GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Thisre-measurement resulted in an estimated benefit of approximately $6,500,000, which was recognized through the carrying amounts of the Credit Suisse Term Loan and Senior Notes (see Note 5)provision (benefit) for income taxes in the accompanying consolidated balance sheets. Unamortized deferred financing costs related to the Asia-Pacific and North American senior credit facilities are includedstatements of operations as a discrete item in the caption “Other intangiblequarter ended December 31, 2017. This estimated tax benefit was offset by approximately $5,200,000 for both the estimated transition tax and a valuation allowance that was established to offset previously recognized FTC carryforward deferred tax assets net”that the Company believes will not be realized, and other adjustments totaling approximately $550,000. Both the estimated transition tax and valuation allowance are considered provisional amounts that require further analysis. These provisional amounts are subject to adjustment during a measurement period which should not extend beyond one year from the enactment date of the Act as in the accompanying consolidated balance sheets.accordance with Staff Accounting Bulletin No. 118.

Recently Issued Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update (“ASU”)No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU2014-09 completes the joint effort by the FASB and IASB to improve financial reporting by creating common revenue recognition guidance for U.S. GAAP and International Financial Reporting Standards (“IFRS”). The ASU2014-09 revenue recognition model virtually replaces all existing revenue recognition guidance and applies to all companies that enter into contracts with customers to transfer goods or services. ASU2014-09 (as updated by ASU2015-14 in August 2015, ASUNo. 2016-08 in March 2016, ASU No. 10 in April 2016 and ASU No. 12 in May 2016) is effective for public entities for interim and annual reporting periods beginning after December 15, 2017. Public and nonpublic entities have the choice to apply ASU2014-09 either retrospectively to each reporting period presented or by recognizing the cumulative effect of applying ASU2014-09 at the date of initial application and not adjusting comparative information. TheWhile the Company is evaluatingcontinues to evaluate the requirements ofASU-204.09, it believes the majority of its revenues, as it relates to contractual rental revenue, is excluded from the scope of this ASU and the accounting for the remaining revenue streams will not be materially affected. Accordingly, the Company does not expect the adoption of ASU2014-09 and has not determined the effect of this ASU in the presentation ofwill have a material impact on its consolidated financial statements.

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes Additionally, the Company intends to Condensed Consolidated Financial Statements

(Unaudited)

utilize the modified retrospective adoption and recognize the cumulative effect of initially applying ASU2014-09, if significant, as an adjustment to the opening balance of accumulated deficit at the date of initial application.

In February 2016, the FASB issued new lease accounting guidance in ASUNo. 2016-02,Leases (Topic 842). This new guidance was initiated as a joint project with the International Accounting Standards Board to simplify lease accounting and improve the quality of and comparability of financial information for users. This new guidance would eliminate the concept ofoff-balance sheet treatment for “operating leases” for lessees for the vast majority of lease contracts. Under ASUNo. 2016-02, at inception, a lessee must classify all leases with a term of over one year as either finance or operating, with both classifications resulting in the recognition of a defined“right-of-use” asset and a lease liability on the balance sheet. However, recognition in the income statement will differ depending on the lease classification, with finance leases recognizing the amortization of theright-of-use asset separate from the interest on the lease liability and operating leases recognizing a single total lease expense. Lessor accounting under ASUNo. 2016-02 would be substantially unchanged from the previous lease requirements under U.S. GAAP. ASUNo. 2016-02 will take effect for public companies in fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted and for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, lessees and lessors must apply a modified retrospective transition approach. TheDuring FY 2017, the Company believes the adoption of ASUNo. 2016-02 will have a material effectevaluated this new accounting standard and engaged professionals in the presentation of its consolidated financial statements, but has not determinednew lease accounting implementation and related real estate consulting industry to assist in determining the effect of this ASUthe new standard as of July 1, 2017. The Company currently has over 100 real estate leases worldwide and evaluated each of these leases in accordance with the new lease accounting standard under ASC Topic 842. As of July 1, 2017, the Company estimates that the right of use asset to be recorded on its consolidated balance sheet would be approximately $34.0 million to $37.0 million and that the related liability would be approximately $35.0 million to $39.0 million related to operating leases. The difference between the right of use asset and related lease liability is predominantly deferred rent and other related lease expenses under the new lease accounting standard. The difference in the presentationranges is due to the presumed renewal of leases whereby the exercise of the renewal option is twelve months or less from July 1, 2017. The Company will continue to evaluate existing renewal options in excess of one year as to the probability of exercising renewal options and is currently evaluating its consolidated financial statements.equipment and other finance leases and its lessor accounting under the new standard. The Company will continue this effort in a manner to be appropriately prepared for its implementation on or before July 1, 2019.

