than 10% of the Company’s Total Tangible Assets. Related party lending

The Company has a rigid policy of not making loan advances to related parties and accordingly does not consider transactions of this nature to be a risk to the Company.

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Investment Statement & Prospectus No 6

•

Approved by an Extraordinary Resolution of the holders of Debenture Stock (being a resolution passed by not less than 75% of the votes given being in favour of the resolution); or

•

In the opinion of the Trustee, clearly not or not likely to become prejudicial to the general interests of the holders of Debenture Stock.

Can the investment be altered? Early Repayment

The Investor has no right to require the Company to repay the Debenture Stock to the Investor prior to the expiry of the fixed term of the investment (“Maturity Date”). However, the Company reserves the ability at its absolute discretion to permit the early repayment of Debenture Stock before the Maturity Date for the respective Debenture Stock in the event of death or financial hardship. Requests for early repayment of Debenture Stock must be made to the Company in writing. In the event that the Company agrees to repay the Debenture Stock to the Investor prior to the Maturity Date, the Company reserves the right, at its discretion, to adjust the interest rate applicable to the Debenture Stock for the term upon which those funds have been held by the Company. The Company may also charge an investment break fee set by the Company from time to time. Early repayment of the Debenture Stock at the election of the Company

The Company reserves the absolute discretion to repay the Investment prior to the expiry of the fixed term of the Investment, provided that the Company: •

•

Provides the Investor with not less than one months notice of the early repayment in writing to the Investor; and The Company must repay all principal and interest accrued to the date of the early repayment on the date of the early repayment.

How do I cash in my investment? Repayment of the Investment

On Maturity Date, Stockholders will be paid the face value of their Investment together with any interest then due, upon presentation of the relevant documentation to the Company. About 14 days before the date the Investment is due to mature, the Investor will be sent a letter which sets out the options available for reinvestment or repayment of the Investment. If the Investor has no immediate use for the Investment, the Company will at the Investor’s request accept the Investment for a further period nominated by the Investor at whatever the current interest rate is at that time. The Investor may request that repayment is made. If so the Investor will need to return the Investment Certificate held in respect of the Debenture Stock. Payments will be made to the Investor by cheque or deposited into the Investor’s bank account at the election of the Investor. If at the maturity date the Company has not received any instruction from you regarding either the reinvestment or repayment of your investment the Company may at its sole discretion: •

Hold that investment “at call”, with seven days notice, at the Company’s “at call” rate until it receives your instructions;

•

Trust Deed

The Trust Deed which governs the Debenture Stock does provide for the alteration of its terms in certain circumstances (which may include an alteration to the specific terms of the Debenture Stock) with the agreement of the Trustee. The Trustee may only agree to make the proposed alteration if the proposed alteration is: •

In the opinion of the Trustee, made to correct a manifest

Investment Statement & Prospectus No 6

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Investment Statement

The Trustee does not guarantee the repayment of the Debenture Stock or the payment of interest thereon.

Prospectus

error or is of a formal or technical nature or is necessary in order to comply with any law or is convenient for the purposes of obtaining or maintaining a quotation of the Debenture Stock on any securities exchange and is not prejudicial to the general interests of the holders of Debenture Stock; or

Deed granted by the Company in favour of Covenant Trustee Company Limited (“the Trustee”). The charge created by the Trust Deed in respect of the Other Property is a floating charge over the Other Property in respect of which a fixed charge is not legally and fully effective and a fixed charge over all Other Property.

•

Repay your investment together with all accrued but unpaid interest by cheque to your last known address or by direct credit to your last nominated bank account.

