Rated Mortgage CM Trust. Interim Report

Transcription

1 Rated Mortgage CM Trust Interim Report Six Months to 30 September 2010

2 Contents Directory... 2 Trust Manager s Report... 3 Statement of Comprehensive Income... 5 Statement of Changes in Equity... 5 Balance Sheet... 6 Statement of Cash Flows... 7 Notes to the Financial Statements... 8 Statutory Information Corporate Governance Statement SIX MONTHS TO 30 SEPTEMBER

3 Directory Trust Manager RMB Trustee Limited Level Victoria Street Christchurch Trust Managers / Board of Directors Mr Barnaby I Sundstrum Chairman/Independent Director 19 Mayfly Lane Clearwater, Harewood Christchurch Mr Peter J M Taylor Independent Director 92 Pauls Road Rapaura, RD3, Blenheim 7273 Mr Darryl B Queen Director 70 Matai Street, Riccarton Christchurch Security Trustee New Zealand Permanent Trustees Limited 141 Willis Street Wellington Auditor Ernst & Young Level 2 Riccarton Racecourse 165 Racecourse Road Christchurch Lawyer Buddle Findlay 245 St Asaph Street Christchurch Share Registry Link Market Services 144 Tancred Street Ashburton Trust Managers Registered Office Level Victoria Street Christchurch SIX MONTHS TO 30 SEPTEMBER

4 Trust Manager s Report Introduction RMB Trustee Limited, as trustee of the Rated Mortgage CM Trust (CM Trust), is pleased to report on the performance of the CM Trust for the six month period ended 30 September The half year period witnessed a profit of $15,000. There was no change in the size of the CM Trust with bonds on issue remaining constant at $18.85 million. Programme Summary Rated Mortgage Bonds (RMBs) are mortgage backed bonds listed on the NZDX. The CM Trust bonds are listed under the NZX code RMTFA. RMBs are rated by Fitch Ratings Australia Pty Limited (Fitch), a major international rating agency. Rated Mortgage CM Trust Assets The CM Trust has as its sole investment (excluding cash) the following investment: Issuer: Trust: Authorised Investments: Debt Notes: Initial Rating: Current Rating*: The New Zealand Guardian Trust Company Limited Propertyfinance Securities CM Trust Commercial First Mortgages / Cash $18,850,000 Class D BBB Bsf Outlook Negative and Loss Severity Rating LS3 * Fitch Ratings Australia Pty Limited; 18 July Returns The RMB bonds pay quarterly coupons benchmarked to a wholesale indicator rate; that being the 90 day bank bill rate (BKBM) plus a fixed margin. The margin over and above the BKBM base rate for the commercial series is 1.35%. A summary of investor returns during the past 18 months is: Quarter End BKBM Base Rate Margin Investor return 11 March % 1.35% 4.182% 11 June % 1.35% 4.100% 11 September % 1.35% 4.450% 11 December % 1.35% 4.600% 11 March % 1.35% 4.580% 11 June % 1.35% 4.030% 11 September % 1.35% 4.370% Further information on the RMB programme, including the original prospectus and investment statement, can be obtained from the website or by contacting the Trust Manager. SIX MONTHS TO 30 SEPTEMBER

5 Rating RMBs, when originally issued, were rated BBB (investment grade) by Fitch. In July 2011 the bonds were downgraded to Bsf, outlook negative, loss severity rating assigned at LS3, reflecting the rating change in the CM Trust s underlying investment. It is relevant to note that the downgrade has no impact on a day to day basis with coupons continuing to be paid. The downgrade reflects a change in the long term credit status of the programme. Yours sincerely RMB Trustee Limited Barney Sundstrum Chairman, Trust Manager SIX MONTHS TO 30 SEPTEMBER

