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Fletcher Building LimitedFINANCING FLETCHER BUILDING’S GROWTH FLETCHER BUILDING FINANCE LIMITED ANNUAL REPORT 2004 FLETCHER BUILDING FINANCE LIMITED FLETCHER BUILDING FINANCE LIMITED ANNUAL REPORT 2004 ANNUAL REPORT 2004 02 Letter from the chairman Letter from the chairman 04 04 05 07 09 Statement of financial performance Statement of financial performance Statement of movements in equity Statement of movements in equity Statement of financial position Statement of financial position Statement of cashflows Statement of cashflows Statement of accounting policies Statement of accounting policies 1 1 Notes to the financial statements Notes to the financial statements 22 24 26 Audit report Audit report Noteholder information Noteholder information Directory Directory GO DIRECTLY TO A SECTION OF THE REPORT BY CLICKING ON THE NUMBER FLETCHER BUILDING FINANCE LIMITED IS A WHOLLY FLETCHER BUILDING FINANCE LIMITED IS A WHOLLY OWNED SUBSIDIARY OF FLETCHER BUILDING LIMITED AND OWNED SUBSIDIARY OF FLETCHER BUILDING LIMITED AND ITS RESULTS AND FINANCIAL POSITION NEED TO BE READ ITS RESULTS AND FINANCIAL POSITION NEED TO BE READ IN CONJUNCTION WITH THE FLETCHER BUILDING 2004 IN CONJUNCTION WITH THE FLETCHER BUILDING 2004 ANNUAL REPORT. ANNUAL REPORT. LETTER FROM THE CHAIRMAN I am very pleased to present the second annual report to holders of Fletcher Building Finance Limited capital notes. The terms of issue of the capital notes by the company provide that they are guaranteed on an unsecured subordinated basis ranking equally with other capital notes issued by Fletcher Building Limited. So as to ensure that the capital notes issued by the company will continue to rank equally with the capital notes issued by Fletcher Building Limited, the company does not seek to maintain over time signifi cant shareholders’ funds. Equally, it does not intend to be in a shareholders’ funds defi cit position. The results of the company need to be considered against this background. Results for the year Net profi t after tax for the year to 30 June 2004 was $1.4 million compared to $0.8 million for the period 13 November 2002 to 30 June 2003. Shareholder funds were $22.8 million, slightly down from the $24.2 million in the prior year. Business activities The company was established in 2002 principally to facilitate the funding for the Laminex acquisition by Fletcher Building. It issued capital notes and borrowed funds pursuant to the banking facilities of Fletcher Building. These facilities are fully guaranteed by Fletcher Building. Funds borrowed, including the funds raised by the issue of the capital notes have been lent on interest-bearing terms to other Fletcher Building group companies. The interest payments made to the company give rise to tax credits that are available to the shareholders of Fletcher Building Limited, and are distributed by way of a dividend to Fletcher Building Limited. The dividend paid during the year was $24.5 million compared to $7.9 million in June 2003. To maintain the company’s solvency ratio, Fletcher Building contributed an additional $20 million of equity during the fi nancial year. The company has continued to maintain a foreign currency hedge transaction with Fletcher Building to minimise currency impacts on its results and fi nancial position. 02 < back next > LETTER FROM THE CHAIRMAN FLETCHER BUILDING FINANCE LIMITED FLETCHER BUILDING FINANCE LIMITED ANNUAL REPORT 2004 ANNUAL REPORT 2004 02 Letter from the chairman Letter from the chairman 04 04 05 07 09 Statement of financial performance Statement of financial performance Statement of movements in equity Statement of movements in equity Statement of financial position Statement of financial position Statement of cashflows Statement of cashflows Statement of accounting policies Statement of accounting policies 1 1 Notes to the financial statements Notes to the financial statements 22 24 26 Audit report Audit report Noteholder information Noteholder information Directory Directory GO DIRECTLY TO A SECTION OF THE REPORT BY CLICKING ON THE NUMBER Corporate governance As a wholly owned subsidiary of Fletcher Building, the company is required to comply with the corporate governance practices of its parent. These procedures are wide ranging and include written delegations of authority to the chief executive, and delegations by the chief executive to other executives prescribing those matters that are reserved for approval by the board, and those matters that can be attended by management. In recognition that the corporate governance procedures of Fletcher Building Limited will apply to the company, and that the Companies Act 1993 allows directors of a subsidiary company, such as Fletcher Building Finance Limited, to act in the best interests of the parent company, the New Zealand Exchange (NZX) has granted a waiver such that the company does not need to comply with the full corporate governance and other regulatory disclosures, provided that the Fletcher Building annual report include these disclosures, and a copy is provided to all noteholders of the company. Specifi c governance initiatives instituted by the company include requirements that: the directors of the company shall only be those persons who are directors of Fletcher Building; the chairman, chief executive, chief fi nancial offi cer and company secretary of Fletcher Building shall hold the equivalent roles in the company; no remuneration shall be payable to any director or executive of the company; an audit committee be established, the constituency, chairmanship and charter being the same as that of Fletcher Building’s. The directors of the company believe that these initiatives, combined with the overarching governance procedures of Fletcher Building, provide an appropriate basis for ensuring the company meets its fi duciary obligations to the capital noteholders. Full details of the Fletcher Building governance practices are now available on its website at www.fl etcherbuilding.com. The fi nancial