In OctoberMarch 2016, the FASB issued ASUNo. 2016-16,2016-09, Income TaxesCompensation – Stock Compensation (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory718). Under ASU2016-16No. 2016-09, all excess tax benefits and tax deficiencies will be recognized in the income statement as they occur. This will replace the current guidance, which requires recognitiontax benefits that exceed compensation cost (windfalls) to be recognized in equity, and tax deficiencies (shortfalls) to be recognized in equity to the extent of previously recognized windfalls. It will also eliminate the need to maintain a “windfall pool,” and will remove the requirement to delay recognizing a

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

windfall until it reduces current taxes payable. ASUNo. 2016-09 will also change the cash flow presentation of excess tax benefits, classifying them as operating inflows, consistent with other cash flows related to income tax consequences of an intra-entity transfer of an asset other than inventory whentaxes. In addition, this ASU allows a policy election to either continue to reduce share-based compensation expense for forfeitures in future periods, or to recognize forfeitures as they occur. The Company implemented ASUNo. 2016-09 in FY 2018, elected to recognize forfeitures as they occur and, because it was not significant, recorded the transfer occurs. This ASU is effective$89,000 benefit for annual reporting periods after December 15, 2017, including interim periods therein, with early adoption permitted and should be applied on a modified retrospective basis through athe cumulative-effect adjustment directly to retained earnings asfor previously unrecognized excess tax benefits and thetax-effect of the beginningdifference between the fair value estimate of awards historically expected to be forfeited and the periodfair value estimate of adoption. The Company is evaluating the requirements of this ASU and has not determined the effect of this ASUawards actually forfeited in the presentationaccompanying consolidated statement of its consolidated financial statements.operations. The tax effect for excess tax benefits and forfeitures in FY 2018 was a tax charge of $202,000.

In JanuaryAugust 2017, the FASB issued ASUNo. 2017-01,2017-12,Business CombinationsDerivatives and Hedging (Topic 842): Clarifying the Definition of a Business.815) – Targeted Improvements to Accounting for Hedging Activities. ASUNo. 2017-012017-12 clarifiesexpands hedge accounting for bothnon-financial and financial risk components and refines the definitionmeasurement of a businesshedge results in an attempt to help companies evaluate whether acquisition or disposal transactions should be accounted for as asset groups or as businesses. Thisbetter reflect an entity’s hedging strategies. The ASU will take effectalso amends the presentation and disclosure requirements and changes how entities assess hedge effectiveness. The effective date of ASUNo. 2017-12 for public companies inis for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company does not believe the requirements of ASUNo. 2017-01 will have a material effect to its consolidated financial statements.

In January 2017, the FASB issued ASUNo. 2017-04,Intangibles - Goodwill2018 and Other (Topic 350): Simplifying the Test for Goodwill Impairment.ASUNo. 2017-04 removes Step 2 of the goodwill impairment test, which requires the assessment of fair value of individual assets and liabilities of a reporting unit to measure goodwill impairments. Goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, but the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. This ASU will take effect for public companies in fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, andthough early adoption is permitted for interim or annual goodwill impairment tests performed on dates on or after January 1, 2017.permitted. The new standard must be adopted using a modified retrospective transition with a cumulative effect adjustment recorded to opening retained earnings as of the initial adoption date. The Company intends to adoptis evaluating the effect that ASUNo. 2017-042017-12 for its next annual impairment tests,will have on the consolidated financial statements and related disclosures, but does not currently believe the requirements of this ASUit will have a material effect to its consolidated financial statements.be significant.

Note 3. Equity Transactions

Preferred Stock

Upon issuance of shares of preferred stock, the Company records the liquidation value as the preferred equity in the consolidated balance sheet, with any underwriting discount and issuance or offering costs recorded as a reduction in additionalpaid-in capital.

Series B Preferred Stock

The Company has outstanding privately-placed 8.00% Series B Cumulative Preferred Stock, par value of $0.0001 per share and liquidation value of $1,000 per share (“Series B Preferred Stock”). The Series B Preferred Stock is offered primarily in connection with business combinations. At June 30, 20162017 and MarchDecember 31, 2017, the Company had outstanding 100 shares of Series B Preferred Stock with an aggregate liquidation preference totaling $102,000. The Series B Preferred Stock is not convertible into GFN common stock, has no voting rights, except as required by Delaware law, and is redeemable after February 1, 2014; at which time it may be redeemed at any time, in whole or in part, at the Company’s option. Holders of the Series B Preferred Stock are entitled to receive, when declared by the Company’s Board of Directors, annual dividends payable quarterly in arrears on the 31^st day of January, July and October and on the 30^th day of April of each year. In the event of any liquidation or winding up of the Company, the holders of the Series B Preferred Stock will have preference to holders of common stock.