6 Statement of Comprehensive Income 6 months ended 6 months ended 12 months ended Notes (unaudited) (unaudited) (audited) Interest income 2 490, ,528 1,035,954 Interest and similar expense 2 (408,145) (442,491) (936,454) Net interest income 2 82,409 64,037 99,500 Operating expenses 3 (67,409) (64,037) (84,013) Profit before income tax 15,000 15,487 Income tax expense 4 (4,950) (9,900) Profit after income tax 10,050 5,587 Other comperhensive income Profit after income tax 10,050 5,587 The accompanying notes form part of these unaudited financial statements. Statement of Changes in Equity For the six months ended 30 September 2011 Retained Trust Total earnings/(deficit) Capital Notes (unaudited) (unaudited) (audited) Balance as at 1 April ,601 1,601 Profit/(loss) after income tax 10 10,050 10,050 Residual income paid to beneficiary (10,050) (10,050) Balance as at 30 September ,601 1,601 For the six months ended 30 September 2010 Retained Trust Total earnings/(deficit) Capital Notes (unaudited) (unaudited) (audited) Balance as at 1 April ,324 10,324 Profit/(loss) after income tax 10 Residual income paid to beneficiary Balance as at 30 September ,324 10,324 For the 12 months ended 31 March 2011 Retained Trust Total earnings/(deficit) Capital Notes (unaudited) (unaudited) (audited) Balance as at 1 April ,324 10,324 Profit/(loss) after income tax 10 5,587 5,587 Residual income paid to beneficiary (14,310) (14,310) Balance as at 31 March ,601 1,601 The accompanying notes form part of these unaudited financial statements. SIX MONTHS TO 30 SEPTEMBER

7 Balance Sheet Assets Notes As at As at As at (unaudited) (unaudited) (audited) Cash and cash equivalents 5 816, , ,901 Sundry debtors and advances 2,719 2, Amounts due from related parties 6 15,270 15,270 15,270 Tax paid Mortgage Backed Securities 8 18,898,989 18,906,722 18,905,777 Total assets 19,733,914 19,670,612 19,716,809 Liabilities Trade creditors and related party payables 48,315 86,276 47,382 Unsecured advance related parties 7 781, , ,748 Provision for tax 9,866 9,866 Rated Mortgage Bonds 9 18,892,880 18,892,761 18,894,212 Total liabilities 19,732,313 19,660,288 19,715,208 Net assets 1,601 10,324 1,601 Investors funds Trust Capital Retained earnings/(deficit) brought forward 1,601 10,324 10,324 Current earnings/(deficit) (8,723) Total investors funds 1,601 10,324 1,601 The accompanying notes form part of these unaudited financial statements. RMB Trustee Limited, the Manager of Rated Mortgage CM Trust, authorised these Statements for issue on 24 November Barney Sundstrum Chairman RMB Trustee Limited Darryl Queen Director RMB Trustee Limited SIX MONTHS TO 30 SEPTEMBER

8 Statement of Cash Flows 6 months ended 6 months ended 12 months ended Notes (unaudited) (unaudited) (audited) Cash Flows from operating activities Interest received 497, ,599 1,033,969 Interest paid (387,437) (410,827) (835,153) Payments to suppliers (72,871) (67,207) (124,355) RWT Paid (4,950) 8,743 8,709 Net cash inflow from operating activities 10 32,085 34,308 83,170 Cash flows from investing activities Net cash (outflow) from investing activities Cash flows from financing activities Beneficiary income paid (10,050) Net cash inflow from financing activities (10,050) Net increase (decrease) in cash held 22,035 34,308 83,170 Add opening cash brought forward 794, , ,731 Cash and cash equivalents held at year end 816, , ,901 The accompanying notes form part of these unaudited financial statements. SIX MONTHS TO 30 SEPTEMBER