position of the company is dependent on that of Fletcher Building which I am pleased to report has again performed very well in the June 2004 year. To gain a full appreciation of the activities and performance of the Fletcher Building group, you should read the Fletcher Building annual report and review its website. Roderick Deane Chairman 03 < back next > FINANCIALS FLETCHER BUILDING FINANCE LIMITED FLETCHER BUILDING FINANCE LIMITED ANNUAL REPORT 2004 ANNUAL REPORT 2004 02 Letter from the chairman Letter from the chairman 04 04 05 07 09 Statement of financial performance Statement of financial performance Statement of movements in equity Statement of movements in equity Statement of financial position Statement of financial position Statement of cashflows Statement of cashflows Statement of accounting policies Statement of accounting policies 1 1 Notes to the financial statements Notes to the financial statements 22 24 26 Audit report Audit report Noteholder information Noteholder information Directory Directory GO DIRECTLY TO A SECTION OF THE REPORT BY CLICKING ON THE NUMBER Statement of Financial Perfo rmance an d Movem ents in Equ ity FOR THE YEAR ENDED 30 JUNE 2004 Statement of Financial Perfo rmance YEAR ENDED PERIOD ENDED NOTE JUNE 2004 JUNE 2003 NZ$ NZ$ Operating revenue 2 54,146,026 29,054,872 Operating expenses (320,741) (140,984) Operating earnings 53,825,285 28,913,888 Funding costs 3 (51,686,119) (27,647,957) Earnings before taxation 2,139,166 1,265,931 Taxation expense 4 (747,499) (417,757) Net earnings 1,391,667 848,174 Statement of Movements in Eq uity Total equity At the beginning of the year 24,160,325 Net earnings for the year 6 1,391,667 848,174 Movement in currency translation reserve 6 1,723,291 1,238,874 Total recognised revenues and expenses for the year 3,114,958 2,087,048 04 Increase in share capital 5 20,000,000 30,000,000 Dividend paid to Fletcher Building Limited 6 (24,500,000) (7,926,723) Total equity 22,775,283 24,160,325 The accompanying notes form part of and are to be read in conjunction with these financial statements. < back next > FINANCIALS Statement of Financial Positio n AS AT 30 JUNE 2004 FLETCHER BUILDING FINANCE LIMITED FLETCHER BUILDING FINANCE LIMITED ANNUAL REPORT 2004 ANNUAL REPORT 2004 02 Letter from the chairman Letter from the chairman 04 04 05 07 09 Statement of financial performance Statement of financial performance Statement of movements in equity Statement of movements in equity Statement of financial position Statement of financial position Statement of cashflows Statement of cashflows Statement of accounting policies Statement of accounting policies 1 1 Notes to the financial statements Notes to the financial statements 22 24 26 Audit report Audit report Noteholder information Noteholder information Directory Directory GO DIRECTLY TO A SECTION OF THE REPORT BY CLICKING ON THE NUMBER NOTE JUNE 2004 JUNE 2003 NZ$ NZ$ Assets Current assets: Cash and liquid deposits 11,473 5,654 Prepayments 3,493,518 4,472,230 Provision for current taxation 8 4,815,320 Total current assets 3,504,991 9,293,204 Non current assets: Amounts owing by related companies 13 850,887,753 737,206,771 Total non current assets 850,887,753 737,206,771 Total assets 854,392,744 746,499,975 05 < back next > FINANCIALS Statement of Financial Positio n AS AT 30 JUNE 2004 FLETCHER BUILDING FINANCE LIMITED FLETCHER BUILDING FINANCE LIMITED ANNUAL REPORT 2004 ANNUAL REPORT 2004 02 Letter from the chairman Letter from the chairman 04 04 05 07 09 Statement of financial performance Statement of financial performance Statement of movements in equity Statement of movements in equity Statement of financial position Statement of financial position Statement of cashflows Statement of cashflows Statement of accounting policies Statement of accounting policies 1 1 Notes to the financial statements Notes to the financial statements 22 24 26 Audit report Audit report Noteholder information Noteholder information Directory Directory GO DIRECTLY TO A SECTION OF THE REPORT BY CLICKING ON THE NUMBER NOTE JUNE 2004 JUNE 2003 NZ$ NZ$ Liabilities Current liabilities: Accrued interest 5,017,437 5,583,719 Creditors 1,772,973 257,657 Provision for current taxation 8 6,439,874 Total current liabilities 13,230,284 5,841,376 Non current liabilities: Capital notes 9 150,000,000 150,000,000 Term debt 10 280,486,469 350,234,634 Amounts owing to related companies 13 387,900,708 216,263,640 Total non current liabilities 818,387,177 716,498,274 Total liabilities 831,617,461 722,339,650 Equity Reported capital 5 50,000,000 30,000,000 Reserves 7 (27, 224, 717) (5,839,675) Total equity 22,775,283 24,160,325 Total liabilities and equity 854,392,744 746,499,975 The accompanying notes form part of and are to be read in conjunction with these financial statements. On behalf of the Board, 11 August 2004. 06 Roderick Deane Chairman of Directors Ralph Waters Managing Director < back next > FINANCIALS Statement of Cas hflows FOR THE YEAR ENDED 30 JUNE 2004 FLETCHER BUILDING FINANCE LIMITED FLETCHER BUILDING FINANCE LIMITED ANNUAL REPORT 2004 ANNUAL REPORT 2004 02 Letter from the chairman Letter from the chairman 04 04 05 07 09 Statement of financial performance Statement of financial performance Statement of movements in equity Statement of movements in equity Statement of financial position Statement of financial position Statement of cashflows Statement of cashflows Statement of accounting policies Statement of accounting policies 1 1 Notes to the financial statements Notes to the financial statements 22 24 26 Audit report Audit report Noteholder information Noteholder information Directory Directory GO DIRECTLY TO A SECTION OF THE REPORT BY CLICKING ON THE NUMBER YEAR ENDED PERIOD ENDED JUNE 2004 JUNE 2003 NZ$ NZ$ Cashflow from operating activities: Interest received 54,146,026 29,054,872 Payments to suppliers, employees and other (320,741) (140,984) Interest paid (49,673,200) (26,278,811) Taxes paid (12,547,990) (3,994,203) Net cash from operating activities (8,395,905) (1,359,126) Cashflow