landHeart
Annual Report 2015
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Heartland New Zealand Limited - Annual Report 2015
Contents
www.heartland.co.nz
3
Heartland’s Performance
Heartland at a Glance in FY2015
Chairman and Managing Director’s Report
Pūrongo a te Toihau me te Tumu Whakahaere
Our Company
Board of Directors
Heartland Supporting Communities
Corporate Governance
Financial Performance
Directors’ Responsibility Statement
Financial Statements
Auditor’s Report
Disclosures
Director Disclosures
Executive Remuneration
Shareholder Information
Other Information
Directory
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This Annual Report is signed on behalf of the Board of Heartland New Zealand Limited
(Heartland) by Geoffrey Ricketts, Chairman, and Jeffrey Greenslade, Managing Director.
Geoffrey Ricketts
Chairman
22 September 2015
Jeffrey Greenslade
Managing Director
22 September 2015
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Heartland New Zealand Limited - Annual Report 2015
Heartland at a Glance in FY2015
Heartland at a Glance in FY2015
www.heartland.co.nz
5
4.5
4.5
4
Heartland
at a Glance
in FY2015
Members of the Heartland Team.
4.5
4
3.5
3
2.5
2
1.5
s
t
n
e
C
s
t
n
e
C
3
2.5
3.5
2.5
4
Heartland Business Call Account
3.5
awarded
3
FIVE STARS
2
by independent financial research
company Canstar
1
s
t
n
e
C
1.5
1.5
2
1
0.5
Return on equity of
10.4%
9.0% for FY2014
0
Dividends
2013
2013
Special
Interim
2014
Special
Interim
Final
2013
Interim
Final
staff
0
1
0.5
We employ
0.5
0
372
Special
in New Zealand
and Australia
4.5
2014
2015
4
2014
3.5
Final
s
t
n
e
C
3
2.5
2
1.5
1
0.5
0
2015
2015
2013
2014
2015
Special
Interim
Final
Total dividend
of 7.5c
Total
Shareholder
Return
on FY2014
25% 31.8%
$48.2M
Net profit after tax
For FY2015
+34% on FY2014
Earnings per
share of 10c
9c for FY2014
64.9%
Since listing to 30 June 2015
Heartland Bank
Credit Rating
BBB
(outlook stable)
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Heartland New Zealand Limited - Annual Report 2015
Open for Business
Open for Business
www.heartland.co.nz
7
Open for
Business
We are transforming the way small businesses
can access much needed capital
Small businesses are the lifeblood of the New Zealand economy,
but their ability to access finance to grow their business can often
be a complex and time-consuming process.
We thought this wasn’t good enough, so we’ve launched an online
application process for small business loans. It’s fast, easy and
convenient, and you get a decision in days, not weeks or months.
openforbusiness.co.nz
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Heartland New Zealand Limited - Annual Report 2015
Chairman & Managing Director’s Report
Chairman & Managing Director’s Report
www.heartland.co.nz
9
Chairman &
Managing Director’s Report
Geoffrey Ricketts
Chairman
Jeffrey Greenslade
Managing Director
It is a pleasure to report that this financial year has been one of strong asset growth, increased
profitability and achievement of key milestones for Heartland New Zealand Limited (Heartland).
Our three core business divisions, Households, Business and Rural
all performed well, resulting in a net profit after tax (NPAT) of
$48.2m, an increase of 34% on the previous financial year. A return
on equity (ROE) of 10.4%, up from 9.0% for the previous financial
year, was achieved.
In Heartland’s view, the Reserve Bank of New Zealand’s decision to
reduce Heartland Bank’s regulatory capital requirements during the
financial year was a further endorsement. This reduction brought
Heartland Bank’s regulatory capital requirements into line with those
of the other New Zealand banks.
In addition to Heartland’s strong financial performance,
endorsement of its strategy and business position was received
through an upgrade to the credit rating for Heartland Bank Limited
(Heartland Bank) to BBB (Outlook Stable) from Fitch Ratings.
Heartland’s net tangible assets (NTA) increased by $20.4m over the
year ending 30 June 2015 (from $399.9m at 30 June 2014 to $420.3m
at 30 June 2015). On a per share basis NTA was $0.89 at 30 June 2015
compared to $0.86 at 30 June 2014.
Strong Business Performance
Strong performance was achieved across all of our core
business units, with net finance receivables increasing by
10% in the financial year. Our focus remains on offering
market-leading, specialist products to areas of the market
that are under-serviced by the major banks and leveraging
our intermediated distribution channels where possible to
achieve greater scale.
Households
The Households division comprises the core Consumer
and Reverse Mortgage books (together with the non-
core residential mortgage book). Net receivables in the
Households division increased by 4.5% to $1.58bn during
the financial year. The Consumer book continued to perform
strongly through our intermediated motor vehicle finance
product. We also launched a new personal loan product in
the second half of the financial year under the ‘i-finance’
brand. There has been a steady uptake of the product,
with an advertising campaign targeting customers who
have an existing personal loan with another lender but are
moving from an interest-free period to an interest-bearing
period (which is typical with consumer finance deals at the
major retailers).
Growth also came through in the Reverse Mortgage book in
the second half of the financial year, with product awareness
continuing to increase through advertising and heightened
media interest in reverse mortgages, particularly in New
Zealand. In Australia, growth in the Reverse Mortgage
book was driven through targeted expansion of the broker
distribution network. The Reverse Mortgage book in Australia
and New Zealand grew $6.1m (excluding foreign exchange
movements) in the second half of the financial year.
Business
The Business division performed well during the period, with
strong asset growth driving an increase in Net Operating
Income, up $5.1m from the previous financial year and net
receivables increasing by 18% to $792.0m. The Business
banking team has retained its focus on providing multiple
products to customers (for example, working capital
finance and asset finance) through a single relationship
manager, improving our responsiveness to customer
needs. Our intermediated strategy continues to ensure we
are positioned at the point of sale for asset purchases by
small-to-medium enterprises (SMEs). Growth in the Business
division was also driven by Heartland Bank lending through
Harmoney’s peer-to-peer platform.
Financial Performance at a Glance
12 months
to June 2015
(NZ $m)
12 months
to June 2014
(NZ $m)
Change
%
134.4
10.5
144.9
68.4
76.5
12.1
-
64.4
16.2
48.2
109.1
23%
13.5
-22%
122.6
64.7
18%
6%
57.9
32%
5.9
105%
1.2
-100%
50.8
27%
14.8
9%
36.0
34%
Net interest income
Net other income
Net operating income*
Expenses
Profit before
impairments and tax
Impaired asset expense
Decrease in fair value of
investment properties
Net profit before tax
Tax
Net profit after tax
(reported)
* Net operating income includes share of MARAC Insurance profit
Net Finance Receivables
As at 30 June 2015
$2,862m
2m
488m
792m
$2,607m
16m
410m
669m
1,512m
1,580m
$2,010m
49m
457m
658m
846m
m
$
30 June 2013
30 June 2014
30 June 2015
Households
Business
Rural
Non-Core Property
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Heartland New Zealand Limited - Annual Report 2015
Chairman & Managing Director’s Report
Chairman & Managing Director’s Report
www.heartland.co.nz
11
Rural
A Focus on Technology
Looking Ahead
Heartland expects underlying asset growth to continue,
particularly in the Households division with the execution of our
Consumer strategy and maintenance of the growth momentum
in the Reverse Mortgage book. SMEs will also be a key growth
area, including through the application of an online strategy to
enhance our distribution and processing capability.
Acquisitions will remain a part of Heartland’s growth strategy,
provided that the opportunity meets Heartland’s financial
criteria and includes a compelling distribution capability or
offers innovative technology.
Heartland has previously announced its NPAT guidance for the
next financial year of $51m to $55m. This guidance range does not
allow for the impact of any capital management initiatives.
We are confident that Heartland is well placed to meet this
guidance based on our strategy to both maximise existing
strengths and efficiencies in our core business as well as
exploring new growth opportunities.
Geoffrey Ricketts
Chairman
Jeffrey Greenslade
Managing Director
The global banking sector has been described as an industry
that is ripe for disruption. This is being demonstrated through
the significant recent developments in financial technology, most
notably in the United States and United Kingdom. It is only a matter
of time before this technology race will play out in a significant way
in New Zealand.
During the financial year, Heartland acquired a strategic 10%
shareholding in New Zealand’s first peer-to-peer lender, Harmoney
Corp Limited (Harmoney). Harmoney is operating in the Consumer
lending market, providing an alternative personal loan offering to
the major banks and finance companies. Licences have recently
been granted to a number of other peer-to-peer platforms by the
Financial Markets Authority and we anticipate that online loan
origination will become a target for other lenders, particularly for
Consumer lending.
The focus for Heartland moving forward will be on opportunities that
enhance distribution or processing capability in both the Consumer
and SME markets. Based on the recent off-shore developments
in new financial technology and strong growth in online lending
platforms, we believe the development of innovative, low cost
technology will allow greater reach into these markets and enable
lower servicing costs. Our strategy is to be a part of this wave of
new technology in niche areas that are under-serviced by the major
banks in New Zealand.
Final Dividend
The Board resolved to pay a fully imputed final dividend of 4.5 cents
per share on 2 October 2015 to shareholders on Heartland’s register
as at 5.00pm on 18 September 2015. This brings the total dividend
pay out in relation to the 2015 financial year to 7.5 cents per share.
The Dividend Reinvestment Plan (DRP) was available and a discount
of 1% was applied. The last date of receipt for a participation
election from a shareholder who wished to participate in the DRP
was 18 September 2015. For further information on the DRP, please
refer to the Dividend Reinvestment Plan Offer Document dated 12
December 2014.
Rural net receivables grew strongly during the financial year,
increasing by 19% to $487.7m. Early settlements were significantly
lower during the financial year as the Rural division completed
the exit of loans that were either higher risk or were in areas that
overlapped with the major banks.
Given heightened market interest in the dairy sector in New
Zealand, Heartland advised the market that its exposure to dairy
is $218.0m which equates to 7.6% of its total lending book. The
average loan to value ratio (LVR) for Heartland’s dairy exposures is
61%. However, it is important to note that LVRs are only one of the
indicators of loan quality.
Heartland expects a continuation of lower than historical higher
milk pay-out levels, followed by a slow recovery. This will lead
to an increase in farmers making operating losses. Heartland is
well positioned to provide support for its dairy customers in the
forthcoming year.
Non-core assets
The non-core residential mortgage book continued to be wound
down during the financial year as part of Heartland’s strategy to
realign its product mix towards products where it can achieve
market leadership and a better risk/return.
The reduction of Heartland’s legacy non-core property assets also
continued during the financial year, reducing by 34% to $27.0m.
Heartland does not expect future earnings to be impacted by the
future realisation of these assets.
Deposit Funding
Deposits continue to be Heartland’s primary source of funding,
with excellent performance being achieved in the financial year to
support our asset growth. Deposits grew by $361m or 21% during
the financial year and a similar level of growth is expected in the
coming financial year with a balance of call and term funding.
Capital
Heartland Bank’s capital ratios reduced over the financial year,
largely due to asset growth. Heartland has previously announced
its intention for Heartland Bank to complete an issue of Tier 2
capital issue in the coming year, provided that market conditions
remain favourable. An issue of Tier 2 capital could (in the absence
of any other use) allow Heartland to return capital by way of a
share buy back which would have a positive impact on ROE and
earnings per share (EPS).
Net profit after tax
12 months to 30 June 2015
$48.2m
34% from FY2014
Net operating income
12 months to 30 June 2015
$144.7m
18% from FY2014
Net finance receivables
As at 30 June 2015
$2.9bn
10% from FY2014
Growth in deposits
12 months to 30 June 2015
$361m21% from FY2014
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Heartland New Zealand Limited - Annual Report 2015
Being where the customer is
Being where the customer is
www.heartland.co.nz
13
Being
where the
customer is
The way people access their bank is
changing rapidly
On average we visit a branch only once or twice a year,
but interact with our bank more than 200 times – mainly
online or by phone.
The days of expecting customers to come to us are long
gone. Now it’s all about going out to them – at a time and
place that suits them.
We will harness the scaling power of technology
and build on our strong intermediated relationships
(including dealers, brokers and partners) to give us
market reach well beyond our size.
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Heartland New Zealand Limited - Annual Report 2015
Heartland New Zealand Limited - Annual Report 2015
Pūrongo a te Toihau me te Tumu Whakahaere
Pūrongo a te Toihau me te Tumu Whakahaere
www.heartland.co.nz
www.heartland.co.nz
15
15
Pūrongo a te Toihau
me te Tumu Whakahaere
(Chairman & Managing Director’s Report)
Pakihi Whai Hua
Rāngai Ahuwhenua
I tino whai hua ā mātou rāngai matua, arā, 10% te pikinga o
te pūtea toopu i te tau pūtea nei. Ko te aronga nui tonu, he
kōkiri ratonga hōu, ratonga arahi mākete hoki ki ngā wāhi o
te mākete kāore e tino torohia ana e ngā whare tahua nui,
otirā, he whakaū i ngā ara tohatoha ki ngā wāhi e tika ana,
kia whanake ake ai te toopuranga pūtea.
Rāngai Whare
Kei te Rāngai Whare te puka kaihoko me te puka takahuri
mōkete, he puka iho matua ērā (tae atu hoki ki te puka
mātāmuri mō te mōkete whare noho). E 4.5% te pikinga o
te pūtea toopu a te Rāngai Whare, arā, ki te $1.58bn i te tau
pūtea nei. I whai hua tonu te puka kaihoko mā roto mai i te
angitū o tā mātou kaupapa tuku pūtea mō te hoko waka. I
whakarewahia hoki he kaupapa pūtea taurewa-a-tangata i te
wāhanga tuarua o te tau pūtea i raro i te kaupapa ‘i-finance’.
E pai ana te honohono haere a te tangata ki taua kaupapa,
he hua pea o te whakatairanga i te kaupapa ki te hunga,
he pūtea taurewa kē tā rātou ki tētahi atu whare tahua,
engari, kei te paheko i te whakaritenga hua moni kore ki te
whakaritenga utu hua moni (he āhuatanga motuhake tonu
tēnei i roto i te nuinga o ngā umanga hokohoko nui)
I kitea hoki he whanaketanga i roto i te puka takahuri mōkete
i te wāhanga tuarua o te tau pūtea nei, nā te whakatairanga
kaupapa me te aro nui o te hunga pāpāho ki te takahuri
mōkete i pēnei ai, inā rā hoki, i Aotearoa nei. I Ahitereiria, nā
te whakapau kaha ki te whakawhānui i ngā āhuatanga o te
puka takahuri mōkete ki waenganui i te pūnaha kaihokohoko
i whanake ai. E $6.1m (hāunga ngā whitinga pūtea o tāwāhi)
te whanaketanga o te puka takahuri mōkete i Ahitereiria me
Aotearoa i te wāhanga tuarua o tēnei tau pūtea.
I tipu hoki te toopuranga pūtea o te Rāngai Ahuwhenua i tēnei
tau pūtea, 19% te pikinga, arā, ki te $487.7m. I tino heke te
whakataunga wawe o ngā pūtea taurewa i tēnei tau pūtea, i te
mea, i te aro te Rāngai Ahuwhenua ki te whakatutuki i ngā pūtea
taurewa mōrea nui, pūtea taurewa rānei i inaki atu rā ki ngā Whare
Tahua matua.
Kua piki te aronui o te mākete ki te rāngai ahuwhenua ki roto o
Aotearoa nei, nā konā anō hoki te whakamārama a Heartland ki te
mākete, e $218.0m te uara o tā mātou whai wāhi ki taua rāngai, ara,
7.6% o te katoa o tā mātou puka pūtea taurewa. Ko te toharite o te
uara pūtea taurewa (LVR) a Heartland ki roto i te rāngai ahuwhenua,
ko te 61%. Hēoi, kia maumahara rā, ko ngā LVR nei, he tohu noa iho
o te kounga o te pūtea taurewa.
E whakapae ana a Heartland, ka paku heke tonu te uara o te miraka,
kātahi ka āta piki anō ai. Mā reira, ka kirihaunga te toopuranga
pūtea-a-tau a ētahi kaiahuwhenua, engari, ko Heartland te taumata
okiokinga mō ana kiritaki ahuwhenua, hei te tau e tū mai nei.
Rawa Mātāmuri
I te tau pūtea nei, i haere tonu ai tā matou whakawhāiti iho i te puka
mōkete mātāmuri mō ngā whare ehara i te whare noho. He wāhanga
tēnei o te rautaki a Heartland hei āta whakatikatika i ana ratonga kia
hāngai pū ai ki te hiahia kia tū mātou hei kaiarahi mākete, otirā, kia
nui ake ai ngā hua ka puta i tā mātou mahi.
I tēnei tau pūtea anō hoki, i haere tonu ai tā Heartland whakawhāiti i
ana rawa whare mātāmuri, arā, e 34% te whakawhāititanga iho, ki te
$27.0m. Ko te whakapae a Heartland, e kore tā mātou whakatoopu
pūtea a ngā tau e tū mai nei, e pīoioi i te whakapūmautanga o aua rawa.
Pūtea Tāpui
Ko ngā pūtea tāpui tonu te tūāpapa moni a Heartland, me te aha,
inā te pai o te tipuranga mai o tērā momo pūtea hei taunaki ake i
te tipuranga mai o ā mātou rawa. E $357m, arā 20%, te tipuranga
mai o ngā pūtea tāpui i tēnei tau pūtea, ā, ko te whakapae ia kia
pērā anō hoki te kaha o te tipu mai hei tēnei tau pūtea, ko te moni
penaroa hei kauhanganuitanga.
Haupū Rawa
I heke iho ngā tatauranga toharite haupū rawa a Heartland i te tau
pūtea nei, ko te take mātuatua i pērā ai, nā te kaha tipu mai o ngā
rawa. Kua puta kē mai te whakatau a Heartland kia tutuki i te Whare
Tahua o Heartland Bank he taumata tuarua mō te toha haupū rawa
hei te tau pūtea e tū mai nei, mēnā ka tau tonu ngā mākete. Ki te eke
ki te taumata tuarua haupū rawa (i te tamōnga o ētahi atu hua) ka
wātea a Heartland ki te hoko hea hei whakaū i te mana o ngā rawa,
ā, ko ngā ROE me ngā EPS ka whai hua i tērā.
Geoffrey Ricketts
Chairman / Toihau
Jeffrey Greenslade
Managing Director / Tumu Whakahaere
Rāngai Pakihi
Harikoa ana a Heartland New Zealand Limited (Heartland) i te kaha piki o ngā rawa, o te pūtea,
tae atu ki te whakatutukitanga o ngā whāinga matua i roto i tēnei tau pūtea.
I whai hua ā mātou rāngai matua e toru, arā, ngā whare, ngā pakihi
me te ahuwhenua, ā, ko te toopuranga pūtea i muri i te tāke (NPAT)
ko te $48.2m, 34% te pikinga i tērā tau pūtea. Ko tētahi atu whāinga
i tutuki, ko te pikinga o te uara o te haupū rawa ki te 10.4%, he
pikinga 9.0% i tērā tau pūtea.
Heartland anō hoki, ko te whakatau a te Pūtea Matua o Aotearoa kia
whakamāmāhia ngā whakaritenga haupū rawa a Heartland Bank i
tēnei tau pūtea, tētahi atu tohu tautoko. Nā tērā whakamāmātanga,
i hāngai pū ai ngā whakaritenga haupū rawa a Heartland Bank ki ngā
whakaritenga haupū rawa a ērā atu whare tahua o Aotearoa.
Tāpiri atu ki tō Heartland angitū-a-pūtea, i whai tautoko tā
mātou rautaki me tō mātou tūranga pakihi, i te whakapikinga
a Fitch Ratings i te mana pūtea toitū o Heartland Bank Limited
(Heartland Bank) ki te taumata BBB (E pūmau ana). Hei tā
$20.4m te pikinga o te uara o ngā rawa papatupu (NTA) a Heartland i
te tau i mutu ai i te 30 Pipiri 2015 (arā I te $399.9m i te 30 Pipiri 2014 ki
te $420.3m i te 30 Pipiri 2015). Ā-hea nei, ko te NTA i te 30 Pipiri 2015,
ko te $0.89, i te 30 Pipiri 2014 e $0.86 kē te uara.
Pai ana te mahi a te Rāngai Pakihi i tēnei tau pūtea. Nā
te kaha o te tipu o ngā rawa, i piki ai te nui o tana pūtea
whakahaere, arā, e $5.1m te pikinga i tērā tau pūtea, e
18% hoki te pikinga o tana pūtea toopu ki te $792.0m. E
pūmau tonu ana te kapa Rāngai Pakihi ki te hāpai i āna
ratonga maha (pēnei i te pūtea taurewa, rawa taurewa, utu
taurewa) ki ngā kiritaki, mā roto mai i te whakatū kaiawhina
motuhake ki tēnā, ki tēnā, ki tēnā, ā, mā reira ka pai ake tā
mātou whakatutuki i ngā hiahia o te kiritaki. Ko tā mātou
whāinga mātāwaenga te kaiarahi i a mātou kia tutuki tonu i a
mātou he tūranga, ka hoko rawa ana ngā SMEs. I tipu hoki te
wāhanga Rāngai Pakihi i te tuku pūtea a Heartland Bank mā
roto mai i te tūāpapa hoa rite a Harmoney.