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Series C Preferred Stock

The Company has outstanding publicly-traded 9.00% Series C Cumulative Redeemable Perpetual Preferred Stock, liquidation preference $100.00 per share (the “Series C Preferred Stock”). At June 30, 20162017 and MarchDecember 31, 2017, the Company had outstanding 400,000 shares of Series C Preferred Stock with an aggregate liquidation preference totaling $40,620,000 and $40,600,000, respectively.$40,620,000. Dividends on the Series C Preferred Stock are cumulative from the date of original issue and will be payable on the 31^st day of each January, July and October and on the 30^thday of April when, as and if declared by the Company’s Board of Directors. Commencing on May 17, 2018, the Company may redeem, at its option, the Series C Preferred Stock, in whole or in part, at a cash redemption price of $100.00 per share, plus any accrued and unpaid dividends to, but not including, the redemption date. Among other things, the Series C Preferred Stock has no stated maturity, is not subject to any sinking fund or other mandatory redemption, and is not convertible into or exchangeable for any of the Company’s other securities. Holders of the Series C Preferred Stock generally will have no voting rights, except for limited voting rights if dividends payable on the outstanding Series C Preferred Stock are in arrears for six or more consecutive ornon-consecutive quarters, and under certain other circumstances. If the Company fails to maintain the listing of the Series C Preferred Stock on the NASDAQ Stock Market (“NASDAQ”) for 30 days or more, the per annum dividend rate will increase by an additional 2.00% per $100.00 stated liquidation value ($2.00 per annum per share) so long as the listing failure continues. In addition, in the event of any liquidation or winding up of the Company, the holders of the Series C Preferred Stock will have preference to holders of common stock and are pair passu with the Series B Preferred Stock. The Series C Preferred Stock is listed on NASDAQ under the symbol “GFNCP.”

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Dividends

As of MarchDecember 31, 2017, since issuance, dividends paid or payable totaled $83,000$89,000 for the Series B Preferred Stock and dividends paid totaled $13,550,000$16,280,000 for the Series C Preferred Stock. The characterization of dividends to the recipients for Federal income tax purposes is made based upon the earnings and profits of the Company, as defined by the Internal Revenue Code.

Royal Wolf Dividends

On August 12, 2015, the Board of Directors of Royal Wolf declared a dividend of AUS$0.05 per RWH share payable on October 2, 2015 to shareholders of record on September 17, 2015; and on February 8, 2016, the Board of Directors of Royal Wolf declared a dividend of AUS$0.03 per RWH share payable on April 4, 2016 to shareholders of record on March 16, 2016.

On August 10, 2016, the Board of Directors of Royal Wolf declared a dividend of AUS$0.025 per RWH share payable on October 4, 2016 to shareholders of record on September 16, 2016 and on February 7,2016. On August 2, 2017, the Board of Directors of Royal Wolf declaredpaid a special dividend of AUS$0.0250.0265 per RWH share payable on April 4, 2017 to shareholders of record on March 16, 2017.

July 18, 2017 (see Note 4). The consolidated financial statements reflect the amount of the dividendsdividend pertaining to the noncontrolling interest.

Note 4. Acquisitions

Acquistion of Noncontrolling Interest of Royal Wolf

On July 12, 2017, the Company announced that it commenced, through GFNAPH, anoff-market takeover offer and entered into a binding takeover bid implementation agreement with the independent directors of RWH to acquire the approximately 49.2 million ordinary (common) shares of RWH not owned by the Company. The takeover offer was for AUS$1.83 per share in cash, less a special dividend declared by RWH of AUS$0.0265 per share (see Note 3), for total purchase consideration to be paid by the Company of AUS$88,712,000 ($70,401,000), or AUS$1.8035 per share. For the takeover offer, the Company used AUS$2,516,000 ($1,997,000) borrowed under its North America senior secured revolving credit facility (see Note 5) and received financing totaling $80,000,000 from Bison Capital Equity Partners V, L.P. (“Bison Capital”) and its affiliates, of which $10,000,000 was used for the repayment of the term loan due to Credit Suisse AG, Singapore Branch (“Credit Suisse”) (See Note 5). At September 8, 2017, the closing of the takeover bid offer period, the Company received valid acceptances for approximately 48.1 million shares, which in combination with the 51.2 million RWH shares previously owned by the Company represented approximately 99% of the total shares outstanding. The Company deposited in escrow the entire amount of the purchase consideration required to acquire all 49.2 million of the RWH shares owned by the noncontrolling interest shareholders, with owners of the 48.1 million shares accepting the takeover bid offer paid on or before September 29, 2017, and the remaining 1.1 million shares paid on or around October 31, 2017.