from financing activities: Advances from related companies 67,684,478 216,263,640 Issue of capital notes 150,000,000 Net debt drawdowns/(settlements) (54,782,513) 350,234,634 Issue of shares 20,000,000 30,000,000 Dividend paid to Fletcher Building Limited (24,500,000) (7,926,723) Advances to related companies (737,206,771) Net cash from financing activities 8,401,965 1,364,780 Net movement in cash held 6,060 5,654 Add opening cash and liquid deposits 5,654 Effect of exchange rate changes on net cash (241) Closing cash and liquid deposits 11,473 5,654 07 < back next > FINANCIALS FLETCHER BUILDING FINANCE LIMITED FLETCHER BUILDING FINANCE LIMITED ANNUAL REPORT 2004 ANNUAL REPORT 2004 02 Letter from the chairman Letter from the chairman 04 04 05 07 09 Statement of financial performance Statement of financial performance Statement of movements in equity Statement of movements in equity Statement of financial position Statement of financial position Statement of cashflows Statement of cashflows Statement of accounting policies Statement of accounting policies 1 1 Notes to the financial statements Notes to the financial statements 22 24 26 Audit report Audit report Noteholder information Noteholder information Directory Directory GO DIRECTLY TO A SECTION OF THE REPORT BY CLICKING ON THE NUMBER Reconciliation of Net Earnings to Net Cash from Operating Activities FOR THE YEAR ENDED 30 JUNE 2004 YEAR ENDED PERIOD ENDED JUNE 2004 JUNE 2003 NZ$ NZ$ Cash was received from net earnings 1,391,667 848,174 Adjustment for items not involving cash: Taxation (11,800,491) (3,576,446) Prepayments 978,712 (4,472,230) Trade creditors and accruals 1,034,207 5,841,376 Net cash from operating activiites (8,395,905) (1,359,126) The accompanying notes form part of and are to be read in conjunction with these financial statements. 08 < back next > FINANCIALS Statement of Accounting Policies FOR THE YEAR ENDED 30 JUNE 2004 FLETCHER BUILDING FINANCE LIMITED FLETCHER BUILDING FINANCE LIMITED ANNUAL REPORT 2004 ANNUAL REPORT 2004 02 Letter from the chairman Letter from the chairman 04 04 05 07 09 Statement of financial performance Statement of financial performance Statement of movements in equity Statement of movements in equity Statement of financial position Statement of financial position Statement of cashflows Statement of cashflows Statement of accounting policies Statement of accounting policies 1 1 Notes to the financial statements Notes to the financial statements 22 24 26 Audit report Audit report Noteholder information Noteholder information Directory Directory GO DIRECTLY TO A SECTION OF THE REPORT BY CLICKING ON THE NUMBER Basis of presentation The financial statements presented are those of Fletcher Building Finance Limited (the company). Fletcher Building Finance Limited is a company domiciled in New Zealand, is registered under the Companies Act 1993, and is an issuer in terms of the Securities Act 1978 and the Financial Reporting Act 1993. The company is also registered in Australia as an overseas company under the Australian Corporations Act 2001. The company was incorporated on 23 October 2002 and began trading on 13 November 2002. The financial statements comprise statements of financial performance, movements in equity, financial position, cashflows and significant accounting policies, as well as the notes to these financial statements. Accounting convention The financial statements are based on the general principles of historical cost accounting. These financial statements have been prepared in accordance with generally accepted accounting practice (GAAP) in New Zealand. Where no financial reporting standard or statement of standard accounting practice exists in New Zealand in relation to a particular issue, the accounting policies adopted have been determined having regard to authoritative support. These policies have been applied on a consistent basis. Estimates The preparation of financial statements in conformity with GAAP requires the directors to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 09 Translation of the financial statements of foreign operations The assets and liabilities of the company’s overseas operations are translated into New Zealand currency at the rates of exchange ruling at balance date. The revenue and expenditure of these operations are translated using an average exchange rate reflecting an approximation of the appropriate transaction rates. Exchange variations arising on the translation of these operations are recognised directly in the currency translation reserve. < back next > FINANCIALS Statement of Accounting Policies cont. FLETCHER BUILDING FINANCE LIMITED FLETCHER BUILDING FINANCE LIMITED ANNUAL REPORT 2004 ANNUAL REPORT 2004 02 Letter from the chairman Letter from the chairman 04 04 05 07 09 Statement of financial performance Statement of financial performance Statement of movements in equity Statement of movements in equity Statement of financial position Statement of financial position Statement of cashflows Statement of cashflows Statement of accounting policies Statement of accounting policies 1 1 Notes to the financial statements Notes to the financial statements 22 24 26 Audit report Audit report Noteholder information Noteholder information Directory Directory GO DIRECTLY TO A SECTION OF THE REPORT BY CLICKING ON THE NUMBER Foreign currency exchange differences Monetary assets and liabilities in foreign currencies at balance date, not covered by forward exchange contracts, are translated at the rates of exchange ruling at balance date. Monetary assets and liabilities in foreign currencies at balance date, covered by forward exchange contracts, are translated at the rates specified in those contracts. Cash Cash and liquid deposits comprise cash and demand deposits with banks or other financial institutions and highly liquid investments that are readily convertible to cash. Prepayments Borrowing costs such as capital notes issue costs, commitment and facility fees are deferred and amortised over the period of expected