9 Notes to the Financial Statements 1. Significant Accounting Policies The following significant accounting policies have been adopted in the preparation and presentation of the financial report: a) Statement of Compliance The Trust was established and is governed by a Trust Deed dated 3 November 2006 and is domiciled in New Zealand. The Trust is a reporting entity for the purposes of the Financial Reporting Act 1993 and its financial statements comply with that Act. The Financial Statements of the Trust have been prepared in accordance with the Financial Reporting Act The Rated Mortgaged Bonds are publicly traded on the NZDX. The financial statements have been prepared in accordance with Generally Accepted Accounting Practices in New Zealand ( NZ GAAP ) and the requirements of The Financial Reporting Act They comply with the New Zealand Equivalents to International Financial Reporting Standards ( NZ IFRS ) and other applicable financial reporting standards as appropriate for profit orientated entities. b) Basis of Preparation The financial statements have been prepared on the basis of historical cost, with the exception of the expense reserve which is measured at fair value. Cost is based on the fair value of the consideration given in exchange for assets. Accounting policies are adopted and applied in a manner which ensures that the resulting financial information satisfies the concepts of relevance and reliability, thereby ensuring that the substance of the underlying transactions or other events is reported. The accounting policies set out below have been applied in preparing the financial statements. The entity meets the definitions of a financial institution under NZ IFRS 7 Financial Instruments: Disclosure and is subject to its requirements. In the application of NZ IFRS management is required to make judgements, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstance, the results of which form the basis of making the judgements. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. Judgements made by management in the application of NZ IFRS that have significant effects on the financial statements and estimates with a significant risk of material adjustments in the next year are disclosed, where applicable, in the relevant notes to the financial statements. To the extent possible management monitors the performance, including loan arrears and credit enhancement levels, of the underlying mortgage trusts and maintains an external investment grade rating, consequently management are confident at balance date, the trusts can meet all interest obligations and principal repayments at the maturity of the financial instrument. Taking account of the information available, management reviews mortgage backed securities and other assets for impairment. The financial statements are presented in New Zealand dollars, and the level of rounding is to the nearest dollar. Certain prior period balances have been reclassified to comply with the current period s presentation. SIX MONTHS TO 30 SEPTEMBER

10 c) Operating segment The business engages in one activity being the investment and issue of Rated Mortgage Bonds. There is also a single reporting unit, therefore under NZ IFRS 8 there is only one reporting segment. d) Cash and Cash Equivalents Cash and cash equivalents comprise cash on hand, cash in banks and investments in money market instruments with maturity within three months. e) Mortgage Back Securities Mortgage Backed Securities are classified as loans and receivables being the nature and purpose of the financial assets at the time of initial recognition. Mortgage Backed Securities are recorded at amortised cost using the effective interest method less impairment. The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset, or where appropriate, a shorter period. f) Impairment of Mortgage Backed Securities Losses for impaired Mortgage Backed Securities would be recognised immediately when there is objective evidence that impairment of a loan or portfolio of loans has occurred. Impairment would be deemed to have occurred if the loan arrears or credit enhancement in the underlying trusts was to deteriorate or the investment grade rating was withdrawn. Losses expected from future events, no matter how likely, are not recognised. The amount of the loss is measured as the difference between the asset s carrying amount and the present value of the estimated future cash flows discounted at original effective interest rates. g) Income Tax and Deferred Tax (i) (ii) Current Tax Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable profit or tax loss for the period. It is calculated using tax rates and tax laws that have been enacted or substantively enacted by reporting date. Current tax for the current period is recognised as a liability (or asset) to the extent that it is unpaid (or refundable). Deferred Tax Deferred tax is accounted for using the comprehensive Balance Sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax base of those items. In principle, deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised to the extent that it is probable that sufficient taxable amounts will be available against which deductible temporary differences or unused tax losses and tax offsets can be utilised. However, deferred tax assets and liabilities are not recognised if the temporary differences giving rise to them arise from the initial recognition of assets and liabilities (other than as a result of a business combination) which affects neither taxable income nor accounting profit. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) when the asset and liability giving rise to them are realised or settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by reporting. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the entity expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. SIX MONTHS TO 30 SEPTEMBER