The accounting for the purchase consideration and total transaction-related costs of $70,402,000 and $2,312,000 (net of income tax effect of $537,000), respectively, as well as the adjustment to the accumulated other comprehensive income (loss) and reclassification of the noncontrolling interest of Royal Wolf to the Company’s equity accounts, have been recorded as equity transactions in the accompanying consolidated balance sheet in FY 2018.

FY 2018 Acquisitions

The Company can enhance its business and market share by entering into new markets in various ways, including starting up a new location or acquiring a business consisting of container, modular unit or mobile office assets of another entity. An acquisition generally provides the Company with operations that enables it to at least cover existing overhead costs and is preferable to astart-up or greenfield location. The businessesacquisition(s) discussed below were acquiredcompleted primarily to expand the Company’s container lease fleet. The accompanying consolidated financial statements include the operations of the acquired businessesbusiness(es) from the dates of acquisition.

On July 22, 2016,September 1, 2017, the Company, throughPac-Van, purchased the container businessbusinesses of The GreatAdvantage Storage Trailer, LLC and Big Star Container, Company, Ltd. (“GCC”LLC (collectively “Advantage”), for $662,000 (C$869,000),approximately $1,576,000, which included a general indemnity holdback and other adjustment amounts totaling $102,000 (C$133,000). GCCof $155,000. Advantage is located in Vancouver, British Columbia.Austin and San Antonio, Texas.

On July 27, 2016,December 1, 2017, the Company, throughPac-Van, purchased the container and mobile office business of Container Systems Storage,Gauthier Homes, Inc. (“CSS”Gauthier”), for $1,667,000,approximately $10,371,000, which included a general indemnity holdback and other adjustment amounts totaling approximately $120,000. CSS, whichof $457,000. Gauthier is located in Yakima, Washington, leasesCarencro (Lafayette) and sells storage containers in the state of Washington and in northern Oregon.Houma, Louisiana.

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

of the Company’s Australianall capital stock of RWH and New Zealandits subsidiaries and has $76,448,000 (AUS$100,000,000) maturingmatures on January 31, 2022 (Facility A), and $38,224,000 (AUS$50,000,000) maturing on July 31, 2019 (Facility B).

For the ANZ proportionate share, borrowings under the ANZ/CBA Credit Facility bear interestNovember 3, 2020, at the bank bill swap interest rate in Australia (“BBSY”) or New Zealand (“BKBM”), plus a marginwhich time an exit fee of 1.40% - 2.40% per annum on Facility A and 1.35% - 2.40% on Facility B,up to $878,000 (A$1,125,000) is owed depending on the net debt leverage ratio (“NDLR”), as defined. The CBA proportionate share has a margin of 1.75% - 2.65% per annum on Facility A and 1.45% - 2.35% on Facility B. At March 31, 2017,final amounts borrowed. In addition, the30-day and90-day BBSY and BKBM were 1.675% and 1.845% and 1.93667% and 2.050%, respectively. The ANZ/CBA Deutsche Bank Credit Facility also include $2,293,000 (AUS$3,000,000)sub-facilities to, among other things, facilitate direct and global payments using electronic banking services. The ANZ/CBA Credit Facility, as amended, is subject to certain financial and other customary covenants, including, among other things, compliance with specified interest coveragenet leverage and net debt requirement or fixed charge ratios based on earnings before interest, income taxes, impairment, depreciation and amortization and othernon-operating costs and income (“EBITDA”) on a semi-annual basis and that borrowings may not exceed a multiple of 3.25 times EBITDA,, as defined.

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

At MarchDecember 31, 2017, total borrowingsthe Deutsche Bank Credit Facility totaled $83,063,000 (A$106,398,000), net of deferred financing costs of $2,404,000, and availability under the ANZ/CBA Creditrevolving Facility C totaled $87,126,000$12,234,000 (AUS$113,968,000) and $11,738,000 (AUS$15,354,000), respectively. Of the total borrowings, $54,033,000 (AUS$70,680,000) is drawn under Facility A and $33,093,000 (AUS$43,288,000) is drawn under Facility B.15,671,000).