Early Repayment

Debenture Stock is issued for fixed terms and for fixed interest rates during that term. This provides the Company with certainty in respect of the planning of its business operations. Accordingly, the Investor has no right to require the Company to repay the Debenture Stock to the Investor prior to the expiry of the fixed term of the Debenture Stock. However, the Company reserves the ability at its absolute discretion to permit the early repayment of Debenture Stock before the Maturity Date for the respective Debenture Stock in the event of death or financial hardship. Requests for early repayment of Debenture Stock must be made to the Company in writing. In the event that the Company agrees to repay the Debenture Stock to the Investor prior to the Maturity Date, the Company reserves the right, at its discretion, to adjust the interest rate applicable to the Debenture Stock for the term upon which those funds have been held by the Company. The Company may also charge an investment break fee set by the Company from time to time. Early repayment of the Debenture Stock at the election of the Company

The Company reserves the absolute discretion to repay the Investment prior to the expiry of the fixed term of the Investment, provided that the Company: •

•

Right to Sell

You may transfer your interest in your Investment at any time (not later than 30 days before Maturity Date) by completion of a Transfer in such form as is customarily used to transfer shares in New Zealand (“Transfer”). More than one person can take ownership of the Investment. The Company is

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Investment Statement & Prospectus No 6

not bound to recognise trusts. Consequently no reference to trusts or trustees should be made in the Transfer. Joint Investment owners will be treated as joint tenants (unless some other form of ownership is indicated) so that on the death of one of them, ownership of the Investment will vest automatically with the survivor(s). To be valid, the Transfer must be registered with the Company. There is currently no fee payable in respect of the Transfer of the Investment to another person; however, the Company reserves the right to charge a fee in the future. Market

In the opinion of the Company there is no established market for the sale or transfer of the Securities.

Who do I contact with enquiries about my investment? Enquiries about your Investment can be addressed to the Company at:

Managing Director Finance Direct Limited Freephone 0800 399 666 Telephone +64 9 529 5399 Facsimile +64 9 529 5509 Freefax 0800 104 200 Email sales@financedirect.co.nz P O Box 17422, Greenlane, Auckland

Is there anyone to whom I can complain if I have problems with the investment? The Company operates an internal complaints procedure to investigate thoroughly any complaint. If for any reason you are unhappy with any aspect of your Investment, you may wish to contact the Managing Director of the Company; the contact details for which are as follows:

Stewart Lockhart Corporate Business Manager Covenant Trustee Company Limited Freephone 0800 268 362 Telephone +64 9 302 0638 Facsimile +64 9 302 1037 Email stewart@covenant.co.nz Level 34, Vero Centre 48 Shortland Street, Auckland P O Box 4243, Shortland Street Auckland, 1140

On-request information A copy of the Trust Deed, Prospectus, most recent financial statements of the Company required to be registered under the Financial Reporting Act 1993, together with all documents that are required to be registered with those financial statements, Annual Report and the latest Investment Statement, are available for inspection free of charge at the registered office of the Company. You can also request at any time, a copy of the Trust Deed on payment of a fee not exceeding 50 cents per page. Simply call the Company during normal business hours.

Prospectus

You may also contact the Trustee; the contact details for which are as follows:

Complaints cannot be made to an Ombudsman.

What other information can I obtain about this investment? Other information about the Debenture Stock or the Company is contained or referred to in the Prospectus and in the financial statements of the Company. A copy of the Prospectus and of the most recent financial statements of the Company can be obtained free of charge at the registered office of the Company at the address stated in the Directory. The Prospectus, the Company’s financial statements, the Trust Deed, any material contracts required to be registered under the Securities Regulations 1983, and the Company’s constitution are filed at the Companies Office of the Ministry of Economic Development and are available for public inspection (upon payment of the prescribed fee) by downloading a copy from the Companies Office website, www.companies.govt.nz, (or where those documents are not able to be viewed via the internet) upon request and payment of the current fee by submitting a search request form which may be obtained from the Companies Office at: Level 18, ASB Centre, 135 Albert Street, Auckland; Ground Level, 33 Bowen Street, Wellington; or 55 Wordsworth Street, Sydenham, Christchurch.

Investment Statement

• • •

Copies of the documents can also be obtained (on payment of the relevant fee) by telephoning the Companies Office on 0508 266 726.