11 (iii) Current and Deferred Tax for the Period Current and deferred tax is recognised as an expense or income in the income statement, except when it relates to items credited or debited directly to equity, in which case the deferred tax is also recognised directly in equity, or, where it arises from the initial accounting for a business combination, it is taken into account in the determination of goodwill or excess. h) Rated Mortgage Bonds Rated Mortgage Bonds are recorded at amortised cost using the effective interest method. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or where appropriate, a shorter period. i) Interest Income/Expense The Trust recognises interest revenue and expense on an accruals basis when the services are rendered using the effective interest method. j) Expense Reserve The expense reserve has been recorded at fair value to eliminate any inconsistency in measurement or recognition. The expense reserve is held in trust on behalf of the bondholders as a form of credit enhancement. The reserve is repayable at the conclusion of the programme unless the Rated Mortgage Bonds are repaid or their principal value reduced to zero at which point the expense reserve would become immediately repayable. k) Other Payables Other payables and accrued expenses are recognised when the Trust becomes obliged to make future payments. Other payables are carried at amortised cost, apart from the related party payables and advances, which have been stated at fair value to eliminate any inconsistency in measurement and recognition. All amounts are unsecured. l) Other Receivables Other receivables are classified as loans and receivable financial assets at the time of initial recognition. Other receivables are measured at amortised cost using the effective interest method less impairment. Losses for impaired other receivables would be recognised immediately when there is objective evidence that impairment of a receivable has occurred. m) Revenue Recognition Revenue is recognised and measured at the fair value of the consideration received or receivable to the extent it is probable that the economic benefits will flow to the Trust and that the revenue can reliably be measured. The following specific recognition criteria must also be met before revenue is recognised: Interest revenue revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial assets and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset. n) Changes in Accounting Policy There have been no changes in accounting policies. All policies have been applied on basis consistent with those used in previous years. SIX MONTHS TO 30 SEPTEMBER

12 o) GST The Trust is not registered for GST and the financial statements have been prepared on a GST inclusive basis. 2. Net Interest Income 6 months ended 6 months ended 12 months ended Interest income Mortgage Backed Securities 470, ,257 1,003,521 Interest on bank accounts 20,077 12,781 31,909 Other Interest expenses Rated Mortgage Bonds (386,105) (411,240) (837,017) Other (22,040) (31,251) (99,437) Net interest 82,409 64,037 99, Operating Expenses 6 months ended 6 months ended 12 months ended Audit fees and tax consulting 11,002 5,631 8,506 Legal fees 2,621 5,513 21,970 Trustee fees 12,717 6,865 34,598 Trust manager / excess management fees Other operating expenses 41,069 46,028 18,939 Operating expenses 67,409 64,037 84, Taxation a) Income tax The major components of income tax are: 6 months ended 6 months ended 12 months ended Income statement Current income tax Current income tax charge 4,950 9,900 Deferred income tax Income tax expense reported in the income statement 4,950 9,900 b) Amounts charged or credited directly to equity Nil. SIX MONTHS TO 30 SEPTEMBER

13 c) Numerical reconciliation between aggregate tax expense recognised in the income statement and tax expense calculated per the statutory income tax rate. 6 months ended 6 months ended 12 months ended Accounting profit before tax 15,000 15,487 At the statutory income tax rate of 33% 4,950 5,111 Tax on non deductible expenses 6,088 Deduction for beneficiary income (4,950) (6,088) Prior period adjustment Aggregate income tax expense 5,111 d) Recognised deferred tax assets and liabilities There were no deferred tax assets or liabilities as at 30 September 2011 (30 September 2010: Nil, 31 March 2011: Nil). e) Tax losses The Trust has no tax losses to carry forward as at 30 September 2011 (30 September 2010: Nil, 31 March 2011: Nil). 5. Cash and Cash Equivalents Bank current accounts 26,436 46,039 4,401 Term deposits (due less than 3 months) 790, , ,500 Total cash and cash equivalents 816, , ,901 Bank accounts earn interest at floating rates based daily deposit rates. The carrying amounts of cash and cash equivalents represent fair value. Cash and Cash Equivalents include an amount of $816,936 held as an Expense Reserve (see Note 7). The Expense Reserve is a requirement of the Trust deed and is held as a form of credit and liquidity enhancement to meet expense payments if required. The Expense Reserve is only assessable by the Trust in certain circumstances to meet defined expenses relating to the Trust. 6. Accounts Receivable from Related Parties RML Trust 15,270 15,270 15,270 15,270 15,270 15,270 All amounts receivable from related parties are unsecured, repayable on demand and non interest bearing. SIX MONTHS TO 30 SEPTEMBER

