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1 September 2000

News Release

WALTUS PROPERTY FINANCE LIMITED

On 29 August 2000 the Securities Commission prohibited the distribution of an investment statement dated 12 May 2000 for secured debenture stock offered by Waltus Property Finance Limited.

On the same day the Commission cancelled the registration of the registered prospectus also dated 12 May 2000 of the same company for the same offer of securities.

The registration of the prospectus was cancelled, and the distribution of the investment statement was prohibited, because in each case the Commission was of the opinion that the document was misleading in relation to a material particular or particulars.

Both offer documents had been suspended by the Commission on 15 August 2000.

The issue common to both documents related to one of the lending restrictions in the Trust Deed.

That limitation is described in both the investment statement and prospectus as applying to lending to a "Person or group of related persons". "Person" is a defined term in the Trust Deed.

The Commission considered that this description did not correctly describe the limitation in the Trust Deed. That limitation applies to lending by the charging group in situations involving more than one person only where there is an "association" between them. In essence, Waltus Property Finance Limited submitted to the Commission in this context that for there to be an "association" there needs to be a common purpose and mutual legal obligations between those persons and for present purposes the Commission accepts that. However the Commission does not consider that a "group of related persons" is the same as an "association of persons".

The Commission therefore considers it misleading for the prospectus and investment statement to state that the limitation applies to any "Person or group of related persons". The Trust Deed limitation does not go that far.

The limitation in the Trust Deed, directed as it is at constraining the concentration of the lender's/charging group's credit risk, is material to consideration of an investment in that lending/charging group. The materiality of that limitation is increased by an inclusion of what is intended to be a summary of it in the investment statement and prospectus. However the limitation in the Trust Deed is considerably less restrictive on the lender/charging group than the limitation described in the prospectus and investment statement.

In the Commission's opinion the description of restrictions on lending by a finance company, including concentration of credit risk, is an important matter for an investor in considering whether to invest.

The Commission was of the opinion that, because of the description of the limitation, the investment statement was likely to mislead with regard to a particular that was material to the offer of securities to which it related, and that the prospectus was misleading as to a material particular.

A very significant proportion of Waltus Property Finance Limited's loans had been made to a group of persons comprising entities associated with the majority of the directors of Waltus Property Finance Limited or Waltus Investments Limited, in the event comprising some 80% of the company's total assets at 31 July 2000. The Commission was also of the opinion that this fact was a material particular, including to a prudent but non-expert investor's understanding of the risks inherent in an investment with Waltus Property Finance Limited. Because of the omission of this fact from the investment statement, including in the context of the descriptions in the investment statement of the activities of Waltus Property Finance Limited and of the risks facing investors, the Commission was of the opinion that the investment statement was likely to mislead with regard to a particular that was material to the offer of securities to which it related.

The effects of the cancellation and prohibition are:

Waltus Property Finance Limited can no longer offer debt securities to the public by use of the cancelled prospectus or the investment statement referred to above;
any moneys received since the prospectus and investment statement were suspended by the Commission on 15 August 2000 must be returned to subscribers.

The directors of Waltus Property Finance Limited are John Neville Hodge, Shayne Patrick Hodge, Brendon John Hodge and David John Cooper. The company has advised the Commission that it intends to appeal the Commission's decisions.

For further information contact:

John Farrell
Chief Executive
Phone (04) 472 9830

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