FINANCING 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
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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
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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
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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
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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
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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
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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.
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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.
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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
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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
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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
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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
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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
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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
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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
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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)
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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
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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
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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
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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
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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 $3.67).
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FINANCIALS
Notes to the Financial Statements cont.
FLETCHER BUILDING FINANCE LIMITED
FLETCHER BUILDING FINANCE LIMITED
ANNUAL REPORT 2004
ANNUAL REPORT 2004
02
Letter from the chairman
Letter from the chairman
04
04
05
07
09
Statement of financial performance
Statement of financial performance
Statement of movements in equity
Statement of movements in equity
Statement of financial position
Statement of financial position
Statement of cashflows
Statement of cashflows
Statement of accounting policies
Statement of accounting policies
1 1
Notes to the financial statements
Notes to the financial statements
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JUNE 2004 JUNE 2003
NZ$ 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
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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
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company are as follows:
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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
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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.
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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
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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 $520 million).
19
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FINANCIALS
Notes to the Financial Statements cont.
FLETCHER BUILDING FINANCE LIMITED
FLETCHER BUILDING FINANCE LIMITED
ANNUAL REPORT 2004
ANNUAL REPORT 2004
02
Letter from the chairman
Letter from the chairman
04
04
05
07
09
Statement of financial performance
Statement of financial performance
Statement of movements in equity
Statement of movements in equity
Statement of financial position
Statement of financial position
Statement of cashflows
Statement of cashflows
Statement of accounting policies
Statement of accounting policies
1 1
Notes to the financial statements
Notes to the financial statements
22
24
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13 Related party transactions
JUNE 2004 JUNE 2003
NZ$ 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 $1.00 each and has a five year term
until 19 December 2007, but may be repaid earlier by the borrower. The advance is secured by a guarantee provided by Fletcher Building
Holdings Limited. As at 30 June 2004 the interest rate was 6.667% (June 2003 5.8283%).
3 This unsecured advance represents long term funding even though it is for no fixed term and bears interest at 6.2217%
(June 2003 5.8517%).
4 These advances are unsecured and are for a fixed term to 30 June 2006. As at 30 June 2004 the interest rate was 6.2217%
(June 2003 5.49%).
20
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FINANCIALS
Notes to the Financial Statements cont.
FLETCHER BUILDING FINANCE LIMITED
FLETCHER BUILDING FINANCE LIMITED
ANNUAL REPORT 2004
ANNUAL REPORT 2004
02
Letter from the chairman
Letter from the chairman
04
04
05
07
09
Statement of financial performance
Statement of financial performance
Statement of movements in equity
Statement of movements in equity
Statement of financial position
Statement of financial position
Statement of cashflows
Statement of cashflows
Statement of accounting policies
Statement of accounting policies
1 1
Notes to the financial statements
Notes to the financial statements
22
24
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14 Segmental information
The company is a finance company and operates in New Zealand and Australia.
GEOGRAPHICAL SEGMENTS NEW ZEALAND AUSTRALIA TOTAL
NZ$ 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
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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
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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.
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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
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23
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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
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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.
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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
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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
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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
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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
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