Credit Rating

This information sheet provides additional information to the latest registered prospectus for Deposits¹ issued by Southern Cross Building Society (“the Society”) dated 30 September 2009.

The creditworthiness of the Society is rated by Standard & Poor’s, a ratings agency approved by the Reserve Bank under section 157J of the Reserve Bank of New Zealand Act 1989.

Standard & Poor’s assigned a “BB” (with stable outlook) long term credit rating to the Society on 27 August 2009.

It is important to note that Standard & Poor’s credit rating of the Society is not a statement of fact, an endorsement of the Society, or a recommendation to invest in the Society’s Deposits. Rather, it is a statement of opinion issued by Standard & Poor’s.

As described in Standard & Poor’s website (www.standardandpoors.com):

“Since there are future events and developments that cannot be foreseen, the assignment of credit ratings is not an exact science. For this reason, Standard & Poor’s ratings opinions are not intended as guarantees of credit quality or as exact measures of the probability that a particular issuer or particular debt issue will default”.

“A Standard & Poor's issuer credit rating is a forward-looking opinion about an obligor's overall financial capacity (its creditworthiness) to pay its financial obligations. This opinion focuses on the obligor's capacity and willingness to meet its financial commitments as they come due. It does not apply to any specific financial obligation, as it does not take into account the nature of and provisions of the obligation, its standing in bankruptcy or liquidation, statutory preferences, or the legality and enforceability of the obligation.”

“A Standard & Poor's rating outlook assesses the potential direction of a long-term credit rating over the intermediate term (typically six months to two years). In determining a rating outlook, consideration is given to any changes in the economic and/or fundamental business conditions”.

The designation of “stable outlook” assigned by Standard & Poor’s to the Society means that a rating is not likely to change.

Also, the credit rating that has been assigned to the Society is a local currency issuer rating as opposed to a foreign currency issuer rating. This means the country (or sovereign) risk that is taken into account by Standard & Poor’s is that of New Zealand only and the currency of repayment is the New Zealand dollar.

Standard & Poor’s adopts the following scale and meanings to its credit rating opinions:

Scale	Meaning
AAA	Extremely strong capacity to meet financial commitments. Highest Rating.
AA	Very strong capacity to meet financial commitments.
A	Strong capacity to meet financial commitments, but somewhat susceptible to adverse economic conditions and changes in circumstances.
BBB	Adequate capacity to meet financial commitments, but more subject to adverse economic conditions.
BBB-	Considered lowest investment grade by market participants.
BB+	Considered highest speculative grade by market participants.
BB	Less vulnerable in the near-term but faces major ongoing uncertainties to adverse business, financial and economic conditions.
B	More vulnerable to adverse business, financial and economic conditions but currently has the capacity to meet financial commitments.
CCC	Currently vulnerable and dependent on favorable business, financial and economic conditions to meet financial commitments.
CC	Currently highly vulnerable.
C	Currently highly vulnerable obligations and other defined circumstances.
D	Payment default on financial commitments.

Note: Ratings from ‘AA’ to ‘CCC’ may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories.

Source: www.standardandpoors.com

3 March 2010