The above amounts were translated based upon the exchange rate of one Australian dollar to $0.76448$0.780683 U.S. dollar at MarchDecember 31, 2017.

Bison Capital Notes

General

On September 19, 2017, Bison Capital, GFN, GFN U.S., GFNAPH and GFNAPF, entered into that certain Amended and Restated Securities Purchase Agreement dated September 19, 2017 (the “Amended Securities Purchase Agreement”). On September 25, 2017, pursuant to the Amended Securities Purchase Agreement, GFNAPH and GFNAPF issued and sold to Bison an 11.9% secured senior convertible promissory note dated September 25, 2017 in the original principal amount of $26,000,000 (the “Convertible Note”) and an 11.9% secured senior promissory note dated September 25, 2017 in the original principal amount of $54,000,000 (the “Senior Term Note” and collectively with the Convertible Note, the “Bison Capital Notes”). Net proceeds from the sale of the Bison Capital Notes were used to repay in full all principal, interest and other amounts due under the term loan to Credit Suisse (see below), to acquire the 49,188,526 publicly-traded shares of RWH not owned by the Company and to pay all related fees and expenses.

The Bison Capital Notes have a maturity of five years and bear interest from the date of issuance, payable quarterly in arrears beginning on January 2, 2018.    The Bison Capital Notes may be prepaid at 102% of the original principal amount, plus accrued interest, after the first anniversary and prior to the second anniversary of issuance, at 101% of the original principal amount, plus accrued interest, after the second anniversary and prior to the third anniversary of issuance and with no prepayment premium after the third anniversary of issuance. The Company may elect to defer interest under the Bison Capital Notes until the second anniversary of issuance. Interest on the Bison Capital Notes are payable in Australian dollars, but the principal must be repaid in U.S. dollars. The Bison Capital Notes are secured by a first priority security interest over all of the assets of GFN U.S., GFNAPH and GFNAPF, by the pledge by GFN U.S. of the capital stock of GFNAPH and GFNAPF and by of all of the capital stock of RWH. The Bison Capital Notes are subject to all terms, conditions and covenants set forth in the Amended Securities Purchase Agreement. The Amended Securities Purchase Agreement contains certain financial and other customary and restrictive covenants, including, among other things, a minimum EBITDA requirement to equal or exceed AUS$30,000,000 per trailing12-month period. In addition, the Bison Capital Notes must be repaid upon a change of control, as defined. At December 31, 2017, the Bison Capital Notes totaled $77,201,000, net of deferred financing costs of $1,137,000.

Convertible Note

At any time prior to maturity, Bison Capital may convert unpaid principal and interest under the Convertible Note into shares of GFN common stock based upon a price of $8.50 per share, subject to adjustment as described in the Convertible Note. If GFN common stock trades above 150% of the conversion price over 30 consecutive trading days and the aggregate dollar value of all GFN common stock traded on NASDAQ exceed $600,000 over a period of 20 consecutive days, GFN may force Bison Capital to convert all or a portion of the Convertible Note. The Convertible Note also provides that Bison Capital shall not be entitled, and GFN shall not be obligated, to convert the Convertible Note into shares of GFN common stock if such conversion would result in holders of the Convertible Note beneficially owning in excess of 5,200,000 shares of GFN common stock, or approximately 19.5% of the number of shares of GFN common stock outstanding immediately prior to issuance of the Convertible Note. The Convertible Note grants Bison Capital and holders of the Convertible Note a preemptive right to invest in any issuance GFN equity securities, options or warrants to maintain its proportionate interest in GFN common stock, after giving effect to the conversion of the entire Convertible Note. In addition, the Convertible Note includes a provision which requires GFNAPH and GFNAPF to pay Bison Capital, via the payment of principal, interest and the value of GFN common stock received upon conversion of all or a portion of the Convertible Note, a minimum return of 1.75 times the original $26,000,000 principal amount. This minimum rate of return will be recorded at $806,000 per year, or $201,500 per quarter, as an accretion in the accompanying consolidated

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

statements of operations. The Convertible Note must also be repaid upon a change of control, as defined. In the event that Bison Capital or holders of the Convertible Note receive aggregate proceeds in excess of $48,900,000 from the sale of GFN common stock received from conversion of the Convertible Note, then 50% of the interest accrued and actually paid to Bison Capital (such amount, the “Price Increase”) shall be repaid by Bison Capital or holders of the Convertible Note by either (i) paying such Price Increase to GFNAPH or GFNAPF in the form of cash, (ii) returning to GFN shares of GFN Common Stock with a value equal to the Price Increase or (iii) any combination of (i) or (ii) above that if the aggregate equals the Price Increase. The value of the GFN common stock for purposes of the return of shares to GFN by the shall be deemed to be the average price per share of GFN common stock realized by the Convertible Note holder in the sale of such shares. The Convertible Note holder may satisfy such obligations by returning to GFN shares of GFN common stock with an aggregate value equivalent to the Price Increase.

