About Instant Finance

Instant Finance was incorporated 1 October 2001 through the amalgamation of the eight finance companies which made up the Instant Finance group. The first of these finance companies, Manhattan Finance, was established by founding Shareholder Nigel Nausbaum in 1970 and commenced operations as a finance company in 1971 in Lower Hutt. Over thirty five years, the trading success of Instant Finance and the companies that operated under the Instant Finance brand prior to 1 October 2001 have ensured that the Instant Finance name is among the best known personal finance brands in the North Island.

Instant Finance currently has a total of 18 strategically placed retail branches, with nine operating in greater Auckland, four in Wellington, two in Northland one in the Waikato, one in the Bay Of Plenty and one in Christchurch. A senior management and investment team operates from the Company's administration centre in Greenlane.

In addition to its branch network, an online finance operation is based in the Company's Greenlane office to process loan applications received via the Instant Finance website. The ongoing development of an online product delivery channel ensures Instant Finance is positioned to adapt to future changes in borrowing patterns from both existing customers and potentially, those from different market segments.

Instant Finance currently employs over 120 full time staff including a core management group that has played a significant role in the Company's development over many years. A commitment to staff welfare, training and individual personal development is a key component in achieving Instant Finance's aspiration of being regarded as an "industry employer of choice".

Instant Finance has prudently managed its operations during a period when many competitors have either failed or exited the industry. With secure funding lines in place, the directors believe that Instant Finance is now well placed to progressively extend its retail branch network into other major centres throughout New Zealand and has the potential to become the country's leading non-bank personal loan provider over the next five years.

Loan origination

The bulk of Instant Finance's lending consists of personal loans of up to $20,000, most of which are secured over household chattels, personal effects, motor vehicles or a combination of these items. For homeowners, larger loans may be secured over property. Approximately 5% of all lending is unsecured. At March 2010 Instant Finance had approximately 18,750 active loans with an average size of approximately $3,500.

"Loans can be needs based as well as aspirational". Instant Finance's typical customer requires assistance to pay bills, to meet the cost of a wedding or funeral, or to cover travel costs in a family emergency. Instant Finance also lends to customers wishing to purchase a used motor vehicle from its subsidiary, Easy Driver Limited. Loan terms are normally between one month to three years, with over 50% of loans being written for a term of 18 months or less.

Instant Finance spreads its credit risk by providing small loans to a large number of customers. Sound lending guidelines have been developed based on many years of experience in the personal loans market. Instant Finance's policy of closely matching loan amounts to the customer's ability to repay ensures that the company manages the risk inherent in its loan portfolio and operates profitably year after year.

A commitment to personal service and respect for individual customers are among the core values that have enabled the Company to develop into the business it is today. The majority of loans written by Instant Finance are taken out by existing customers, with approximately 13% of lending to new customers each month. Instant Finance enjoys a high level of customer loyalty, with over 75% of its customers having had two or more loans and over 40% of customers having had five or more loans with Instant Finance.

Instant Finance does not maintain relationships with other lenders or third party vendors. The primary source of new business is referrals from existing customers. Advertising mediums utilised include branch signage, local and national newspapers, TV, buses, billboards, radio, Yellow Pages and the Instant Finance website.

Instant Finance customers generally do not meet the lending criteria traditionally applied by lenders such as trading banks due to a combination of factors including the small loan values, many customers being low paid workers or beneficiaries with an average to poor credit history, frequent borrowing requirements and limited security combined with the high costs of administering such loans.

The diverse background and borrowing needs of its customer base means that Instant Finance relies on the experience of its staff to assess the overall risk associated with each lending decision. In evaluating the creditworthiness of potential customers, the Company employs profile lending techniques developed over 39 years to assist staff at different branches in making consistent lending decisions.

Instant Finance lenders work closely with the customer to understand their budget and ensure that payments are affordable. Most loans are structured with weekly repayments so that small, regular amounts are being paid by the customer.

Loan servicing and collections

Responsibility for the management of arrears remains with the originating retail branch, which ensures regular face to face contact between the customer and credit controller and also facilitates clear communication between branch lenders and credit controllers. Branch managers take responsibility for the arrears performance of their branch and front line staff assist credit controllers in the early stages of the arrears cycle.

Instant Finance's management of customers facing payment difficulty is a key strength of the business. Many of Instant Finance's customers have limited budgets and even the most reliable customers can suddenly be faced with changed circumstances and find they are struggling to repay their loan.

When a payment is missed Instant Finance works closely with the customer to clear the arrears in the shortest timeframe. Securing small regular payments is often more successful in the long term than attempting to obtain more than the customer's budget allows. When a customer enters into a payment arrangement to clear arrears, default fees and default interest are not charged provided the customer keeps to the arrangement.

Instant Finance maintains a collective provision for doubtful debts to recognise the likely profit impact of loans which are not expected to achieve full recovery. Responsibility for writing off bad debts is delegated to each branch, which review potential write-off accounts against specific criteria in order to achieve consistency in the assessment of bad debts across the branch network. The monthly write off process is transparent across all branches which ensures that there is no ability for any branch to fail to recognise when a bad debt should be written off.

Related parties

Instant Finance has one wholly owned subsidiary (which also has a wholly owned subsidiary) and one associated company in which it has a 50% shareholding:

• ED 2001 Limited
  
  This subsidiary company forms part of the Instant Finance charging group under the Company's Trust Deed with Covenant Trustee Company Ltd. ED 2001 Limited wholly owns Easy Driver Limited which is a registered Motor Vehicle Trader and operates from a retail facility in Manukau. In addition to selling vehicles directly to the public, Easy Driver Limited provides a range of quality used vehicles in the price bracket best suited to both the transport and financial requirements of Instant Finance customers.
  
  
• iFone Limited
  
  Associate company iFone Limited imports mobile phones and retails these together with connection packs, accessories and phone cards through Instant Finance branches. Most phones are sold by way of finance agreements provided by Instant Finance. 50% of the shares in iFone Limited are owned by Instant Finance and 50% by Symon Nausbaum, a director of Instant Finance.

Corporate Governance

Instant Finance is committed to achieving best practice standard in all areas of its operations. Governance and risk management continue to be subjected to regular scrutiny and review under a Corporate Governance charter based on and consistent with the principles and guidelines espoused by the Securities Commission.

The Instant Finance Board has delegated responsibilities to three sub committees that monitor Audit and Risk, Credit and Remuneration. Each committee has its own charter and is charged with reporting and making recommendations to the Board. A formal and robust internal audit process complements the work carried out by external auditors PricewaterhouseCoopers. Both the annual internal audit plan and the audit results are reviewed by the Audit Committee.

The Company is committed to strict compliance with all aspects of statutory and legal requirements. Instant Finance welcomes the introduction of regulatory regimes that require increased disclosure and compliance from non bank financial institutions.