14 7. Amounts Payable to Related Parties RMB Trustee Limited 34,963 26,200 26,200 34,963 26,200 26,200 Expense reserve propertyfinance securities limited Beneficiary income owing by the Trust Avon Number One Limited 766, , ,437 14,311 14, , , ,748 Pursuant to the Rated Mortgage CM Trust Deed, an expense reserve is required as a form of liquid enhancement and credit enhancement for the Rated Mortgage Bond program. The expense reserve has been fully funded by an unsecured advance from propertyfinance securities limited. The advance has no fixed term and is repayable at the conclusion of the programme. The advance accrues interest at the bank 3 month term deposit rate less bank charges, if any. The advance is stated at fair value to eliminate any inconsistencies in measurement and recognition, as the advance liability relates directly to a cash deposit of $816,836 held for the expense reserve subject to the terms of the Rated Mortgage CM Trust Deed. Since the expense reserve cash deposit may be utilised to meet costs in the Trust in accordance with the Trust Deed, there is inherent uncertainty regarding the repayment of the unsecured advance to propertyfinance securities limited. During the period there have been no changes in the fair value of the unsecured advance due to credit risk or liquidity risk and no difference between carrying amount and the settlement amount on maturity. 8. Mortgage Backed Securities Mortgage Backed Securities 18,898,989 18,906,722 18,905,777 The Trust purchased Commercial Mortgage Backed Securities (MBS) with a minimum rating at the purchase date of BBB. The MBS purchased are tradable securities and carry a floating interest rate based on the 90 day bank bill bid rate (reset quarterly) and margin. The MBS investment carries an interest rate (at 30 September 2011) of 5.27%pa, based on the 90 day bill bid rate and a margin of 2.25%pa (reset quarterly). The MBS investment is secured over the underlying loans held by the Trustee of the Propertyfinance Securities CM Trust. The MBS investment is recorded at amortised cost using the effective interest method, less impairment. 9. Rated Mortgage Bonds Rated Mortgage Bonds 18,892,880 18,892,761 18,894,212 The Rated Mortgage Bonds are issued securities that carry a floating interest rate (at 30 September 2011) of 4.37%pa, based on the 90 day bill bid rate and a margin of 1.35%pa (reset quarterly). The Rated Mortgage Bonds are secured by a security interest over the present and future property of the Trust. Each Rated Mortgage Bond Trust is operated under separate cover. The claims of the rated mortgage bond holders of any single Trust may not be met out of the assets of another Trust. The Rated Mortgage Bonds have a legal maturity date of SIX MONTHS TO 30 SEPTEMBER

15 The Rated Mortgage Bonds are recorded at amortised cost using the effective interest method, less impairment. The rated mortgage bonds mature December The holders of the rated mortgage bonds have no right of early repayment except in the case where the Trustee ceases to hold MBSs in accordance with the Trust Deed, and does not reinvest in further MBSs that are rated at least BBB by Fitch within a ninety day period of the existing MBS s being repaid. 10. Notes to Cashflow Statement Reconciliation of profit/(loss) after tax to net cash flows from operating activities. 6 months ended 6 months ended 12 months ended Profit/loss from ordinary activities after income tax 10,050 5,587 Add: Non Cash portion of interest expense/income 5,455 (2,517) (120) Less: Shortfall income included in financing activities Movements in working capital: (Increase) in sundry debtors and advances (1,858) (1,766) (46) Increase/(decrease) in tax paid/tax provision 8,743 18,609 Increase/(decrease) in trade creditors and other accruals 18,438 29,848 59,140 Net cash provided by operating activities 32,085 34,308 83, Commitments and Contingent Liabilities There were no capital commitments or contingent liabilities as at 30 September 2011 (30 September 2010: nil, 31 March 2011: nil). 12. Financial Instruments Financial risk management objectives: The Trust does not enter into financial instruments, including derivative financial instruments, for speculative purposes. The Trust s activities expose it primarily to the financial risks of changes in interest rates. The fair value of mortgage backed securities has been assessed as approximating the carrying value in the financial statements. In arriving at a fair value for the mortgage backed securities the Trust Manager has taken account of the following: Fair value would normally be the market price of the instrument. However the mortgage backed securities held by the Trust have not been traded and so market data is not available. In the absence of market prices for the instruments, observable market data would be used to assist in establishing a fair value. However the Trust Manager has been unable to identify any similar instruments with comparable characteristics that have been observable market data to enable a fair market value to be assessed in this manner. In the absence of observable market data for other similar instruments, the Trust Manager has concluded that carrying value, being amortised cost using the effective interest method less impairment, best approximates fair value for the mortgage backed securities. The Trust Manager intends to hold the mortgage backed securities to maturity. This is possible as the Trust s funding continues until after maturity of the mortgage backed securities. In arriving at carrying value it is assumed that the mortgage backed securities are held to maturity and interest received through to maturity. SIX MONTHS TO 30 SEPTEMBER