Investment Statement & Prospectus No 6

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Reserve Bank of New Zealand Amendment Act 2008 With the passing of the Reserve Bank of New Zealand Amendment Act 2008, there have been additional regulatory requirements placed on non bank deposit takers with various effective dates. There are also additional powers and obligations for trustees of non bank deposit takers.

•

Sections 157P and 157S – Regulations may impose requirements that trust deed sets out a minimum capital amount and a capital ratio that a deposit taker is required to maintain (these regulations are not yet in force, but are currently expected to take effect in late 2010).

Finance Direct Limited is a “deposit taker” as defined under Section 157C and is, therefore, subject to the requirements of the Act. A brief summary of the requirements follow:

•

Section 157V – Regulations may impose requirements that trust deed includes maximum limit on exposures to related parties (these regulations are not yet in force, but are currently expected to take effect in late 2010).

• Finance Direct Limited currently has a restriction on related party lending as set out in “Restrictions on the Company” on page 5.

•

Section 157Z – Regulations may impose requirements that liquidity obligations be included in trust deeds (the date on which these regulations will take effect is yet to be determined).

• How Finance Direct Limited currently manages its liquidity is set out under the heading “Liquidity Risk” in the “General Risks” section on page 62.

•

Section 157I – Deposit taker must have a current credit rating from an approved rating agency (comes into force on 1 March 2010). •

Under the Deposit Takers (Credit Ratings Minimum Threshold) Exemption Notice 2009 (commencement date 7 August 2009) an exemption is available from this section if the consolidated liabilities of the borrowing group of the deposit taker are less than $20 million. The exemption notice outlines certain conditions that a deposit taker must comply with in order to benefit from this class exemption. Applications for exemption are considered by Reserve Bank staff. Finance Direct Limited currently qualifies for this exemption but as at the date of this Prospectus has not yet made a formal application for it to the Reserve Bank.

Finance Direct Limited is currently subject to minimum capital requirements set out in the Trust Deed. Further information is set out under “Restrictions on the Company” on page 5.

•

Section 157L – Deposit taker must have at least 2 independent directors on its board (comes into force on a date yet to be determined).

•

Section 157ZD – The Reserve Bank may require trustee to attest as to deposit taker’s compliance with requirements.

• Finance Direct Limited currently has 1 independent director as a member of its board.

•

Section 157M – Deposit taker must have and comply with a risk management programme (comes into force on 1 September 2009).

Section 157ZE – Trustee must report to the Reserve Bank non-compliance or likely non-compliance by the deposit taker.

•

Section 157ZI – 157ZJ – Powers of the Reserve Bank to obtain reports and other information from the deposit taker.

•

Finance Direct Limited does have a risk management programme in place which has been provided to and Deposit takers and trustees which breach their obligations under the Act may be subject to prosecution, and if convicted, approved by the Trustee as required by Section fines up to a maximum amount of $2,000,000. 157N and Section 157M(2) of the Act. The summaries above are not a full representation of the legal effect of the Reserve Bank of New Zealand Amendment Act 2008, nor a full description of its terms. At the date of this Prospectus, Finance Direct Limited is using all reasonable endeavours to comply with its obligations under the new legislation as these obligations take effect.

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Investment Statement & Prospectus No 6

Index of Statutory Information

SECOND SCHEDULE

PAGE(S)

Main terms of Offer

Clause 1

Name and address of offeror

Clause 2

N/A

Details of incorporation of issuer

Clause 3

Guarantors

Clause 4

Directorate and advisors

Clause 5

Clause 5A

Description of activities of borrowing group

Clause 6

Summary of financial statements

Clause 7

6 and 50

Acquisition of business or subsidiary

Clause 8

N/A

Material contracts

Clause 9

Pending proceedings

Clause 10

Issue expenses

Clause 11

Ranking of securities

Clause 12

Provisions of trust deed and other restrictions on the borrowing group

Clause 13

Clause 13(3)