16
Heartland New Zealand Limited - Annual Report 2015
Pūrongo a te Toihau me te Tumu Whakahaere
www.heartland.co.nz
17
Te aro ki te Hangarau
Tirohanga Whakamua
E whakapae ana a Heartland, ka tipu tonu ngā rawa, inā rā hoki,
i roto i te Rāngai Whare mā runga i te tuarā o tā mātou rautaki
kaihoko me te penapena tonu i ngā kākano e pihi ake ana i te
pārekereke o te Puka Takahuri Mōkete. Ko te tipuranga mai o
ngā SMEs tētahi pou angitū, arā, ko te rautaki-a-ipurangi tērā
hei whakawhānui i te torotoro haere o ā mātou ratonga me ngā
āheinga o aua ratonga rā.
Ko te hoko rawa hoki tētahi pou o te rautaki whakatipu a
Heartland, engari, me hāngai pū taua rawa ki ngā whakaritenga
pūtea a Heartland, me whai ara tohatoha, me whai hangarau
auaha hoki rānei.
Kua puta kē i a Heartland tana heitara NPAT mō te tau pūtea e tū
nei, arā, mai i te $51m ki te $55m. Kāore tēnei heitara i te tauawhi
i ngā kaupapa whakatoopu rawa.
E whakapono pū ana mātou, kei te wāhi tika a Heartland e tutuki
ai taua heitara, mā te ū ki te rautaki whakapūmau kaupapa mahi
whai kaha i roto i ā mātou rāngai matua, tae atu rā hoki ki te
taunahatanga o ētahi kaupapa whakatipu rawa hōu.
Geoffrey Ricketts
Chairman / Toihau
Jeffrey Greenslade
Managing Director /
Tumu Whakahaere
E kiia ana te rāngai whare tahua o te ao, he rāngai e rite ana mō
ngā pokenga o anamata. Kei te kitea te tūturutanga o tēnei kōrero
i roto i te whanaketanga o ngā hangarau whakahaere pūtea, matua
rā i Amerika me Uropi. Taro ake nei ka tau mai te whakataetae
whakawhanake hangarau me tērā mana nui ki roto o Aotearoa nei.
I te tau pūtea nei, i riro ai i a Heartland ngā hea 10% o te umanga
tūāpapa hoa rite tuatahi o tēnei whenua, arā, o Harmoney Corp
Limited (Harmoney). Kei te mākete pūtea taurewa ki ngā kaihoko a
Harmoney e mahi ana, ā, he ratonga anō rātou i tua atu i ngā whare
tahua matua me ngā pakihi taurewa, e tuku pūtea taurewa ana ki
ngā kaihoko. Kātahi anō ētahi tūāpapa hoa rite ka whakawhiwhia
ki wā rātou raihana e te Mana Mākete Hokohoko, ā, hei tā mātou,
ko te ipurangi te huarahi ka aruaruhia e ētahi atu ratonga tuku
pūtea taurewa, inā rā hoki, ngā ratonga e tuku pūtea taurewa ana ki
nga kaihoko.
Ko te aronga o Heartland i roto i tana kauneke whakamua, kia
aruaru i ngā ara e whānui ake ai te torotoro, e pakari ake ai rānei ngā
āheinga i roto i ngā mākete kaihoko, SME hoki. Mēnā ka mātaitia ngā
hangarau tuku pūtea hōu kua hua ake i tāwāhi me te tino tipuranga
mai o ngā tūāpapa tuku pūtea taurewa i runga ipurangi, ka kitea te
pūtake o tō mātou whakapono, mā te hanga hangarau auaha, māmā
hoki te utu ka whānui ake tā tatou torotoro haere ki aua mākete,
engari, ka māmā ake te utu mō ā tātou ratonga. Ko te rāutaki ia,
kia whai wāhi nui tātou ki te ao hangarau e whati mai nei ki tēnei
whenua, mā te aronui ki ngā momo rāngai motuhake, kāore nei i te
tino aronuihia e ngā whare tahua matua o Aotearoa nei.
Pūtea Toha
Ko te whakatau a te Poari, kia utua te 4.5 hēneti mō ia hea, i te 2
October 2015 ki ngā kaipupuri i runga i te rārangi ingoa a Heartland i
te 5.00pm i te 18 Māhuru 2015. Heipuhia ake, ko te katoa o te utu ka
utua i tēnei tau pūtea 2015, ko te 7.5 mō ia hea.
I reira te Mahere Whakangao Utu Hea (DRP) hei whirinakihanga, ā,
1% te rahi o te uara i poroa hei oranga. Ko te 18 Māhuru 2015 te rā
whakamutunga i taea ai e tētahi kaipupuri hea te whirinaki ki te DRP.
Mō ētahi atu taipitopito e pā ana ki te DRP, tirohia te pūrongo mō te
Mahere Whakangao Utu Hea, 12 Hakihea 2014.
We wish to thank Scotty Morrison for providing this Māori translation of the Chairman and Managing Director’s Report.
Heartland Staff Mark de Ree and Lydia Zulkifli.
18
Heartland New Zealand Limited - Annual Report 2015
Fresh thinking
Fresh thinking
www.heartland.co.nz
19
Fresh
thinking
Our market-leading products are designed for
changing New Zealand lifestyles
Traditional banking products haven’t really changed for decades.
But lifestyles certainly have, and customers today are looking for
something different: innovative products that genuinely serve
their needs, not the bank’s.
Take retirement for example, once considered the ‘twilight’ years,
but now for many a time of exploration, travel and adventure.
Heartland’s Home Equity Loan is the market leader in seniors
finance, enabling retired New Zealanders to unlock wealth
tied up in their homes to fund the lifestyle they really want.
20
Heartland New Zealand Limited - Annual Report 2015
The Board of Directors - Heartland New Zealand Limited
The Board of Directors - Heartland New Zealand Limited
www.heartland.co.nz
21
Setting the standard
As at the date of this Annual Report, the directors of Heartland New Zealand Limited are as follows:
Jeffrey Greenslade
Jane Taylor
Christopher Mace
Graham Kennedy
Gregory Tomlinson
Geoffrey Ricketts
LLB
Managing Director
– Appointed 30 September 2010
LLB (Hons), LLM, Dip Acc, CA, CF Inst D
Director
– Appointed 10 December 2014
CNZM, CM Inst D
Director
– Appointed 30 September 2010
J.P., BCom, FCA, ACIS, ACIM, CF Inst D
Director
– Appointed 30 September 2010
AME
Director
– Appointed 18 March 2013
Jeff has over 20 years’ experience as
a senior banking executive, including
with the ANZ National Banking Group,
where he last held the position of
Managing Director of Corporate and
Commercial Banking for ANZ National
Bank. From February 2006 until
February 2008 he spent time on the
board of UDC Finance Limited. Jeff has
also held a number of senior positions
in the Institutional and Capital Markets
areas of The National Bank of New
Zealand and its subsidiary, Southpac.
Jeff is responsible for the strategy and
operational management of Heartland.
He is also CEO of Heartland Bank. He
joined the Heartland Group as Chief
Executive Officer of MARAC Finance
Limited in 2009.
Jane is a professional director,
following a 30 year career in law,
accountancy and finance. Her current
governance appointments include
Silver Fern Farms Limited (where she
chairs the Audit Risk and Mitigation
Committee), Landcare Research New
Zealand Limited (Chair), Radio New
Zealand Limited, Hirepool Group
Limited and OTPP New Zealand
Forest Investments Limited. She is
also a board member of the XRB
(External Reporting Board) and
chairs the Queenstown Airport Noise
Liaison Committee.
Chris is an Auckland based
businessman and company director
with experience in the New Zealand
and Australian business environments.
He is Chairman of the Crown Research
Institute, the National Institute of
Water and Atmospheric Research
(NIWA), a Commissioner of the Tertiary
Education Commission and a director
of a number of companies. Chris was
a director of Southern Cross Building
Society leading up to the merger to
form Heartland Bank.
Chris is a lifetime member of the Sir
Peter Blake Trust and was instrumental
in establishing the Trust in 2004. He is
a passionate supporter of education,
science and research as well as a keen
supporter of the Arts. He received a
CNZM for services to Antarctica and
the community and was named 2012
Maori Business Leader of the Year.
Graham has over 40 years’ experience
as a chartered accountant and
business advisor and is now an
independent professional director
and Chairman of a number of
private companies providing
him with governance experience
across a diverse range of business
sectors including property, tourism,
agribusiness, transport, construction
and professional services.
Graham is also actively involved,
at a governance level, in a
variety of community-based
charitable organisations.
Greg is a Christchurch based
businessman and investor with 40
years’ experience owning, managing
and building businesses. An early
pioneer of the mussel industry of
Marlborough he has established Impact
Capital with active investments in the
aged care, animal pharmaceutical,
finance and wine sectors. Greg and his
wife Jill support a variety of charities in
New Zealand and abroad.
CNZM, LLB (Hons), F Inst D
Chairman
– Appointed 30 September 2010
Geoff is a commercial lawyer,
company director and investor
with wide experience in the New
Zealand and Australian business
environments. He holds a number of
directorships, including Chairman of
Todd Corporation, Chairman of Vero
New Zealand Limited, and a director
of ASX listed company Suncorp
Group Limited. Geoff was Chairman
of Southern Cross Building Society
leading up to the merger to form
Heartland Bank.
Geoff chairs The University of Auckland
Foundation and is a strong supporter
of community and philanthropic
activities, particularly in relation to the
arts and education in New Zealand.
22
Heartland New Zealand Limited - Annual Report 2015
The Board of Directors - Heartland Bank Limited
www.heartland.co.nz
23
As at the date of this Annual Report, the Heartland Bank Board includes J K Greenslade, G T Ricketts
and G R Kennedy, plus the following directors who are independent directors:
Bruce Irvine
BCom, LLB, FCA, CF Inst D, FNZIM
Chairman – Appointed 31 January 2013
Nicola Greer
MCom
Director – Appointed 26 July 2013
Bruce is a chartered accountant and was admitted into the
Christchurch partnership of Deloitte in 1988. He was Managing
Partner from 1995 to 2007 before his retirement from Deloitte in
May 2008 to pursue his career as an independent director. Bruce is
also Chairman of Christchurch City Holdings Limited, and a director
of several public and private companies, including House of Travel
Holdings Limited, Market Gardeners Limited, PGG Wrightson
Limited, Scenic Hotels Limited and Skope Industries Limited.
Bruce is involved in a voluntary capacity as a trustee of the
Christchurch Symphony Orchestra.
Nicola has extensive experience in the banking and finance
sector, both in New Zealand and overseas. Her career to
date includes senior positions at ANZ Bank (New Zealand
and Australia), Citibank and Goldman Sachs International,
where she worked in financial markets and asset and
liability management.
John Harvey
Richard Wilks
BCom, CA
Director – Appointed 31 January 2013
BCom, CA
Director – Appointed 1 February 2013
John has considerable financial services experience and
36 years in the professional services industry, including 23 years
as a partner of PricewaterhouseCoopers. Since his retirement
from PricewaterhouseCoopers in 2009, John has pursued a
career as an independent director of a number of companies,
including Port Otago Limited, Ballance Agri-Nutrients
Limited, NZX listed DNZ Property Fund Limited and NZX/ASX
listed Kathmandu Holdings Limited. He is also chairman of
NZ Opera Limited.
Richard has extensive experience across a range of industries
including the banking and finance sector. He recently retired
from a career as a senior corporate banking professional, which
included Chief Credit Officer and Chief Risk Officer with ANZ
National Bank and executive roles with Standard Chartered
Bank, Citibank Australia, Westpac Trust Australia and Citibank
New Zealand. Richard is currently a director of a number of
companies including Rainbow’s End Theme Park Limited,
Rangatira Limited and the Maxwell Farms group of companies.
Heartland Staff Michael Drumm and Sarah Smith.
24
Heartland New Zealand Limited - Annual Report 2015
Heartland Supporting Communities
Heartland Supporting Communities
www.heartland.co.nz
25
Heartland Supporting
Communities
We offer help and support to a wide variety of groups and organisations across New Zealand.
Whether making a difference at an individual, local, regional or national level, we know how important
our support is to our communities and we are incredibly proud of the difference we make.
Special Children’s Christmas Party
Heartland has always been committed to supporting and investing
in Kiwis, helping them grasp opportunities and realise their dreams,
but Christmas always adds an extra incentive to make a difference.
Young Auctioneers
Heartland is honoured to sponsor the Young Auctioneers
Competition at the prestigious Canterbury A&P Show.
A vocation that many people are familiar with – but few would
consider – demands a unique skill set that includes a keen eye,
quick thinking and sharp wit. However, the training grounds
and opportunities for the young up-and-coming auctioneers
are limited.
“It was a huge thrill to win
this competition. It’s so
valuable to the industry,
giving young auctioneers the
chance to stand up and be
counted amongst their peers.”
Heartland Young Auctioneer
winner 2014, Cam Bray
The Young Auctioneers
competition runs over
two days and puts
competitors – who
must be aged under
30 – through their
paces on all aspects
of auctioneering
including knowledge,
style and personal
presentation. In return
they are provided with
guidance and feedback from an experienced judging panel and
given tips on how to polish their performance. After three years,
the competition is going from strength to strength with both the
number and standards of entrants steadily rising, showing this
important component of New Zealand’s livestock industry is still
very much in demand.
“Supporting an event
like this is a great
opportunity to give
something back to
the community.”
Every year over 7,000 children
suffering from life-threatening
illnesses, physical or intellectual
impairment, domestic violence
or living in underprivileged
circumstances, are given the
chance to experience Christmas
at a number of Special Children’s
Christmas Parties that take place
in several cities across the country.
For Heartland, support for this cause goes a lot deeper than simply
a financial donation as many of our staff get involved too. Handing
out gifts, painting faces or blowing up balloons, Heartland staff roll
Heartland staff member
“I never really thought I would have the chance
to properly showcase my photos but I always
imagined it would be a special thing to do.”
Tauranga resident and photographic historian, Alf Rendell
up their sleeves and see first-hand how these simple, fun things can
make such a huge difference, building memories that will stay with
the children and their families for years to come.
Alf Rendell
Community is very important to Heartland. Where the majority of
our support is provided to groups and organisations, sometimes
we meet very special individuals who have made a real difference
but could do with a bit of assistance themselves.
97-year-old Alf Rendell from Tauranga has been photographing
the local area for over 80 years and, despite building up an
enviable collection of photographs cataloguing how the region
has changed over the years, he had never fulfilled his life-long
ambition of hosting his own exhibition. For a man that has
given the community so much – he’s also a volunteer involved
in transforming a disused quarry into a world class park – local
Heartland Bank branch manager Deborah Lee thought it was his
turn to get something back.
Early in 2015 and running for a total of five weeks, Heartland
helped Alf to host a dedicated exhibition showing over 40 of his
original prints.
Scholarships
The ability to open up opportunities and change lives for the better
is never more apparent than during the school years.
Heartland is involved with a number of organisations, clubs and
schools who are dedicated to helping children unlock and deliver
their true potential. Whether it is on a rugby field, performing
arts or through gaining entry to a level of education that would
“It’s not just about the
opportunity of getting
into a top school.
Scholarships also give
these kids a sense of value,
focus and responsibility.”
King’s College Head of Admissions,
Graeme Syms
otherwise not be
available, Heartland’s
support has helped
a number of children
access and remain in a
range of activities and
educational scholarships.
For three high-achieving
year 9 boys, this was
an education at King’s
College Auckland.
King’s College matches
outstanding educational
opportunities with a dedication to promoting excellence in the
arts, culture and sports. It is the only private school represented in
division one of the national kapa haka competition as well as being
the only private school to offer Te Reo Māori from year 9 through
to year 13. Heartland hopes to extend support to include a female
student in the coming school year.
26
Heartland New Zealand Limited - Annual Report 2015
Corporate Governance
Corporate Governance
www.heartland.co.nz
27
Corporate Governance
Codes of Conduct
The Company’s Code of Conduct and Directors’ Code of Conduct
set out the ethical and behavioural standards expected of the
Company’s directors and employees. The Codes of Conduct are
available on the Company’s website.
Securities Trading Policy
The Board continually considers whether any matters under
consideration are likely to materially influence the Company’s share
price and therefore whether additional trading restrictions should
be imposed on directors and senior employees of the Company.
All directors and senior employees of the Company are required to
obtain consent before buying or selling shares in the Company and
to certify that their decision to buy or sell shares has not been made
on the basis of inside information.
Principle 2 – Board Composition
and Performance
There is a balance of independence, skills, knowledge, experience
and perspectives among directors to ensure an effective Board.
Role of the Board
The Board of Directors is responsible for corporate governance
and setting the Company’s overall strategic direction. The Board
charter regulates Board procedure and describes the Board’s role
and responsibilities in detail. The Board establishes objectives,
strategies and an overall policy framework within which the
business is conducted. Day-to-day management is delegated to
the Chief Executive Officer (and, in the case of risk management,
to the Chief Risk Officer). The Board regularly monitors and reviews
management’s performance in carrying out their delegated duties.
The Board schedules monthly meetings at which it receives regular
briefings on key strategic and operational issues from management.
The Board and management of Heartland New Zealand Limited
(the Company) are committed to ensuring that the Company
maintains corporate governance practices in line with current
best practice.
The Board has established policies and protocols which comply
with the corporate governance requirements of the NZX Main Board
Listing Rules and which are consistent with the principles contained
in the NZX Corporate Governance Best Practice Code.
This governance statement outlines the main corporate governance
practices applied by the Company as at 30 June 2015. During the
year the Board reviewed and assessed the Company’s governance
structure to confirm that its governance practices are consistent
with best practice. The Board considers it has complied with the
NZX Corporate Governance Best Practice Code for the year ended 30
June 2015.
This section of the Annual Report reflects the Company’s compliance
with the requirements of the Financial Markets Authority Corporate
Governance in New Zealand Principles and Guidelines.
The Company’s Constitution and Board and Committee charters are
available on the Company’s website, www.heartland.co.nz.
Principle 1 – Ethical Standards
Directors set high standards of ethical behaviour, model this
behaviour, and hold management accountable for delivering these
standards throughout the organisation.
The Company expects its directors and staff to act honestly and in
good faith, and in the best interests of the Company at all times.
They must act with the care, diligence and skill expected of a
director or staff member of a company that has shares that are
publicly traded on the NZX Main Board and has subsidiaries that
issue securities and accept funds from the general public.
Directors and staff are required to act honestly and fairly in all
dealings with the Company’s shareholders, customers, investors and
service providers.
Each director and staff member has an obligation, at all times, to
comply with the spirit as well as the letter of the law, to comply with
the principles of the Company’s Code of Conduct, the Directors’
Code of Conduct and the Company’s Constitution, and to exhibit a
high standard of ethical behaviour.
Board
Audit and Risk
Committee
Governance and
Remuneration
Committee
Board Processes
The Board held 11 meetings during the
year ended 30 June 2015. The table shows
attendance by the director at the Board and
committee meetings.
At the Company’s Annual Meeting held on
31 October 2014, all of the then-serving
directors attended the meeting.
Eligible
to Attend
Attended
Eligible
to Attend
Attended
Eligible
to Attend
Attended
J K Greenslade
G R Kennedy
C R Mace
G T Ricketts
D J Taylor
G R Tomlinson
11
11
11
11
6
11
11
11
11
11
6
11
-
5
-
5
2
-
-
5
-
5
2
-
-
-
-
2
-
2
-
-
-
2
-
2
Board Membership, Size and Composition
Principle 3 – Board Committees
The NZX Main Board Listing Rules provide that the number of
directors must not be fewer than three. Subject to this limitation,
the size of the Board is determined from time to time by the Board.
As at 30 June 2015, the Board comprised six directors, being an
independent Chairman, the Managing Director and four non-
executive directors. The Board encourages rigorous discussion
and analysis when making decisions. The current Board comprises
directors with a mix of qualifications and skills who hold diverse
business, governance and industry experience.
Nomination and Appointment of Directors
Procedures for the appointment and removal of directors are
governed by the Company’s constitution.
A director is appointed by ordinary resolution of the shareholders,
although the Board may fill a casual vacancy, in which case the
appointed director retires at the next Annual Meeting but is eligible
for re-election. Nominations for election as a director may be made
by shareholders up until a closing date, which must not be more
than two months before the date of the Annual Meeting.
Independence of Directors
A director is considered to be independent if that director is not an
executive of the Company and if the director has no direct or indirect
interest or relationship that could reasonably influence, in a material
way, the director’s decisions in relation to the Company.
As at 30 June 2015, the Board determined that G R Kennedy, C R
Mace, G T Ricketts and D J Taylor were the independent directors.
Board Performance Assessment
The Board undertakes a regular review of its own, its committees’
and individual directors’ performance. This is to ensure it has the
right composition and appropriate skills, qualifications, experience
and background to effectively govern the Company and monitor the
Company’s performance in the interests of shareholders.
The Board uses committees where this enhances effectiveness in key
areas while still retaining Board responsibility.
Board Committees
The Board has two permanently constituted committees to
assist the Board by working with management in specific
areas of responsibility and then reporting their findings and
recommendations back to the Board. Each of these committees has
a charter which set out the committee’s objectives, membership,
procedures and responsibilities. A committee does not take
action or make decisions on behalf of the Board unless specifically
mandated. The committee charters are available on the Company’s
website, www.heartland.co.nz.
Other ad hoc Board committees are established for specific
purposes from time to time.
Audit and Risk Committee
Membership is restricted to non-executive directors, with at least
three members, the majority of whom must be independent.
As at 30 June 2015, the members of the Audit and Risk Committee
were G R Kennedy (Chairman), G T Ricketts and D J Taylor.
The role of the Audit and Risk Committee is to advise and provide
assurance to the Board in order to enable the Board to discharge its
responsibilities in relation to the oversight of:
• The integrity of financial control, financial management and
external financial reporting.
• Risk management and internal control.
• The internal audit function.