The Company evaluated the Convertible Note and determined that certain conversion rights were an embedded derivative that required bifurcation because they were not deemed to be clearly and closely related to the Convertible Note. As a result, the Company separately accounts for these conversion rights as a standalone derivative. As of the date of issuance on September 25, 2017, the fair value of this standalone derivative was determined to be $1,864,000, resulting in a principal balance of $24,136,000 for the Convertible Note. The Company determines the fair value of the embedded derivative using a valuation model and market prices and reassesses the fair value of the embedded derivative at the end of each reporting period or more frequently as deemed necessary, with any changes in value reported in the accompanying consolidated statements of operations. At December 31, 2017, the fair value of this standalone derivative was $3,581,000.

North America Senior Credit Facility

The North America leasing(Pac-Van and Lone Star) and manufacturing operations (Southern Frac) have a combined $230,000,000$237,000,000 senior secured revolving credit facility, as last amended, in March 2017, with a syndicate led by Wells Fargo Bank, National Association (“Wells Fargo”) that also includes East West Bank, CIT Bank, N.A., the PrivateCanadian Imperial Bank and Trust Company,of Commerce (“CIBC”), KeyBank, National Association, and Bank Hapoalim B.M. and Associated Bank, N.A. (the “Wells Fargo Credit Facility”). The Wells Fargo Credit Facility matures on March 24, 2022, assuming the Company’s publicly-traded senior notes due July 31, 2021(see below) are extended at least 90 days past this scheduled maturity date; otherwise the Wells Fargo Credit Facility would mature on March 24, 2021. In addition, subject to certain conditions, the amount that may be borrowed under the Wells Fargo Credit Facility may increase by $7,000,000 to a maximum of $237,000,000. In conjunction with the closing of the Wells Fargo Facility, the Company entered intoThere is also a separate loan agreement with Great American Capital Partners (“GACP”), where GACP provided a First In Last Out Term Loan (“(”FILO Term Loan”) within the Wells Fargo Credit Facility in the amount of $20,000,000, and inclusive in the $230,000,000$237,000,000 total amount. The FILO Term Loan has the same maturity date and commences principal amortization after 18 months from the anniversary date of March 27, 2017on October 1, 2018 at $500,000 per quarter. The FILO Term Loan has a prepayment fee of 3.00% of the prepaid amount if prepaid prior to the first anniversary, 2.00% of the prepaid amount if prepaid prior to the second anniversary and 1.00% of the prepaid amount if prepaid prior to the third anniversary.

The Wells Fargo Credit Facility is secured by substantially all of the rental fleet, inventory and other assets of the Company’s North American leasing and manufacturing operations. The FILO Term Loan also contains a first priority lien on the same collateral, but on a “last out basis,” after all of the outstanding obligations to the primary lenders in the Wells Fargo Credit Facility have been satisfied. The Wells Fargo Credit Facility effectively not only finances the North American operations, but also the funding requirements for the Series C Preferred Stock (see Note 3), the term loan with Credit Suisse (see below) and the publicly-traded unsecured senior notes. The maximum amount of intercompany dividends thatPac-Van and Lone Star are allowed to pay in each fiscal year to GFN for the funding requirements of GFN’s senior and other debt and the Series C Preferred Stock are (a) the lesser of $5,000,000 for the Series C Preferred Stock or the amount equal to the dividend rate of the Series C Preferred Stock and its aggregate liquidation preference and the actual amount of dividends required to be paid to the Series C Preferred Stock; (b) the actual annual interest to be paid for the term loan with Credit Suisse; and (c)(b) $6,300,000 for the public offering of unsecured senior notes or the actual amount of annual interest required to be paid; provided that (i) the payment of such dividends does not cause a default or event of default; (ii) each ofPac-Van and Lone Star is solvent; (iii) excess availability, as defined, is $5,000,000 or more under the Wells Fargo Credit Facility; (iv) the fixed charge coverage ratio, as defined, will be greater than 1.25 to 1.00; and (v) the dividends are paid no earlier than ten business days prior to the date they are due.