Clause 14

Clauses 15-32

11-42

Places of inspection of documents

Clause 33

Other material matters

Clause 34

Directors’ statement

Clause 35

Auditors’ report

Clause 36

43-46

Restrictions on directors’ powers

Trustee’s Statement Other terms of offer and securities Financial statements

Investment Statement

MATTER

Prospectus

For the purposes of regulation 5(6) of the Securities Regulations 1983, the matters required to be stated or contained in this Offer Document by virtue of the Second Schedule to the Securities Regulations 1983, and the page reference within this Offer Document in which each matter appears are:

Investment Statement & Prospectus No 6

PAGE 69

Glossary “Act” means the Reserve Bank of New Zealand

“NZ GAAP” means generally accepted accounting

Amendment Act 2008.

practice as defined in section 3 of the Financial

2(3) of the Companies Act) of any Related

Reporting Act 1993.

Party;

“Application Form” means the Application Form

(e)

a related company (as defined in section

accompanying the Investment Statement upon

“NZ IFRS” means the New Zealand International

which applications to invest are required to be

Financial Reporting Standards approved by the

shareholder of the Company, any Subsidiary

made.

Accounting Standards Review Board and forming

or any other Charging Group Member or

part of NZ GAAP.

any Family Member of any such director

“Business Day” means a day on which the Company is normally open for business. “Certificate” means the Debenture Stock application to invest has been accepted by the

company, all of its Real Property and all other

Company.

present and after-acquired property that is not Personal Property.

“Group” means the Company and its Charging

“Personal Property” means, in relation to any

Subsidiaries (if any) as the context requires.

company, all of its present and after-acquired

“Charging Group Member” means each member of the Charging Group. “Charging Subsidiaries” has the same meaning afforded that term in the Trust Deed.

beneficiary.

Debenture Stock. “Other Property” means, in relation to any

“Related Party Transaction” means any transaction of any nature between the Company or any other Charging Group Member and a Related Party including, but not limited to: (a)

Member to a Related Party; (b)

the investment by the Company or any other Charging Group Member in the capital

interest on the Secured Property, or any part

or equity of a Related Party;

thereof, ranking in priority to the security interests in favour of the Trustee created by or pursuant to

the provision of financial accommodation by the Company or any other Charging Group

personal property. “Prior Security Interest” means any security

any trust of which any director or

or shareholder is a trustee, settlor or

“Offer” means the offer to subscribe for

certificate to be issued to an Investor whose

“Charging Group”, “Borrowing Group” and

(f)

(c)

the transfer of assets between the Company

“the Company”, “Finance Direct”, “we”, “us”, “our”

the Trust Deed or as the case requires the principal

or any other Charging Group Member and a

means Finance Direct Limited.

moneys secured by such security interests.

Related Party;

“Crown” means her Majesty the Queen in right of

“Prospectus” means the registered prospectus

New Zealand.

relating to the Company and the issue of

Company or any other Charging Group

Debenture Stock comprised within this document.

Member to or by a Related Party; and

“Debenture Stock” means all debenture stock

(d)

the provision of services by or to the

or other secured indebtedness by whatever name

“Real Property” means, in relation to any company,

called, constituted and issued by the Company

all of its present and after-acquired freehold and

commitment by the Company or any other

pursuant to the Trust Deed from time to time

leasehold land, all estates and interests in land and

Charging Group Member to, at the request

pursuant to this Prospectus.

all buildings, structures and fixtures (including trade

of, or for the benefit of, a Related Party,

“Directors” and “Board” means the board of directors for the time being of the Company. “Investor” means a Stockholder. “Investment” means the subscription for

fixtures) for the time being on that land. “Related Party” means any person, other than a Charging Group Member, who is: (a)

Debenture Stock in accordance with the terms of this Prospectus.

