Investor Newsletter - December 2016

Welcome to our December 2016 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.

The 2016 Year in Review
This year has been a year of two halves for us. The first part of the year was quiet - we had surplus funds and a relatively small number of mortgage applications being forwarded to us. This changed in August, when we started receiving an increased number of lending proposals and this has continued. The question is why has this occurred? We believe the banks have tightened up their lending criteria, which means there are more applications for us. We think this trend will continue and as a result, we are looking for additional deposits to fund this growth.

Crystal Ball for 2017
Despite some turbulent events this year, such as Brexit and the recent American election, the economic outlook for NZ Inc actually looks surprisingly good. Interest rates are at historic lows and the Reserve Bank may cut one more time next year. This will not cause interest rates or mortgage rates to decrease - quite the contrary, they will rise. Banks are looking at increasing their NZ based deposits and the only way to do this is to increase their interest rates. It is becoming more expensive for the banks to fund their increasing mortgage books using offshore funding, so mortgage rates will increase. The increase in deposit and mortgage rates will be relatively modest - between a quarter and half a percent. Dairy prices have bottomed and will gradually improve. Tourism will continue to grow. Our currency may ease in the coming months, particularly if the Reserve Bank cuts the Official Cash Rate again. Unemployment is at a low of 4.9% and may well decrease further. The economic outlook for this country appears sound for 2017.

Next Year for Us
We believe that next year will be a good year for us. The lending environment will continue to be favourable for us, which means we can pick and choose what we wish to lend on. Our arrears have been steadily decreasing this year, which is positive. Our lending margins are conservative - we lend to 70% on first mortgages and 65% on second mortgages, secured over residential properties only. If there is a correction in the property market, we have a sound level of protection already in place. Next year is about growing our mortgage portfolio in a prudent and businesslike manner. Next Interest Payment Our next quarterly interest payment will be made on Friday 30 December 2016. Direct credits will be processed that evening, with cheques (if applicable) and paperwork being forwarded during the week. As this is our last newsletter for the 2016, we wish everyone a Merry Christmas and a happy New Year. We appreciated your support this year and look forward to your continued support in 2017.

Next Interest Payment
Our next quarterly interest payment will be made on Friday 30 December 2016. Direct credits will be processed that evening, with cheques (if applicable) and paperwork being forwarded during the week.

As this is our last newsletter for the 2016, we wish everyone a Merry Christmas and a happy New Year. We appreciated your support this year and look forward to your continued support in 2017.

If you have any questions about your investment, please do not hesitate to contact James Lockie on 09 526 7800 or by email to jlockie@general.co.nz.  Our website is www.general.co.nz.          

If you want to invest more funds, you can obtain an investment statement and application form from Computershare Investor Services, our securities registrar.  Their freephone number is 0800 500 602

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Your continued support is appreciated.