Hanover 'not secretive' - Right of reply

By Kerry Finnigan, CEO, Hanover Group

Friday 2nd April 2004

We felt the need to correct some of the more glaring errors and omissions in your article on Hanover Group (NBR, Mar 26).

* It was implied Hanover was secretive and objected to scrutiny. Not true we provided two written responses to a three-page list of questions and made Hanover's chairman, CEO, group legal counsel and auditor available to your reporter.

* It was stated there is no regulatory body watching over non-bank finance companies. False a primary function of the Securities Commission is to regulate issuers of securities. In addition, all issuers of debt securities to the public must have a trust deed governing the issuer's conduct and an independent trustee reviewing compliance, as well as meeting all disclosure requirements. The financial statements included in the prospectus are audited and the prospectus is then registered with the Companies Office.

* It was stated Elders Finance has short-term deposits but longer-term lending and that the company must keep raising money "to keep the show on the road." Completely untrue and misleading the true position is quite the opposite, with the $175 million in short-term deposits referred to in the article more than matched by $320 million in financial assets having the same maturity (clearly shown in the Elders Finance accounts). Ensuring lending repayments have a shorter term than the maturity of deposits shows our prudent management of the business in this area.

* In relation to United Finance's transactions with Leasing Solutions, your reporter omitted to say (as was made clear to her) that the acquisition of lease receivables is structured this way to take advantage of the chattel paper provisions in the Personal Property Securities Act. This ensures the best possible security relating to the underlying lease is taken for the benefit of the investors, and for this reason is best industry practice for funding receivables. Another fundamental omission is that the funding of Leasing Solutions by this method is expressly stated throughout United Finance's prospectus as one of its core functions.

* Your reporter referred to $112 million being "lent" by Elders Finance to an "amorphous-sounding category of 'financial, insurance and professional' borrowers." She omitted to say (as she was aware) that this includes $69.7 million made up of cash and fixed-income securities placed with trading banks such as ANZ, BNZ and ASB part of Elders Finance's prudent liquidity policy, and a fact that is clear from the accounts.

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