To Our Customers, Stockholders, and Friends:

Over the past several years we have continued to stay ahead of the consolidation and contraction in the general equipment lessor marketplace through concerted investment in our strategic business segments as well as our most promising new business initiatives. Currently, our company-wide efforts in these areas have given rise to a platform of four successful business units that I feel are well positioned to ensure that Varilease maintains it’s status as one of the prominent independent specialty finance companies in the leasing industry. These core business elements include, structured finance products (Salt Lake City, UT), community bank leasing services (Dallas, TX), direct corporate technology finance (Detroit, MI), and small ticket vendor finance (Portland, OR). There are so many members of our talented team without which our overall success would not be possible, and I would like to point out a few of our team’s achievements and big-picture highlights that have made this year one of the most dramatic in recent memory at Varilease.

1. We were once again named by Monitor Magazine as one of the 100 largest leasing companies in the United States, ranking 94th in total assets and 86th in new business originations.
2. Our BancLeasing subsidiary continued to provide more than 100 community banks across the country with a comprehensive suite of highly competitive and responsive equipment leasing products, in addition to expanding it’s valued client network to include several new bank-partners.
3. Our Varilease Finance, Inc subsidiary produced impressive origination volume, which not only met but also eclipsed our aggressive growth plan for this segment. Our aim for this group is to effectively double its size by the end of 2007, and I’m happy to report that we have obtained the necessary office space and technology requirements to do so.
4. Our small-ticket vendor finance division is capturing additional market share at a steady pace while sustaining very acceptable delinquency and loss rates. This group achieved profitability far sooner that projected, and we expect that trend to continue as this portfolio matures.
5. In 2007, we commenced operations of our new third party lease origination desk. This initiative has also exceeded projections and is yet another exciting area of growth within The Varilease Companies.
6. We have secured an increase in our operational banking & finance lines (currently in excess of $30,000,000) in order to accommodate the overall growth plan of the Varilease Companies, and make certain that our funding capacity exceeds the growing demands of our customer base.

We are excited about the prospects for 2007 and anticipate overall Varilease lease originations to increase by at least 20% over 2006. Our year over year mission remains an overall increase in new business volume based on our commitment to customer retention, first-class service, as well as the flexibility and creativity that all of The Varilease Companies’ financial products offer.

- Robert VanHellemont, CEO