16 The Trust Manager considers that the carrying amount of rated mortgage bonds recorded in the financial statements approximates fair value. No recent trading has occurred in the rated mortgage bonds. No observable market data is available for other similar instruments that would provide information to enable a fair value to be assessed. It is the intention of the Trust Manager to retain the rate mortgage bond funding until maturity, as provided for in the Trust Deed. Fair value for the rated mortgage bonds has therefore been assessed as being amortised cost using the effective interest method less impairment. The fair value of all remaining financial assets and liabilities are approximated by their carrying values. Credit Risk Credit risk refers to the risk that a counter party will default on its contractual obligations resulting in financial loss to the Trust. The Trust has mitigated this risk by investing in investment grade debt notes and holdings its cash balances with registered banks. The carrying amount of financial assets recorded in the financial statements is the Trust s maximum exposure to credit risk without taking account of the value of any collateral or other security obtained. On the inception of the Trust the Trust manages the risk by: Placing cash funds with banks assigned high credit ratings by international credit rating agencies. Purchasing mortgage backed securities that have an assigned credit rating within the criteria set for each Trust. Ensuring the Trust s management function is undertaken by staff that are experienced and suitably qualified for this type of business. The Trust s major asset is Mortgage Backed Securities (MBSs) comprise Class D Debt Notes in the CM Trust with a face value of $18.85 million and a carrying value of $18.90 million. At initial issue the MBS s were rated BBB (investment grade) by Standard & Poors. The investment grade rating of the Propertyfinance Securities CM Class D Debt Notes was withdrawn on 9 February 2009 when the Debt Note was downgraded from BBB to BB+ (outlook negative). The downgrade to below investment grade gives rise to a potential impairment of the asset. The maximum exposures to credit risk at the relevant balance dates are: Bank current account 26,436 46,039 4,401 Bank term deposits 790, , ,500 Sundry debtors and advances 2,719 2, Amounts due from related parties 15,270 15,270 15,270 Mortgage Backed Securities 18,898,989 18,906,722 18,905,777 19,733,914 19,670,612 19,716,808 The Mortgage Backed Securities, for the purposes of this disclosure, are recorded at their undiscounted contractual cash flow settlement value. Liquidity Risk Liquidity risk is the risk that the entity will encounter difficulty in raising funds at short notice to meet commitments associated with financial instruments. The entity maintains sufficient funds to meet its commitments based on forecasted cash flow requirements. Liquidity risk and exposure is reviewed on an ongoing basis. The Trust has also put in place an SIX MONTHS TO 30 SEPTEMBER

