Dorchester Finance Letter to Investors

26 June 2008


Dear Investor,

Please find enclosed a recent announcement regarding Dorchester Finance.

While we had hoped to get through the current financial market crisis without the need to defer payments to debenture holders and note holders, the rapid decline in the property finance market and a continuing fall in reinvestment rates have led us to the view that it is better to take a proactive stance now.

Unfortunately we have to inform you that repayments of debenture and subordinated note maturities have therefore been suspended from Thursday 26 June 2008. However, interest payments will be paid as per usual on 1 July 2008.

The Board of Dorchester Finance intends to work closely with both trustees, Perpetual Trust Limited and New Zealand Permanent Trustees Limited, and has engaged Grant Samuel and Associates Limited as an independent adviser to assist in the preparation of a deferred repayment plan for you to consider in several weeks time.

The intention of the deferred repayment plan is to allow us to make principal repayments to you over a period of approximately two years. Although the details are yet to be formulated and agreed with the trustees, we intend to continue to make interest payments throughout.

We will write to you again in several weeks with details of the plan. You will subsequently have an opportunity to vote on whether or not to accept our plan.

Our intended approach is quite different from a number of other plans that have been recently proposed to investors by other finance companies. The key differences are:

 We are taking action early and while we still have significant cash holdings.

 We intend to continue to make full interest payments to investors so that their income from this source remains.

 We are confident that the plan, if approved, should give us time to realise property loan positions in an orderly way and ensure full repayment to investors.

 The intended plan is for a medium term (of approximately two years), rather than the longer terms of other plans.

 We will not be asking debenture holders to convert their debt to equity.

To reiterate, a deferred repayment plan should give us time to realise property loan positions in an orderly way and ensure full repayment to debenture holders and note holders, whilst continuing to pay interest throughout.

Please feel free to contact me, or any member of the investment team, on 0800 100 601 if you have questions about the attached.


Yours sincerely



Paul Byrnes
Executive Director