benefit. Taxation The provision for current tax is the estimated amount due for payment in the next 12 months by the company. Investment revenue Interest income is taken to earnings when received or accrued in respect of the period for which it was earned. Dividends and distributions are taken to earnings when received or accrued where declared prior to balance date. 10 < back next > FINANCIALS Notes to the Financial Statements FLETCHER BUILDING FINANCE LIMITED FLETCHER BUILDING FINANCE LIMITED ANNUAL REPORT 2004 ANNUAL REPORT 2004 02 Letter from the chairman Letter from the chairman 04 04 05 07 09 Statement of financial performance Statement of financial performance Statement of movements in equity Statement of movements in equity Statement of financial position Statement of financial position Statement of cashflows Statement of cashflows Statement of accounting policies Statement of accounting policies 1 1 Notes to the financial statements Notes to the financial statements 22 24 26 Audit report Audit report Noteholder information Noteholder information Directory Directory GO DIRECTLY TO A SECTION OF THE REPORT BY CLICKING ON THE NUMBER YEAR ENDED PERIOD ENDED JUNE 2004 JUNE 2003 NZ$ NZ$ 1 Changes in accounting policies The company was incorporated on 23 October 2002. There have been no changes in accounting policy, however certain comparatives have been restated to comply with the current year’s presentation. 2 Operating revenue Operating revenue includes interest received from related companies: Fletcher Building Limited 16,002,915 8,164,941 Fletcher Building (Australia) Pty Limited 38,143,111 20,889,931 54,146,026 29,054,872 3 Funding costs Interest payable on: Term debt 16,927,511 9,797,475 Capital notes interest 13,000,720 7,444,555 Interest paid to related companies: Fletcher Building Limited 2,936,662 Fletcher Building (Australia) Pty Limited 187,423 Fletcher Building (Australia) Finance Pty Limited 15,109,928 3,761,869 Fletcher Challenge Investments Overseas Limited 1,207,117 Fletcher Challenge Overseas Holdings Limited 4,171,548 2,599,737 Income from short term deposits (96,161) 50,604,247 26,444,137 Plus bank fees, share registry and issue expenses 1,081,872 1,203,820 51,686,119 27,647,957 < back next > 11 FINANCIALS Notes to the Financial Statements cont. FLETCHER BUILDING FINANCE LIMITED FLETCHER BUILDING FINANCE LIMITED ANNUAL REPORT 2004 ANNUAL REPORT 2004 02 Letter from the chairman Letter from the chairman 04 04 05 07 09 Statement of financial performance Statement of financial performance Statement of movements in equity Statement of movements in equity Statement of financial position Statement of financial position Statement of cashflows Statement of cashflows Statement of accounting policies Statement of accounting policies 1 1 Notes to the financial statements Notes to the financial statements 22 24 26 Audit report Audit report Noteholder information Noteholder information Directory Directory GO DIRECTLY TO A SECTION OF THE REPORT BY CLICKING ON THE NUMBER YEAR ENDED PERIOD ENDED JUNE 2004 JUNE 2003 NZ$ NZ$ 4 Taxation expense Earnings before taxation: New Zealand 2,260,652 99,957 Overseas (121,486) 1,165,974 2,139,166 1,265,931 Taxation at 33 cents per dollar (705,925) (417,757) Adjusted for: Tax rate adjustment (3,644) 34,979 Foreign dividend withholding tax payable (13,134,466) (6,543,885) Deductible expenses 13,096,536 6,508,906 (747,499) (417,757) Current taxation: New Zealand (783,945) (67,965) Overseas 36,446 (349,792) (747,499) (417,757) Shareholder tax credits Dividend withholding payment credit account: Dividend withholding payment credits at the beginning of the year 89,996 Dividend withholding payment credits received from taxation payments 12,052,554 3,994,203 Dividend withholding payment credits attached to dividends paid (12,052,554) (3,904,207) 89,996 89,996 12 < back next > FINANCIALS Notes to the Financial Statements cont. FLETCHER BUILDING FINANCE LIMITED FLETCHER BUILDING FINANCE LIMITED ANNUAL REPORT 2004 ANNUAL REPORT 2004 02 Letter from the chairman Letter from the chairman 04 04 05 07 09 Statement of financial performance Statement of financial performance Statement of movements in equity Statement of movements in equity Statement of financial position Statement of financial position Statement of cashflows Statement of cashflows Statement of accounting policies Statement of accounting policies 1 1 Notes to the financial statements Notes to the financial statements 22 24 26 Audit report Audit report Noteholder information Noteholder information Directory Directory GO DIRECTLY TO A SECTION OF THE REPORT BY CLICKING ON THE NUMBER YEAR ENDED PERIOD ENDED JUNE 2004 JUNE 2003 NZ$ NZ$ 5 Capital Reported capital: Reported capital at the beginning of the year 30,000,000 Issue of shares 20,000,000 30,000,000 50,000,000 30,000,000 YEAR ENDED PERIOD ENDED JUNE 2004 JUNE 2003 Number of shares: Number of shares at the beginning of the year 30,000,000 Issue of shares 20,000,000 30,000,000 50,000,000 30,000,000 All ordinary shares carry equal rights in respect of voting, dividend payments and distribution upon winding up. 6 Reserve movements YEAR ENDED PERIOD ENDED JUNE 2004 JUNE 2003 NZ$ NZ$ Reserves at the beginning of the year (5,839,675) Net earnings 1,391,667 848,174 Dividend paid to Fletcher Building Limited (24,500,000) (7,926,723) Net currency translations 1,723,291 1,238,874 (27,224,717) (5,839,675) 13 < back next > FINANCIALS Notes to the Financial Statements cont. FLETCHER BUILDING FINANCE LIMITED FLETCHER BUILDING FINANCE LIMITED ANNUAL REPORT 2004 ANNUAL REPORT 2004 02 Letter from the chairman Letter from the chairman 04 04 05 07 09 Statement of financial performance Statement of financial performance Statement of movements in equity Statement of movements in equity Statement of financial position Statement of financial position Statement of cashflows Statement of cashflows Statement of accounting policies Statement of accounting policies 1 1 Notes to the financial statements Notes to the financial statements 22 24 26 