Heartland Group 2019 Annual Shareholder Meeting

NZX/ASX Release
Heartland Group 2019 Annual Shareholder Meeting
12 November 2019
The Annual Shareholder Meeting of Heartland Group Holdings Limited (Heartland Group) (NZX/ASX:
HGH) will be held today at Chateau on the Park (DoubleTree by Hilton), Riccarton, Christchurch
commencing at 10am.
Please find attached the following documents relating to the meeting:
1.Annual Meeting Presentation Slides
2.Chairman’s Address
3.Chief Executive Officer’s Address
- Ends –
For further information, please contact:
Andrew Dixson
Head of Corporate Finance
Heartland Group Holdings Limited
DDI 09 927 9274
Michael Drumm
General Counsel
Heartland Group Holdings Limited
DDI 09 927 9136

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2019 Annual
Meeting
12 November 2019

Agenda
oWelcome and formalities
oChair’s address
oChief Executive Officer’s address
oShareholder discussion
oVoting and conduct of poll
oOther business
2

Board of Directors
Heartland Group Board
oGeoff RickettsChair and Independent Non-Executive Director
oJeff GreensladeExecutive Director and Chief Executive Officer
oEllie ComerfordIndependent Non-Executive Director
oSir Chris MaceIndependent Non-Executive Director
oGreg TomlinsonNon-Executive Director
Heartland Bank Board
oBruce IrvineChair and Independent Non-Executive Director
oEllie ComerfordIndependent Non-Executive Director
oJeff GreensladeExecutive Director and Chief Executive Officer
oJohn HarveyIndependent Non-Executive Director
oKate MorrisonIndependent Non-Executive Director
oGeoff RickettsIndependent Non-Executive Director
oVanessa StoddartIndependent Non-Executive Director
3

Strategic Management Group
oJeff GreensladeChief Executive Officer, Heartland Group
oChris FloodChief Executive Officer, Heartland Bank
oCherise BarrieChief Financial Officer
oLaura ByrneGroup Chief of Staff
oGrant KembleChief Risk Officer
oRochelle MoloneyChief Culture & Communications Officer
oSarah SmithChief Technology Officer
oLydia ZulkifliChief Digital Officer
4

Other formalities
oProxies and postal votes received
oMeeting procedures
oVoting procedures and declaration of poll
oNotice of meeting
oMinutes of last Annual Meeting
5

Chair’s Address
Geoff Ricketts
6

Financial overview
7
NPAT ($m)
Focus on customers and community
support at the heart of our growth.
oNet profit after tax of $73.6
million, up 9%
oGrowth in gross finance
receivables of 10% to $4.4 billion
As at 30 June 2019

Doing the right thing for customers
oDoing the right thing for customers is reflected in one of
Heartland’s refreshed values –mahitika
oHeartland is proud to offer products that contribute to
positive social outcomes
oIn March 2019, as required of all banks, Heartland
submitted a workplanto the FMA and RBNZ addressing
improvement in conduct and culture
oSupportive of the review and committed to continuous
improvement in all areas identified by the FMA and
RBNZ
oSupportive of the financial conduct licensing regime
announced this year
8

The year in review
oStrong growth across the business
oFocus on core growth areas –reverse mortgages, small business loans,
motor vehicle finance, intermediated business lending
oCompletion of the corporate restructure
and listing on the ASX
oFully-imputed final dividend of 6.5 cents
per share
oTotal dividend for the year of 10.0 cents
per share
9
Dividend per share (cps)
As at 30 June 2019

Community sponsorship
10
Paid towards sponsorship
and community
activities this year by the
Heartland Trust.
$617.3k

CEO Address
Jeff Greenslade
11

2019 financial highlights
oThree strategic pillars:
•New Zealand banking
•Australia
•Digital
oContinue to focus on providing ‘best or only’ products
12
Gross finance receivables
12 months to 30 June 2019
$4.4b
up 10.5% from FY2018
Net profit after tax
12 months to 30 June 2019
$73.6m
up 9.0% from FY2018
Net operating income
12 months to 30 June 2019
$205.8m
up 4.6% from FY2018
As at 30 June 2019

Digital
“Digging down, digital is about two things: speed and agility –externally to your
customers and market and internally within your organisation.”
–John Rossman
oBeing digital is about always evolving –mahitipu.
oThe purpose of Heartland’s digital strategy is to deliver great customer outcomes
by always striving to deliver fast and simple service.
oPrioritising User Experience (UX) means keeping our customers at the forefront of
decision making.
13