• The independent audit process.
As at 30 June 2015, the Board determined that all committee
members had a recognised form of financial expertise in accordance
with the Audit and Risk Committee’s charter.
28
Heartland New Zealand Limited - Annual Report 2015
Corporate Governance
Corporate Governance
www.heartland.co.nz
29
Governance and Remuneration Committee
Principle 4 – Reporting and Disclosures
Principle 5 – Remuneration
The Board demands integrity in both financial reporting and in the
timeliness and balance of corporate disclosures.
The remuneration of directors and executives is transparent,
fair and reasonable.
The Committee is required to comprise of at least three directors,
the majority of whom must be independent. It is also a requirement
that one member be a director of Heartland Bank Limited
(Heartland Bank) to ensure the flow of relevant information
between the Company and Heartland Bank.
As at 30 June 2015, the members of the Governance and
Remuneration Committee were G T Ricketts (Chairman) and G R
Tomlinson and B R Irvine (in an ex-officio capacity).
The role of the Governance and Remuneration Committee is to
advise and provide assurance to the Board in order to enable the
Board to discharge its responsibilities in relation to:
• Corporate governance matters.
• Remuneration of the directors, Chief Executive Officer and
senior executives and remuneration policies generally.
• Director and senior executive appointments, Board composition
and succession planning.
• Capital management.
The gender composition of Directors and Officers was as follows:
The Board is committed to ensuring the highest standards
are maintained in financial reporting and disclosure of all
relevant information.
The Audit and Risk Committee oversees the quality and timeliness
of all financial reports, including all disclosure documents issued by
the Company or any of its subsidiaries.
The Chief Executive Officer and Chief Financial Officer are required to
certify to the Audit and Risk Committee that the financial statements
of the Company and its subsidiaries present a true and fair view of
the Company and comply with all relevant accounting standards.
As at 30 June 2015
As at 30 June 2014
Positions
Female
Male
Female
Male
Heartland New Zealand Limited Directors
1 (16.6%)
5 (83.3%)
0 (0%)
6 (100%)
Heartland Bank Limited Directors
1 (12.5%)
7 (87.5%)
1 (12.5%)
7 (87.5%)
Officers
3 (33.3%)
6 (66.7%)
2 (22%)
7 (78%)
“Officers” include J K Greenslade and all persons who report directly
to him in an executive capacity.
Non-Executive Directors’ Remuneration
Total remuneration available to non-executive directors of the
Company and its subsidiaries is determined by shareholders.
The current aggregate approved amount by shareholders is
$1,000,000 per annum.
The Company’s policy is to pay directors’ fees in cash. There is no
requirement for directors to take a portion of their remuneration in
shares and there is no requirement for directors to hold shares in
the Company. However, as at 30 June 2015 all directors held shares
in the Company (see the “Directors’ Disclosures” section of this
Report for further details).
Senior Executive Remuneration
The objective is to provide competitive remuneration that aligns
executives’ remuneration with shareholder value and rewards
the executives’ achievement of the Company’s strategies and
business plans.
All senior executives receive a base salary and are also eligible to
participate in short-term and long-term incentive plans under which
they are rewarded for achieving key performance and operating results.
Principle 6 – Risk Management
The Board has a sound understanding of the key risks faced by
the business. The Board regularly verifies that the Company has
appropriate processes that identify and manage potential and
relevant risks.
The Board ensures that the Company has a Risk Management
Programme in place which identifies, manages and communicates
the key risks that may impact the Company’s business. Specific risk
management strategies have been developed for each of the key
risks identified. The Audit and Risk Committee of the Board oversees
the risk management programme and strategy. The Company also
has in place insurance cover for insurable liability and general
business risk.
Principle 7 – Auditors
The Board ensures the quality and independence of the external
audit process.
The Audit and Risk Committee is responsible for overseeing
the external, independent audit of the Company’s financial
statements. The Audit and Risk Committee ensures that the level
of non-audit work undertaken by the auditors does not jeopardise
their independence.
The Company’s External Auditor Independence Policy provides
guidelines to ensure that non-audit related services do not conflict
with the independent role of the external auditor, and the Audit
and Risk Committee ensures that non-audit work undertaken by
the auditors is in accordance with that Policy. That Policy also sets
out guidelines in relation to the tenure and re-appointment of the
external auditor, which the Audit and Risk Committee ensures
are complied with. Refer to Heartland’s website for a copy of the
External Auditor Independence Policy.
The external auditor monitors its independence and reports to
the Audit and Risk Committee bi-annually to confirm that it has
remained independent in the previous six months, in accordance
with the Company’s External Auditor Independence Policy and the
external auditor’s policies and professional requirements. There
have been no threats to auditor independence identified during the
year ended 30 June 2015.
The Company also has an internal audit function which is
independent of the external auditors. The Audit and Risk Committee
approves the annual internal audit programme, which is developed
in consultation with management of the Company.
Principle 8 – Shareholder Relations
The Board fosters constructive relationships with shareholders that
encourage them to engage with the Company.
The Board is committed to maintaining a full and open dialogue with
all shareholders and keeps shareholders informed through:
• Periodic and continuous disclosure to NZX.
• Information provided to analysts and media during briefings.
• The Annual Meeting at which shareholders’ questions are
responded to.
• Annual and half year reports.
The Board encourages full participation of shareholders at the
Annual Meeting to ensure a high level of accountability. The
Company’s external auditor also attends the Annual Meeting and is
available to answer questions relating to the external audit.
Principle 9 – Stakeholder Interests
The Board respects the interests of stakeholders within the context
of the Company’s ownership type and its fundamental purpose.
The Company has a wide range of stakeholders and aims to manage
its business in a way which builds sustainable value and produces
positive outcomes for stakeholders. As a listed entity with a
subsidiary which is a registered bank, the Company is cognisant of
its responsibility to respect and balance its stakeholder interests
(including customers, staff, regulators and shareholders).
30
Heartland New Zealand Limited - Annual Report 2015
Financial Statements For The Year Ended 30 June 2015
Financial Statements For The Year Ended 30 June 2015
www.heartland.co.nz
31
DIRECTORS' RESPONSIBILITY STATEMENT
For the year ended 30 June 2015
STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 June 2015
The directors are responsible for presenting financial statements for each financial year that give a true and fair view of the financial position of
Heartland New Zealand Limited (Company), its subsidiaries (Group) and of the financial performance and cash flows for that period.
The directors consider the financial statements of the Group have been prepared using appropriate accounting policies that have been consistently
applied and supported by reasonable judgements and estimates, and that all relevant financial reporting and accounting standards have been
followed.
The directors believe that proper accounting records have been kept which enable, with reasonable accuracy, the determination of the financial
position of the Group and facilitate compliance of the financial statements with the Financial Reporting Act 2013.
The directors consider that they have taken adequate steps to safeguard the assets of the Group and to prevent and detect fraud and other
irregularities.
The Board of Directors (Board) of Heartland New Zealand Limited approved and authorised the financial statements for the year ended 30 June 2015
set out on pages 3 to 39 for issue on 18 August 2015.
31 to 67 for issue on 18 August 2015.
For and on behalf of the Board
Director
Director
Interest income
Interest expense
Net interest income
Operating lease income
Operating lease expenses
Net operating lease income
Lending and credit fee income
Other income
Net operating income
Selling and administration expenses
Profit before impaired asset expense and income tax
Impaired asset expense
Decrease in fair value of investment properties
Operating profit
Share of joint arrangement profit
Profit before income tax
Income tax expense
Profit for the year
Other comprehensive income
Items that are or may be reclassified subsequently to profit or loss:
Effective portion of changes in fair value of cash flow hedges, net of income tax
Movement in available for sale reserve, net of income tax
Movement in foreign currency translation reserve, net of income tax
Items that will not be reclassified to profit or loss:
Movement in defined benefit reserve, net of income tax
Other comprehensive income for the year, net of income tax
Total comprehensive income for the year
Earnings per share from continuing operations
Basic earnings per share
Diluted earnings per share
Total comprehensive income for the year is attributable to owners of the Group.
The notes on pages 8 to 39 are an integral part of these financial statements.
The notes on pages 36 to 67 are an integral part of these financial statements.
NOTE
Jun 15
Jun 14
$000
$000
2
2
3
3
4
5
6
10
25
7
260,468
126,041
134,427
210,297
101,221
109,076
10,350
7,087
3,263
3,077
3,940
13,348
7,709
5,639
2,469
4,971
144,707
122,155
68,403
76,304
64,739
57,416
12,105
-
5,895
1,203
64,199
50,318
137
486
64,336
50,804
16,173
48,163
14,765
36,039
(2,709)
1,111
898
2,136
(12)
95
50
3
375
1,197
48,538
37,236
8
8
10c
10c
9c
9c
2
3
32
Heartland New Zealand Limited - Annual Report 2015
Financial Statements For The Year Ended 30 June 2015
Financial Statements For The Year Ended 30 June 2015
www.heartland.co.nz
33
STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2015
STATEMENT OF FINANCIAL POSITION
As at 30 June 2015
Treasury Employee Currency Available Defined
Foreign
Share
Shares BenefitsTranslation for sale
NOTE
Capital Reserve Reserve
$000
$000
$000
benefit Hedging Retained
Reserve Reserve Reserve Reserve Earnings
$000
$000
$000
$000
$000
Total
Equity
$000
Balance at 1 July 2014
406,142
(926)
1,476
95
272
44
1,157
44,362
452,622
Total comprehensive income/(loss) for the year
Profit for the year
Other comprehensive income / (loss), net of
income tax
Total comprehensive income/(loss) for the year
Contributions by and distributions to owners
Dividends paid
14
Dividend reinvestment plan
Share based payments
14
26
Shares vested
Treasury shares sold
Total transactions with owners
-
-
-
-
7,621
-
138
16
7,775
-
-
-
-
-
-
629
25
654
-
-
-
-
-
2,136
2,136
898
898
-
-
1,491
(767)
-
724
-
-
-
-
-
-
-
-
-
-
-
-
-
50
50
-
-
-
-
-
-
-
48,163
48,163
(2,709)
-
375
(2,709)
48,163
48,538
-
-
-
-
-
-
(30,188)
-
-
(30,188)
7,621
1,491
-
-
-
41
(30,188)
(21,035)
Balance at 30 June 2015
413,917
(272)
2,200
2,231
1,170
94
(1,552)
62,337
480,125
Balance at 1 July 2013
193,020
(1,000)
629
-
284
41
46
177,522
370,542
Total comprehensive income/(loss) for the year
Profit for the year
Other comprehensive income / (loss), net of
income tax
Total comprehensive income/(loss) for the year
Contributions by and distributions to owners
Effect of amalgamation
Dividends paid
Dividend reinvestment plan
Issue of share capital
Transaction costs associated with capital
raising
Shares vested
Share based payments
Total transactions with owners
14
14
26
-
-
-
149,269
-
7,321
57,840
(1,322)
14
-
213,122
-
-
-
-
-
-
-
-
74
-
74
-
-
-
-
-
-
-
-
(88)
935
847
-
95
95
-
-
-
-
-
-
-
-
-
(12)
(12)
-
-
-
-
-
-
-
-
-
3
3
-
-
-
-
-
-
-
-
-
36,039
36,039
1,111
-
1,197
1,111
36,039
37,236
- (149,269)
-
-
-
-
-
-
-
(19,930)
(19,930)
-
-
-
-
-
7,321
57,840
(1,322)
-
935
- (169,199)
44,844
Balance at 30 June 2014
406,142
(926)
1,476
95
272
44
1,157
44,362
452,622
The notes on pages 8 to 39 are an integral part of these financial statements.
The notes on pages 36 to 67 are an integral part of these financial statements.
Assets
Cash and cash equivalents
Investments
Investment properties
Finance receivables
Operating lease vehicles
Current tax assets
Other assets
Investment in joint arrangement
Intangible assets
Deferred tax assets
Total assets
Liabilities
Borrowings
Current tax liabilities
Trade and other payables
Total liabilities
Equity
Share capital
Retained earnings and reserves
Total equity
Total equity and liabilities
The notes on pages 8 to 39 are an integral part of these financial statements.
The notes on pages 36 to 67 are an integral part of these financial statements.
NOTE
9
10
11
12
7(b)
15(a)
25
15(b)
7(c)
Jun 15
Jun 14
$000
$000
37,012
329,338
24,513
2,862,070
29,998
-
12,119
4,383
51,119
8,707
37,344
238,859
24,888
2,607,393
31,295
1,558
18,597
4,246
47,421
5,287
3,359,259
3,016,888
13
7(b)
15(c)
2,825,245
2,524,460
7,869
46,020
431
39,375
2,879,134
2,564,266
14
413,645
405,216
66,480
47,406
480,125
452,622
3,359,259
3,016,888
4
5
34
Heartland New Zealand Limited - Annual Report 2015
Financial Statements For The Year Ended 30 June 2015
Financial Statements For The Year Ended 30 June 2015
www.heartland.co.nz
35
STATEMENT OF CASH FLOWS CONTINUED
For the year ended 30 June 2015
Reconciliation of profit after tax to net cash flows from operating activities
Profit for the year
Add / (less) non-cash items included in net profit before taxation:
Depreciation and amortisation expense
Depreciation on lease vehicles
Change in fair value of investment properties
Capitalised interest
Impaired asset expense
Total non-cash items
Add / (less) movements in operating assets and liabilities:
Finance receivables
Operating lease vehicles
Other assets
(Gain) / loss on disposal of property, plant and equipment and intangibles
Current tax
Derivative financial instruments revaluation
Deferred tax (benefit) / expense
Deposits
Other liabilities
Total movements in operating assets and liabilities
Net cash flows from operating activities
The notes on pages 8 to 39 are an integral part of these financial statements.
The notes on pages 36 to 67 are an integral part of these financial statements.
Jun 15
$000
Jun 14
$000
48,163
36,039
2,010
6,375
-
(2,045)
12,105
18,445
(275,274)
(5,078)
2,997
(98)
8,996
1,326
2,142
7,060
1,203
-
5,895
16,300
96,815
(5,960)
804
56
(3,986)
91
(3,420)
11,100
362,590
(97,646)
3,130
95,169
2,153
3,427
161,777
55,766
STATEMENT OF CASH FLOWS
For the year ended 30 June 2015
Cash flows from operating activities
Interest received
Operating lease income received
Lending, credit fees and other income received
Operating inflows
Payments to suppliers and employees
Interest paid
Taxation paid
Operating outflows
Jun 15
$000
Jun 14
$000
243,729
8,951
7,017
259,697
60,346
126,179
9,956
196,481
193,519
12,086
7,440
213,045
59,687
101,675
8,033
169,395
Net cash flows from operating activities before changes in operating assets and liabilities
63,216
43,650
Proceeds from sale of operating lease vehicles
Purchase of operating lease vehicles
Net movement in finance receivables
Net movement in deposits
Net cash flows from operating activities
Cash flows from investing activities
Net proceeds from sale of investment properties
Proceeds from sale of office fit-out, equipment and intangible assets
Dividend received from joint venture
Total cash provided from investing activities
Purchase of office fit-out, equipment and intangible assets
Net increase in investments
Purchase of subsidiaries
Total cash applied to investing activities
Net cash flows applied to investing activities
Cash flows from financing activities
Increase in share capital
Total cash provided from financing activities
Dividends paid
Transaction costs associated with capital raising
Net decrease in wholesale funding
Total cash applied to financing activities
Net cash flows applied to financing activities
Net decrease in cash held
Opening cash and cash equivalents
Cash impact of business combinations
Closing cash and cash equivalents
The notes on pages 8 to 39 are an integral part of these financial statements.
The notes on pages 36 to 67 are an integral part of these financial statements.
7,386
9,086
(11,544)
(12,954)
(259,871)
362,590
113,630
(97,646)
161,777
55,766
9,375
4,885
-
14,260
6,344
89,581
-
95,925
42,244
19
560
42,823
432
73,648
48,300
122,380
(81,665)
(79,557)
-
-
20,000
20,000
22,567
-
57,877
80,444
12,609
1,322
123,023
136,954
(80,444)
(116,954)
(332)
37,344
-
37,012
(140,745)
174,262
3,827
37,344
6
7
36
Heartland New Zealand Limited - Annual Report 2015
Financial Statements For The Year Ended 30 June 2015
Financial Statements For The Year Ended 30 June 2015
www.heartland.co.nz
37
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
Notes
Basis of Reporting
Performance
1
Segmental analysis
2
3
4
5
6
7
8
Net interest income
Net operating lease income
Other income
Selling and administration expenses
Impaired asset expense
Taxation
Earnings per share
Financial position
Investments
9
10
Investment properties
11 Finance receivables
12 Operating lease vehicles
13 Borrowings
14 Share capital and dividends paid
15 Other balance sheet items
16 Fair value
Risk management
17 Risk management policies
18 Credit risk exposure
19 Asset quality
20
21
Liquidity risk
Interest rate risk
22 Concentrations of funding
Other disclosures
23 Significant subsidiaries and interests in joint arrangements
24 Structured entities
25
Joint arrangements
26 Staff share ownership arrangements
27 Contingent liabilities and commitments
28 Application of new and revised accounting standards
29 Events after the reporting date
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
Basis of reporting
Reporting entity
Heartland New Zealand Limited is a listed public company incorporated in New Zealand under the Companies Act 1993 and is a FMC reporting
entity for the purposes of the Financial Reporting Act 2013 and Financial Markets Conduct Act 2013.
The financial statements presented are the consolidated financial statements comprising Heartland New Zealand Limited (Heartland), its
subsidiaries and joint arrangements. All entities within the Group offer financial services or are special purpose entities.
On 1 April 2014, the Company, through its subsidiary Heartland HER Holdings Limited, acquired New Sentinel Limited and Australian Seniors
Finance Pty Limited (collectively the HHHL Group). Comparatives presented include the results of HHHL Group operations for only three months
of the prior year.
Basis of preparation
The financial statements have been prepared in accordance with Generally Accepted Accounting Practice in New Zealand (NZ GAAP) and with
the requirements of the Financial Reporting Act 2013. They comply with New Zealand equivalents to International Financial Reporting Standards
(NZ IFRS) and other applicable Financial Reporting Standards, as appropriate for profit-oriented entities. The financial statements also comply
with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.
The financial statements are presented in New Zealand dollars which is the Company's functional and the Group's presentation currency. Unless
otherwise indicated, amounts are rounded to the nearest thousand.
The accounting policies adopted have been applied consistently throughout the periods presented in these financial statements. Certain
comparative information has been restated to comply with the current year presentation.
The financial statements have been prepared on the basis of historical cost, except for financial instruments, land and buildings and investment
properties, which are measured at their fair values as identified in the accounting policies set out in the accompanying notes.
The financial statements have been prepared on a going concern basis after considering the Group’s funding and liquidity position.
Financial assets and liabilities
The Group initially recognises finance receivables, borrowings and subordinated liabilities on the date that they are originated. All other financial
assets and liabilities (including assets and liabilities designated at fair value through profit or loss) are initially recognised on the trade date at
which the Group becomes a party to the contractual provisions of the instrument.
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive
the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset
are transferred. Any interest in transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability.
The Group derecognises a financial liability when its contractual obligations are discharged or cancelled or expire.
The Group enters into transactions whereby it transfers assets recognised on its Statement of Financial Position, but retains either all risks and
rewards of the transferred assets or a portion of them. If all or substantially all risks and rewards are retained, then the transferred assets are not
derecognised from the Statement of Financial Position. Transfers of assets with the retention of all or substantially all risks and rewards include,
for example, securitised assets and repurchase transactions.
Principles of consolidation
The consolidated financial statements of Heartland incorporate the assets, liabilities and results of all controlled entities. Controlled entities are all
entities in which Heartland is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those
returns through its power over the investee. Intercompany transactions, balances and any unrealised income and expense (except for foreign
currency transaction gains or losses) between controlled entities are eliminated.
The assets and liabilities of entities whose functional currency is not the New Zealand dollar, are translated at the exchange rates ruling at
balance date. Revenue and expense items are translated at the spot rate at the transaction date or a rate approximating that rate. Exchange
differences are taken to the foreign currency translation reserve.
Estimates and judgements
The preparation of the Group's financial statements requires the use of estimates and judgement. This note provides an overview of the areas
that involved a higher degree of judgement or complexity. Detailed information about each of these estimates and judgements is included in the
relevant notes together with the basis of calculation for each affected item in the financial statements.
Provisions for impairment - The effect of credit risk is quantified based on management's best estimate of future cash repayments and
proceeds from any security held or by reference to risk profile groupings and historical loss data. Refer to Note 19(e) for further details.
Goodwill - Determining the fair value of assets and liabilities of acquired businesses requires the exercise of management judgement. The
carrying value of goodwill is tested annually for impairment, refer to Note 15(b)(ii).
The estimates and judgements used in the preparation of the Groups financial statements are continually evaluated. They are based on historical
experience and other factors, including expectations of future events that may have a financial impact on the entity.
8
9
38
Heartland New Zealand Limited - Annual Report 2015
Financial Statements For The Year Ended 30 June 2015
Financial Statements For The Year Ended 30 June 2015
www.heartland.co.nz
39
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
Performance
1 Segmental analysis
Segment information is presented in respect of the Group's operating segments which are those used for the Group's management and internal
reporting structure.
All income received is from external sources, except those transactions with related parties. Refer to Note 15(d) - Related party transactions for
further details. Certain selling and administration expenses, such as premises, IT and support centre costs are not allocated to operating
segments and are included in Administration and Support (Admin & Support).