Borrowings under the Wells Fargo Credit Facility accrue interest, at the Company’s option, either at the base rate, plus 0.5% and a range of 1.00% to 1.50%, or the LIBOR rate, plus 1.0% and a range of 2.50% to 3.00%. The FILO Term Loan within the Wells Fargo Credit Facility bears interest at 11.00% above the LIBOR rate, with a LIBOR rate floor of 1.00%. The Wells Fargo Credit Facility contains, among other things, certain financial covenants, including fixed charge coverage ratios, and other covenants, representations, warranties, indemnification provisions, and events of default that are customary for senior secured credit facilities; including a covenant that would require repayment upon a change in control, as defined.

At MarchDecember 31, 2017, borrowings and availability under the Wells Fargo Credit Facility totaled $189,743,000$195,030,000 and $26,885,000,$33,970,000, respectively.

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Credit Suisse Term Loan

On March 31, 2014, the Company entered into a $25,000,000 facility agreement, as amended, with Credit Suisse (“Credit Suisse Term Loan”) as part of the financing for the acquisition of Lone Star and, on April 3, 2014, the Company borrowed the $25,000,000 available to it. The Credit Suisse Term Loan providesprovided that the amount borrowed willwould bear interest at LIBOR plus 7.50% per year, willwould be payable quarterly and that all principal and interest willwould mature on July 1, 2017.2018. In addition, the Credit Suisse Term Loan iswas secured by a first ranking pledge over substantially all shares of RWH owned by GFN U.S., requiresrequired a certain coverage maintenance ratio in U.S. dollars based on the value of the RWH shares and, among other things, that an amount equal tosix-months

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

interest be deposited in an interest reserve account pledged to secure repayment of all amounts borrowed. The Company has

had repaid, prior to maturity, $15,000,000 of the outstanding borrowings of the Credit Suisse Term Loan and, as of March 31,June 30, 2017, $9,966,000$9,920,000 remained outstanding, net of unamortized debt issuance costs of $34,000.$80,000. On September 25, 2017, in connection with the acquisition of the noncontrolling interest of Royal Wolf (see Note 4), the Credit Suisse Term Loan was fully repaid.

Senior Notes

At March 31,On June 18, 2014, the Company completed the sale of unsecured senior notes (the “Senior Notes”) in a public offering for an aggregate principal amount of $72,000,000. On April 24, 2017, the Company completed the sale of a“tack-on” offering of its publicly-traded Senior Notes for an aggregate principal amount of $5,390,000 that was priced at $24.95 per denomination. Net proceeds were $5,190,947, after deducting an aggregate original issue discount (“OID”) of $10,780 and underwriting discount of $188,273. In both offerings, the Company used at least 80% of the gross proceeds to reduce indebtedness atPac-Van and Lone Star under the Wells Fargo Credit Facility in order to permit the payment of intercompany dividends byPac-Van and Lone Star to GFN to fund the interest requirements of the Senior Notes. For the‘tack-on” offering, this amounted to $4,303,376 of the net proceeds. The Company has total outstanding publicly-traded senior notes (“Senior Notes”)Notes in an aggregate principal amount of $72,000,000$77,390,000 ($70,207,000,75,319,000 and $75,570,000, net of unamortized debt issuance costs of $1,793,000)$2,071,000 and $1,820,000, at June 30, 2017 and December 31, 2017, respectively).

The Senior Notes were issued in minimum denominations of $25 and integral multiples of $25 in excess thereof and pursuant to the First Supplemental Indenture (the “First Supplemental Indenture”) dated as of June 18, 2014 by and between the Company and Wells Fargo, as trustee (the “Trustee”). The First Supplemental Indenture supplements the Indenture entered into by and between the Company and the Trustee dated as of June 18, 2014 (the “Base Indenture” and, together with the First Supplemental Indenture, the “Indenture”). The Senior Notes bear interest at the rate of 8.125% per annum, mature on July 31, 2021 and are not subject to any sinking fund. Interest on the Senior Notes is payable quarterly in arrears on January 31, April 30, July 31 and October 31, commencing on July 31, 2014.

The Senior Notes rank equally in right of payment with all of the Company’s existing and future unsecured senior debt and senior in right of payment to all of its existing and future subordinated debt. The Senior Notes are effectively subordinated to any of the Company’s existing and future secured debt, to the extent of the value of the assets securing such debt. The Senior Notes are structurally subordinated to all existing and future liabilities of the Company’s subsidiaries and are not guaranteed by any of the Company’s subsidiaries.