17 expense reserve as required by the Trust Deed to act as a form of liquidity enhancement to meet expense payments if required. Currency Risk The Trust is not exposed to currency risk. Concentration of Funding The majority of the Trust s external funding from non related parties is from within New Zealand. The Trust's concentration of external funding is as follows: Class D Debt Notes in the Propertyfinance Securities CM Trust Geographical concentration of external funding New Zealand 16,863,274 16,863,167 16,864,462 Australia 2,004,550 2,004,537 2,004,691 United States of America 25,057 25,057 25,059 18,892,880 18,892,761 18,894,212 The rated mortgage bonds are designated in New Zealand dollars. Interest Rate Risk Interest rate risk is the risk of loss to the entity arising from adverse fluctuations in interest rates. To mitigate this risk the entity principally matches borrowing costs with lending rates. Assets Cash and cash equivalent 816, , ,901 Mortgage Backed Securities 18,898,989 18,906,722 18,905,777 Total Interest bearing assets 19,715,925 19,652,761 19,700,678 Interest rate applicable to the Mortgage Backed Securities as at 30 September 2011: 5.27% pa. Liabilities Rated Mortgage Bonds 18,892,880 18,892,761 18,894,212 Total interest bearing liabilities 18,892,880 18,892,761 18,894,212 Interest rates applicable to the Rated Mortgage Bonds as at 30 September 2011: 4.37% pa. Interest Rate Sensitivity The Trust is exposed to interest rate risks; primarily the spread between its interest income on its investments and the interest payable to its investors. The Trust specifically manages this risk by maintaining a positive margin between these two rates and maintaining a common synchronised floating benchmark being the New Zealand bank bill wholesale rate for the repricing of both its assets and its liabilities. SIX MONTHS TO 30 SEPTEMBER

18 At 30 September 2011, had interest rates moved up by.5% (50 basis points) the net result would have been an increase in pre tax profit of $2,015 (Interest Income increase of $49,140 less Interest expense increase of $47,125). At 30 September 2011, had interest rates moved down by 1.0% (100 basis points) the net result would have been a decrease in pre tax profit of $4,030 (interest income decrease of $98,280 less interest expense decrease of $94,250). Interest rate movements impact on profit or loss and equity equally. The interest rate sensitivity analysis relates to interest receivable on Mortgage Backed Securities and cash and interest payable on Rated Mortgage Bonds. Significant assumptions used in the interest rate sensitivity analysis include: Reasonably possible movements in interest rates given the economic situation within New Zealand and overseas. The net exposure at balance date is representative of what the Trust was or is expecting to be exposed to in the twelve months following balance date. The Trust has been designed to mitigate this risk by maintaining a fixed margin between these two rates and maintaining a common synchronised floating rate benchmark being the New Zealand bank bill wholesale rate for the repricing of both its assets and its liabilities i.e. movements in the underlying reset rate (90 day bill rate, BKBM) effects both assets and liabilities equally and at the same time. Maturity of Financial Assets and Liabilities Financial liabilities Rated Mortgage Bonds 18,892,880 18,892,761 18,894,212 Trade and related party payables 48,315 86,276 47,382 Unsecured advance related party 781, , ,748 19,722,447 19,660,288 19,705,342 Financial assets Cash and cash equivalents 816, , ,901 Mortgage Backed Securities 18,898,989 18,906,722 18,905,777 Amount due from related parties 15,270 15,270 15,270 Sundry debtors and advances 2,719 2, ,733,914 19,670,612 19,716,809 Note: The table above represents Financial Assets and Liabilities as reflected in the Balance Sheet. SIX MONTHS TO 30 SEPTEMBER

