Friday 18th of July 2008

The directors of Dominion Finance Holdings Limited (DFH) consider the article by Jenni McManus in the Independent (17 July), titled "Crippled finance company directors pay themselves $1m dividends", to be inaccurate and misleading in several respects. The suggestion in the article that directors and shareholders of DFH "had no trouble paying themselves nearly $1 million in dividends just days before the company's bankers moved in", is simply not correct. The relevant facts are: • When announcing its annual result on 14 May, DFH declared a dividend of 1 cent per share, significantly down on previous dividends, but which the directors of DFH considered at that time appropriate based on financial results, market conditions prevailing, and DFH's ability to support such payment, and having regard to the requirements under the Companies Act 1993 in respect of the authorisation and payment of dividends. • At the time the dividend was paid, 13 June (being the payment date that had been notified at the time the annual results were announced on 14 May 2008), , the directors continued to be satisfied on reasonable grounds that DFH would, immediately after payment of the dividend, meet solvency requirements under the Company's Act. • The actual dividend that would have been payable was $716,000, not $970,000 as claimed by the Independent. A significant portion of this dividend was re-invested in DFH, as indicated below. • As clearly stated in DFH's announcement of 14 May 2008, the number of shares on issue following the 1:20 bonus issue increased to 71.6m not 97.3m quoted in the Independent article. • In the light of the rapid change in market conditions between 14 May 2008 and 13 June 2008, the major shareholders, the Butler Trusts, voluntarily adopted a prudent stance and reinvested the dividends payable to them back into the company. The net dividend paid in cash to other mainly small shareholders totalled $254,000. • The statement in the article in the Independent that of the major shareholdings are held in a web of inter-linked family trusts" is distorting a very simple and straightforward arrangement where shares were allocated to Terry and Ann Butler, their daughter, son and grandchildren at the time of the IPO in July 2004. The Butlers, Messrs Whale and Forsyth are trustees of the individual trusts and was fully disclosed in the IPO Prospectus. The directors would have gained no personal financial benefit from the dividends paid on these holdings as implied by the Independent. • The figures quoted as directors' shareholdings are misleading as they include cross holding in a number of trusts and results in double counting. The holdings quoted by the Independent as held by directors total 133% which illustrates that this information is not accurate. • It is factually incorrect for the Independent to state that "the company's bankers moved in". There has been no such action by the DFH's bankers or any other party. • As has been announced, DFH has entered discussions with the bankers and trustees for each member of the group, with a view to exploring the prospect of DFH's operating subsidiaries, Dominion Finance Group Limited and North South Finance Limited, entering into a moratorium. DFH will make further announcements to the market as soon as it is able to do so. DFH is taking legal advice on the content of the article in the Independent and will determine the appropriate action to take in due course.