Group capital
NZX LISTED
ASX LISTED
DEBT
FACILITIES
HEARTLAND
GROUP
(BBB)
HEARTLAND
AUSTRALIA
(BBB-)
HEARTLAND
BANK
(BBB)
DEBT
FACILITIES
BANKING
GROUP
NON BANKING
GROUP
SHAREHOLDERS
REGULATORY
CAPITAL AS
AND WHEN
REQUIRED
14

1089m
206m
133m
758m
561m
425m
122m
693m
535m
512m
MotorHarmoney and
other personal
lending
Open for
Business
Reverse
Mortgages AU
Reverse
Mortgages NZ
Business
Intermediated
LivestockBusiness
Relationship
Rural
Relationship
Other Assets
Return on equity
“SUPERIOR”
(ABOVE 15% ROE)
13.3%24.0%11.4%32.9%48.2%31.4%18.8%16.1%
“INFERIOR”
( 0% -11% ROE)
“IN LINE”
(11% -15% ROE)
(1)
CONTRIBUTION
TO GROUP ROE
ASSET
GROWTH
RATE
ASSET
SIZE ($M)
4.2%
1.Based on ROE range of major banks
15
As at 30 June 2019

Our business
As at 30 June 2019
16

Outlook for FY20
oForecast range of $77 to $80 million.
oExpect continued growth in core product areas.
oInvesting in TV advertising in Open for Business and Reverse Mortgages.
oIncreased emphasis on growth in Australia with support from New Zealand.
oThe Open for Business Australia website has launched and we are about to begin
marketing activity.
oContinued shift to digital, enhancing customer experience.
17

18
Shareholder
discussion

19
Voting

Thank you
20

1
2019 ANNUAL MEETING
CHAIR’S ADDRESS
1.SLIDE 7: 2019 FINANCIAL YEAR OVERVIEW
On behalf of the Board, it is my pleasure to report on another successful year for
Heartland. The company delivered a net profit after tax of $73.6 million, a 9% growth
in profitability. This growth was driven by a 10.5% increase in gross finance receivables
to $4.4 billion.
At the centre of Heartland’s continued growth is an intensified focus on our customers
and support for the communities we serve.
2.SLIDE 8: DOING THE RIGHT THING FOR CUSTOMERS
Heartland prides itself on doing the right thing for customers and keeping customers’
needs at heart. This is reflected in mahi tika, one of Heartland’s values – our
mātāpono. Our values are printed on the covers of this year’s Annual Review and
Financial Report and guide the behaviour of our people as they serve our customers.
Heartland is proud to offer products that contribute to positive social outcomes. Our
Reverse Mortgage product and small business loans are good examples of this.
Heartland’s Reverse Mortgage provides opportunities for people over 60 to enjoy a
more comfortable retirement by releasing equity in their homes, while Heartland’s
small business loans help business owners reach their goals without having to secure
their business loan against their family home.
Following last year’s Australian Royal Commission review into misconduct in the
banking and financial services industry in Australia, you would have seen a lot of

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discussion in the media about the Reserve Bank of New Zealand and Financial Markets
Authority review into the conduct and culture of New Zealand banks and insurance
providers.
Overall, the findings from the review concluded that there does not appear to be
widespread conduct and culture issues in New Zealand banks, but there is room for
improvement. Heartland is supportive of the review and committed to continuous
improvement in all areas identified by the FMA and RBNZ.
In March 2019, as required of all banks, Heartland submitted a workplan to the FMA
and RBNZ addressing improvement in conduct and culture and is currently working
through the plan and focusing on iterative improvement across the organisation.
More recently, the government announced a new conduct licensing regime which
aims to ensure banks and insurers are treating customers fairly. We support this
regime and believe it reflects our commitment to doing the right thing for our
customers at all times.
3.SLIDE 9: THE YEAR IN REVIEW
Our strategy continues to deliver strong asset growth across the business. Our focus
has continued on the areas which are core to future growth - particularly reverse
mortgages, small business loans and motor vehicle finance.
The 2019 financial year saw significant change to Heartland’s corporate structure
which resulted in shares in Heartland Group being listed on both the NZX Main Board
and the ASX (under a Foreign Exempt Listing) and Heartland Group trading under the
HGH ticker code from 1 November 2018. Heartland Bank became a wholly-owned
subsidiary of Heartland Group and all of the shares in Heartland Bank were exchanged
for shares in Heartland Group. In addition, the Australian group companies were
transferred from Heartland Bank to Heartland Group.
This restructure was a significant milestone for the Group and provides a more
suitable platform for future growth by removing constraints on growth previously