Audit report Audit report Noteholder information Noteholder information Directory Directory GO DIRECTLY TO A SECTION OF THE REPORT BY CLICKING ON THE NUMBER YEAR ENDED PERIOD ENDED JUNE 2004 JUNE 2003 NZ$ NZ$ 7 Reserve balances Reserves comprise: Revenue reserves (30,186,882) (7,078,549) Net currency translation 2,962,165 1,238,874 (27,224,717) (5,839,675) 8 Provision for current taxation Provision for current taxation: Opening provision for taxation 4,815,320 Taxation in the statement of financial performance (747,499) (417,757) Taxation in reserves (15,570,169) 1,238,874 Intercompany payment (7,485,516) Net taxation payments 12,547,990 3,994,203 (6,439,874) 4,815,320 14 < back next > FINANCIALS Notes to the Financial Statements cont. JUNE 2004 JUNE 2003 NZ$ NZ$ 9 Capital notes Capital notes Coupon Election date Series 2008 8.60% 15 March 2008 112,670,000 112,670,000 Series 2010 8.85% 15 March 2010 37,330,000 37,330,000 150,000,000 150,000,000 Capital notes are long-term fixed rate unsecured subordinated notes. On each election date, the coupon rate and term to the next election date of that series of the capital notes will be reset. Holders may then choose either to keep their capital notes on the new terms or to convert the principal amount and any accrued but unpaid interest into shares of Fletcher Building Limited, in the prescribed ratio at approximately the current market price. Instead of Fletcher Building Limited issuing shares to holders who choose to convert, Fletcher Building Finance Limited may, at its option, purchase or redeem the capital notes for cash at the principal amount plus any accrued but unpaid interest. If interest is not paid when due it is compounded on each subsequent interest payment date at the same rate as applicable to the principal of the capital notes. Non payment of interest does not constitute a default by the company FLETCHER BUILDING FINANCE LIMITED FLETCHER BUILDING FINANCE LIMITED ANNUAL REPORT 2004 ANNUAL REPORT 2004 02 Letter from the chairman Letter from the chairman 04 04 05 07 09 Statement of financial performance Statement of financial performance Statement of movements in equity Statement of movements in equity Statement of financial position Statement of financial position Statement of cashflows Statement of cashflows Statement of accounting policies Statement of accounting policies 1 1 Notes to the financial statements Notes to the financial statements or Fletcher Building Limited. However, each of the company and Fletcher Building Limited have covenanted not to 22 24 26 Audit report Audit report Noteholder information Noteholder information Directory Directory GO DIRECTLY TO A SECTION OF THE REPORT BY CLICKING ON THE NUMBER pay dividends on, or make any distribution in respect of, in the case of the company, its ordinary shares, and in the case of Fletcher Building Limited, Fletcher Building shares, while any interest payments on the capital notes which have not been paid on the due date remain outstanding. The capital notes do not carry voting rights and do not participate in any change in value of the issued shares 15 of Fletcher Building Limited. If the principal amount of the capital notes were to be converted to shares, 33.6 million (June 2003 41.7 million) Fletcher Building Limited shares would be issued at the share price as at 30 June 2004, of $4.55 (June 2003 $3.67). < back next > FINANCIALS Notes to the Financial Statements cont. FLETCHER BUILDING FINANCE LIMITED FLETCHER BUILDING FINANCE LIMITED ANNUAL REPORT 2004 ANNUAL REPORT 2004 02 Letter from the chairman Letter from the chairman 04 04 05 07 09 Statement of financial performance Statement of financial performance Statement of movements in equity Statement of movements in equity Statement of financial position Statement of financial position Statement of cashflows Statement of cashflows Statement of accounting policies Statement of accounting policies 1 1 Notes to the financial statements Notes to the financial statements 22 24 26 Audit report Audit report Noteholder information Noteholder information Directory Directory GO DIRECTLY TO A SECTION OF THE REPORT BY CLICKING ON THE NUMBER JUNE 2004 JUNE 2003 NZ$ NZ$ 10 Term debt Loans subject to the negative pledge Floating loans 280,486,469 350,234,634 280,486,469 350,234,634 Summary of repayment terms and interest rates by repayment period JUNE 2004 JUNE 2004 JUNE 2003 JUNE 2003 NZ$ INT. RATE % NZ$ INT. RATE % Due for repayment: within one year within two years 170,921,442 5.95 within three years 206,020,373 5.18 within four years 109,565,027 6.03 within five years after five years 144,214,261 5.30 280,486,469 5.96 350,234,634 5.23 Credit rating The company has not sought and does not hold a credit rating from an accredited rating agency. 16 < back next > FINANCIALS Notes to the Financial Statements cont. 11 Financial instruments Exposures to currency and interest rate risks arise in the normal course of the company’s business. To manage and limit the effects of these financial risks the company operates within the following policies and utilises the following financial instruments. Management policies The company does not enter into derivative financial instruments for trading or speculative purposes. Currency balance sheet risk There is no foreign exchange exposure to balance sheet currency risk as the assets and liabilities are naturally hedged. The company has entered into derivative financial instruments to hedge a taxation exposure arising from the translation of the Australian operations. Currency trade risk It is company policy that no currency exchange risk may be entered into or allowed to remain outstanding should it arise on trade transactions. Interest rate risk The company is a wholly owned subsidiary of Fletcher Building Limited and does not have an independent policy regarding interest rate risk but complies with the group policy. It is group policy to manage the fixed interest rate ratio on its debt and capital notes portfolio within the range of 40 to 70 percent. The position in