The Company may, at itshad an option, prior to July 31, 2017, to redeem the Senior Notes in whole or in part upon the payment of 100% of the principal amount of the Senior Notes being redeemed, plus any additional amount required by the Indenture. In addition, the Company may from time to time redeemhave redeemed up to 35% of the aggregate outstanding principal amount of the Senior Notes before July 31, 2017 with the net cash proceeds from certain equity offerings at a redemption price of 108.125% of the principal amount plus accrued and unpaid interest. The Company has not redeemed any of its Senior Notes as July 31, 2017.

If the Company sells certain of its assets or experiences specific kinds of changes in control, as defined, it must offer to redeem the Senior Notes. The Company may, at its option, at any time and from time to time, on or after July 31, 2017, redeem the Senior Notes in whole or in part. The Senior Notes will be redeemable at a redemption price initially equal to 106.094% of the principal amount of the Senior Notes (and which declines each year on July 31) plus accrued and unpaid interest to the date of redemption. On and after any redemption date, interest will cease to accrue on the redeemed Senior Notes.

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The Indenture contains covenants which, among other things, limit the Company’s ability to make certain payments, to pay dividends and to incur additional indebtedness if the incurrence of such indebtedness would cause the company’s consolidated fixed charge coverage ratio, as defined in the Indenture, to be below 2.0 to 1.0. The Senior Notes are listed on NASDAQ under the symbol “GFNSL.”

Other

At MarchDecember 31, 2017, other debt totaled $8,314,000.$9,207,000.

The Company was in compliance with the financial covenants under all its credit facilities as of MarchDecember 31, 2017.

The weighted-average interest rate in the Asia-Pacific area was 4.9% and 10.0% and 4.9% and 5.3% and 4.9%7.4% in the quarter ended MarchDecember 31, 2016 and 2017 and in FY 20162017 and FY 2017,2018, respectively; which does not include the effect of translation, interest rate swap contracts and options and thederivative valuation, amortization of deferred financing costs.costs and accretion. The weighted-average interest rate in North America was 4.9%5.0% and 5.2%5.9% and 4.9%5.0% and 5.0%6.0% in the quarter ended MarchDecember 31, 2016 and 2017 and in FY 20162017 and FY 2017,2018, respectively, which does not include the effect of the amortization of deferred financing costs and accretion of interest.accretion.

Note 6. Financial Instruments

Fair Value Measurements

FASB ASC Topic 820,Fair Value Measurements and Disclosures, defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, FASB ASC Topic 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value, as follows:

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Level 1 - Observable inputs such as quoted prices in active markets for identical assets or liabilities;

Level 2 - Observable inputs, other than Level 1 inputs in active markets, that are observable either directly or indirectly; and

Level 3 - Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The Company’s derivative instruments are not traded on a market exchange; therefore, the fair values are determined using valuation models that include assumptions about yield curve at the reporting dates as well as counter-party credit risk. The assumptions are generally derived from market-observable data. The Company has consistently applied these calculation techniques to all periods presented, which are considered Level 2. Derivative instruments measured at fair value and their classification in the consolidated balances sheets and statements of operations are as follows (in thousands):

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Interest Rate Swap Contracts

The Company’s exposure to market risk for changes in interest rates relates primarily to its senior and other debt obligations. The Company’s policy is to manage its interest expense by using a mix of fixed and variable rate debt.

To manage its exposure to variable interest rates in a cost-efficient manner, the Company entershas entered into interest rate swaps and interest rate options, in which the Company agreesagreed to exchange, at specified intervals, the difference between fixed and variable interest amounts calculated by reference to an agreed-upon notional principal amount. These swaps and options arewere designated to

hedge changes in the interest rate of a portion of the outstanding borrowings in the Asia-Pacific area. In August 2012, theThe Company entered into antwo interest rate swap contractcontracts in FY 2017 that washave been designated as a cash flow hedge. This cash flow hedge was determined to be highly effective and, therefore, changes in the fair value of the effective portion were recorded in accumulated other comprehensive income.hedges. The Company expects this derivativeexpected these derivatives to remain effective during the remaining term of the swap;swaps; however, any changes in the portion of the hedgehedges considered ineffective would bewas recorded in interest expense in the consolidated statement of operations. There was no ineffective portion recorded in FY 2016 and2017. In FY 2017.

GENERAL FINANCE CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

2018 the two interest rate swap contracts were closed, with the Company incurring break costs of $148,000.

The Company’s interest rate derivative instruments arewere not traded on a market exchange; therefore, the fair values arewere determined using valuation models which include assumptions about the interest rate yield curve at the reporting dates (Level 2 fair value measurement). As of June 30, 2016 and March 31, 2017, there was onethe two open interest rate swap contract that was designated as a cash flow hedge and matures in June 2017,contracts were as follows (dollars in thousands):