INVESTMENT STATEMENT

New Zealand Baptist Savings & Development Society Incorporated

(Baptist Savings)

Important information


Please be aware:

Investments carry potential risks and rewards. You should therefore take the time to read this document carefully.

If you have any queries about this Investment Statement, please do not hesitate to contact Baptist Savings with any
query you may have.

Baptist Savings is not a registered bank.


New Zealand Baptist Savings &
Development Society Incorporated
Investment Statement
Required for the purposes of the
Securities Act 1978, the Securities
Act (Charity Debt Securities)
Exemption Notice 2013 and the
Deposit Takers (Charities) Exemption
Notice 2014.
WARNING:
Prospective investors are advised that New Zealand Baptist
Savings & Development Society Inc. (BSDS), in making this offer
of debt securities, is not subject to the normal offer document
and independent supervisor requirements under the Securities
Act 1978. This is because a general exemption from those
requirements has been granted to all charities.
Accordingly, the information required to be disclosed in respect
of this offer is less than the information that would normally be
disclosed in a registered prospectus and an investment
statement.
Also, there is no independent supervision of your money, and the
normal mechanism for redress if you encounter difficulties in
securing repayment of your money is not available.
The Financial Markets Authority has not examined or approved
this particular offer. The general exemption was granted on the
basis that prospective investors in charities are not necessarily
seeking a commercial investment opportunity, but instead wish
to support the charitable purpose of the charity. The particular
charitable and religious purposes of BSDS are discussed below.
If the investment risk or return, or if repayment of your
investment is important to you, you should consider seeking
financial advice before subscribing to this offer. The FMA
website maintains a list of authorized financial advisers that
you could consult; see www.fma.govt.nz.
WHO IS PROVIDING THIS?
New Zealand Baptist Savings & Development Society Inc. is the
issuer. Its address is: PO Box 12738, Penrose, Auckland 1642;
Level 1, 477 Great South Road, Penrose, Auckland 1061.
BSDS is incorporated under the Incorporated Societies Act
1908, has carried on business as a Development Society since
1962 and is a registered charity under No. CC24623. BSDS is a
religious organisation within the definition of the Securities Act
(Charity Debt Securities) Exemption Notice 2013 and the
Deposit Takers (Charities) Exemption Notice 2014.
WHAT SORT OF INVESTMENT IS THIS?
BSDS Call and Term deposits are unsecured interest bearing
investments, denominated in New Zealand dollars. Fixed term
investments have a fixed rate of interest payable to you by
BSDS. The interest rate on call deposits is subject to change at
any time, or after provision of an agreed notice period.
WHAT WILL MY INVESTMENT BE USED FOR?
The rules of the BSDS only allow money to be lent to Christian
organisations recognised by the Baptist Union of New
Zealand. BSDS provides low cost finance and grants to
Christian organisations throughout New Zealand. The funds
deposited are utilised to satisfy the charitable purposes of
BSDS, such as building facilities and providing better resources
for Christian organisations, who in turn carry out benevolent
and charitable works in local communities. Deposits held on
reserve may be invested with financial institutions or
investment companies that have an investment grade credit
rating.
No member of the BSDS staff or any Board director may use
depositors money for their own purposes and there are strict
provisions against private pecuniary gain in the Rules of the
Society.
BSDS obtains the majority of its funds from churches,
individuals, companies and trusts associated with those
churches.
WHAT RETURNS WILL I GET?
You are entitled to:
repayment of the amount you invest; and
payment of interest on the amount of your deposit.
Interest will be paid or compounded on Term Deposits, with
the frequency and on the dates as specified on any application
form relating to the term deposit, or as agreed with the BSDS
at the time of investment.
Resident Withholding Tax will be deducted from interest
payments to New Zealand resident investors unless the
depositor provides a Certificate of Exemption issued by the
Inland Revenue Department. For non-resident investors; Non
Resident Withholding Tax will be deducted at the appropriate
rate from interest payments.
WHAT ARE MY RISKS?
Principal risk:
The main risk is not being paid on time or in full, should BSDS
become insolvent or go into liquidation or statutory
management. This could occur if borrowers from BSDS or if
financial institutions or investment companies holding funds
from BSDS failed to repay on time or in full.
Should this occur:
you may not recover all of the amount you invested, or
receive the agreed interest in full.
you will not be obliged to pay any more than the amount
you invested with BSDS.
General market risk:
Any political, social and or economic downturn could
negatively impact the number of deposits held by BSDS or the
financial position of our borrowers.
Regulatory risk:
Increasingly stringent regulatory and legal requirements for
non-bank deposit takers (including BSDS) are significantly
increasing our operational costs. This has a negative impact on
the retained earnings and therefore capital adequacy of BSDS.
BSDS mitigates this risk by completing regular budgets to
manage and forecast its costs and expenditure.
BSDS is exempt until 1 May 2015 from the following sections
of the Reserve Bank of New Zealand Act 1989:
to have a credit rating in section 157I
the governance requirements in section 157L.
BSDS is also exempted until 30 November 2016 from the
following sections of the Reserve Bank of New Zealand Act
1989:
the capital requirements in sections 157T and 157U;
the related party exposure requirements in section 157X
and 157Y ; and
the liquidity requirements in sections 157ZA and 157ZB.
However, by 1 October 2014, BSDS will be under the trustee
supervision of Covenant Trustees Limited, part of whose
responsibility is to monitor the levels of capital adequacy,
related party lending and liquidity.