3
arising from RBNZ regulations. The restructure and ASX listing will provide the Group
with greater flexibility to take advantage of growth opportunities in New Zealand and
Australia outside of the banking group, and to expand the capital sources available to
fund growth.
In 2019, Heartland continued to enhance its digital platforms through further
development of the Heartland Mobile App, the build and rebrand of the Heartland
Seniors Finance websites in New Zealand and Australia and the development of
Heartland Digital – a user-friendly online banking solution that savings and deposits
customers can access in place of internet banking on a desktop or mobile devices
which don’t support the app.
I would like to recognise the Heartland team for their efforts this year; together they
have enabled Heartland to successfully execute its strategy and continue to deliver
value to you, our shareholders.
A fully-imputed final dividend of 6.5 cents per share was paid to shareholders for the
six months to 30 June 2019, resulting in a total dividend for the year of 10.0 cents per
share. Our dividend yield still remains very strong and competitive among our peers.
What was particularly pleasing was the ability for Heartland Australia to contribute to
the dividend which supported the increase to 10.0 cents.

4. SLIDE 10: HEARTLAND TRUST AND COMMUNITY SPONSORSHIP
Heartland is in a privileged position to make a positive contribution to our society, and
we do this is by giving back to our communities through a range of sponsorships from
the Heartland Trust.
The Heartland Trust is a registered charitable trust which is independent from, but
closely supported by, Heartland Bank and Heartland Group.
This year, the Heartland Trust continued its support of education through the InZone
Education Foundation which aims to enhance the educational outcomes of Māori and
Pasifika youth. It does this by establishing boarding hostels that provide an

4
opportunity for motivated Māori and Pasifika students to access high-performing state
schools within the school zones.
As part of our support of InZone, Heartland’s internship programme Manawa Ako
continued, this year welcoming 20 students into paid internship positions over their
summer holiday. The programme aims to provide the students with experience and an
understanding of what the ‘world of work’ will require of them. It also allows us to
learn from them, particularly in relation to how we can make Heartland more
welcoming and inclusive to Māori and Pasifika people.
Manawa Ako has been a success so far, leading to seven interns continuing
employment with Heartland Bank. We look forward to welcoming even more students
in December.
Furthering our support of te reo Māori and education, the Heartland Trust this year
began sponsorship of Te Matatini festival (New Zealand’s national kapa haka festival),
and the Kupe Leadership Scholarship which aims to develop our country’s future
leaders.
Mental wellbeing is also an area of great importance to Heartland. This year the
Heartland Trust continued its sponsorship of Lifeline, a confidential phone line service
for New Zealanders experiencing difficult times, and Auckland City Mission’s
HomeGround project – the project will result in a purpose-built facility to provide
support to those who need it most.
This was our third year as the platinum sponsor of the Auckland Writer’s Festival
which once again featured a variety of speakers from a wide range of backgrounds.
Through the Heartland Trust, we are proud to support an initiative that caters to a
hugely diverse audience, giving those people the opportunity to consider the world
around them through bringing the written word to life.
Heartland also continues to sponsor the Young Auctioneers competition and various
First XV teams, with an increased focus on supporting women’s rugby.
This year, the Heartland Trust paid $617,300 towards sponsorship and community
activities.

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5.SLIDE 11: CONCLUSION
I wish to conclude my address this afternoon by expressing my thanks and gratitude to
my fellow directors for their wise counsel and support.
Thank you to Jeff, Chris Flood and the Executive team who continue to lead Heartland
with their diligence and strong and diverse skill set. I also wish to acknowledge all of
our Heartland staff who go above and beyond to make Heartland a successful
organisation. We are grateful to you.
Last but not least, I would like to thank you, our shareholders and customers, for
supporting Heartland. We appreciate the confidence you place in us and we look
forward to continuing the delivery of strong shareholder returns through the
execution of our strategy.
Thank you.

2019 ANNUAL MEETING
GROUP CHIEF EXECUTIVE OFFICER’S REPORT
1.SLIDE 11: INTRODUCTION
E ngā mana, e ngā reo, e ngā rau rangatira, tēnā koutou katoa
Greetings to all of you, all voices, all authorities and leaders.
Ki ngā iwi o Te-Wai-Pounamu, tēnā Koutou Katoa.
To you the local iwi, I acknowledge your role as tangata whenua.
Tēnā koutou ki a koutou katoa kua hui mai nei i tēnei rā, kei te mihi, kei te mihi, kei
te mihi
Thank you for joining us this morning.