19 Maturities financial liabilities On Demand 49,274 26,200 30,134 Within 6 months 413, , ,337 Between 6 months and 12 months 447, , ,155 Between 12 months and 18 Months 444, , ,280 Between 18 months and 24 months 447, , ,280 Between 24 months and 60 months 2,691,780 2,881,416 2,557,677 Over 60 months 50,367,147 53,441,884 50,078,424 54,861,704 58,221,243 54,298,287 Maturities financial assets Within 6 months 1,304,652 1,285,575 1,259,741 Between 6 months and 12 months 500, , ,250 Between 12 months and 18 months 501, , ,980 Between 18 months and 24 months 503, , ,830 Between 24 months and 60 months 3,031,080 3,223,350 2,414,148 Over 60 months 46,157,401 48,966,981 46,451,756 51,998,225 55,039,200 51,551,703 The maturity amounts shown above represent actual contractual undiscounted cash flows including contractual interest receipts and payments using an appropriate current interest rate where instruments carry floating interest rates. The maturity of financial assets and liabilities are expected to occur on the contractual dates. Priority of Financial Liabilities The ranking of financial liabilities for repayment by the Trust is as follows, set out in order of first to last priority: Priority of financial liabilities Rated Mortgage Bonds 18,892,880 18,892,761 18,894,212 Unsecured creditors 829, , ,130 19,722,447 19,660,288 19,705,342 Advances from related parties are unsecured. Amounts due to related parties primarily include amounts of expenses of the Trust that are paid by the Trust Manager and reimbursed by the Trust. The expenses of the Trust are paid first from income of the Trust before payments are paid to bondholders for interest. The Rated Mortgage Bonds are rated by international rating agency Fitch Ratings Australia Pty Limited. Their current rating is Bsf Outlook Negative and Loss Severity Rating LS3. The Rated Mortgage Bonds, for the purposes of this disclosure, are recorded at their undiscounted contractual cash flow settlement value. Past Due and Impaired Assets There were no past due or impaired assets as at 30 September 2011 (30 September 2010: nil, 31 March 2011: nil). SIX MONTHS TO 30 SEPTEMBER

20 13. Related Parties Rated Mortgage CM Trust is controlled by RMB Trustee Limited. RMB Trustee Limited is the Issuer and the Trust Manager. Excess management fees are payable to RMB Trustee Limited by the Trust. The excess management fees vary depending on the net interest income and expenses in each quarterly period. RMB Trustee Limited is in control of another Rated Mortgage, RML Trust, which has invested in MBS s in a Trust that was established by propertyfinance group limited. RMB Trustee Limited is a controlled entity of PropertyFinance Group Limited (in liquidation). propertyfinance securities limited (PFSL) is a subsidiary of PropertyFinance Group Limited (in liquidation). PFSL holds 20,000 of the Rated Mortgage Bonds, and has provided an unsecured advance of $650,000 to the Trust for an expense reserve. Land Securities Limited assumed the administration and management services for the Trust in June 2010 after PropertyFinance Group Limited was placed into liquidation. Darryl Queen is a director of both Land Securities Limited and RMB Trustees Limited. Darryl Queen is also the ultimate shareholder of Land Securities Limited. Avon Number One Limited is a subsidiary of propertyfinance securities limited. Avon Number One Limited is the beneficiary of both the Rated Mortgage CM Trust and the Rated Mortgage RML Trust. New Zealand Permanent Trustees Limited (NZPT) is the security trustee for the Rated Mortgage CM Trust. NZPT provides trustee services for the Trust. Public Trust provides Standby Management services for the Trust. 14. Trust Capital There are no externally imposed capital requirements. There are no requirements for a return on capital. The intention of the Trust Manager is to maximise the return for the bondholders. 15. Going Concern The Trust is dependent on the carrying value of the Mortgage Backed Securities. These securities are supported by loans and receivables held in securitisation trusts controlled by other parties. If there is a future unexpected and significant deterioration in these underlying assets, this would have a flow on impact on the carrying value of the mortgage backed securities held by the Trust. At balance date, nothing has come to the Manager s attention that has given rise to any concerns around the validity of the going concern assumption. 16. Other Information On 13 February 2009, Fitch Ratings Australia Pty Limited downgraded the Rated Mortgage Bonds issued by the CM Trust to a BB+ credit rating from BBB and assigned a negative outlook. In September 2009 Fitch placed the CM Bonds on Rating Watch Negative. In August 2010, Fitch Ratings Australia Pty Limited downgraded the Rated Mortgage Bonds issued by the CM Trust to a BB credit rating from BB+ and assigned a negative outlook, loss severity rating assigned at LS3. On 18 July 2011, Fitch Ratings Australia Pty Limited further downgraded the Rated Mortgage Bonds issued by the CM Trust to Bsf Outlook Negative and Loss Severity Rating LS3 SIX MONTHS TO 30 SEPTEMBER