Operating segments
The Group operates predominantly within New Zealand and comprises the following main operating segments:
Households
Providing a comprehensive range of
financial services to New Zealand businesses and families,
including transactional accounts together with mortgage lending (residential and home equity release),
Business
Rural
motor vehicle finance and asset finance.
Providing term debt, plant and equipment finance, commercial mortgage lending and working capital
solutions for small-to-medium sized New Zealand businesses.
Providing specialist financial services to the farming sector primarily offering livestock finance, rural
mortgage lending, seasonal and working capital financing, as well as leasing solutions to farmers.
Non-core Property
Funding assets of the non-core property division.
The Group's operating segments are different than the industry categories detailed in Note 19 - Asset quality. The operating segments are
primarily categorised by sales channel, whereas Note 19 - Asset quality categorises exposures based on credit risk concentrations.
During the year ended 30 June 2015, a business unit previously reported in the Households segment was moved to the Business segment.
Comparative segment information has been restated to be consistent with the current reporting period.
Jun 15
Interest income
Interest expense
Net interest income / (expense)
Net operating lease income
Net other income
Net operating income
Depreciation and amortisation expense
Other selling and administration expenses
Selling and administration expenses
Profit / (loss) before impaired asset expense and
income tax
Impaired asset expense / (benefit)
Operating profit / (loss)
Share of joint arrangement profit
Profit / (loss) before income tax
Income tax expense
Profit / (loss) for the year
Total assets
Total liabilities
Total equity
Households
Business
$000
$000
134,193
64,299
69,894
3,263
2,560
75,717
-
20,071
20,071
70,258
29,931
40,327
-
1,639
41,966
-
6,207
6,207
Rural
$000
41,380
17,496
23,884
-
135
24,019
-
4,878
4,878
Non-core
Property
$000
Admin &
Support
$000
779
1,569
(790)
-
1,478
688
-
1,273
1,273
13,858
12,746
1,112
-
1,205
2,317
2,010
33,964
35,974
Total
$000
260,468
126,041
134,427
3,263
7,017
144,707
2,010
66,393
68,403
55,646
35,759
19,141
(585)
(33,657)
76,304
5,465
50,181
6,467
29,292
510
18,631
-
-
-
50,181
29,292
18,631
(337)
(248)
-
(248)
-
(33,657)
137
(33,520)
-
-
-
-
16,173
50,181
29,292
18,631
(248)
(49,693)
1,609,887
791,984
487,673
27,038
442,677
-
-
-
-
-
-
-
-
2,879,134
480,125
12,105
64,199
137
64,336
16,173
48,163
3,359,259
2,879,134
480,125
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
1 Segmental analysis (continued)
Jun 14
Interest income
Interest expense
Net interest income / (expense)
Net operating lease income
Net other income
Net operating income
Depreciation and amortisation expense
Other selling and administration expenses
Selling and administration expenses
Profit / (loss) before impaired asset expense and
income tax
Households
Business
$000
$000
Rural
$000
Non-core
Property
$000
Admin &
Support
$000
92,247
41,264
50,983
5,639
2,000
58,622
-
11,947
11,947
62,686
26,302
36,384
-
435
39,666
16,865
22,801
-
68
36,819
22,869
-
5,983
5,983
-
5,409
5,409
2,977
4,426
(1,449)
-
3,822
2,373
-
4,000
4,000
12,721
12,364
357
-
1,115
1,472
2,142
35,258
37,400
Total
$000
210,297
101,221
109,076
5,639
7,440
122,155
2,142
62,597
64,739
46,675
30,836
17,460
(1,627)
(35,928)
57,416
Impaired asset expense / (benefit)
Decrease in fair value of investment properties
Operating profit / (loss)
648
-
5,535
-
963
-
46,027
25,301
16,497
(1,251)
1,203
(1,579)
-
-
(35,928)
Share of joint arrangement profit
Profit / (loss) before income tax
-
-
-
-
486
46,027
25,301
16,497
(1,579)
(35,442)
5,895
1,203
50,318
486
50,804
14,765
36,039
-
-
-
-
14,765
46,027
25,301
16,497
(1,579)
(50,207)
1,543,248
669,264
410,219
40,846
353,311
-
-
-
-
-
-
-
-
2,564,266
452,622
3,016,888
2,564,266
452,622
Income tax expense
Profit / (loss) for the year
Total assets
Total liabilities
Total equity
2 Net interest income
Interest income and expense is recognised in the profit or loss using the effective interest method. The effective interest rate is established on
initial recognition of the financial assets and liabilities and is not revised subsequently. The calculation of the effective interest rate includes all
yield related fees and commissions paid or received that are an integral part of the effective interest rate.
Interest on the effective portion of a derivative designated as a cash flow hedge is initially recognised in the hedging reserve. It is released to the
profit or loss at the same time as the hedged item or if the hedge relationship is subsequently deemed to be ineffective.
Interest income
Cash and cash equivalents
Investments
Finance receivables
Total interest income
Interest expense
Retail deposits
Bank and securitised borrowings 1
Net interest expense on derivative financial instruments
Total interest expense
Net interest income
Jun 15
$000
Jun 14
$000
2,458
9,919
248,091
260,468
82,526
43,294
221
3,559
9,189
197,549
210,297
79,430
20,932
859
126,041
101,221
134,427
109,076
Included within the Group's interest income on finance receivables is $1,157,000 (2014: $2,665,000) on individually impaired assets.
1 Bank and securitised borrowings interest expense increased $22.4 million during the year ended 30 June 2015. This was due to comparatives
only including HHHL Group results for three months of the prior year.
10
11
40
Heartland New Zealand Limited - Annual Report 2015
Financial Statements For The Year Ended 30 June 2015
Financial Statements For The Year Ended 30 June 2015
www.heartland.co.nz
41
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
3 Net operating lease income
6 Impaired asset expense
Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in
negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over
the lease term. Profits on the sale of operating lease vehicles are included as part of operating lease income. Current year depreciation and
losses on the sale of operating lease vehicles are included as part of operating lease expenses.
Operating lease income
Lease income
Gain on disposal of lease vehicles
Total operating lease income
Operating lease expense
Depreciation on lease vehicles
Direct lease costs
Total operating lease expenses
Net operating lease income
4 Other income
Jun 15
$000
Jun 14
$000
9,430
920
10,350
6,375
712
7,087
11,256
2,092
13,348
7,060
649
7,709
3,263
5,639
Non-securitised
Individually impaired expense
Collectively impaired expense / (recovery)
Total non-securitised impaired asset expense
Securitised
Individually impaired expense
Collectively impaired expense
Total securitised impaired asset expense
Total
Individually impaired expense
Collectively impaired expense / (recovery)
Total impaired asset expense
7 Taxation
(a)
Income tax expense
NOTE
Jun 15
$000
7,153
4,051
11,204
53
848
901
Jun 14
$000
11,851
(6,536)
5,315
-
580
580
19(e)
19(e)
7,206
4,899
12,105
11,851
(5,956)
5,895
Rental income from investment properties is recognised on a straight-line basis over the term of the relevant lease. Other items of income are
recognised at the fair value of the consideration received or receivable, net of the amount of goods and services tax levied.
Income tax expense for the year comprises current tax and movements in deferred tax balances. Income tax expense is recognised in profit or
loss except to the extent that it relates to items recognised directly in other comprehensive income, in which case it is recognised in equity or
other comprehensive income.
Rental income from investment properties
Management fees
Other income
Total other income
5 Selling and administration expenses
Personnel expenses
Directors' fees
Superannuation
Audit and review of financial statements
Other assurance services paid to auditor 1
Other fees paid to auditor 2
Depreciation - property, plant and equipment
Amortisation - intangible assets
Operating lease expense as a lessee
Legal and professional fees
Other operating expenses
Total selling and administration expenses
NOTE
15(d)
Jun 15
$000
1,478
500
1,962
3,940
Jun 14
$000
4,027
374
570
4,971
Jun 15
$000
39,619
Jun 14
$000
35,180
917
782
431
23
125
777
1,233
2,001
2,318
20,177
68,403
882
585
430
18
193
801
1,341
1,654
4,434
19,221
64,739
1 Other assurance services paid to auditor comprise of reporting on trust deed requirements.
2 Other fees paid to auditor include professional fees in connection with RBNZ reporting and other regulatory compliance, accounting advice,
internal audit and review work completed.
Income tax recognised in profit or loss
Current tax
Current year
Adjustments for prior year
Deferred tax
Current year
Adjustments for prior year
Income tax expense recognised in profit or loss
Income tax recognised in other comprehensive income
Current tax
Fair value movements of available for sale investments
Deferred tax
Defined benefit plan
Fair value movements of cash flow hedges
Income tax (benefit) / expense recognised in other comprehensive income
Reconciliation of effective tax rate
Profit before income tax
Prima facie tax at 28%
Higher tax rate for overseas jurisdiction
Plus/ (minus) tax effect of items not taxable / deductible
Adjustments for prior year
Utilisation of unrecognised tax losses
Total income tax expense
Jun 15
$000
Jun 14
$000
18,755
(195)
3,746
351
(2,209)
(178)
16,173
10,989
(321)
14,765
349
(5)
19
(1,052)
(684)
1
431
427
64,336
50,804
18,014
14,225
92
(141)
(283)
(1,509)
16,173
21
489
30
-
14,765
12
13
42
Heartland New Zealand Limited - Annual Report 2015
Financial Statements For The Year Ended 30 June 2015
Financial Statements For The Year Ended 30 June 2015
www.heartland.co.nz
43
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
7 Taxation (continued)
(b) Current tax
Current tax is the expected tax receivable or payable on the taxable income for the year, using tax rates enacted or substantively enacted at the
reporting date, and any adjustment to the tax receivable or payable in respect of previous years. Current tax for current and prior years is
recognised as a liability (or asset) to the extent that it is unpaid (or refundable).
(c) Deferred tax assets
The Group has recognised deferred tax assets, including those relating to the tax effects of income tax losses and credits available to be carried
forward, to the extent that there are sufficient taxable temporary differences (deferred tax liabilities) relating to the same taxation authority and the
same subsidiary against which the unused tax losses can be utilised.
Deferred tax assets comprise of the following temporary differences:
Employee entitlements
Provision for impairment
Investment properties
Intangibles and property, plant and equipment
Operating lease vehicles
Other temporary differences
Total deferred tax assets
Opening balance of deferred tax assets
Movement recognised in profit or loss
Movement recognised in other comprehensive income
Closing balance of deferred tax assets
(d) Goods and services tax (GST)
Jun 15
$000
Jun 14
$000
1,229 1,619
6,633 4,404
1,473 1,740
(399) (853)
(1,543) (1,397)
1,314 (226)
8,707
5,287
5,287
2,387
1,033
8,707
16,387
(10,668)
(432)
5,287
Revenues, expenses and assets are recognised net of the amount of GST. As the Group is predominantly involved in providing financial services,
only a proportion of GST paid on inputs is recoverable. The non-recoverable proportion of GST is treated as part of the cost of acquisition of the
asset or is expensed.
(e)
Imputation credit account
Imputation credit account
8 Earnings per share
Jun 15
$000
3,484
Jun 14
$000
(1,471)
The calculation of basic and diluted earnings of 10c per share at 30 June 2015 (2014: 9c per share) is based on the profit for the year of
$48,163,000 (2014: $36,039,000), and a weighted average number of shares on issue of 466,643,607 (2014: 411,753,442).
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
Financial position
9 Investments
The Group holds investments in bank bonds and floating rate notes, local authority stock, public securities, corporate bonds and equity
investments. Equity investments are classified as being fair valued through profit or loss and the fair value is based on unobservable inputs. All
other investments held are classified as being available for sale and are stated at fair value less impairment, if any. The fair values are derived by
reference to published price quotations in an active market or modelled using observable market inputs.
Bank bonds and floating rate notes
Local authority stock
Public securities and corporate bonds
Equity investments
Total investments
Jun 15
$000
Jun 14
$000
244,505
143,063
46,839
31,275
6,719
36,982
58,814
-
329,338
238,859
During the year ended 30 June 2015 Heartland acquired an interest of 11% in Harmoney Corp Limited and an interest of 12% in Ora HQ Limited.
10 Investment properties
Investment properties have been acquired through the enforcement of security over finance receivables and are held to earn rental income or for
capital appreciation (or both).
Investment properties are initially recorded at fair value, with subsequent changes in fair value recognised in profit or loss. Fair values are
determined by qualified independent valuers or other similar external evidence, adjusted for changes in market conditions and the time since the
last valuation.
Opening balance
Acquisitions
Additional capital expenditure
Sales
Decrease in fair value of investment properties
Closing balance
Jun 15
$000
24,888
9,000
-
(9,375)
-
24,513
Jun 14
$000
58,287
9,746
302
(42,244)
(1,203)
24,888
14
15
44
Heartland New Zealand Limited - Annual Report 2015
Financial Statements For The Year Ended 30 June 2015
Financial Statements For The Year Ended 30 June 2015
www.heartland.co.nz
45
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
11 Finance receivables
12 Operating lease vehicles
Finance receivables are initially recognised at fair value plus incremental direct transaction costs and are subsequently measured at amortised
Operating lease vehicles are stated at cost less accumulated depreciation.
cost using the effective interest method, less any impairment loss.
Past due but not impaired assets are any assets which have not been operated by the counterparty within their key terms but are not considered
to be impaired by the Group.
Individually impaired assets are those loans for which the Group has evidence that it will incur a loss, and will be unable to collect all principal and
interest due according to the contractual terms of the loan.
Restructured assets are impaired assets where the Group expects to recover all amounts owing, although the original terms have been changed
due to the counterparty's difficulty in complying with the original terms of the contract and the amended terms are not comparable with similar new
lending.
Credit impairment provisions are made where events have occurred leading to an expectation of reduced future cash flows from certain
receivables. These provisions are made in some cases against an individual loan and in other cases on a collective basis. When all appropriate
collection and legal action has been performed and the loan is known to be uncollectible, it is written off against the related provision for
impairment.
Non-securitised
Neither at least 90 days past due or impaired
At least 90 days past due
Individually impaired
Restructured assets
Gross finance receivables
Less provision for impairment
Less fair value adjustment for present value of future losses1
Total non-securitised finance receivables
Securitised
Neither at least 90 days past due or impaired
At least 90 days past due
Individually impaired
Gross finance receivables
Less provision for impairment
Total securitised finance receivables
Total
Neither at least 90 days past due or impaired
At least 90 days past due
Individually impaired
Restructured assets
Gross finance receivables
Less provision for impairment
Less fair value adjustment for present value of future losses1
Total finance receivables
NOTE
Jun 15
$000
Jun 14
$000
2,552,302
2,321,630
33,459
25,567
3,881
32,969
27,617
4,064
2,615,209
2,386,280
24,511
6,242
15,725
8,000
2,584,456
2,362,555
276,944
1,516
55
244,409
1,065
-
278,515
245,474
901
636
277,614
244,838
2,829,246
2,566,039
34,975
25,622
3,881
34,034
27,617
4,064
2,893,724
2,631,754
25,412
6,242
16,361
8,000
2,862,070
2,607,393
19(b)
19(c)
19(a)
19(e)
19(a)
1 A fair value adjustment of $8m for the present value of future losses was recognised on acquisition of HHHL Group. This fair value adjustment
is amortised over the estimated lifetime of the finance receivables acquired.
Operating lease vehicles are depreciated on a straight line basis over their expected life after allowing for any residual values. The estimated lives
of operating lease vehicles vary up to five years. Vehicles held for sale are not depreciated but are tested for impairment.
Cost
Opening balance
Additions
Disposals
Closing balance
Accumulated depreciation
Opening balance
Depreciation charge for the year
Disposals
Closing balance
Opening net book value
Closing net book value
Jun 15
$000
43,595
11,544
Jun 14
$000
47,339
12,954
(12,953)
(16,698)
42,186
43,595
12,300
6,375
(6,487)
12,188
31,295
29,998
14,944
7,060
(9,704)
12,300
32,395
31,295
The future minimum lease payments receivable under non-cancellable operating leases not later than one year is $7,961,000 (2014: $8,610,000),
within one to five years is $6,225,000 (2014: $7,816,000) and over five years is nil (2014: nil).
13 Borrowings
Bank borrowings and deposits are initially recognised at fair value including incremental direct transaction costs. They are subsequently
measured at amortised cost using the effective interest method.
Deposits
Subordinated bond
Bank borrowings
Securitised borrowings
Total borrowings
Jun 15
$000
Jun 14
$000
2,097,458
1,736,751
3,378
465,779
258,630
3,378
555,708
228,623
2,825,245
2,524,460
Deposits rank equally and are unsecured. The Subordinated bonds rank below all other general liabilities of the Group.
Securitised borrowings held by investors in Heartland ABCP Trust 1 (ABCP Trust) rank equally with each other and are secured over the
securitised assets of that trust. The Group has securitised bank facilities of $350 million (2014: $400 million) in relation to the ABCP Trust, which
matures on 3 February 2016.
The Group has a New Zealand and Australian bank facility provided by Commonwealth Bank of Australia (CBA) totalling $466 million in relation to
HHHL Group (CBA bank facility). The CBA bank facility is secured over assets of HHHL Group and has a maturity date of 30 September 2019.
Capacity for new Australian drawings is available for two years, based on scheduled repayments achieved by the Group. ASF Group (comprising
ASF, ASF Settlement Trust and Seniors Warehouse Trust) has also provided a cross-guarantee to CBA for bank loans to other members of ASF
Refer to Note 19 - Asset quality for further analysis of finance receivables by credit risk concentration.
Group.
Finance lease receivables
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee.
Amounts due from finance leases are recognised as finance receivables at the amount of the Group's net investment in the leases. The table
below provides an analysis of finance lease receivables for leases of certain property and equipment in which the Group is the lessor.
The banking agreements include covenants for the provision of information, attainment of minimum financial ratios and equity, compliance with
specified procedures and certification of due performance by ASF Group.
Gross finance lease receivables
Less than 1 year
Between 1 and 5 years
More than 5 years
Total gross finance lease receivables
Less unearned finance income
Less provision for impairment
Net finance lease receivables
Jun 15
$000
Jun 14
$000
32,484
66,835
68
36,420
66,184
66
99,387
102,670
14,315
170
84,902
14,681
87
87,902
16
17
46
Heartland New Zealand Limited - Annual Report 2015
Financial Statements For The Year Ended 30 June 2015
Financial Statements For The Year Ended 30 June 2015
www.heartland.co.nz
47
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
14 Share capital and dividends paid
(b) Intangible assets and goodwill (continued)
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognised
(ii) Goodwill
as a deduction from equity, net of any tax effects.
Number of shares issued and authorised
Issued shares
Opening balance
Shares issued during the year
Dividend reinvestment plan
Closing balance
The shares have equal voting rights, rights to dividends and distributions and do not have a par value.
Jun 15
Jun 14
Number of
shares
Number of
shares
000
000
463,266
388,704
-
6,624
65,900
8,662
469,890
463,266
Goodwill arising on acquisition represents the excess of the cost of the acquisition over the Group’s interest in the fair value of the identifiable net
assets. Goodwill that has an indefinite useful life is not subject to amortisation and is tested for impairment annually. Goodwill is carried at cost
less accumulated impairment losses.
Goodwill
Jun 15
$000
45,143
Jun 14
$000
45,143
On 1 April 2014, as part of the acquisition of HHHL Group $25.0 million of goodwill was recognised.
Goodwill was tested for impairment as at 30 June 2015. In assessing impairment, an internal valuation model was developed to indicate the value
of the business. This value was compared to the net assets of the Group. There was no indication of impairment and no impairment losses have
been recognised against the carrying amount of goodwill for the year ended 30 June 2015 (30 June 2014: nil).
The Group’s management and Board of Directors have assessed that goodwill should be allocated to the Group as a cash-generating unit, as this
is the cash generating unit at which goodwill is assessed for impairment and to which any future economic benefit will arise.
Dividends paid
(c) Trade and other payables
The Group paid total dividends of $30,222,744 ($0.06 per share) (2014: $19,958,000 ($0.05 per share)).
Derivative financial liabilities consist of interest rate swaps held to manage the Group's exposure to interest rate repricing risk arising from fixed
Under dividend reinvestment plans, the Group issued 3,680,052 new shares at $1.015 per share on 3 October 2014 and 2,943,636 new shares
rate mortgage loans.
at $1.320 per share on 7 April 2015.
15 Other balance sheet items
(a) Other assets
Derivative financial assets consist of interest rate swaps and foreign exchange options.
Interest rate swaps are held to manage the Group's
exposure to interest rate repricing risk arising from deposits, commercial paper issuance, current and future floating rate bank debt and
investments. Foreign exchange options are used to manage the Group's exposure to foreign exchange rate risk.
Property, plant and equipment are stated at cost less accumulated depreciation and impairment. Depreciation is calculated on a straight line basis
to write off the net cost or other revalued amount of each asset over its expected useful life to its estimated residual value.
Annual leave entitlements are accrued at amounts expected to be paid. Long service leave is accrued by calculating the probable future value of
entitlements and discounting back to present value. Obligations to defined contribution superannuation schemes are recognised as an expense
when the contribution is paid.
Derivative financial liabilities
Trade payables
GST payable
Due to related parties
Employee benefits
Total trade and other payables
(d) Related party transactions
NOTE
15(d)
Jun 15
$000
6,407
14,808
16,571
2,448
5,786
46,020
Jun 14
$000
4,180
12,849
15,749
500
6,097
39,375
The Group provided administrative assistance to MARAC Insurance Limited (MARAC Insurance) and received insurance commission from
MARAC Insurance.
MARAC Insurance, Heartland Cash and Term PIE Fund and some key management personnel invested in Heartland Bank Limited's deposits.