Collateral Security Risk:
Under the Building Act 2004, territorial authorities are
required to ensure certain buildings (including churches) are
strengthened to a minimum of 34 percent of the new building
standard.
This policy affects many BSDS borrowers and has created a
significant liability for many churches and therefore BSDS.
To mitigate this risk, BSDS has a strict lending policy which
includes criteria on Earthquake-Prone Buildings before any
new lending is granted.
Depreciation can also affect the security of BSDSs portfolio.
BSDS mitigates this risk through regular reviews of its lending
policies.
Credit Risk:
Loans from BSDS are fully secured by registered first
mortgages over land and buildings.
All term loans are repayable on demand, except in some cases
where a fixed interest rate loan is involved.
While a registered first mortgage provides additional security
for BSDS in the event of a default by a borrower, it does not
provide immediate recovery of any funds still outstanding. As
it could be months before a property could be sold, there
would be a delay between a church defaulting and when BSDS
could recover some or all of its money from the sale of a
property.
This provides a risk as it would impact on BSDSs cash flow and
liquidity.
To mitigate this risk BSDS has conservative lending policies, as
it only lends up to 60% of the value of a church property or
other commercial property and 80% of the value of a
residential property. Its investment policy is similarly
conservative, with at least 80% of investments with the major
trading banks.
Concentration Risk:
BSDS only lends to New Zealand Christian churches and
organizations. There is therefore risk arising from the
concentration of borrowers in one country and one sector.
Additionally, churches, like any entity tend to experience
periods of prosperity and decline.
Churches also have varied income sources that are very
different from typical businesses. Churches rely heavily on
gifts or tithing from members and this source of income
cannot be guaranteed.
Capital Adequacy:
In the event of BSDS experiencing significant losses through
financial institutions or investment companies holding funds
for BSDS and/or experiencing significant losses through its
lending to churches and other Christian organizations, BSDS
may be unable to meet its obligations to its customers under
the terms of any debt security (term deposit or savings
account) or loan.
BSDS mitigates this risk by maintaining its capital adequacy
ratio at greater than 8%.
Operational risk:
The most significant operational risk to BSDS is IT and computer
system failure or degradation. This risk is managed by a disaster
recovery plan which has business and client information backed
up on computers situated out of Auckland.
An additional operational risk is staff mistake or negligence. To
mitigate this risk, the Board has regular staff performance and
operational reviews and maintains a $2,000,000 fidelity insurance
policy, with cover for (but not limited to) negligence and
embezzlement.
Interest rate risk:
There is a risk that BSDS' profitability might suffer if the margin
between its borrowing and lending narrows, and interest rate
rises will cause the value of some of its investments to fall. This
risk is managed by BSDS regularly reviewing its lending and
borrowing rates and by not being heavily exposed to the bond
market.
Liquidity risk:
There is a risk that as BSDS tends to lend for the long term and
borrow from its depositors for the short term, there might not be
enough cash to meet its obligations to its depositors. BSDS
manages this risk by maintaining at least 20% of its deposits in
short term cash investments.
CONSEQUENCES OF INSOLVENCY:
If BSDS becomes insolvent and is wound up, you would rank
equally with all other unsecured creditors of BSDS and behind all
secured creditors and preferred claims. However, BSDS has not
and cannot under the terms of its Trust Deed give any securities
to any person or organisation that rank ahead of unsecured
creditors.
WHAT ARE THE TERMS AND CONDITIONS OF THE OFFER?
Minimum account balances for deposits are:
$500 on Fixed Term deposits.
$100 on Call.
The minimum transaction amount on savings accounts is $20.
Payment or delivery of investment money can be made by
cash, by cheque payable to the New Zealand Baptist Savings &
Development Society Inc, by automatic payment, by ordinary
deposit to the BSDS bank account or by another electronic
delivery mechanism.
No period of notice is required for withdrawal of on Call
deposits.
Usually your term deposit is not repayable until maturity.
Should a term deposit be repaid at your request prior to
maturity date, the interest rate may be adjusted and the
principal amount repayable may be reduced to offset interest
payments (calculated at the rate prior to adjustment) which
you may have received during the term of the investment.
Holding of Investment money: Money lodged with the BSDS
will be deposited in accordance with your instructions to your
nominated account or investment. The money will be held
according to the usual terms and conditions applying and so
held until disbursed in accordance with your instructions.
WHAT FEES DO YOU CHARGE?
BSDS does not charge Account Fees, Establishment Fees,
Maintenance Fees or Transaction fees for term or call deposit
accounts, but it reserves the right to make an adjustment to the
interest rate, if the deposit is terminated or partially withdrawn
prior to maturity date.
RECORD KEEPING
Any money deposited with BSDS will be allocated an account
number. BSDS will keep adequate records of deposits and all
withdrawals and dealings with such money using the account
number allocated to your investment. You may have access to
those records upon request.
ARE YOUR FINANCIAL STATEMENTS AUDITED?
The BSDS systems and operations are audited during each
financial year and the financial statements are audited annually.
It is a requirement of this investment that all current depositors
and prospective depositors are entitled to a free copy of BSDSs
most recent audited financial statements within five working
days of BSDS receiving the request.
DOES BSDS HAVE PROFESSIONAL INDEMNITY INSURANCE?
BSDS maintains a fidelity insurance policy with a cover of
$2,000,000.
WHAT DISPUTE RESOLUTION FACILITIES ARE AVAILABLE?
BSDS endeavours to maintain very good relations with all its
investors. In cases where there is a need for a formal dispute
resolution process, BSDS will refer the matter to the Chairman
and then to Financial Services Complaints Limited as required
under the Financial Services Providers (Registration and Dispute
Resolution) Act 2008.
Dated 17 September 2014