(e)

but does not include: (a)

(b)

by a Related Party to a Charging Group Member on arm’s length commercial terms,

more than 10% of the issued shares, units or

or any payment by a Charging Group

other interests are beneficially owned by the

Member to that Related Party of principal,

Company or another Related Party;

interest or other moneys in respect of that financial accommodation in accordance with

a person who has a relevant interest (as

those terms;

defined in Section 5 of the Securities

is comprised within this Offer Document on pages

Markets Act 1988) in any shares in the

56 to 69. “Maturity Date” means the date agreed upon by

(b)

(c)

to investments of a Charging Group

Group Member;

Member which are, or are to be, held by that Related Party as nominee or trustee for that

a Director or a director of any Subsidiary or

Charging Group Member; or

other Charging Group Member;

Investor. (d)

transactions with a Related Party in relation

Company, a Subsidiary or any other Charging the Company and the Investor, upon which date the Investor’s Investment is due to be repaid to the

the provision of financial accommodation

a company, trust or other person of which

“Investment Statement” means the Investment Statement relating to the issue of Securities which

the giving of a guarantee, indemnity or other

a Family Member of any person defined in paragraph (b) or (c) above;

(c)

payment of reasonable salary and other remuneration benefits to a Related Party who is employed by a Charging Group Member;

PAGE 70

Investment Statement & Prospectus No 6

payment of reasonable remuneration

“Total Tangible Assets” means, at any time, the

and expenses to a Director for his or her

aggregate of:

services as a Director of a Charging Group Member; or (e)

(a)

80% of the market value, as determined by the latest market valuation, of any

payment of rental at arm’s length market

Real Property and shares or other equity

rates by the Company to a Related Party in

securities or units in any company, unit trust

relation to office accommodation occupied

or other person; and

by the Company.

(b)

the book values of all other Tangible

“Secured Property” means, in relation to any

Assets of the Charging Group as would be

company, all of its Personal Property and Other

disclosed in a statement of financial position

Property, wherever situated.

if a statement of financial position was then prepared,

“Securities” means Debenture Stock. “Securities Regulations” means the Securities Regulations 1983 and includes any amendments.

adjusted by excluding: (c)

of which the Trustee is not satisfied that

from time to time entered in the Register of

there is a valid and effective security interest

Stockholders as the holders of Debenture Stock

in favour of the Trustee enforceable in

and includes their personal representatives.

accordance with the laws of the place where

“Tangible Assets” means all assets except deferred are considered to be intangible assets. “Total Contingent Liabilities” means, at any time, the aggregate amount of all Contingent Liabilities of the Charging Group at that date other than any Contingent Liability: (a)

that is secured to the Charging Group by a first ranking security interest over an asset in all respects acceptable to the Trustee; or

(b)

the book values of any Tangible Assets situated outside New Zealand in respect

“Stockholders” means the several persons

tax assets and assets which according to NZ GAAP

Prospectus

(d)

the relevant assets are situated; and (d)

15% of the principal amount of all development loans outstanding at that time.

“Trust Deed” means the Debenture Trust Deed entered into between the Company and the Trustee dated 30 September 2004. “Trustee” means Covenant Trustee Company Limited. “You/your” means the Investor.

in respect of which the Charging Group has the benefit of a guarantee or indemnity from a bank, other financial institution or other person, in any case having a credit rating or credit worthiness acceptable to the Trustee.

“Total Liabilities” means, at any time, the aggregate of: (a)

the amounts of all Liabilities of the Charging Group as would be disclosed in a statement

Investment Statement

of financial position if a statement of financial position was then prepared; (b)

Total Contingent Liabilities; and

(c)

the amount payable on redemption of redeemable shares,

but does not include the principal amount of subordinated debt or convertible notes.