Jun 15
$000
59
5,546
1,092
5,422
Jun 14
$000
1,867
6,134
1,023
9,573
12,119
18,597
The investments of Heartland Cash and Term PIE Fund are detailed in Note 24 - Structured entities.
Derivative financial assets
Trade receivables
Prepayments
Property, plant and equipment
Total other assets
(b) Intangible assets and goodwill
(i)
Intangible assets with definite useful lives
Software acquired or internally developed by the Group is stated at cost less accumulated amortisation and any accumulated impairment losses.
Subsequent expenditure on software assets is capitalised only when it increases the future economic value of that asset. Amortisation of software
is on a straight line basis, at rates which will write off the cost over their estimated economic lives. All other expenditure is expensed immediately
as incurred.
Computer Software Cost
Jun 15
Jun 14
$000
5,976
$000
2,278
Transactions with related parties
MARAC Insurance Limited
Interest expense
Lending and credit fee income
Other income
Total transactions with other related parties
Due to related parties
MARAC Insurance Limited
Total due to related parties
Jun 15
$000
Jun 14
$000
(31)
625
500
1,094
2,448
2,448
(21)
300
374
653
500
500
18
19
48
Heartland New Zealand Limited - Annual Report 2015
Financial Statements For The Year Ended 30 June 2015
Financial Statements For The Year Ended 30 June 2015
www.heartland.co.nz
49
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
(d) Related party transactions (continued)
Transactions with key management personnel
Key management personnel, being directors of Heartland and those Executives reporting directly to the Chief Executive Officer and their
immediate relatives, have transacted with the Group during the year as follows:
Transactions with key management personnel
Interest income
Interest expense
Key management personnel compensation:
Short-term employee benefits
Share-based payment expense
Total transactions with key management personnel
Due (to) / from key management personnel
Finance receivables
Borrowings - deposits
Total due to key management personnel
16 Fair value
Jun 15
$000
Jun 14
$000
68
(573)
55
(281)
(6,690)
(2,693)
(9,888)
1,391
(14,386)
(12,995)
(7,304)
(907)
(8,437)
709
(5,998)
(5,289)
The fair values of financial assets and financial liabilities that are traded in active markets are based on quoted market prices or dealer price
quotations. For all other financial instruments, the Group determines fair value using other valuation techniques.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
16 Fair value (continued)
The following table analyses financial instruments measured at fair value at the reporting date by the level in the fair value hierarchy into which
each fair value measurement is categorised. The amounts are based on the values recognised in the Statement of Financial Position.
June 15
Assets
Investments
Derivative assets held for risk management
Total
Liabilities
Derivative liabilities held for risk management
Total
June 14
Assets
Investments
Derivative assets held for risk management
Total
Liabilities
Derivative liabilities held for risk management
Total
Level 1
$000
Level 2
$000
Level 3
$000
Total
$000
311,815
10,804
6,719
329,338
-
59
-
59
311,815
10,863
6,719
329,397
-
-
6,407
6,407
198,385
-
198,385
40,474
1,867
42,341
-
-
4,180
4,180
-
-
-
-
-
-
-
6,407
6,407
238,859
1,867
240,726
4,180
4,180
The Group measures fair values using the following fair value hierarchy, which reflects the significance of the inputs used in making the
There have been no transfers between Level 1 and Level 2 of the fair value hierarchy.
measurements.
-
-
-
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices)
or indirectly (that is, derived from prices).
Level 3: Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).
The Group recognises transfers between levels of the fair value hierarchy as of the end of the reporting period during which the change has
occurred.
(a) Financial instruments measured at fair value
The following methods and assumptions were used to estimate the fair value of each class of financial asset and liability measured at fair value
on a recurring basis in the Statement of Financial Position.
Investments
Investments in public sector securities and corporate bonds are classified as being available for sale and are stated at fair value less impairment,
(b) Financial instruments not measured at fair value
The following methods and assumptions were used to estimate the fair value of each class of financial assets and liabilities not recognised at fair
value but for which fair value is calculated for disclosure purposes under level 2 or 3 of the fair value hierarchy.
Cash and cash equivalents and other financial assets and liabilities
The fair value of all cash and cash equivalents and other financial assets and liabilities is considered equivalent to their carrying value due to their
short term nature.
Finance receivables
The fair value of the Group's finance receivables is calculated using a valuation technique which assumes the Group's current weighted average
lending rates for loans of a similar nature and term.
The current weighted average lending rate used to fair value finance receivables with a fixed interest rate was 8.95% (2014: 8.99%). Finance
receivables with a floating interest rate are deemed to be at current market rates. The current amount of credit provisioning has been deducted
from the fair value calculation of finance receivables as a proxy for future losses. Prepayment rates have not been factored into the fair value
with the fair value being based on quoted market prices (Level 1 under the fair value hierarchy) or modelled using observable market inputs
calculation as they are not deemed to be material.
(Level 2 under the fair value hierarchy). Refer to Note 9 - Investments for more details.
Investments valued under level 2 of the fair value hierarchy are valued either based on quoted market prices or dealer quotes for similar
instruments, or discounted cash flows analysis.
Investments in unlisted equity securities are classified as being fair valued through profit or loss and are valued under Level 3 of the fair value
hierarchy, with the fair value being based on unobservable inputs.
Derivative items
Interest rate swaps are classified as held for trading and are recognised in the financial statements at fair value. Derivatives are initially
recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at their fair value. Fair values
are determined on the basis of discounted cash flow analysis using observable market prices and adjustments for counterparty credit spreads.
(Level 2 under the fair value hierarchy).
20
21
50
Heartland New Zealand Limited - Annual Report 2015
Financial Statements For The Year Ended 30 June 2015
Financial Statements For The Year Ended 30 June 2015
www.heartland.co.nz
51
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
16 Fair value (continued)
(b) Financial instruments not measured at fair value (continued)
Borrowings
The fair value of deposits, bank borrowings and other borrowings is the present value of future cash flows and is based on the current market
interest rates payable by the Group for debt of similar maturities. The current market rate used to fair value borrowings for the Group is 4.32%
(2014: 4.64%).
Other financial assets and financial liabilities
The Group has not disclosed the fair values for financial instruments such as short-term trade receivables and payables, because their carrying
amounts are a reasonable approximation of fair values.
The following table sets out the fair values of financial instruments not measured at fair value and analyses them by the level in the fair value
hierarchy into which each fair value measurement is categorised.
June 15
Assets
Cash and cash equivalents
Finance receivables
Finance receivables - securitised
Other financial assets
Total financial assets
Liabilities
Borrowings
Borrowings - securitised
Other financial liabilities
Total financial liabilities
June 14
Assets
Cash and cash equivalents
Finance receivables
Finance receivables - securitised
Other financial assets
Total financial assets
Liabilities
Borrowings
Borrowings - securitised
Other financial liabilities
Total financial liabilities
Level 1
Level 2
Level 3
$000
$000
$000
Total Fair
Value
$000
Total
Carrying
Value
$000
37,012
-
-
-
37,012
-
-
-
-
-
-
37,012
37,012
2,582,776
2,582,776
2,584,456
279,491
5,546
279,491
5,546
277,614
5,546
2,867,813
2,904,825
2,904,628
-
-
-
-
2,576,425
258,630
2,448
-
-
20,594
2,576,425
2,566,615
258,630
23,042
258,630
23,042
2,837,503
20,594
2,858,097
2,848,287
37,344
-
-
-
37,344
-
-
-
-
-
-
37,344
37,344
2,357,824
2,357,824
2,362,555
246,674
6,134
246,674
6,134
244,838
6,134
2,610,632
2,647,976
2,650,871
-
-
-
-
2,297,381
228,887
5,420
-
-
14,026
2,297,381
2,295,837
228,887
19,446
228,623
19,446
2,531,688
14,026
2,545,714
2,543,906
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
16 Fair value (continued)
(c) Classification of financial instruments
The following tables summarise the categories of financial instruments and the carrying value and fair value of all financial instruments of the
Group:
June 2015
Cash and cash equivalents
Investments
Finance receivables
Finance receivables - securitised
Derivative financial assets
Other financial assets
Total financial assets
Borrowings
Borrowings - securitised
Derivative financial liabilities
Other financial liabilities
Total financial liabilities
June 2014
Cash and cash equivalents
Investments
Finance receivables
Finance receivables - securitised
Derivative financial assets
Other financial assets
Total financial assets
Borrowings
Borrowings - securitised
Derivative financial liabilities
Other financial liabilities
Total financial liabilities
Held for
trading
Loans and
receivables
Available for
sale
$000
$000
$000
Financial
liabilities at
amortised
cost
$000
Total
Carrying
Value
Total Fair
Value
$000
$000
-
37,012
-
6,719
-
322,619
-
-
59
-
2,584,456
277,614
-
5,546
-
-
-
-
6,778
2,904,628
322,619
-
-
-
-
-
-
-
37,012
329,338
37,012
329,338
2,584,456
2,582,776
277,614
279,491
59
5,546
59
5,546
3,234,025
3,234,222
-
-
-
-
-
37,344
-
-
-
-
-
-
-
238,859
-
-
6,407
-
6,407
-
-
-
-
2,362,555
244,838
1,867
-
-
6,134
-
-
-
-
1,867
2,650,871
238,859
2,566,615
2,566,615
2,576,425
258,630
258,630
258,630
-
23,042
6,407
23,042
6,407
23,042
2,848,287
2,854,694
2,864,504
-
-
-
-
-
-
-
37,344
238,859
37,344
238,859
2,362,555
2,357,824
244,838
246,674
1,867
6,134
1,867
6,134
2,891,597
2,888,702
-
-
4,180
-
4,180
-
-
-
-
-
-
-
-
-
-
2,295,837
2,295,837
2,297,381
228,623
228,623
228,887
-
19,446
4,180
19,446
4,180
19,446
2,543,906
2,548,086
2,549,894
22
23
52
Heartland New Zealand Limited - Annual Report 2015
Financial Statements For The Year Ended 30 June 2015
Financial Statements For The Year Ended 30 June 2015
www.heartland.co.nz
53
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
Risk management
17 Risk management policies
The Group is committed to the management of risk and operates an Enterprise Risk Management Program (RMP) across four primary risk
domains; credit, liquidity, market (including interest rate), and operational & compliance. The Group's risk management strategy is set by the
Board of Directors (Board). The Group has put in place management structures and information systems to manage risks incorporated in the
RMP. The Group has separate monitoring tasks where feasible and subjects all risk processes to hindsight and internal audit, and accounting
systems to regular internal and external audits.
The Audit and Risk Committee has been appointed by the Board to advise and provide assurance to the Board in relation to the oversight of:
The integrity of financial control, financial management and external financial reporting of the Group.
Risk management and internal control.
The internal audit function and the internal audit process.
-
-
-
The Audit and Risk Committee are responsible for the risk management of the overall Group. Risks in Heartland Bank Limited (the Bank), the
largest operating subsidiary are managed by the Bank's Board Risk Committee.
Role of the Board and the Board Risk Committee
The Bank's Board Risk Committee (BRC) is responsible for the overall risk management process and the development of the RMP. The role of
the BRC is to assist the Board of Directors of the Bank (Bank's Board) to formulate its risk appetite, understand the risks the Bank faces and to
ensure that all policy and decisions are made in accordance with the Bank's corporate values and guiding principles. The BRC has the following
responsibilities:
-
-
-
-
-
-
-
-
To oversee the Bank's risk profile and review and approve the Bank's RMP within the context of the risk-reward strategy determined by the
Bank's Board at least annually.
To make recommendations regarding high-level liquidity / capital / funding policies and strategy, including the use of securitisation and
special investment vehicles.
To agree and recommend for the Bank Board's approval and annual review; a set of risk limits and conditions that apply to the taking of risk,
as delegated to the Risk Committee by the Bank's Board, that are consistent with the Bank Board's determined risk appetite. This includes
the authorities delegated by the Board to the Chief Executive Officer (CEO), Chief Financial Officer (CFO), Chief Risk Officer (CRO) and any
other officers of the Bank to whom the Board or the Committee have delegated authority, and to consider and accept risks beyond
management’s approval discretion where deemed appropriate.
To monitor the risk profile, performance, capital levels, exposures against limits and the management and control of the Bank's risks.
To review significant correspondence with the Bank's regulators, and receive reports from management on the Bank's regulatory relations
and report any significant issues to the Bank's Board.
To monitor changes anticipated in the economic and business environment and other factors considered relevant to the Bank's risk profile
and capital adequacy.
To review significant risk management issues that are raised in external or internal audits as well as the length of time and action taken to
resolve such issues.
To ensure an appropriate set of applicable corporate governance principles are developed, and reviewed on a regular basis.
The BRC consists of four Bank directors, of which at least three are non-executive directors and two are independent directors. In addition the
CEO, CRO and CFO may attend meetings. The BRC meets at least bi-monthly to review identified risk issues, and reports directly to the Bank's
Board. A member of the BRC sits on the Audit Committee and vice versa.
Audit Committee and Internal Audit
The Group has an internal audit function, the objective of which is to provide independent, objective assurance over the internal control
environment and additional services designed to add value and improve the Group’s operations. It assists the Group to accomplish its objectives
by bringing a systematic and disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance
processes. Internal audit is granted full, free and unfettered access to any and all of the organisation’s records, personnel and physical properties
deemed necessary to accomplish its internal audit activities.
A regular cycle of testing has been implemented to cover all areas of the business. Its focus is on assessment, management and control of risks.
The intention is to cycle through various business units and operational areas on a pre-set and agreed cycle relative to assessed risk, looking at
the specific internal control issues pertinent to the area, with a requirement to meet or exceed the Standards for the Professional Practice of
Internal Auditing of The Institute of Internal Auditors.
Each audit has a separate audit programme tailored to the area of business that is being reviewed. The audit programmes are updated during
each audit to reflect any process changes. Audit work papers are completed to evidence the testing performed in accordance with the audit
programme.
All internal audit reports are addressed to the manager of the relevant area that is being audited. Management comments are obtained from the
process owner(s) and are included in the report.
The internal audit function has direct reporting lines, and accountability to the Audit Committee of the Bank, the Audit and Risk Committee of
Heartland (collectively the Audit Committees) and administratively to the CFO. A schedule of all outstanding internal control issues is maintained
and presented to the Audit Committees to assist the Audit Committees to track the resolution of previously identified issues. Any issues raised
that are categorised as high risk are specifically reviewed by internal audit during a follow-up review once the issue is considered closed by
management. The follow-up review is performed with a view to formally close out the issue.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
17 Risk management policies (continued)
Audit Committee and Internal Audit (continued)
The Audit Committees focus on financial reporting and application of accounting policies as part of the internal control and risk assessment
framework. The Audit Committees monitor the identification, evaluation and management of all significant risks through the Group. This work is
supported by internal audit, which provides an independent assessment of the design, adequacy and effectiveness of internal controls. The Audit
Committees receive regular reports from internal audit.
Charters for the Audit and Risk Committee ensure suitable cross representation to allow effective communication pertaining to identified issues
with oversight by the Board. The CRO has a direct reporting line to the Chairman of the Board. The Head of Internal Audit has a direct reporting
line to the Chairman of the Audit and Risk Committee.
Bank's Asset and Liability Committee (ALCO)
The ALCO comprises the CEO (Chair), CFO, CRO, Treasurer, Head of Consumer & Retail, Head of Rural and Head of Business. The ALCO has
responsibility for overseeing aspects of the Group's financial position risk management. The purpose of the ALCO is to support the BRC with
specific responsibilities for decision making and oversight of risk matters in relation to:
- Market risk (including non-traded interest rate risk and the investment of capital)
- Liquidity risk (including funding)
- Foreign exchange rate risk
- Balance sheet structure
- Capital management
The ALCO usually meet monthly, and reports to the BRC.
Bank's Executive Risk Committee (ERC)
The ERC comprises the CEO (Chair), CFO, CRO, Chief Operating Officer, Head of Consumer & Retail, Head of Rural, Head of Business, Head
of Human Resources and Group General Counsel. The ERC has responsibility for overseeing all risk aspects not considered by ALCO. The
purpose of ERC is to support the BRC with specific responsibilities for decision making and oversight of the following risk categories:
- Operational and compliance risk
- Credit risk
- Strategic risk
- Legal and governance risk
- Business risk
Operational & compliance risk
Operational & compliance risk is the risk arising from day to day operational activities in the execution of the Group's strategy which may result in
direct or indirect loss. Operational & compliance risk losses can occur as a result of fraud, human error, missing or inadequately designed
processes, failed systems, damage to physical assets, improper behaviour or from external events. The losses range from direct financial losses,
to reputational damage, unfavourable media attention, or loss of staff or clients. Examples include failure to comply with policy and legislation,
human error, natural disasters, fraud and other malicious acts. Where appropriate, risks are mitigated by insurance.
To ensure appropriate responsibility is allocated for the management, reporting and escalation of operational & compliance risk, the Group
operates a “three lines of defence” model which outlines principles for the roles, responsibilities and accountabilities for operational & compliance
risk management:
The first line of defence is the business line management for the identification, management and mitigation of the risks associated with the
products and processes of the business. This accountability includes regular testing and certification of the adequacy and effectiveness of
controls and compliance with the Group’s policies.
The second line of defence is the Risk & Compliance function, responsible for the design and ownership of the operational & compliance
Risk Policies. It incorporates key processes including Risk and Control Self-Assessment (RCSA), incident management, independent
evaluation of the adequacy and effectiveness of the internal control framework, and the self-certification process.
The third line of defence is audit.
is responsible for assessing compliance with policy frameworks and for providing
Internal Audit
-
-
-
independent evaluation of the adequacy and effectiveness of the risk and control framework.
The Group’s exposure to operational & compliance risk is governed by a policy approved by the Board and managed by the ERC. This policy sets
out the nature of risk which may be taken and aggregate risk limits, and the ERC must conform to this. The objective of the ERC is to manage the
identification of operational & compliance risk and maintenance of a suitable internal control environment so residual risk to the Group is
consistent with the Groups risk appetite.
Foreign exchange rate risk
Foreign exchange risk is the risk that the Group’s earnings and shareholder equity position are adversely impacted from changes in foreign
exchange rates. The Group has exposure to foreign exchange translation risks through its wholly owned subsidiary, ASF (which has a functional
currency of Australian dollars), in the forms of profit translation risk and balance sheet translation risk.
Profit translation risk is the risk that deviations in exchange rates have a significant impact on the reported profit. Balance sheet translation risk is
the risk that whilst the foreign currency value of the net investment in a subsidiary may not have changed, when translated back to the New
Zealand dollars (NZD), the NZD value has changed materially due to movements in the exchange rates. The foreign exchange revaluation gains
and losses are booked to the Foreign currency translation reserve. Substantial foreign exchange rate movements in any given year may have a
impact on other comprehensive income. The Group manages this risk by setting and approving the foreign exchange rate for the upcoming
financial year and entering into hedging contracts to manage the foreign exchange translation risks.
24
25
54
Heartland New Zealand Limited - Annual Report 2015
Financial Statements For The Year Ended 30 June 2015
Financial Statements For The Year Ended 30 June 2015
www.heartland.co.nz
55
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
18 Credit risk exposure
18 Credit risk exposure (continued)
Credit risk is the risk that a borrower will default on any type of debt by failing to make payments which it is obligated to do so. The risk is primarily
(b) Concentration of credit risk by geographic region
that of the lender and includes loss of principal and interest, disruption to cash flows and increased collection costs.
Credit risk is managed to achieve sustainable and superior risk-reward performance whilst maintaining exposures within acceptable risk “appetite”
parameters. This is achieved through the combination of governance, policies, systems and controls, underpinned by sound commercial
judgement as described below.
To manage this risk the BRC has been delegated the task of overseeing a formal credit risk management strategy. The BRC reviews the Group's
credit risk exposures to ensure consistency with the Group's credit policies to manage all aspects of credit risk. The credit risk management
strategies ensure that:
- Credit origination meets agreed levels of credit quality at point of approval.
- Sector and geographical risks are actively managed.
- Industry concentrations are actively monitored.
- Maximum total exposure to any one debtor is actively managed.
- Changes to credit risk are actively monitored with regular credit reviews.
The Group has adopted a detailed Credit Policy Framework supported by Lending Standards providing criteria for finance products within each
business sector. The combination of the Credit Policy Framework and Lending Standards guides credit assessment, credit risk grading,
documentation standards, legal procedures and compliance with regulatory and statutory requirements.
The BRC has authority from the Board for approval of all credit exposures. Lending authority has been individually provided to the Group's Credit
New Zealand:
Auckland
Wellington
Rest of North Island
Canterbury
Rest of South Island
Australia:
Queensland
New South Wales
Victoria
Western Australia
South Australia
Rest of Australia
Rest of the world 1
Committee, for delegation through the business units under a detailed Delegated Lending Authority framework. Application of credit discretions in
Provision for collectively impaired assets
the business operation are monitored through a defined review and hindsight structure. Delegated Lending Authorities are provided to individual
Less acquisition fair value adjustment for present value of future losses
officers with due cognisance of their experience and ability. Larger and higher risk exposures require approval of senior management, the Credit
Total on balance sheet credit exposures
Jun 15
$000
Jun 14
$000
830,027
206,818
788,904
494,848
424,828
117,867
182,032
83,213
17,396
18,169
11,048
75,318
725,318
196,992
668,629
482,159
380,814
115,936
171,765
79,041
14,456
16,951
10,311
44,224
3,250,468
2,906,596
(10,201)
(6,242)
(6,999)
(8,000)
3,234,025
2,891,597
1 These overseas assets are not Finance Receivables, they are Investments. These assets represent NZD-denominated investments in AA+ and
higher rated securities issued by offshore supranational agencies ("Kauri Bonds").
