Investor Newsletter #4 - December 2010

Welcome to our December 2010 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 Year in Summary from a Finance Company Perspective

For the financial services industry 2010 has been a difficult year, much like 2009. When the Government guarantee for deposit takers came into force in 2008, most of the weaker finance companies had already collapsed.  During the year we had the failure of South Canterbury Finance which appeared to be due to, among other things, too much related party lending (which is a no no), excessive growth, management and systems issues. As it was covered under the guarantee the Government has paid out to all those investors. The guarantee has ended for most institutions, including the banks, and we believe that it is no longer needed. To give the investing public greater security, and this is required; all non bank deposit taking institutions are now subject to tougher regulatory and reporting requirements.  General Finance has registered on the new Financial Service Providers Register, and has been preparing for the new regulatory regime for some time.

2011 Crystal Ball

It is always difficult to predict the next twelve months but we believe it may be a slight improvement on the current year.  We are clearly still in a recession - unemployment remains high by New Zealand standards but not compared with many other countries. Currently many retailers and small businesses are finding business conditions tough.  If immigration improves next year this will add some stimulus to the residential housing markets. Our currency is likely to remain firm over the next twelve months which makes it tough for the exporting sector but easier for those purchasing larger imported consumer items such as flat screen televisions and cars. Each month that passes by, the global financial crisis of 2007/8 recedes into history and its ramifications diminish. We feel that next year will be a little better than this year due to some positive economic growth returning, and one off events such as the election and the Rugby World Cup.

Our Current Lending

In most of our newsletters we continue to update our investors on the type of lending we are doing.  It has remained unchanged for many years. One of the reasons for our continuing success in the finance company area is that we have well defined lending criteria.  We lend on residential securities only - that is residential homes and investment dwellings. Currently around 80% of our mortgage portfolio is secured over residential first mortgages and the remainder over second mortgages. We do not lend on commercial developments, motels, hotels, farms or commercial properties. Our lending criteria are very much along the lines of a conservative building society. We are going to continue with this policy.

Interest rates

Interest rates have been edging up slowly over the past year. Just to remind our investors if you are looking at a rate above 8.0%, our two year rate is 8.50% and our three year rate is 9.25%. If you deposit more than $10,000 with us you can have your interest paid monthly. This is a great advantage for those wanting a monthly regular income.

Next Interest Payment

Our next quarterly interest payment will be made on the evening of Friday 31 December 2010. Direct credits will be processed 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 wcairns@general.co.nz  Our website is a www.general.co.nz.      

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

Your continued support is appreciated.

May we take this opportunity to wish you and your families a very Merry Christmas and all the best for the New Year.