this range is managed depending upon underlying interest rate exposures and economic conditions. Off balance sheet risk Financial instruments are used as a means of reducing exposure to fluctuations in foreign exchange rates and interest rates. While these financial instruments are subject to the risk of market rates changing subsequent to acquisition, such changes would generally be offset with an opposite effect on the items being hedged. The principal or contract amounts of forward exchange contracts and financial instruments with off balance sheet risk for the 17 FLETCHER BUILDING FINANCE LIMITED FLETCHER BUILDING FINANCE LIMITED ANNUAL REPORT 2004 ANNUAL REPORT 2004 02 Letter from the chairman Letter from the chairman 04 04 05 07 09 Statement of financial performance Statement of financial performance Statement of movements in equity Statement of movements in equity Statement of financial position Statement of financial position Statement of cashflows Statement of cashflows Statement of accounting policies Statement of accounting policies 1 1 Notes to the financial statements Notes to the financial statements 22 24 26 Audit report Audit report Noteholder information Noteholder information Directory Directory GO DIRECTLY TO A SECTION OF THE REPORT BY CLICKING ON THE NUMBER company are as follows: < back next > FINANCIALS Notes to the Financial Statements cont. 11 Financial instruments cont. FLETCHER BUILDING FINANCE LIMITED FLETCHER BUILDING FINANCE LIMITED ANNUAL REPORT 2004 ANNUAL REPORT 2004 02 Letter from the chairman Letter from the chairman 04 04 05 07 09 Statement of financial performance Statement of financial performance Statement of movements in equity Statement of movements in equity Statement of financial position Statement of financial position Statement of cashflows Statement of cashflows Statement of accounting policies Statement of accounting policies 1 1 Notes to the financial statements Notes to the financial statements 22 24 26 Audit report Audit report Noteholder information Noteholder information Directory Directory GO DIRECTLY TO A SECTION OF THE REPORT BY CLICKING ON THE NUMBER JUNE 2004 JUNE 2003 NZ$ NZ$ Principal or contract amount: Foreign exchange Currency forward exchange contracts To pay 325,408,130 To receive (325,408,130) The cash settlement amounts of these instruments, if they had settled on 30 June 2004, approximates the principal or contract amount. Interest rate repricing The following table sets out the interest rate repricing profile and weighted average interest rate of the company’s term debt and capital notes: JUNE 2004 JUNE 2004 JUNE 2003 JUNE 2003 NZ$ INT. RATE % NZ$ INT. RATE % Interest rate repriced: (including average interest rate) within one year 280,486,469 6.00 350,234,634 5.23 within two years within three years within four years within five years 112,670,000 8.60 112,670,000 8.60 after five years 37,330,000 8.85 37,330,000 8.85 430,486,469 6.93 500,234,634 6.26 The net effective interest rate for cash and liquid deposits as at 30 June 2004 is 2 percent (June 2003 2 percent). Creditors are not interest rate sensitive. < back next > 18 FINANCIALS Notes to the Financial Statements cont. FLETCHER BUILDING FINANCE LIMITED FLETCHER BUILDING FINANCE LIMITED ANNUAL REPORT 2004 ANNUAL REPORT 2004 02 Letter from the chairman Letter from the chairman 04 04 05 07 09 Statement of financial performance Statement of financial performance Statement of movements in equity Statement of movements in equity Statement of financial position Statement of financial position Statement of cashflows Statement of cashflows Statement of accounting policies Statement of accounting policies 1 1 Notes to the financial statements Notes to the financial statements 22 24 26 Audit report Audit report Noteholder information Noteholder information Directory Directory GO DIRECTLY TO A SECTION OF THE REPORT BY CLICKING ON THE NUMBER 11 Financial instruments cont. Fair values The estimated fair values of the company’s financial assets and liabilities compared to their carrying values, where materially different, are as follows: JUNE 2004 JUNE 2004 JUNE 2003 JUNE 2003 CARRYING VALUE FAIR VALUE CARRYING VALUE FAIR VALUE NZ$ NZ$ NZ$ NZ$ Currency forward exchange contracts loss (7,026,298) The fair value of derivative financial instruments is estimated based on the quoted or estimated market prices of those instruments. 12 Contingent liabilities and capital commitments There were no contingent liabilities or capital commitments as at 30 June 2004 (June 2003 nil). The Fletcher Building group borrows funds based on covenants and a negative pledge and guarantee arrangement. The principal borrowing covenants relate to gearing and interest cover and minimum net tangible assets. As at 30 June 2004, the Fletcher Building group was in compliance with all its covenants. The negative pledge ensures that external senior indebtedness ranks equally in all respects and includes the covenant that security can be given only in very limited circumstances. The guarantee states that Fletcher Building and certain of its subsidiaries, including Fletcher Building Finance Limited, guarantee the debt of the group that has the benefit of the negative pledge and guarantee. As at 30 June 2004 the guaranteeing group had debt subject to the negative pledge, guarantee and covenants of $478 million (June 2003 $520 million). 