(c) Concentration of credit risk by industry sector
Risk Committee and ultimately through to the BRC.
In addition to regular internal audit activity in regards to credit standards, the Group employs a comprehensive process of hind sighting loans to
ensure that credit policies and the quality of credit processes are maintained.
Home equity loans and negative equity risk
Home equity release loans are a form of mortgage lending targeted toward the seniors market. These loans differ to conventional mortgages in
that they typically are not repaid until the borrower ceases to reside in the property. Further, interest is not required to be paid, it is capitalised with
the loan balance and is repayable on termination of the loan. As such, there are no incoming cash flows and therefore no default risk to manage
during the term of the loan. Credit risk becomes 'negative equity' risk through the promise to customers that they can reside in their property for
'as long as they wish' and repayment of their loan is limited to the net sale proceeds of their property.
The Group's exposure to negative equity risk is managed by Credit Risk Policy in conjunction with associated lending standards specific for this
product.
(a) Maximum exposure to credit risk at the relevant reporting dates
The following table represents the maximum credit risk exposure, without taking account of any collateral held. The exposures set out above are
based on net carrying amounts as reported in the Statement of Financial Position.
Agriculture
Forestry and Fishing
Mining
Manufacturing
Finance & Insurance
Wholesale trade
Retail trade
Households
Property and Business services
Transport and storage
Other Services
Cash and cash equivalents
Investments
Finance receivables
Derivative financial assets
Other financial assets
Total on balance sheet credit exposures
Jun 15
$000
37,012
329,338
Jun 14
$000
37,344
238,859
2,862,070
2,607,393
59
5,546
1,867
6,134
3,234,025
2,891,597
Provision for collectively impaired assets
Less acquisition fair value adjustment for present value of future losses
Total on balance sheet credit exposures
(d) Commitments to extend credit
Undrawn facilities available to customers
Conditional commitments to fund at future dates
Jun 15
$000
Jun 14
$000
537,286
469,020
35,126
14,105
93,779
377,318
82,665
193,862
22,301
11,148
77,321
291,223
80,884
171,019
1,397,003
1,313,877
396,939
20,068
102,317
330,860
15,873
123,070
3,250,468
2,906,596
(10,201)
(6,242)
(6,999)
(8,000)
3,234,025
2,891,597
116,217
108,037
114,004
95,780
As at 30 June 2015 there are no undrawn lending commitments to counterparties for whom drawn balances are classified as individually impaired
(2014: nil).
26
27
56
Heartland New Zealand Limited - Annual Report 2015
Financial Statements For The Year Ended 30 June 2015
Financial Statements For The Year Ended 30 June 2015
www.heartland.co.nz
57
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
19 Asset quality
The disclosures in this note are categorised by the following credit risk concentrations:
Corporate
Rural
Property
Other
Residential
Lending to the farming sector primarily livestock, rural mortgage lending, seasonal and working capital
financing, as well as leasing solutions to farmers.
Includes lending to individuals and small
to medium
enterprises.
Property asset lending including non-core property.
All other lending that does not fall into another category.
Lending secured by a first ranking mortgage over a residential property used primarily for residential purposes
either by the mortgagor or a tenant of the mortgagor.
All Other
Consumer lending to individuals.
(a) Finance receivables by credit risk concentration
Jun 15
Neither at least 90 days past due nor impaired
At least 90 days past due
Individually impaired
Restructured assets
Fair value adjustment for present value of
future losses
Provision for impairment
Total net finance receivables
Jun 14
Neither at least 90 days past due nor impaired
At least 90 days past due
Individually impaired
Restructured assets
Fair value adjustment for present value of
future losses
Provision for impairment
Total net finance receivables
NOTE
19(b)
19(c)
11
19(e)
19(b)
19(c)
11
19(e)
Corporate
Rural
$000
Property
$000
Other
$000
Residential
All Other
Total
$000
$000
$000
553,739
17,904
1,562
43
-
-
884,942
837,063
553,502
2,829,246
286
6,854
-
-
13,384
16,982
1,024
655
224
-
2,746
-
2,814
34,975
25,622
3,881
-
(6,242)
-
(6,242)
(2,173)
(4,614)
(14,368)
(1,763)
(2,494)
(25,412)
571,075
2,526
901,964
829,937
556,568
2,862,070
480,596
9,433
2,818
5
-
2,007
2,599
17,090
-
-
774,527
19,917
7,709
1,175
869,701
439,208
2,566,039
463
-
-
1,622
-
2,884
34,034
27,617
4,064
-
(8,000)
-
(8,000)
(2,114)
(5,744)
(7,275)
(57)
(1,171)
(16,361)
490,738
15,952
796,053
862,107
442,543
2,607,393
(b) Past due but not impaired
Jun 15
Less than 30 days past due
At least 30 and less than 60 days past due
At least 60 but less than 90 days past due
At least 90 days past due
Total past due but not impaired
Jun 14
Less than 30 days past due
At least 30 and less than 60 days past due
At least 60 but less than 90 days past due
At least 90 days past due
Total past due but not impaired
7,338
3,752
416
17,904
29,410
4,221
5,509
3,791
9,433
22,954
-
-
-
286
286
-
-
-
2,599
2,599
9,185
3,434
4,099
13,384
30,102
8,604
3,047
3,534
19,917
35,102
2,877
14,700
491
532
655
3,984
1,789
2,746
4,555
23,219
1,064
313
114
463
7,826
2,362
1,176
1,622
1,954
12,986
34,100
11,661
6,836
34,975
87,572
21,715
11,231
8,615
34,034
75,595
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
19 Asset quality (continued)
(c)
Individually impaired assets
Jun 15
Opening
Additions
Deletions
Write offs
Closing gross individually impaired assets
Less: provision for individually impaired assets
Total net impaired assets
Jun 14
Opening
Additions
Deletions
Write offs
Closing gross individually impaired assets
Less: provision for individually impaired assets
Total net impaired assets
(d) Credit risk grading
Corporate
Rural
$000
Property
$000
Other
$000
Residential
All Other
Total
$000
$000
$000
2,818
1,072
(1,651)
(677)
1,562
817
745
2,979
4,150
(3,027)
(1,284)
2,818
1,531
1,287
17,090
700
7,709
32,707
(10,375)
(23,117)
(561)
6,854
3,258
3,596
61,634
18,122
(30,361)
(32,305)
17,090
3,739
13,351
(317)
16,982
11,136
5,846
4,688
8,160
(3,470)
(1,669)
7,709
4,092
3,617
-
227
(3)
-
224
-
224
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
27,617
34,706
(35,146)
(1,555)
25,622
15,211
10,411
69,301
30,432
(36,858)
(35,258)
27,617
9,362
18,255
The Group's receivables are monitored either by account behaviour or a regular assessment of their credit risk grade based on an objective
review of defined risk characteristics. The portfolio risk is regularly refreshed based on current information.
The Group classifies finance receivables as Behavioural or Judgement.
The Behavioural portfolio consists of consumer, retail and home equity release receivables and usually relates to financing of or the acquisition of
a single asset.
Consumer loans are typically introduced by vendors of the asset financed and are smaller in value than Judgement loans. Consumer and Retail
loans are risk graded based on arrears status.
Behavioural loans are classified as either not in arrears, active, arrangement, non-performing / repossession or recovery, as described below:
•
•
•
•
Active – loans for which the arrears category has reached 5 days overdue.
Arrangement – 5 to 34 days overdue accounts for which arrangements have or are in the process of being made for arrears to be repaid.
Non-performing / Repossession – residential mortgage loans that are greater than 90 days past due / other loans for which security has or is
in the process of being repossessed.
Recovery loans – loans for which security has been sold and shortfalls are being sought from the customer or where other recovery action is
being taken.
The Group also lends funds on it's home equity release product which is considered behavioural but has no arrears characteristics. These loans
are assessed on origination against a pre-determined criteria supported by an actuarial assessment of future losses. The assumptions embedded
in that assessment are reviewed annually against actual experience.
The Judgement portfolio consists mainly of Business and Rural lending. Judgement loans relate to loans where an on-going and detailed working
relationship with the customer has been developed.
Judgement loans are individually risk graded based on loan status, financial information, security and debt servicing ability. Exposures in the
Judgement portfolio are credit risk graded by an internal risk grading mechanism.
In the Judgement portfolio, grade 1 is the strongest risk grade for undoubted risk and grade 9 represents the weakest risk grade where a loss is
probable. Grade 10 reflects loss accounts written off. Grades 2 to 8 represent ascending steps in management's assessment of risk of exposures.
The Group typically finances new loans in risk grades 2 to 5 of the Judgement portfolio.
28
29
58
Heartland New Zealand Limited - Annual Report 2015
Financial Statements For The Year Ended 30 June 2015
Financial Statements For The Year Ended 30 June 2015
www.heartland.co.nz
59
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
19 Asset quality (continued)
(d) Credit risk grading (continued)
Corporate
Rural
$000
Property
$000
Other
$000
Residential
All Other
Total
$000
$000
$000
Jun 15
Judgement portfolio
Grade 1 - Very Strong
Grade 2 - Strong
Grade 3 - Sound
Grade 4 - Adequate
Grade 5 - Acceptable
Grade 6 - Monitor
Grade 7 - Substandard
Grade 8 - Doubtful
Grade 9 - At risk of loss
533
8,019
17,363
101,029
343,645
49,276
3,484
761
-
-
-
-
-
-
286
-
3,596
-
-
-
30,113
52,022
160,527
259,241
50,162
11,453
157
7,082
2,480
463
3,791
5,315
125
-
-
-
Total Judgement portfolio
524,110
3,882
570,757
12,174
-
-
-
-
-
-
-
-
-
-
533
40,612
69,848
265,347
608,201
99,849
14,937
4,514
7,082
1,110,923
Behavioural portfolio
Not in arrears
Active
Arrangement
Non-performing / Repossession
Recovery
Total Behavioural portfolio
Provision for collectively impaired assets
Fair value adjustment for present value of future losses
47,208
415
443
201
54
48,321
(1,356)
-
-
-
-
-
-
-
324,995
821,357
530,204
1,723,764
4,526
2,776
1,266
876
2,721
1,690
-
-
13,535
10,946
1,620
2,757
21,197
15,855
3,087
3,687
334,439
825,768
559,062
1,767,590
(1,356)
(3,232)
-
-
(1,763)
(6,242)
(2,494)
-
(10,201)
(6,242)
Total finance receivables
571,075
2,526
901,964
829,937
556,568
2,862,070
Jun 14
Judgement portfolio
Grade 1 - Very Strong
Grade 2 - Strong
Grade 3 - Sound
Grade 4 - Adequate
Grade 5 - Acceptable
Grade 6 - Monitor
Grade 7 - Substandard
Grade 8 - Doubtful
Grade 9 - At risk of loss
616
3,303
17,888
63,785
305,781
54,757
3,897
722
58
-
-
-
-
3,837
440
-
12,798
882
-
-
25,331
35,420
145,774
209,825
59,071
10,936
-
2,472
865
1,157
5,038
13,193
1,508
-
-
-
Total Judgement portfolio
450,807
17,957
488,829
21,761
-
-
-
-
-
-
-
-
-
-
616
29,499
54,465
214,597
532,636
115,776
14,833
13,520
3,412
979,354
Behavioural portfolio
Not in arrears
Active
Arrangement
Non-performing / Repossession
Recovery
Total Behavioural portfolio
Provision for collectively impaired assets
Fair value adjustment for present value of future losses
40,142
238
96
38
-
40,514
(583)
-
-
-
-
-
-
-
305,736
844,967
427,279
1,618,124
1,816
1,554
556
745
3,009
151
-
276
8,054
5,770
1,519
1,092
13,117
7,571
2,113
2,113
310,407
848,403
443,714
1,643,038
(2,005)
(3,183)
-
-
(57)
(8,000)
(1,171)
-
(6,999)
(8,000)
Total finance receivables
490,738
15,952
796,053
862,107
442,543
2,607,393
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
19 Asset quality (continued)
(e) Provision for impairment
Credit impairment provisions are made where events have occurred leading to an expectation of reduced future cash flows from certain
receivables. These provisions are made in some cases against an individual loan and in other cases on a collective basis.
Bad debts provided for are written off against individual or collective provisions. Amounts required to bring the provisions to their assessed levels
are recognised in profit or loss. Any future recoveries of amounts provided for are recognised in profit or loss.
Collective provisioning
The term collectively impaired asset refers to an asset where an event has occurred of which past history indicates that there is an increased
possibility that the Group will not collect all its principal and interest as it falls due. No losses have yet been identified on these individual loans
within the collectively impaired asset grouping, and history would indicate that only a small portion of these loans will eventually not be recovered.
The Group provides fully for its expected losses on collectively impaired assets.
Collective provisions are assessed with reference to risk profile groupings and historical loss data. Other judgemental factors including economic
and credit cycle considerations are also taken into account in determining appropriate loss propensities to be applied. The future credit quality of
these portfolios is subject to uncertainties that could cause actual credit losses to differ materially from reported loan impairment provisions.
These uncertainties include the wider economic environment, interest rates and their effect on customer spending, unemployment levels,
payment behaviour and bankruptcy rates.
No provisions are applied to loans that are newly written and loans that remain within their contractual terms, except where the Group becomes
aware of an event that might alter its view of the risk of a particular deal or group of deals.
Individual provisioning
Specific impairment provisions are made where events have occurred leading to an expectation of reduced future cash flows from certain
receivables. For individually significant loans for which the assessed risk grade is considered a “potential loss”, an individual assessment is made
of an appropriate provision for credit impairment.
Credit impairments are recognised as the difference between the carrying value of the loan and the discounted value of management’s best
estimate of future cash repayments and proceeds from any security held (discounted at the loan’s original effective interest rate). All relevant
considerations that have a bearing on the expected future cash flows are taken into account, including the business prospects for the customer,
the likely realisable value of collateral, the Group’s position relative to other claimants, the reliability of customer information and the likely cost
and duration of the work-out process. Subjective judgements are made in this process. Furthermore, judgement can change with time as new
information becomes available or as work-out strategies evolve, resulting in revisions to the impairment provision as individual decisions are
taken. Changes in judgement could have a material impact on the financial statements.
Adequacy of the collective provision levels for each risk grouping is measured against historical loss experience at least annually. Adequacy of
individual provisions is assessed in respect of each loan on a material development or at least quarterly.
For Behavioural loans, excluding home equity release loans, arrears drive provision outcomes. Each arrears classification carries a provision for
potential loss based on historical experience for that classification in the same portfolio.
30
31
60
Heartland New Zealand Limited - Annual Report 2015
Financial Statements For The Year Ended 30 June 2015
Financial Statements For The Year Ended 30 June 2015
www.heartland.co.nz
61
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
19 Asset quality (continued)
(e) Provision for impairment (continued)
Corporate
Rural
$000
Property
$000
Other
$000
Residential
All Other
Total
$000
$000
$000
Jun 15
Provision for individually impaired assets
Opening provision for individually impaired assets
1,531
3,739
4,092
Impairment loss for the year
- (credit) / charge for the year
- recoveries
- write offs
- effect of discounting
Closing provision for individually impaired assets
Provision for collectively impaired assets
(35)
-
(677)
(2)
817
349
-
(561)
(269)
6,892
669
(317)
(200)
3,258
11,136
-
-
-
-
-
-
-
-
-
-
-
-
9,362
7,206
669
(1,555)
(471)
15,211
Opening provision for collectively impaired assets
583
2,005
3,183
57
1,171
6,999
Impairment loss for the year
- charge / (credit) for the year
- recoveries
- write offs
Closing provision for collectively impaired assets
775
-
(2)
1,356
(691)
42
-
1,356
537
168
(656)
3,232
1,706
-
-
1,763
2,572
3
(1,252)
2,494
4,899
213
(1,910)
10,201
Total provision for impairment
2,173
4,614
14,368
1,763
2,494
25,412
Jun 14
Provision for individually impaired assets
Opening provision for individually impaired assets
1,125
31,252
2,153
Impairment loss for the year
- charge for the year
- recoveries
- write offs
- effect of discounting
Closing provision for individually impaired assets
Provision for collectively impaired assets
1,714
-
6,247
4
(1,284)
(32,305)
(24)
1,531
(1,459)
3,739
3,890
2
(1,669)
(284)
4,092
-
-
-
-
-
-
-
-
-
-
-
-
34,530
11,851
6
(35,258)
(1,767)
9,362
Opening provision for collectively impaired assets
581
10,260
3,479
134
1,507
15,961
Impairment loss for the year
- charge / (credit) for the year
- recoveries
- write offs
Closing provision for collectively impaired assets
62
4
(64)
583
(7,497)
2
(760)
2,005
559
189
(1,044)
3,183
Total provision for impairment
2,114
5,744
7,275
(77)
-
-
57
57
997
59
(1,392)
1,171
(5,956)
254
(3,260)
6,999
1,171
16,361
20 Liquidity risk
Liquidity risk is the risk that the Group is unable to meet its payment obligations as they fall due. The timing mismatch of cash flows and the
related liquidity risk is inherent in all banking operations and is closely monitored by the Group.
Management of liquidity risk is designed to ensure that the Group has the ability to generate or obtain sufficient cash in a timely manner and at a
reasonable price to meet its financial commitments on a daily basis.
The Group’s exposure to liquidity risk is governed by a policy approved by the Board and managed by the ALCO. This policy sets out the nature of
risk which may be taken and aggregate risk limits, and the ALCO must conform to this. The objective of the ALCO is to derive the most
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
20 Liquidity risk (continued)
Contractual liquidity profile of financial assets and liabilities
The following tables present the Group's financial assets and liabilities by relevant maturity groupings based upon contractual maturity date. The
amounts disclosed in the tables represent undiscounted future principal and interest cash flows. As a result, the amounts in the tables below may
differ to the amounts reported on the balance sheet.
The contractual cash flows presented below may differ significantly from actual amounts as a result of future actions of the Group and its
counterparties, such as early repayments or refinancing of term loans. Deposits and other public borrowings include customer savings deposits
and transactional accounts, which are at call. History demonstrates that such accounts provide a stable source of long term funding for the Group.
It should be noted that the Group does not manage its liquidity risk on the basis of the information below.
On
0-6
6-12
Demand
Months
Months
$000
$000
$000
1-2
Years
$000
2-5
Years
$000
5+
Years
$000
Total
$000
Jun 15
Cash and cash equivalents
37,012
-
-
-
-
Investments
Finance receivables
Finance receivables - securitised
Derivative financial assets
Other financial assets
Total financial assets
Borrowings
Borrowings - securitised
Derivative financial liabilities
Other financial liabilities
Total financial liabilities
-
-
-
-
-
27,039
544,745
87,168
59
5,546
47,376
334,438
68,824
-
-
35,801
501,222
92,675
-
-
237,409
841,869
66,949
-
-
-
19,852
37,012
367,477
3,291,828
5,514,102
-
-
-
315,616
59
5,546
37,012
664,557
450,638
629,698
1,146,227
3,311,680
6,239,812
746,637
1,187,234
-
-
1,695
5,215
6,407
20,594
424,928
260,964
-
267
130,242
137,587
-
-
522
-
-
-
748,332
1,219,450
686,159
130,764
137,587
-
-
-
-
-
2,626,628
266,179
6,407
23,078
2,922,292
Net financial (liabilities) / assets
(711,320)
(554,893)
(235,521)
498,934
1,008,640
3,311,680
3,317,520
Unrecognised loan commitments
Undrawn committed bank facilities
116,217
130,188
-
-
-
-
-
-
-
-
-
-
116,217
130,188
Undrawn committed bank facilities of $90.0 million (2014: $170.0 million) were available to be drawn down on demand. To the extent drawn,
$90.0 million is contractually repayable in 6-12 months' time upon facility expiry. The remaining undrawn committed bank facilities of $40.2 million
(2014: $3.8 million) were available to ASF Group to fund new home equity release finance receivables.
Jun 14
Cash and cash equivalents
Investments
Finance receivables
Finance receivables - securitised
Derivative financial assets
Other financial assets
Total financial assets
Borrowings
Borrowings - securitised
Derivative financial liabilities
Other financial liabilities
Total financial liabilities
-
-
-
-
-
4,382
403,974
60,833
1,867
6,134
62,301
250,028
55,235
-
-
80,564
374,431
90,552
-
-
37,344
262,872
81,878
20,837
726,524
2,938,811
4,693,768
83,911
-
-
30
-
-
290,561
1,867
6,134
50,254
477,190
367,564
545,547
892,313
2,959,678
5,292,546
615,862
737,055
4,765
126
6,183
306,974
230,984
92
-
101,548
148,395
567,509
2,477,343
-
179
-
-
521
-
-
235,749
3,262
-
4,180
19,446
748,129
538,050
101,727
148,916
570,771
2,736,718
37,344
12,910
-
-
-
-
-
-
13,263
629,125
Net financial (liabilities) / assets
(578,871)
(270,939)
(170,486)
443,820
743,397
2,388,907
2,555,828
Unrecognised loan commitments
Undrawn committed bank facilities
114,004
173,800
-
-
-
-
-
-
-
-
-
-
114,004
173,800
appropriate strategy for the Group in terms of the mix of assets and liabilities given its expectations of future cash flows, liquidity constraints and
The undrawn committed bank facilities totalling $170.0 million were available to be drawn down on demand. To the extent drawn, $170.0 million is
capital adequacy. The Group employs asset and liability cash flow modelling to determine appropriate liquidity and funding strategies.
contractually repayable in 6-12 months' time upon facility expiry. The remaining undrawn committed bank facilities of $3.8 million were available to
The Group holds the following financial assets for the purpose of managing liquidity risk:
ASF Group to fund new home equity release finance receivables.