Investment Statement & Prospectus No 6

PAGE 71

Directory Directors

Finance Direct Limited

Richard Waddel BCom FCA AF Inst D

Company Number

TRUSTEE

Chairman and independent Director

981004

Covenant Trustee Company Limited Level 34 Vero Centre 48 Shortland Street Auckland

301 Kingsridge Apartments 424 Remuera Road Remuera Auckland Wayne Croad Dip Bus Finance Managing Director

7 Tranquility Rise Mellons Bay Auckland

Date of incorporation

23 September 1999 Registered Office

Level 2, Finance Direct House 88 Broadway Newmarket Auckland

23 Milton Road Mt Eden Auckland

Freephone 0800 399 666 Telephone +64 9 529 5399 Facsimile +64 9 529 5509 Freefax 0800 104 200 Email sales@financedirect.co.nz P O Box 17422, Greenlane, Auckland

Peter Huljich BCom, Dip. NZX, SA Fin.

THE SECURITIES HOLDERS REGISTER

John Callaghan BBS Non-Executive Director

Non-Executive Director

8 Karori Crescent Orakei Auckland

PAGE 72

Investment Statement & Prospectus No 6

The register of holders of securities is kept at Finance Direct Limited Level 2, Finance Direct House 88 Broadway Newmarket Auckland

AUDITORS

Grant Thornton 152 Fanshawe Street Auckland BANKERS

ANZ Bank Limited 154 Kitchener Road Milford North Shore City

Application Form for Secured Debenture Stock BROKERS STAMP

THE INVESTMENT MANAGER Finance Direct Limited P.O. Box 17422, Greenlane, Auckland

If reinvesting tick box and complete reinvestment date

Investor Details Investor

Mr/Mrs/Miss Ms/Dr/Trustee

First names in full

Appl i c at i on Form

Having read the current Finance Direct Limited Prospectus and Investment Statement (“Offer Document”), I/we irrevocably apply for Debenture Stock as set out below, and upon the terms and conditions comprised within the Offer Document and the Debenture Trust Deed dated 30 September 2004. Brokers No.

TAX DETAILS

Surname

IRD No.

Joint Investor

Mr/Mrs/Miss Ms/Dr/Trustee

First names in full

IRD No.

Surname

IRD No.

CORPORATE NAME, TRUST NAME

Please Note If we do not have your IRD number on file, we

Residential Address

are required to deduct Resident Withholding Tax (‘RWT’) at 39%.

City or Town

Daytime Phone No

Post Code

Mailing Address (if different from above)

Investment Information TERM

Please deduct RWT rate at

Email Address

19.5% Exempt

33.0% AIL

39.0%

Interest payment options

INTEREST RATE

AMOUNT

Please indicate how your interest is to be paid

4 years

3 years

2 years

18 months

Quarterly Cheque

12 months

Quarterly direct credit to bank account

6 months

3 months

(tick one box)

Compounding Interest (Quarterly)

Bank

Branch

If you need a specific date, specify your requirements, (not to exceed 5 years) Specified period

Signatures I/We have received a copy of the Offer Document and I/we irrevocably apply for Debenture Stock as set out in this Application Form (including any lesser amount of Debenture Stock that may be allotted to me/us) upon the terms and conditions comprised within the Offer Document and the Debenture Trust Deed I/we enclose the sum of $

being payment in full on application

Signature

Dated

Signature

Dated

Please Note: 1. Make cheques payable to FINANCE DIRECT LIMITED and cross ‘not negotiable’. 2. Joint applications to be signed by all applicants. 3. If signed by attorney, please attach power of attorney. If signed under power of attorney the attorney hereby declares that they have not had notice of the death of the donor or of the revocation of the power of attorney. 4. All applications including reinvestments will be acknowledged by a letter of confirmation. 5. Further copies of the current registered Prospectus and Investment Statement may be obtained from FINANCE DIRECT LIMITED at the above address.

Please tick box if you require additional Application Forms

HOW DID YOU FIND OUT ABOUT THIS INVESTMENT?

Press Advertising

Financial Advisor

Personal Referral

Existing Investor

Office Use Only Investor Number(s)

Date Banked

Maturity Date

Start Date

Interest Option

Brokerage Source

Other