2
2.SLIDE 12: 2019 FINANCIAL HIGHLIGHTS
As the Chairman stated, Heartland increased profitability on the back of 10.5%
growth in receivables (excluding FX impact).
This achievement as with last year’s was above system growth. Industry receivables
growth has been at an average of 6%, yet Heartland has out-performed this. This
has been achieved without taking increased risk (leaving aside the impact of IFRS)
and was not generated at the expense of margin or by incurring increased operating
costs. Why is that? Why has Heartland consistently achieved above benchmark
growth?
The answer to this is strategic and is fundamental to our three core pillars: NZ
Banking, Australia, and Digital.
Through this we have access to growth that is driven by factors other than those
driving industry growth. Those drivers are less macro-economic. For example, there
is the tide of demographics, in the case of Reverse Mortgages, utility in the case of
Motor and better customer experience in O4B online lending to SMEs. The ‘best or
only’ approach to the markets we occupy continues to underpin growth.
These markets have the added advantage of being markets in which the big banks do
not focus. Open for Business loans through our digital platform for SME lending
have grown by 48% in the last financial year, and while big banks also operate in this
market we are able to differentiate by the speed and ease of access.

3


3. SLIDE 13: DIGITAL
Digital is a word, like ‘fintech’ that is bandied about frequently.
WHAT IS DIGITAL?
The concept of digital is frequently defined by reference to things like the internet or
mobile phones or APIs (Application Programming Interface). These are digital tools.
Being digital is a way of doing things:
“Digging down, digital is about two things: speed and agility – externally to your
customers and market and internally within your organisation.”
– John Rossman
One of Heartland’s mātāpono, or values, is mahi tipu – always evolving. This is the
essence of being digital. The purpose is to deliver great customer outcomes by
always striving to deliver fast and simple service. Increasingly, how we are judged
will be by how successful we are in delivering an excellent ‘Customer Experience’
(CX).
CX is another new catchphrase; it encompasses all aspects of a customer’s
interaction with our products and services. This includes UX – yet more jargon which
is the ‘User Experience’, which is the experience within our digital platforms for
example, how easy it is to navigate on our websites or Mobile App. These concepts
of CX and UX are now very important and reflect a fundamental shift in leverage
from providers to customers. Digital disruption has given customers genuine choice.

4
This has already happened in the telco, travel and entertainment sectors, if CX or UX
is poor, customers can exercise a choice to go elsewhere. Banking still has some way
to go; if you’re standing in a queue at a bank, your choice is often only to stand in
another queue. Customers, though are demanding more. We see that as an
opportunity.
A good UX is one which makes it easy for the customer to access services and which
delivers the desired outcome quickly. UX is a constantly evolving challenge:
identifying user pain points, gathering insights about how we can do things better,
and letting our customers know that their experience matters to us.
This is where agility comes in: getting things done, responding to UX.
Examples of UX in action at Heartland include: usability testing of new websites,
updates to the Heartland Mobile App and new digital products; the introduction of
online, real-time customer feedback mechanisms on the Heartland website; and
using online qualitative analytics tools to record UX and customer journeys across all
webpages.
Prioritising UX means we keep our customers at the forefront of decision making.
This leads to better customer loyalty and retention, and better business outcomes.
The Digital age is influencing our behaviours even if we are not particularly technical.
We all want precision and simplicity; above all we want everything fast, we don’t
want to queue. It is this challenge that is shaping our future, why we regard
ourselves as a financial technology group which operates a bank.

5


At the heart of Digital is a smart mobile phone. Research by FIS in the US shows that
the mobile phone is effectively the only channel for Millennials, the preferred
channel for Gen X and a growing channel for Baby-Boomers. It is quickly superceding
other channels, including internet banking, which a short time ago was a major
innovation.
It is true to say that we are in a world where the future is about speed and simplicity.
I know wish to address various matters concerning Return on Equity or RoE.
This is an important measure of how effectively we are using your capital.
Historically, Heartland’s headline RoE of 11.1% for 2019 was consistent with 2018,
though excluding one-off costs was 11.7% in 2019 trending favourably at 12.2% for
the second-half of 2019.
But despite exceeding benchmark rates of peers in terms of receivables growth, net
interest margin and cost-to-income ratio, RoE is at the low end of expectations.
Comparable benchmarks in Australia suggest a range of between 11%-15%.
We need to do better.
As the name suggests RoE measures earnings – in our case the net return on our
loans – against the capital required to be invested to generate those loans.
There are two ways to improve RoE: earn more and/or invest less equity.