Cash and cash equivalents
Investments
Undrawn committed bank facilities
Total liquidity
Jun 15
$000
37,012
322,619
130,188
489,819
Jun 14
$000
37,344
238,859
173,800
450,003
The Group has securitised bank facilities of $350 million (2014: $400 million) in relation to the ABCP Trust, which matures on 3 February 2016
and CBA bank facilities of $507 million (2014: $560 million) in relation to the ASF Group maturing on 30 September 2019.
32
33
62
Heartland New Zealand Limited - Annual Report 2015
Financial Statements For The Year Ended 30 June 2015
Financial Statements For The Year Ended 30 June 2015
www.heartland.co.nz
63
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
21 Interest rate risk
22 Concentrations of funding
The Group's market risk arises primarily due to significant exposure to interest rate risk, predominantly from raising funds through the retail and
wholesale deposit market, the debt capital markets and committed and uncommitted bank funding, securitisation of receivables, and offering loan
finance products to the commercial and consumer market in New Zealand and Australia.
Interest rate risk is the risk that the value of assets or liabilities will change because of changes in interest rates or that market interest rates may
change and thus alter the margin between interest
earning assets and interest
bearing liabilities. Interest rate risk for the Group refers to the risk
of loss due to holding assets and liabilities that may mature or re-price in different periods.
‐
‐
The Group’s exposure to market risk is governed by a policy approved by the Board and managed by the ALCO. This policy sets out the nature of
risk which may be taken and aggregate risk limits, and the ALCO must conform to this. The objective of the ALCO is to derive the most
appropriate strategy for the Group in terms of the mix of assets and liabilities given its expectations of the future and the potential consequences
of interest rate movements, liquidity constraints and capital adequacy.
To manage this market risk, the Group measures sensitivity to interest rate changes by frequently testing its position against various interest rate
Monitoring maturity profiles and seeking to match the re-pricing of assets and liabilities (physical hedging);
change scenarios to assess potential risk exposure. The Group also manages interest rate risk by:
•
•
•
Monitoring interest rates daily and regularly (at least monthly) reviewing interest rate exposure; and
Entering into forward rate agreements and interest rate swaps and options to hedge against movements in interest rates.
(a) Concentration of funding by industry
Finance
Other
Total borrowings
(b) Concentration of funding by geographical area
Auckland
Wellington
Rest of North Island
Canterbury
Rest of South Island
Overseas 1
Total borrowings
Jun 15
$000
Jun 14
$000
790,137
818,543
2,035,108
1,705,917
2,825,245
2,524,460
441,921
384,344
472,167
772,689
206,563
547,561
453,168
202,829
376,495
687,168
168,442
636,358
2,825,245
2,524,460
Contractual Repricing Analysis
1 Included in Overseas funding is the CBA bank facility totalling $466 million, refer to Note 13 - Borrowings for more information.
The interest rate risk profile of financial assets and liabilities that follows has been prepared on the basis of maturity or next repricing date,
Other Disclosures
whichever is earlier.
Jun 15
Cash and cash equivalents
Investments
Finance receivables
Finance receivables - securitised
Other financial assets
Total financial assets
Borrowings
Borrowings - securitised
Other financial liabilities
Total financial liabilities
Effect of derivatives held for risk
management
0-3
3-6
6-12
Months
Months
Months
$000
$000
$000
1-2
Years
$000
2+ Non-interest
Years
$000
bearing
$000
Total
$000
36,928
137,742
1,962,329
40,193
59
-
-
-
-
1,938
87,889
35,548
25,797
149,239
60,778
14,410
204,142
83,434
142,732
180,427
57,661
-
-
-
-
2,177,251
125,375
235,814
301,986
380,820
1,529,593
375,635
411,061
119,351
130,975
258,630
8,102
-
-
-
250
-
503
-
-
1,796,325
375,635
411,311
119,854
130,975
84
6,719
430
37,012
329,338
2,584,456
-
277,614
5,546
12,779
5,605
3,234,025
-
-
20,594
20,594
2,566,615
258,630
29,449
2,854,694
250,699
(25,355)
(46,365)
(88,039)
(90,940)
-
-
23 Significant subsidiaries and interests in joint arrangements
As at 30 June 2015 the Group includes the following controlled entities.
Significant
subsidiaries / Joint
arrangements
Heartland Bank Limited (Bank)
VPS Properties Limited
Heartland HER Holdings Limited (HHHL) 1
New Sentinel Limited (NSL) 1
Australian Seniors Finance Pty Limited (ASF) 1
MARAC Insurance Limited 2
Country of
Nature
incorporation
of business
and place of
business
New Zealand
Financial services
New Zealand
Investment property holding company
New Zealand
Holding company
New Zealand
Financial services
Australia
Financial services
New Zealand
Insurance services
Proportion of
ownership interest and
voting power held
Jun 15
Jun 14
100%
100%
100%
100%
100%
50%
100%
100%
100%
100%
100%
50%
1
On 13 February 2014 Heartland HER Holdings Limited was incorporated. On 1 April 2014 Heartland acquired New Sentinel Limited and
Australian Seniors Finance Pty Limited from Seniors Money International Limited.
2 On 17 July 2015, MARAC Insurance Limited was acquired in full. Refer to Note 29 - Events after reporting date.
Net financial assets/(liabilities)
631,625
(275,615)
(221,862)
94,093
158,905
(7,815)
379,331
24 Structured entities
Jun 14
Cash and cash equivalents
Investments
Finance receivables
Finance receivables - securitised
Other financial assets
Total financial assets
Borrowings
Borrowings - securitised
Other financial liabilities
Total financial liabilities
Effect of derivatives held for risk
management
37,004
126,585
1,781,120
43,043
1,867
-
-
-
-
2,039
83,718
30,518
29,379
137,484
51,819
32,608
182,307
71,827
48,248
175,355
47,631
-
-
-
-
1,989,619
116,275
218,682
286,742
271,234
1,556,658
328,448
282,156
66,726
61,849
228,623
4,680
-
-
-
-
-
-
-
-
1,789,961
328,448
282,156
66,726
61,849
340
-
37,344
238,859
2,571
2,362,555
-
244,838
6,134
9,045
8,001
2,891,597
-
-
18,946
18,946
2,295,837
228,623
23,626
2,548,086
252,411
(22,550)
(40,925)
(64,025)
(124,911)
-
-
Deposits
A structured entity is one which has been designed such that voting or similar rights are not the dominant factor in deciding who controls the
entity. Structured entities are created to accomplish a narrow and well-defined objective such as the securitisation or holding of particular assets,
or the execution of a specific borrowing or lending transaction. Structured entities are consolidated where the substance of the relationship is that
the Group controls the structured entity.
(a) Heartland Cash and Term PIE Fund
The Group controls the operations of Heartland Cash and Term PIE Fund (Heartland PIE Fund). Heartland PIE Fund is a portfolio investment
entity that invests in the Bank's deposits. Investments of Heartland PIE Fund are represented as follows:
Jun 15
$000
45,110
Jun 14
$000
38,819
Net financial assets/(liabilities)
452,069
(234,723)
(104,399)
155,991
84,474
(9,901)
343,511
The tables above illustrate the periods in which the cash flows from interest rate swaps are expected to occur and affect profit or loss.
The management of interest rate risk against interest rate gap limits is supplemented by monitoring the sensitivity of the Group's financial assets
and liabilities to various standard and non standard interest rate scenarios. Standard scenarios which are considered on a monthly basis include a
100 basis point parallel fall or rise in the yield curve. There is no material impact on profit or loss in terms of a fair value change from movements
in market interest rates. Furthermore there is no material cash flow impact on the Statement of Cash Flows from a 100 basis point change in
interest rates.
34
35
64
Heartland New Zealand Limited - Annual Report 2015
Financial Statements For The Year Ended 30 June 2015
Financial Statements For The Year Ended 30 June 2015
www.heartland.co.nz
65
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
24 Structured entities (continued)
(b) ABCP Trust
The Group has securitised a pool of receivables comprising commercial and motor vehicle loans to the ABCP Trust.
The Group substantially retains the credit risks and rewards associated with the securitised assets, and continues to recognise these assets and
associated borrowings on the Statement of Financial Position. Despite this presentation in the financial statements, the loans sold to the Trusts
are set aside for the benefit of investors in the Trusts. The securitised balances are represented as follows:
Cash and cash equivalents - securitised
Finance receivables - securitised
Borrowings - securitised
Derivative financial asset - securitised
Derivative financial liabilities - securitised
NOTE
11
13
Jun 15
Jun 14
$000
5,553
$000
5,421
277,614
244,838
(258,630)
(228,623)
59
(1,995)
1,768
-
(c) Seniors Warehouse Trust (SW Trust) and ASF Settlement Trust (ASF Trust)
SW Trust and ASF Trust form part of ASF's home equity release business. They were both set up by ASF, as asset holding entities. The Trustee
for both Trusts is ASF Custodians Pty Limited and the Trust Manager is ASF. The balances of SW Trust and ASF Trust are represented as
follows:
Cash and cash equivalents
Finance receivables - Home equity release loans
Borrowings - CBA
Derivative financial liabilities
25 Joint arrangements
Jun 15
Jun 14
$000
1,207
$000
846
424,445
405,523
(372,333)
(364,335)
(3,608)
(4,147)
At 30 June 2015, the Group owned 50% of MARAC Insurance Limited through Marac JV Holdings Limited. The Group determined that this joint
arrangement was a joint venture. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights
to the net assets of the joint arrangement.
Investments in joint ventures are accounted for by the Group using the equity method and are recognised initially at cost. The consolidated
financial statements include the Group's share of the income and expenses and equity movements of equity accounted investees, from the date
that significant influence or joint control commences until the date that significant influence or joint control ceases.
Carrying amount at beginning of year
Dividends received from joint venture
Share of joint arrangement profit
Carrying amount at end of year
Total comprehensive income from joint venture
Jun 15
Jun 14
$000
4,246
-
137
4,383
$000
4,320
(560)
486
4,246
949
972
On 17 July 2015, the Group acquired the remaining 50% of MARAC Insurance Limited. During the year ended 30 June 2015 the Group has
recognised a provision for the write down of the carrying value of MARAC Insurance Limited of $339,000. This write down is reflected in the share
of joint arrangement profit above.
26 Staff share ownership arrangements
The Group operates share-based compensation plans that are cash settled and equity settled.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
26 Staff share ownership arrangements (continued)
In relation to the staff share ownership arrangements, the Group has recognised the following:
Equity settled
Total amount recognised in equity
Cash settled
Total amount recognised as an expense
Liability recognised
Jun 15
$000
Jun 14
$000
1,491
678
1,555
-
326
676
The following share-based compensation plans were in place during the year for selected senior employees of the Group:
(a) Equity settled
Heartland LTI Net Share Settled Plan (LNSSP)
The LNSSP has been allotted under three tranches. Under the LNSSP participants are granted an option to acquire shares in Heartland. The
number of shares granted upon exercise of the options is based on the difference between the market price of the shares on the exercise date
and the reference price. The options are subject to the option holders continued employment with the Group.
2015 tranche - Special Grant
Optionholders of the 2015 tranche - special grant will be able to exercise the options in the period beginning on the date the market price of
Heartland ordinary shares is equal to $1.50 and ending on 1 July 2017. Market price is calculated based on the volume weighted average price of
a Heartland share on the NZX Main Board for the 10 business days immediately before (but excluding) the exercise date for those options.
The reference price is the amount (if any) by which the market price of Heartland ordinary shares at the time of exercise exceeds $1.00 (based on
a volume weighted average price of Heartland ordinary shares for the prior 20 business days), plus the aggregate amount of cash dividends
(cents per Heartland ordinary share) paid by Heartland in the period from 1 April 2015 until and including the date the options are exercised.
However, for the purpose of calculating the settlement amount, the market price of Heartland ordinary shares is capped at $1.50 and any increase
above this amount shall be disregarded.
2013 and 2014 tranches
Optionholders of the 2013 and 2014 tranches will be able to exercise the options between September 2015 to 1 July 2017 and September 2016 to
1 July 2018 respectively.
The reference price is the amount (if any) by which the market price (based on a volume weighted average price of Heartland ordinary shares for
the prior 20 business days) of Heartland ordinary shares at the time of exercise exceeds an opening price. This opening price is a 5% premium
over the volume weighted average price of Heartland ordinary shares for the 20 business days following 26 August 2013 for the 2013 tranche and
25 August 2014 for the 2014 tranche, less cash dividends paid after issue of the options.
Grant date
Number of shares granted
Option valuation at grant date
Total value at grant date
June 2015
Opening unvested options outstanding / exercisable 1 July 2014
Number of options granted:
Less: options forfeited
Closing unvested options outstanding / exercisable 30 June 2015
2015
2014
2013
Tranche
Tranche
Tranche
1/04/2015
28/08/2014
26/08/2013
5,208
0.09
8,954
0.20
5,136
0.21
467 1,755 1,099
-
5,208
-
5,208
-
8,954
(383)
8,571
-
-
-
-
-
-
-
-
5,005
-
(125)
4,880
-
5,136
(131)
5,005
For the cash settled plans, the Group recognises a liability based on the estimated fair value of the obligation. The value of this liability is
recognised in profit or loss over the relevant service period and is re-measured at each reporting date.
June 2014
For equity settled plans, share based payments to employees providing services are measured at the fair value of the equity instruments at the
grant date.
The fair value determined at the grant date of the equity settled share-based payments is expensed on a straight line basis over the vesting
period, based on the Group's estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each
reporting period, the Group revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original
estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to
the equity-settled employee benefits reserve.
Opening unvested options outstanding / exercisable 1 July 2013
Number of options granted:
Less: options forfeited
Closing unvested options outstanding / exercisable 30 June 2014
36
37
66
Heartland New Zealand Limited - Annual Report 2015
Financial Statements For The Year Ended 30 June 2015
Financial Statements For The Year Ended 30 June 2015
www.heartland.co.nz
67
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
26 Staff share ownership arrangements (continued)
(a) Equity settled (continued)
The fair value at grant date of these options has been measured using the Black Scholes option pricing model. As the exercise price is reduced
by dividends paid between the grant date and the exercise date, the model has been adjusted to reflect this. Information regarding the calculation
of the fair value under the LNSSP is as follows:
Volatility
Risk free interest rate
Estimated option life (years)
Expiry date
Exercise price ($)
Market price at grant date($)
2015
2014
2013
Tranche
Tranche
Tranche
20.1%
3.1%
20.0%
4.0%
25.0%
3.4%
3.3 3.9 3.9
30/06/2018
30/06/2018
30/06/2017
1.00
1.28
0.99
0.95
0.89
0.87
The volatility is calculated based on the historical movement in Heartland's ordinary shares.
Heartland LTI Cash Entitlements Plan (LCEP)
Under the LCEP, participants were granted a cash entitlement. This cash entitlement is based on the amount by which the market price of
Heartland shares at a future date exceeds an agreed reference price (no payment is made in the event that the market price of Heartland shares
at that future date is lower than the reference price). Cash entitlements based on a reference pool of 5.65 million shares were issued in the year
ending 30 June 2013 at a reference price of $0.72 per share. The cash entitlements plan was closed during the year at a share price of $1.20.
(b) Cash settled
Heartland Long Term Executive Share Plan (LTESP)
The LTESP was introduced in the year ended 30 June 2013 and concluded during the year ended 30 June 2015 with all of the shares under the
LTESP vesting. Under the LTESP, the Group lent funds to the participants. These funds were used by the participants to acquire Heartland
shares, which were held on the participants behalf. Participants that were still employed by the Group on 30 June 2015 were entitled to some or
all of the Heartland shares held on their behalf. To the extent a participant was entitled to the shares held on their behalf, the participant was given
a cash bonus which was applied toward repayment of the loan. To the extent a participant was not entitled to the shares held on their behalf,
those shares were acquired by Heartland NZ Trustee Limited for a purchase price which was applied toward repayment of the loan.
27 Contingent liabilities and commitments
Letters of credit, guarantees and performance bonds
Total contingent liabilities
Undrawn facilities available to customers
Conditional commitments to fund at future dates
Total commitments
Jun 15
$000
14,844
14,844
116,217
108,037
224,254
Jun 14
$000
6,329
6,329
114,004
95,780
209,784
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
28 Application of new and revised accounting standards
(a) New standards and interpretations adopted
The following new standards and amendments to standards have been adopted from 1 July 2014 in the preparation of these financial statements:
NZ IAS 32 Financial Instruments: Presentation
Clarifies certain aspects of offsetting financial assets and liabilities because of diversity in the application of the requirements of offsetting.
Its
adoption did not have a material impact on the financial statements.
(b) New standards and interpretations not yet adopted
A number of new standards, amendments to standards and interpretations are not yet effective for the year ended 30 June 2015, and have not
been applied in preparing these financial statements. The new standards identified which may have an effect on the financial statements of the
Group are:
Standard and description
Effective
for annual
years
beginning
on or
after:
Expected to
be initially
applied in
year ending:
NZ IFRS 9 Financial Instruments , which specifies how an entity should classify and measure financial assets and
1 January
30 June
liabilities.
2018
2019
NZ IFRS 9 Financial Instruments (2013) , which provides a principles-based approach to hedge accounting and
1 January
30 June
aligns hedge accounting closely with risk management.
2018
2019
The full impact of NZ IFRS 9 is yet to be assessed.
29 Events after the reporting date
On 17 July 2015, the Group acquired the remaining 50% of MARAC Insurance Limited. During the year ended 30 June 2015 the Group has
recognised a provision for the write down of the carrying value of MARAC Insurance Limited of $339,000. Going forward MARAC Insurance's
results will be consolidated and will form part of the Group.
There have been no other material events after the reporting date that would affect the interpretation of the financial statements or the
performance of the Group.
38
39
68
Heartland New Zealand Limited - Annual Report 2015
Independent Auditor’s Report
Independent Auditor’s Report
www.heartland.co.nz
69
70
Heartland New Zealand Limited - Annual Report 2015
Director Disclosures
Director Disclosures
www.heartland.co.nz
71
Director Disclosures
Directors
The following persons were directors of the Company and the Company’s subsidiaries during the year ended 30 June 2015.
Company
Directors
Company
Directors
Heartland New Zealand Limited
Jeffrey Kenneth Greenslade
Non-Independent Director
Heartland HER Holdings Limited
Laura Anne Byrne (appointed 13 May 2015)
Graham Russell Kennedy
Independent Director
Gary Richard Leech
Independent Director (resigned 31 October 2014)
Christopher Robert Mace
Independent Director
Geoffrey Thomas Ricketts
Independent Director
Deborah Jane Taylor
Independent Director (appointed 10 December 2014)
Gregory Raymond Tomlinson
Non-Independent Director
ASF Custodians Pty Limited
Julie Marie Campbell-Bode (appointed 4 May 2015)
Christopher Patrick Francis Flood (appointed 15 December 2014, resigned 4 May 2015)
Richard Udovenya
Vaughan Keith Underwood (resigned 27 February 2015)
Australian Seniors Finance Pty Limited
Julie Marie Campbell-Bode
Richard Udovenya
Vaughan Keith Underwood (resigned 27 February 2015)
Christopher Patrick Francis Flood (appointed 15 December 2014, resigned 4 May 2015)
Canterbury Building Society Limited
Jeffrey Kenneth Greenslade
Bruce Robertson Irvine
HBL Australian Investments Limited
Julie Marie Campbell-Bode
Heartland Bank Limited
Jeffrey Kenneth Greenslade
Christopher Patrick Francis Flood
Nicola Jean Greer
Edward John Harvey
Bruce Robertson Irvine
Michael Danton Jonas
Graham Russell Kennedy
Geoffrey Thomas Ricketts
Richard Arthur Wilks
Heartland Financial Services Limited
Jeffrey Kenneth Greenslade
Christopher David Andrew Cowell (appointed 13 May 2015)
Christopher Patrick Francis Flood (resigned 13 May 2015)
Jeffrey Kenneth Greenslade
Michael Danton Jonas
Geoffrey Thomas Ricketts (resigned 13 May 2015)
Gregory Raymond Tomlinson (resigned 13 May 2015)
Heartland NZ Holdings Limited
Jeffrey Kenneth Greenslade
Heartland NZ Trustee Limited
Jeffrey Kenneth Greenslade
Bruce Robertson Irvine
Heartland PIE Fund Limited
Jeffrey Kenneth Greenslade
Heartland Seniors Finance Pty Limited
Julie Marie Campbell-Bode
Bruce Robertson Irvine
New Sentinel Limited
Christopher Patrick Francis Flood (appointed 31 October 2014)
Brett Stephen Wilson (resigned 31 October 2014)
Vaughan Keith Underwood (resigned 27 February 2015)
Sentinel Custodians Limited
Garry Dean Bishop
Vaughan Keith Underwood (resigned on 27 February 2015)
Christopher Patrick Francis Flood (appointed 27 February 2015)
Seniors Finance Custodians Pty Limited
Julie Marie Campbell-Bode (appointed 4 May 2015)
Christopher Patrick Francis Flood (resigned 4 May 2015)
Richard Udovenya
Seniors Finance Pty Limited
Julie Marie Campbell-Bode
Richard Udovenya
Christopher Patrick Francis Flood (resigned 4 May 2015)
VPS Parnell Limited1
Michael Danton Jonas
VPS Properties Limited
Michael Danton Jonas
Mark Stephen Mountcastle (resigned 28 November 2014)
Mark Stephen Mountcastle (resigned 28 November 2014)
1 VPS Parnell Limited was amalgamated into VPS Properties Limited on 22 December 2014
72
Heartland New Zealand Limited - Annual Report 2015
Director Disclosures
Director Disclosures
www.heartland.co.nz
73
Interests Register
The following are the entries in the Interests Register of the Company (and the Company’s subsidiaries)
made during the year ended 30 June 2015.