19 < back next > FINANCIALS Notes to the Financial Statements cont. FLETCHER BUILDING FINANCE LIMITED FLETCHER BUILDING FINANCE LIMITED ANNUAL REPORT 2004 ANNUAL REPORT 2004 02 Letter from the chairman Letter from the chairman 04 04 05 07 09 Statement of financial performance Statement of financial performance Statement of movements in equity Statement of movements in equity Statement of financial position Statement of financial position Statement of cashflows Statement of cashflows Statement of accounting policies Statement of accounting policies 1 1 Notes to the financial statements Notes to the financial statements 22 24 26 Audit report Audit report Noteholder information Noteholder information Directory Directory GO DIRECTLY TO A SECTION OF THE REPORT BY CLICKING ON THE NUMBER 13 Related party transactions JUNE 2004 JUNE 2003 NZ$ NZ$ The company is a wholly owned subsidiary of Fletcher Building Limited, which is also the ultimate holding company. All other related companies are also subsidiaries of Fletcher Building Limited. Term receivable owing from related companies Fletcher Building Limited 1 180,776,011 167,554,917 Fletcher Building (Australia) Pty Limited 2 661,772,762 559,688,680 Fletcher Building (Australia) Pty Limited 3 8,338,980 9,963,174 850,887,753 737,206,771 Term receivable owing to related companies Fletcher Challenge Overseas Holdings Limited 4 72,511,660 Fletcher Challenge Investments Overseas Limited 4 54,399,080 Fletcher Building (Australia) Finance Pty Limited 4 333,501,628 143,751,980 387,900,708 216,263,640 1 This unsecured advance represents long term funding even though it is for no fixed term and bears interest at 9% (June 2003 9%). 2 This advance represents 604,000,000 (June 2003 489,000,000) fixed rate debentures of Australian $1.00 each and has a five year term until 19 December 2007, but may be repaid earlier by the borrower. The advance is secured by a guarantee provided by Fletcher Building Holdings Limited. As at 30 June 2004 the interest rate was 6.667% (June 2003 5.8283%). 3 This unsecured advance represents long term funding even though it is for no fixed term and bears interest at 6.2217% (June 2003 5.8517%). 4 These advances are unsecured and are for a fixed term to 30 June 2006. As at 30 June 2004 the interest rate was 6.2217% (June 2003 5.49%). 20 < back next > FINANCIALS Notes to the Financial Statements cont. FLETCHER BUILDING FINANCE LIMITED FLETCHER BUILDING FINANCE LIMITED ANNUAL REPORT 2004 ANNUAL REPORT 2004 02 Letter from the chairman Letter from the chairman 04 04 05 07 09 Statement of financial performance Statement of financial performance Statement of movements in equity Statement of movements in equity Statement of financial position Statement of financial position Statement of cashflows Statement of cashflows Statement of accounting policies Statement of accounting policies 1 1 Notes to the financial statements Notes to the financial statements 22 24 26 Audit report Audit report Noteholder information Noteholder information Directory Directory GO DIRECTLY TO A SECTION OF THE REPORT BY CLICKING ON THE NUMBER 14 Segmental information The company is a finance company and operates in New Zealand and Australia. GEOGRAPHICAL SEGMENTS NEW ZEALAND AUSTRALIA TOTAL NZ$ NZ$ NZ$ JUNE 2004 JUNE 2004 JUNE 2004 Operating revenue 16,002,915 38,143,111 54,146,026 Earnings before taxation 2,260,652 (121,486) 2,139,166 Total assets 184,269,529 670,123,215 854,392,744 JUNE 2003 JUNE 2003 JUNE 2003 Operating revenue 8,164,941 20,889,931 29,054,872 Earnings before taxation 99,957 1,165,974 1,265,931 Total assets 177,192,259 569,307,716 746,499,975 21 < back next > AUDIT REPORT Audit Repor t FLETCHER BUILDING FINANCE LIMITED FLETCHER BUILDING FINANCE LIMITED ANNUAL REPORT 2004 ANNUAL REPORT 2004 02 Letter from the chairman Letter from the chairman 04 04 05 07 09 Statement of financial performance Statement of financial performance Statement of movements in equity Statement of movements in equity Statement of financial position Statement of financial position Statement of cashflows Statement of cashflows Statement of accounting policies Statement of accounting policies To the shareholder of Fletcher Building Finance Limited We have audited the financial statements on pages 4 to 21. The financial statements provide information about the past financial performance of the company and its financial position as at 30 June 2004. This information is stated in accordance with the accounting policies set out on pages 9 to 10. Directors’ responsibilities The directors are responsible for the preparation of financial statements which give a true and fair view of the financial position of the company as at 30 June 2004 and the results of its operations and cashflows for the year ended on that date. Auditors’ responsibilities It is our responsibility to express an independent opinion on the financial statements presented by the directors and report our opinion to you. 1 1 Notes to the financial statements Notes to the financial statements Basis of opinion 22 24 26 Audit report Audit report Noteholder information Noteholder information Directory Directory GO DIRECTLY TO A SECTION OF THE REPORT BY CLICKING ON THE NUMBER An audit includes examining, on a test basis, evidence relevant to the amounts and disclosures in the financial statements. It also includes assessing: • the significant estimates and judgements made by the directors in the preparation of the financial statements; • whether the accounting policies are appropriate to the company’s circumstances, consistently applied and adequately disclosed. 22 < back next > AUDIT REPORT Audit Repor t cont. We conducted our audit in accordance with New Zealand Auditing Standards issued by the Institute of Chartered Accountants of New Zealand. 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 information in the financial statements. Other than in our capacity as auditors we have no relationship with or interest in the company. Unqualified opinion We have obtained all the information and explanations we have required. In our opinion: • proper accounting records have been kept by the company as far as appears from our examination of those records; • the financial statements on pages 4 to 21: – comply with New Zealand generally accepted accounting practices; – give a true and fair view of the financial position of the company as at 30 June 2004 and the results of its operations and cashflows for the year ended on that date. Our audit was completed on 11 August 2004 and our unqualified opinion is expressed as at that date. FLETCHER BUILDING FINANCE LIMITED FLETCHER BUILDING FINANCE LIMITED ANNUAL REPORT 2004 ANNUAL REPORT 2004 02 Letter from the chairman