Dear Mr Power

Thank you for your letter of 5th December 2010.

We have not been able to peruse a copy of the McPherson / McGlinn (statutory manager) report to the Securities Commission which was dated Friday 18th June 2010. The reason for this is that a copy was supplied on a confidential basis to Mr Hubbard's solicitors, Russell McVeagh.

Without breaching confidentiality we are advised that the main allegations in respect of Aorangi Securities Ltd were : 1. That Aorangi was trading recklessly, 2. That Aorangi Was insolvent, 3. That the majority of Aorangi loans were to Allan Hubbard, 4. That no securities were held for the loans, and 5. That the loans were not authorised by investors.

In answer to these serious allegations we advise:

*1*. McPherson and McGlinn (statutory manager) made a report on Aorangi Securities on Friday, 18th June 2010

*2.* On the afternoon of Sunday, 20th June 2010 the Cabinet of the New Zealand Government sat in on an extraordinary meeting and approved the placing of Aorangi Securities Ltd and Allan and Jean Hubbard into Statutory Management and the appointment of the Serious Fraud Office to investigate each entity for fraud. As the report was only available Friday there was therefore little time for the Government to consider before Sunday's meeting.

*3.* No opportunity was given to Aorangi Securities or Allan to reply and Jean Hubbard to any of the allegations.

*4*. I am advised that Mcpherson's report covers 17 pages but the main allegations are :

a. That Aorangi was trading recklessly,

b. That Aorangi was insolvent,

c. That the majority of Aorangi loans were to Allan Hubbard,

d. That no securities were held for loans,

e. That the loans made were not authorised by investors.

*5*. ln answer to these specific allegations we can advise :

i) Aorangi had never traded recklessly. lt always paid its interest seven (7) days before it was due. No depositor was refused repayment. The company had subordinated equity from AJ & MJ Hubbard of $30-odd Million and had been in business continuously since 1974 (ie 36 years). ii) Aorangi was not insolvent. It had always paid its obligations without default.. It had $30-odd Million of subordinated equity ex AJ & MJ Hubbard. iii) There were securities in place for all advances, except for one which was held up by tenure review, and all mortgages were registered against the titles. As part of the audit review for the prospectus all securities were currently being re-documented by lawyers. iv) There were always sufficient 1st mortgages to cover those clients that required lst mortgage securities v) AJ & MJ Hubbard have subordinated all their interest to depositors and AJ & MJ Hubbard have sufficient other resources as well.

*6*. ln support of the above AJ & MJ Hubbard are prepared

a. To sign a declaration that none of the advances are to them personally and confirming the subordination of their assets of $32,035,078.

b. Have solicitors verify by letter details of all securities held and copies of the titles verifying the registration of these securities.

*7*. The Securities Commission, Government Caucus and the Governor General have all been misled by a report that is clearly incorrect and has not been subject to any separate verification or been open to challenge from the other parties involved.

As possibly, you have not received or read the Mcpherson / McGlinn report we are arranging for a copy to be sent to you. After you have read this report and the answers supplied above you should be able to see that the report is false and that subsequent actions were therefore unnecessary and can only be described as extreme misuse of the law.

We are advised that Statutory Management only applies if:

a. A Company is insolvent, and

b. ls trading recklessly.

Neither of these circumstances applied to Aorangi Securities Ltd.

As well as sending you a copy of the Mcpherson / McGlinn report I am arranging to send you the Balance Sheet of Aorangi Securities Ltd that was given that was to Messrs McPherson and McGlinn and which indicates an equity of $32,035,078.

Over the 36 years of its existence Aorangi had paid its depositors without fail and its interest one week before it was due each three months and had never refused payment to its depositors.

The appointment of a Statutory Manager has resulted in the destruction of a way of life for about 500 depositors who have in the past year received no income and had to go to WINZ and other agencies to obtain sufficient funds to live. As well, even although there is no deficiency, all Mr & Mrs Hubbard's private assets have been seized, all their private mail opened and any cheques are taken by the Statutory Manager.

This unnecessary and inhuman tribulation has been inflicted upon someone who has clearly devoted his life to the betterment of New Zealand, a person who lives a modest life, has given over $200 Million to New Zealand charities, has assisted 250 young farmers on to dairy farms with interest free loans, established a charitable trust for single income families in South Canterbury so their children can attend University or other Tertiary education is indefensible.

The Scholarships established by the Hubbards are available for 3 years at each of the 13 Secondary Schools in South Canterbury and have a value of up to $3000 per annum.

The Hubbards funded all the capital needed to provide the interest of $39,000 per annum to service these Scholarships.

We understand Mr Hubbard has twice declined nominations for knighthood.

At the start of a new year, we urge you to act on this grave injustice.

(Balance sheet below).

AORANGI SECURITIES LTD BALANCE SHEET AS AT 9TH JUNE 2010

(DATE OF McPHERSON AND McGLINN VISIT)

ASSETS

Loans 131,273,828 South Canterbury Finance Ltd Bonds 500,000 Cash at Bank 172,491

LIABILITIES

Sundry Deposits 99,911,240 Deposit ex AJ & M J Hubbard 32,035,079

* .......................... .............................*

*

**$ 131,946,319 $131,946,319 *

Yours Sincerely,

*We, the 211 undersigned investors and supporters of Allan and Jean Hubbard of Timaru*

* **Stand by** Hubbard* * Support Team

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