Indemnification and Insurance of Directors
The Company has given indemnities to, and has effected insurance for, directors of the Company and the
Company’s subsidiaries to indemnify and insure them in respect of any liability for, or costs incurred in
relation to, any act or omission in their capacity as directors, to the extent permitted by the Companies
Act 1993. The cost of the insurance premiums to the Company and the Company’s subsidiaries for the
year ended 30 June 2015 was $52,612.50.
Share Dealings by Directors
Details of individual directors’ share dealings as entered in the Interests Register of the Company under
Section 148(2) of the Companies Act 1993 during the year ended 30 June 2015 are as follows (all dealings
are in ordinary shares unless otherwise specified):
J K Greenslade
No. of Shares
Nature of Relevant Interest
145,903
15,277
50,000
145,903
Transfer of legal title under the Heartland New Zealand
Limited 2012 Long Term Executive Share Plan
Transfer of beneficial interest under the Heartland New
Zealand Limited 2012 Long Term Executive Share Plan -
shares forfeited back to Heartland NZ Trustee Limited
Disposal
Transfer of shares as part of FY2014 employee
remuneration
Acquisition
Transfer of legal title under the Heartland New Zealand
Limited 2012 Long Term Executive Share Plan
Acquisition
Acquisition/
Disposal
Acquisition
Consideration
Nil
Nil
Nil
Nil
Date of Acquisition/
Disposal
1 September 2014
2 September 2014
1 September 2014
30 June 2015
G R Kennedy
No. of Shares
Nature of Relevant Interest
82,470
16,838
Allotment of shares under dividend reinvestment plan
as trustee of the Heartland Trust
Distribution of assets by the trustees of the Archford
Trust to the beneficiaries of the Archford Trust
Acquisition/
Disposal
Consideration
Date of Acquisition/
Disposal
Acquisition
$108,860
2 April 2015
Disposal
Nil
30 June 2015
G R Leech (Resigned 31 October 2014)
No. of Shares
Nature of Relevant Interest
176,740
13,400
Off market transfer of shares by GR & AM Leech
(as trustees of the GR & AM Leech Family Trust) to
Investment Custodial Services Ltd (as custodian for the
GR & AM Leech Family Trust)
Off market transfer of shares by Robert Lindsay
Aitken and Gary Richard Leech (as trustees of the RL
& EJ Aitken Family Trust) to FNZ Custodians Ltd (as
custodian for the RL & EJ Aitken Family Trust)
C R Mace
No. of Shares
Nature of Relevant Interest
82,470
Allotment of shares under dividend reinvestment plan
as trustee of the Heartland Trust
G T Ricketts
No. of Shares
Nature of Relevant Interest
82,470
Allotment of shares under dividend reinvestment plan
as trustee of the Heartland Trust
D J Taylor
No. of Shares
Nature of Relevant Interest
Acquisition/
Disposal
Consideration
Date of Acquisition/
Disposal
Disposal
Nil
24 March 2015
Disposal
Nil
26 March 2015
Acquisition/
Disposal
Consideration
Date of Acquisition/
Disposal
Acquisition
$108,860
2 April 2015
Acquisition/
Disposal
Consideration
Date of Acquisition/
Disposal
Acquisition
$108,860
2 April 2015
Acquisition/
Disposal
Consideration
Date of Acquisition/
Disposal
50,000
On-market purchase of shares
Acquisition
$51,500
10 December 2014
G R Tomlinson
No. of Shares
Nature of Relevant Interest
Acquisition/
Disposal
Consideration
Date of Acquisition/
Disposal
3,846,000
Off-market purchase by Harrogate Trustee Limited
Acquisition
$4,999,800
7 May 2015
74
Heartland New Zealand Limited - Annual Report 2015
Director Disclosures
Director Disclosures
www.heartland.co.nz
75
General Notice of Disclosure of Interest
in the Interests Register
Details of directors’ general disclosures entered in the relevant
interests register under Section 140 of the Companies Act 1993
during the year ended 30 June 2015 are as follows:
Radio New Zealand Limited
Silver Fern Farms Limited
Silver Fern Farms Beef Limited
Director
Director
Director
Silver Fern Farms Venison Limited
Director
Heartland New Zealand Limited
G R Kennedy
Bradford Management 2013 Limited
Director (resigned on
28 October 2014)
Trevor Wilson Charities Limited
Director
Trevor Wilson Charities (No 2) Limited Director
NZ Express Transport (2006) Limited
Director
Rural Transport Limited
Director
D J Taylor
Forestry Equities Management Limited Director and Shareholder
Tassenberg Limited
Director and Shareholder
Taylor Partners Limited
Shareholder (resigned
28 January 2015)
Details of directors’ general disclosures entered in the relevant
interest register under Section 140 of the Companies Act 1993 prior
to 1 July 2014, can be found in earlier Annual Reports.
Specific Disclosures of Interest in the
Interests Register
There were no specific disclosures of interests in transactions
entered into by the Company or its subsidiaries during the period
1 July 2014 to 30 June 2015.
(resigned as a Director
27 January 2015)
Information Used by Directors
HGL New Zealand Limited
Hirepool Group Limited
Director
Director
Landcare Research New Zealand Limited Director
No director of the Company or its subsidiaries disclosed use of
information received in his or her capacity as a director that would
not otherwise be available to that director.
Petra Forestry Limited
Petra Securities Limited
Shareholder (resigned
28 January 2015)
Shareholder (resigned
28 January 2015)
Directors’ Relevant Interests
Set out in the table below are the Heartland New Zealand Limited
shares, and options which are convertible into shares, in which each
director of the Company had a relevant interest as at 30 June 2015.
Number of Ordinary Shares –
Beneficial
Number of Ordinary Shares –
Non-Beneficial
Number of Options
G R Leech (Resigned 31 October 2014)
C R Mace
5,937,204
D J Taylor (Appointed 10 December 2014)
Director
J K Greenslade
G R Kennedy
G R Leech (Resigned 31 October 2014)
C R Mace
G T Ricketts
D J Taylor
G R Tomlinson
918,074
481,052
176,740
12,289,728
12,289,728
50,000
48,224,352
572,090
5,807,897
240,054
5,797,897
5,797,897
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Directors’ Remuneration
The current total directors’ fee pool for the non-executive directors
of the Company and its subsidiaries approved by shareholders at the
Annual Shareholder Meeting held on 31 October 2014 is $1,000,000
per annum.
The total remuneration received by each non-executive director who
held office in the Company and the Company’s subsidiaries during
the year ended 30 June 2015 was as follows.
Heartland New Zealand Limited
Board/Committee 2
Board
Audit and Risk Committee
Governance and Remuneration Committee
Heartland Bank Limited
Board/Committee
Board
Audit Committee
Risk Committee
Chairman
$125,000
$7,500
$10,000
Chairman
$125,000
$15,000
$20,000
Member
$75,000
$7,500
$5,000
Member
$70,000
$7,500
$10,000
The total remuneration and value of other benefits 3 received by each non-executive director who
held office in the Company and its subsidiaries during the year ended 30 June 2015 was as follows:
Director
G T Ricketts
N J Greer
E J Harvey
B R Irvine
G R Kennedy
G R Tomlinson
R A Wilks
Total
Remuneration
$142,500
$80,000
$95,000
$137,500
$92,500
$27,500
$85,000
$46,222
$80,000
$90,000
$876,222
Richard Udovenya received A$30,000 per annum in his capacity as an independent director of
Australian Seniors Finance Pty Limited from 1 July 2014 to 30 June 2015.
Directors’ fees exclude GST where appropriate. In addition, directors are entitled to be
reimbursed for costs associated with carrying out their duties.
2 Where a director sits on both the Heartland New Zealand Limited and Heartland Bank Limited Boards, the director receives the single highest applicable fee.
3 In addition to these amounts Heartland New Zealand Limited meets costs incurred by directors, which are incidental to the performance of their duties. This includes providing
directors with telephone concessions and paying the cost of directors’ travel. As these costs are incurred by Heartland New Zealand Limited to enable directors to perform their
duties, no value is attributable to them as benefits to directors for the purposes of the above table.
76
Heartland New Zealand Limited - Annual Report 2015
Director Disclosures
Director Disclosures
www.heartland.co.nz
77
Remuneration and/or Other Benefits
from the Company and its subsidiaries
to Executive Directors
The remuneration for the Executive Directors includes a fixed
remuneration component and a variable remuneration component
comprising short-term incentives (cash and/or shares) and/or long-
term incentives (cash settled or share settled options). Long-term
incentives are offered to selected employees (including the Executive
Directors in their capacity as employees) in order to:
Share Settled Options Plan
• The Reference Price is $1.00.
Under the Share Settled Options Plan (Options Plan) selected
employees were granted net share settled options (Options), being
a right (the exercise of which is contingent and dependent on certain
factors, including continued employment by the Heartland group
and the market value of Heartland’s shares) to receive in the future
Heartland shares as incentive based remuneration.
The key terms of the Options Plan are:
• The Options are linked to a three year service period beginning
• For the purposes of calculating the settlement amount, the
market price of Heartland shares is capped at $1.50 and any
increase above this amount is disregarded.
• Participants are prohibited from disposing of any Heartland
shares allotted on exercise of the Options until 1 July 2020,
except with the prior approval of the Governance, Capital and
Remuneration Committee of the Heartland board.
• Incentivise and motivate participants to continue in employment
with the Heartland group for the applicable service period;
on the first day of the financial year in which the options
are granted.
J K Greenslade (Chief Executive Officer)
• Incentivise and motivate participants to exercise long-term
thinking to contribute to the long-term success of the Heartland
group; and
• Align the interests of participants with those of Heartland and
its shareholders.
Further information on the long-term incentive plans is set out below.
LTI Cash Entitlements Plan
Under the LTI Cash Entitlements Plan (Plan) selected employees
were granted an entitlement, being a right (which is contingent and
dependent on certain factors, including continued employment
by the Heartland group and the value of Heartland’s shares)
to receive in the future a lump sum cash payment as incentive
based remuneration.
• The employee can exercise their Options at any time during
a specified exercise period which generally commences 20
business days after Heartland’s annual results announcement
for the last financial year of the service period and ends two
years later.
• The reference price of each Option is an amount equal to
5% over the VWAP of Heartland shares on the NZX over 20
business days immediately following the reference date
(Reference Price).
• When Options are exercised, a settlement amount is calculated.
The settlement amount is the amount by which (as multiplied by
the number of Options):
- The VWAP of Heartland shares on NZX over 20 business days
immediately preceding the exercise date (Market Price),
The key terms of the Plan are:
exceeds
• The entitlements are linked to a service period beginning 1 July
2012 and ending 1 July 2015.
• The settlement date is 20 business days after Heartland’s
annual results announcement for the financial year ended 30
June 2015.
• The settlement amount is the amount by which (as multiplied
by the number of shares in the participant’s reference pool)
the volume weighted average price (VWAP) of Heartland’s
shares over the 20 business days immediately preceding the
settlement date exceeded the reference price (being $0.7205).
In January 2015, the Board determined to settle the Plan prior to the
settlement date as the rise in Heartland’s share price had materially
exceeded performance of the NZX benchmark and the Plan would
therefore materially exceed cost expectations if the appreciating
trend in Heartland’s share price continued. The entitlements were
settled on 16 January 2015 based on a notional settlement share
price of $1.20. It is not intended that further grants be made under
the Plan.
Refer to Note 26 of the financial statements for further information
in relation to the Plan.
- the Reference Price, less the aggregate amount of cash
dividends (cents per share) paid by Heartland in the period
from the date those Options were granted until and including
the exercise date for those Options.
• The employee receives Heartland shares having an aggregate
Market Price equal to the settlement amount.
Refer to Note 26 of the financial statements for further information
in relation to the Options Plan.
Share Settled Options Plan – Special Grant
A special grant under the Options Plan was made to selected
employees. For the purposes of this special grant, the existing terms
of the Options Plan applied subject to the following modifications:
• The exercise period for the Options begins on the date the
market price of Heartland shares is equal to $1.50 and ends on
1 July 2017 (subject to continued employment by the Heartland
group). For this purpose, the market price of Heartland shares
on any day will be regarded as the VWAP for the prior 10
business days.
The tables below detail the nature and amount of the remuneration and the value of other benefits received by J K Greenslade during FY15.
Fixed Remuneration and Short-Term Incentive (STI)
Fixed
$887,254
Variable STI*
$447,500
Total
$1,334,754
* The short term incentive remuneration is comprised of a cash payment relating to the year ended 30 June 2015 (which is determined and paid in the first quarter of the next financial
year) and the transfer of 50,000 shares on 1 September 2014 (share price $0.95) relating to the year ended 30 June 2014.
Long-Term Incentive (LTI)
Number of options issued
during year
Value of options/
entitlements* issued and
amortising during year ($)
Value of options/
entitlements* issued in
past years and amortising
during year ($)
LTI Cash Entitlements Plan
2013 Share Settled Options
2014 Share Settled Options
-
-
-
-
-
-
Special Grant – Share Settled Options
2,604,201
147,500
470,925
106,800
120,000
-
* The value of the options disclosed above is the portion of the fair value of options allocated to the reporting period. The fair value of the options is likely to be different from the
market value of the options at the date when (and if) they vest. The value of the entitlements disclosed above under the LTI Cash Entitlements Plan represents the actual value
received in the reporting period (as opposed to the fair value allocated) due to the entitlements being settled prior to the original settlement date (see the description of the LTI
Cash Entitlements Plan for further details).
M D Jonas (Head of Strategic & Product Development)
The remuneration and value of other benefits received by M D Jonas during FY15 comprised of a fixed remuneration component of $600,000
and long-term incentives as specified in the table below. M D Jonas resigned as a director of Heartland Bank Limited on 5 August 2015.
Long-Term Incentive (LTI)
Number of options issued
during year
Value of options/
entitlements* issued and
amortising during year ($)
Value of options/
entitlements* issued in
past years and amortising
during year ($)
LTI Cash Entitlements Plan
2013 Share Settled Options
2014 Share Settled Options
-
-
-
-
-
-
Special Grant – Share Settled Options
1,302,101
73,750
348,834
44,500
70,000
-
* The value of the options disclosed above is the portion of the fair value of options allocated to the reporting period. The fair value of the options is likely to be different from the
market value of the options at the date when (and if) they vest. The value of the entitlements disclosed above under the LTI Cash Entitlements Plan represents the actual value
received in the reporting period (as opposed to the fair value allocated) due to the entitlements being settled prior to the original settlement date (see the description of the LTI
Cash Entitlements Plan for further details).
78
Heartland New Zealand Limited - Annual Report 2015
Executive Remuneration
Shareholder Information
www.heartland.co.nz
79
Executive Remuneration
Shareholder Information
The number of employees of the Company and its subsidiaries (including former employees), other than directors, who received remuneration,
including non-cash benefits, in excess of $100,000 during the year ended 30 June 2015 is set out in the remuneration bands detailed below.
Spread of Shares
Set out below are details of the spread of shareholders of the Company as at 21 August 2015.
Remuneration
$100,000 to $109,999
$110,000 to $119,999
$120,000 to $129,999
$130,000 to $139,999
$140,000 to $149,999
$150,000 to $159,999
$160,000 to $169,999
$170,000 to $179,999
$180,000 to $189,999
$190,000 to $199,999
$200,000 to $209,999
$210,000 to $219,999
$220,000 to $229,999
$240,000 to $249,999
$260,000 to $269,999
$270,000 to $279,999
$280,000 to $289,999
$290,000 to $299,999
$300,000 to $309,999
$320,000 to $329,999
$360,000 to $369,999
$390,000 to $399,999
$490,000 to $499,999
$580,000 to $589,999
$630,000 to $639,999
$650,000 to $659,999
$1,240,000 to $1,249,999
Number
of Staff
17
11
15
18
9
4
2
3
3
1
4
2
1
3
3
1
1
1
2
1
1
1
1
1
1
1
1
Total
109
Size of Holding
1–1,000 shares
1,001–5,000 shares
5,001–10,000 shares
10,001–50,000 shares
50,001–100,000 shares
100,001 shares and over
TOTAL
Number of Shareholders
Total Number of Shares
% of Issued Shares
1,009
2,627
1,769
3,297
599
417
9,718
616,925
7,242,590
13,498,032
75,153,993
42,146,529
331,232,211
469,890,280
0.13
1.54
2.87
15.99
8.97
70.49
100%
Twenty Largest Shareholders1
Set out below are details of the 20 largest shareholders of the Company as at 21 August 2015.
Rank Shareholder
Total Shares
% of Total Shareholders
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Harrogate Trustee Limited
Accident Compensation Corporation
FNZ Custodians Limited
JPMorgan Chase Bank
Oceania & Eastern Limited
Philip Maurice Carter
Citibank Nominees (NZ) Ltd
Leveraged Equities Finance Limited
National Nominees New Zealand Limited
Investment Custodial Services Limited
Forsyth Barr Custodians Limited
New Zealand Permanent Trustees Limited
Heartland Trust
Investment Custodial Services Limited
Jarden Custodians Limited
HSBC Nominees (New Zealand) Limited
HSBC Nominees (New Zealand) Limited
Custodial Services Limited
GUY Perry & D A Thompson Trustee Limited
Cogent Nominees Limited
48,224,352
25,032,601
19,643,526
14,382,406
12,289,728
9,500,000
9,393,743
7,971,302
7,916,590
7,290,726
7,218,516
6,915,000
5,693,728
4,550,955
4,500,000
4,322,922
3,729,077
3,459,523
3,370,000
3,365,577
10.26
5.33
4.18
3.06
2.62
2.02
2.00
1.70
1.68
1.55
1.54
1.47
1.21
0.97
0.96
0.92
0.79
0.74
0.72
0.72
TOTAL FOR TOP 20 HOLDERS
208,770,272
44.43
1 Any person wishing to acquire an interest in 10% or more of the Company’s shares must obtain the consent of the Reserve Bank of New Zealand before they do so.
80
Heartland New Zealand Limited - Annual Report 2015
Shareholder Information
Other Information
www.heartland.co.nz
81
Substantial Product Holders
At 30 June 2015, the following product holders had given notice in accordance with Sections 276 and 277
of the Financial Markets Conduct Act 2013 that they were substantial product holders in the Company.
The number of shares shown below are as advised in the most recent substantial product holder notices
to the Company and may not be their holding as at 30 June 2015.
Name
Number of Shares
Class of Shares
Total Number
of Shares in Class
Harrogate Trustee Limited
and Gregory Raymond Tomlinson
Accident Compensation Corporation,
Nicholas Bagnall, Guy Elliffe, Paul Robertshawe,
Blair Tallott, Blair Cooper and Jason Familton
Blair Cooper (includes ACC’s relevant interest)
Blair Tallott (includes ACC’s relevant interest)
40,285,070
Ordinary
469,890,280
27,035,156
Ordinary
469,890,280
27,067,714
27,083,180
Ordinary
Ordinary
469,890,280
469,890,280
The total number of Heartland New Zealand Limited ordinary shares on issue as at 30 June 2015 was 469,890,280.
Other Information
Auditors’ Fees
KPMG has continued to act as auditors of the Company and
its subsidiaries. The amount payable by the Company and its
subsidiaries to KPMG as audit fees during the year ended 30 June
2015 was $454,000. The amount of fees payable to KPMG for
non-audit work during the year ended 30 June 2015 was $125,000.
These non-audit fees were primarily for regulatory compliance
services and they complied with the Company’s External Auditor
Independence Policy.
Credit Rating
As at 1 September 2015, Heartland Bank Limited had a Fitch
Australia Pty Limited long-term credit rating of BBB (outlook stable).
Exercise of NZX Disciplinary Powers
NZX Limited did not exercise any of its powers under Listing Rule 5.4.2
in relation to the Company during the year ended 30 June 2015.
NZX Waivers
The Company did not rely upon any waivers granted by NZX Limited
during the year ended 30 June 2015.
82
Heartland New Zealand Limited - Annual Report 2015
Directory
Directory1
Heartland New Zealand Limited
Heartland Bank Limited
Chairman
Managing Director
Director
Director
Director
Director
Directors
Geoffrey Ricketts
Jeffrey Greenslade
Graham Kennedy
Chris Mace
Jane Taylor
Gregory Tomlinson
Registered Office
35 Teed Street
Newmarket
Auckland 1023
PO Box 9919
Newmarket
Auckland, 1149
T 0508 432 785
E info@heartland.co.nz
W www.heartland.co.nz
Heartland Executives
Directors
Bruce Irvine
Jeffrey Greenslade
Nicola Greer
John Harvey
Graham Kennedy
Geoff Ricketts
Richard Wilks
Auditors
Chairman
Managing Director
Director
Director
Director
Director
Director
KPMG
KPMG Centre, 18 Viaduct Harbour, Auckland 1010
T 09 367 5800
Share Registry
Link Market Services Limited
Level 7, Zurich House, 21 Queen Street, Auckland 1010
T 09 375 5998
F 09 375 5990
E enquiries@linkmarketservices.com
W www.linkmarketservices.com
Jeffrey Greenslade
Managing Director
Laura Byrne
Group General Counsel
Chris Flood
Head of Banking
Richard Lorraway
Chief Risk Officer
James Mitchell
Chief Operating Officer
Rochelle Moloney
Senior Manager –
Corporate Communications
Simon Owen
Chief Financial Officer
Sarah Selwood
Head of Human Resources
1Correct as at 1 September 2015.