Letter from the chairman 04 04 05 07 09 Statement of financial performance Statement of financial performance Statement of movements in equity Statement of movements in equity Statement of financial position Statement of financial position Statement of cashflows Statement of cashflows Statement of accounting policies Statement of accounting policies 1 1 Notes to the financial statements Notes to the financial statements KPMG Auckland, New Zealand 22 24 26 Audit report Audit report Noteholder information Noteholder information Directory Directory GO DIRECTLY TO A SECTION OF THE REPORT BY CLICKING ON THE NUMBER 23 < back next > FLETCHER BUILDING FINANCE LIMITED FLETCHER BUILDING FINANCE LIMITED ANNUAL REPORT 2004 ANNUAL REPORT 2004 02 Letter from the chairman Letter from the chairman 04 04 05 07 09 Statement of financial performance Statement of financial performance Statement of movements in equity Statement of movements in equity Statement of financial position Statement of financial position Statement of cashflows Statement of cashflows Statement of accounting policies Statement of accounting policies 1 1 Notes to the financial statements Notes to the financial statements 22 24 26 Audit report Audit report Noteholder information Noteholder information Directory Directory GO DIRECTLY TO A SECTION OF THE REPORT BY CLICKING ON THE NUMBER Noteholder Information Noteholders with enquiries about transactions or changes of address should contact: Computershare Investor Services Limited Private Bag 92 119 Auckland 1020 Level 2, 159 Hurstmere Rd Takapuna, North Shore City New Zealand Telephone: +64 9 488 8777 Facsimile: +64 9 488 8787 Other investor enquiries Fletcher Building Finance Limited Private Bag 92 114 Auckland, New Zealand Telephone: +64 9 525 9000 Facsimile: +64 9 525 9032 Email: moreinfo@fb.co.nz Website: www.fletcherbuilding.com Interest payment dates Interest on capital notes is paid semi-annually on 15 March and 15 September. The company recommends that all noteholders have their interest payments direct credited to their bank account to ensure security and promptness of receipt. If you do not already have your payments direct credited, please contact Computershare Investor Services to register your bank account details. < back next > 24 FLETCHER BUILDING FINANCE LIMITED FLETCHER BUILDING FINANCE LIMITED ANNUAL REPORT 2004 ANNUAL REPORT 2004 02 Letter from the chairman Letter from the chairman 04 04 05 07 09 Statement of financial performance Statement of financial performance Statement of movements in equity Statement of movements in equity Statement of financial position Statement of financial position Statement of cashflows Statement of cashflows Statement of accounting policies Statement of accounting policies 1 1 Notes to the financial statements Notes to the financial statements 22 24 26 Audit report Audit report Noteholder information Noteholder information Directory Directory GO DIRECTLY TO A SECTION OF THE REPORT BY CLICKING ON THE NUMBER Noteholder Information cont. Quotation and transfers The Fletcher Building Finance capital notes are quoted on the New Zealand Exchange under codes FBF010 and FBF020 and may be bought and sold through sharebrokers. No transfer will be registered if it would result in the transferor or the transferee holding capital notes with an aggregate principal amount of less than $5,000. Subject to this minimum holding, transfers must be in multiples of $1,000. Other information New Zealand Exchange Waiver The New Zealand Exchange has granted a waiver to the company from Listing Rule 10.5 – Annual and Half-Yearly Reports, subject to the following conditions: a) that the company send copies of the annual and half-yearly reports of Fletcher Building (with financial information relating to the Fletcher Building group) to its noteholders, b) that the company’s annual report include any specific relevant disclosures required by the Companies Act 1993 and certain sections of Listing Rule 10.5, and c) that the Fletcher Building annual report contain details of the spread of the company’s noteholders and the corporate governance policies, practices and processes. 25 < back next > FLETCHER BUILDING FINANCE LIMITED FLETCHER BUILDING FINANCE LIMITED ANNUAL REPORT 2004 ANNUAL REPORT 2004 02 Letter from the chairman Letter from the chairman 04 04 05 07 09 Statement of financial performance Statement of financial performance Statement of movements in equity Statement of movements in equity Statement of financial position Statement of financial position Statement of cashflows Statement of cashflows Statement of accounting policies Statement of accounting policies 1 1 Notes to the financial statements Notes to the financial statements 22 24 26 Audit report Audit report Noteholder information Noteholder information Directory Directory GO DIRECTLY TO A SECTION OF THE REPORT BY CLICKING ON THE NUMBER Directors Registered Offices Trustee Roderick S Deane Chairman New Zealand The capital notes are constituted Fletcher Building Finance Limited under a Trust Deed dated Paul E A Baines Chair of the Audit Committee Hugh A Fletcher Member of the Audit Committee Geoffrey J McGrath Ralph J Norris Sir Dryden Spring Kerrin M Vautier Member of the Audit Committee Private Bag 92 114 Auckland Fletcher House 810 Great South Road Penrose, Auckland New Zealand Ralph G Waters Chief Executive Officer Telephone: +64 9 525 9000 and Managing Director Australia Management Martin C Farrell Company Secretary William J Roest Chief Financial Officer Don Le Quesne Australian Branch Manager Fletcher Building Finance Limited 3 Everglades Avenue Leura NSW 2780 Australia Telephone: +61 2 4784 2953 ARBN 102 568 178 12 November 2002 and noteholders are entitled to the benefit of, are bound by, and are deemed to have notice of the provisions of the Trust Deed. The Trustee is: Perpetual Trust Limited PO Box 3376 Auckland Level 17, HSBC Centre 1 Queen Street Auckland Telephone: +64 9 366 3290 DIRECTORY 26 < back < back next >
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