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Investor Newsletter #3 - September 2008

30 September 2008

Welcome to our September 2008 General Finance quarterly newsletter. We appreciate your support. The purpose of this newsletter is to keep you informed about the company and various financial matters that may interest you. This newsletter, like our last one, will be more technical and we will be discussing various factors that make us able to handle the current economic issues facing the finance company sector.

Finance Company Sector

A number of finance companies are in receivership or in moratoria.  The effect is much the same - they have let their investors down. The question is why? We note a number of common themes. Related party lending (essentially lending to yourselves) has been an issue with a number of companies such as Hanover.  Lending outside New Zealand has caused problems for such companies as St Laurence and Bridgecorp.  Large single exposures to an individual leads to problems when that individual runs into trouble - as Lombard has found out. Rapid growth, which is hard to control, can lead to problems as MFS Boston Finance has discovered. Over concentration in fairly specialist property sectors such as construction or subdivisions has been an issue for both Dominion and Hanover.  At General Finance we can say that we have no related party lending, no lending outside of this country, no large single exposures that would exceed 20% of our shareholders funds and that our growth is controlled.  We lend only in the largest and most diverse property sector where there is still a degree of liquidity - that is the residential property sector. We will continue with our conservative lending policy.

Small is Not Necessarily Bad

Some self-appointed market commentators on finance companies have been saying that the bigger the finance company, the safer it is. This has proved to be complete nonsense. All the recent high profile collapses and moratoria - Dominion Finance, Hanover, St Laurence, Strategic, Dorchester, and Bridgecorp - have been larger finance companies. Size is completely irrelevant - what determines the success of a finance company is the quality of its lending, liquidity management and the quality of its directors and staff. If someone said the best wines only come from the biggest vineyards this would be laughed at.  At General Finance we are a smaller finance company and we operate in a well defined niche that we understand - that is residential property. This sector is the most liquid part of the property market and this together with our management skills, rather than our size, should give our investors the comfort they are rightly seeking.

Hints on Reading a Prospectus

A prospectus is a legal document that a finance company has to prepare each year. Many view it as a complex financial document but it need not be. In a short period of time a reader can acquire a good overview about the company concerned. We will take you through our prospectus, highlighting a number of non technical aspects which we consider are important. We do urge investors to read our prospectus and investment statement and if you have any queries you are welcome to contact us to discuss them. Referring to our prospectus, the chairman’s letter on page 3 gives you an overview of how the company has performed over the past year. The past year has been a demanding one and in this letter we address how we are responding to the current environment. On page 4 we have a summary of our financial performance over the past 6 years.  Despite being a trying year, we made a small profit and our capital (equity) continues to grow. Page 5 is the company profile - it tells you more about us and the type of business we are operating. Page 6 is the directors’ profile. We go into considerable detail on our backgrounds and qualifications. We believe this section is considerably lacking with a number of our competitors as it is an absolute must to know with whom you are placing your money. You should also take particular note of the audit certificate, (which must not be tagged) on page 35 and a current trustee’s certificate on page 37.

Next Interest Payment

Our next quarterly interest payment will be made on the evening of Monday 30 September  2008. Direct credits will go in that evening, with cheques (if applicable) and paperwork being forwarded during the week.

If you have any questions about your investment please do not hesitate to contact me on 09 526 7801 or by email to  Our website is a

If you want to invest more funds, or obtain an investment statement and application form, our securities registrar's number is 0800 500 602.

Your continued support is much appreciated.