6


I want to explain two things:
i. How the demerger provides the potential for improving RoE; and
ii. how we invest equity, what are the relative contributions of our activities to
RoE.
4. SLIDE 14: GROUP CAPITAL
Turning first to the de-merger.
Under the previous structure where we were one entity, the Bank’s capital
requirements drove Group equity requirements. When the Bank needed capital, the
Group had to raise equity. This had to be done in amounts large enough to support
an issuance and also had to be spaced out so as not to over-reach shareholder
appetite. This meant in effect, that we raised capital in advance of needs resulting in
periodically carrying excess capital.
Under the new structure, capital for the Bank is separate from that of the group.
This means that capital can be inserted by the parent into the Bank as and when
required. If you like, we now have the ability to manage the Bank’s equity on a ‘just
in time’ basis. This is much more efficient.
Moreover – and this is very important - the parent is not confined only to equity
issuances in order to fund capital injections. It can fund the equity by raising debt at
a much lower cost. This allows us to lower the Group’s Weighted Average Cost of
Capital and improve RoE.

7


The debt the Group borrows is supported by businesses outside the Bank. For
prudential reasons we aim to limit the amount of group leverage to stay within the
criteria of our BBB rating and to an amount that can be serviced without recourse to
bank dividends.
5. SLIDE 15: RETURN ON EQUITY
In the release we also sought to clarify how the various activities of the Group – how
we allocate capital – are ranked in terms of their RoE.
It is difficult to give exact RoEs for each activity – things move around, depending on
short term performance or where operational expenses happen to be focussed from
time to time and there are also the complexities of allocating central costs.
Accordingly, we have chosen not to provide exact RoE; rather rank the activities by
those that perform below what we regard as the benchmark, at or around the
benchmark and those that exceed the benchmark. Based on a sampling of
Australian banks, we have assumed a benchmark range of 11%-15%.
6. SLIDE 16: OUR BUSINESS
There are investments in infrastructure or in intangibles such as systems that
generate little or no return. However, these are necessary for operating the
business.

8
There are also lending activities that generate poor returns such as Business
Relationship loans – these are larger loans where we compete with major banks,
that we wish to reduce.
Then as you can see, we have a number of activities such as Reverse Mortgages that
sit within acceptable ranges of RoE.
Finally there are lending activities such as Motor, O4B (the unsecured business loans
to small businesses provided via a digital channel) and the consumer loans provided
through Harmoney that deliver superior returns.
The challenge for us is one of balance; to be agile in moving to minimise the low
returning purposes, and offset the drag they cause and expand into better returning
loans.
7.SLIDE 17: OUTLOOK FOR FY20
Turning now finally to the future. What can you expect?
First, you can expect to continue to see growth across the three core divisions of NZ
Banking, Australia and Digital. While there is talk of reduced consumer confidence
which may impact borrowing behaviour, we are confident that we are well
positioned by being in the right place at the right time for our customers, providing
fast access to products like Reverse Mortgages which are driven more by
demographics than economic sentiment.

9


We have forecast a range of $77 to $80 million for FY20. When we gave that
forecast, we also stated that we are investing greater amounts in marketing,
including TV advertising to raise awareness of O4B and Reverse Mortgages in
particular. This is underway and while it is too soon to be definitive, initial responses
are encouraging.
In addition, a lot of emphasis is being placed on Australia with increased support
from New Zealand. The Australian market is clearly much larger and offers great
potential. It is also planned very soon to launch O4B in Australia to add to the
existing Reverse Mortgages business. In this regard, we have recently created a
high-touch call centre in Ashburton which is available to assist our Australian Reverse
Mortgages and O4B customers as well as our New Zealand customers. This is in
addition to the telephony currently available to our depositors.
We will also continue our shift into Digital, enhancing CX and UX with more ways to
access and transact quickly. We are proud of the fact that we have end to end
platforms for our customers to access deposits and small business loans without
standing in a queue or waiting on the telephone. Recently, in Australia our reverse
Mortgage customers have been able to complete applications and received
conditional approvals online.
The Digital age is not necessarily at the end of human interaction. Part of our
challenge is to take care that we know when this is required and our investment in
the Ashburton Call Centre is an example of this.

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The Bank is investing $1 million this financial year in improvements in CX. This is a
good investment, constantly improving customer outcomes is essential for a
sustainable business.
To summarise, we will continue to consolidate and grow our New Zealand Banking
activities, seek to expand in Australia, and through Digital, continue to enhance CX
through swift and agile actions.
Finally, I would like to thank the people of Heartland.
He manawa whenua, he manawa tangata, Ko Heartland tēnei.
This is our Heartland.
Thank you also to our shareholders.
Tēnā koutou katoa.
Thank you all.