CFLA ANNUAL REPORT€¦ · On-line (CLEO). This unique 10-session cost-effective, "learn from the...

CFLAANNUALREPORT 2007 - 2008

Partners in ProductivityEnabling Canadians to Work Smarter

CF&LA

Canadian Finance & Leasing AssociationAssociation canadienne de financement et de location

ACFL

CFLA Annual Report2007-2008

Canadian Finance & Leasing Association

Association canadienne de financement et de location

Partners in Productivity – Enabling Canadians

to work smarter

CFLA ANNUAL REPORT 2007-2008 Partners in Productivity - Enabling Canadians to work smarter



15 Toronto Street, Suite 301, Toronto, Ontario M5C 2E3Telephone: (416) 860-1133 • Toll-free: 1(877) 213-7373 • Fax: (416) 860-1140 E-mail: [email protected] • Web site: www.cfla-acfl.ca

15, rue Toronto, bureau 301, Toronto (Ontario) M5C 2E3Téléphone: (416) 860-1133 • Sans-frais:1(877) 213-7373 • Telecopieur: (416) 860-1140 c.elec: [email protected] • Site Web: www.cfla-acfl.ca

CF&LAAC

FL

Annual Report 2007-2008

Table of contents

Chairman's Report Riding out challenging times …CFLA needed now more than ever . . . . . . . . . . .1

President's ReportRiding out challenging times …Reiterating first principles . . . . . . . . . . . . . . . . .3

CFLA: Who We AreIndustry Profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6Association Profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

The Year in ReviewCanadian Market Overview 2007-2008 . . . . . . . . . . . . . . . . . . . . . . . . . .10Industry Advocacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13Canadian Lease Education On-line . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18Professional Development and Events . . . . . . . . . . . . . . . . . . . . . . . . . . .19New Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21Staff Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22Members of the Year 2006-2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23

GovernanceBoard of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24Executive Committee & Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25Past Chairmen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25CFLA Staff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26CFLA Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35Code of Ethics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37


Chairman’s Report

Riding out challenging times …. CFLA needed now more than ever

We have probably seen moreeconomic turbulence in the lastyear than in the last decade.

Those of us who have been inthe asset-based financing andleasing industry for much ofour working careers have livedthe "ups" and the "downs".The industry always emerges -with some bruising and scars

certainly, definitely with changes, but always thestronger.

In many ways, your association is more importantto its members in challenging times. When theeconomy is growing, and the industry along withit, CFLA members enjoy networking with theirpeers, sharing successes and looking to the nextopportunities. Everyone is focused on growingtheir businesses.

In tougher times, CFLA members need theirassociation: connecting with your peers,understanding what is impacting your businessand why, how others are responding to thechallenges, these are all invaluablebenefits that only an association canoffer.

Our Industry may now be morevulnerable to government regulatoryand policy changes. In challengingeconomic times, when we are focusingon the business fundamentals,governments often feel compelled "todo something". Officials scramble tounderstand the economy and financialmarkets. Regulators are on constantlookout, thinking about how theyshould react, intervene or participate inthe economy. Experience tells us thatrules made in haste or driven by asense of crisis have a habit of causingunintended consequences.

Such rules also tend to linger longbeyond their useful life. Napoleonwarned that nothing lasts as long as thetemporary. The vicarious liability rules whichhave seriously impacted vehicle and truck lessorsin recent years are a good example. They were

adopted across Canada in the 1920s and 1930sand only now has your Association succeeded ingetting member liability capped.

Impacts come in waves. Those who are in deepermay experience the first jolts, but everyoneultimately feels the repercussions.

The future of asset-backed commercial paper(ABCP) in Canada is a case in point.Parliamentary committees, various provincial andnational regulators are conducting high-profileinquiries. The good news - industry observorsbelieve that new ABCP originators should emergefairly soon to fill a gaping hole in the marketbecause there are many lenders with qualityproduct who need a place to sell their lease andloan assets. Will the committees and regulatorscreate new rules that will help or impede theemergence of new ABCP originators?

We have to stay on top of what is happening.Our industry, through your Association, has to beready, to be present to make sure thatgovernment actions do not undermine ourbusinesses. Only CFLA is there to advocate on

your behalf, to mobilize the information,arguments and people needed to makethe case for your business.

So, in good times and in tough times,the core strengths of your Associationremain

! Advocacy - to key publics includinggovernments, media, other associationsin the financial services sector, and thegeneral public. You will find moreinformation on the Association'sadvocacy achievements in the"Association Highlights" section of thisAnnual Report.

! Networking - providing a forum andcreating opportunities for industryleaders and their employees to meet,exchange information on issues ofcommon interest, and learn best

practices from each other.

! Information - providing timely information tomembers to alert them of changes that maydirectly impact their businesses. The CFLAWebsite (www.cfla-acfl.ca) has become the


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"These are the timeswhen associating

really has meaning.We tend to take toomuch for granted sothese times are ourbuilt in wake-up callto reach out and findeach other. It isn't

hard when you stayinvolved and continueto contribute becauseit is always there to

give back." U.S. leasing veteran

Jim Merrilees

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Chairman’s Report

primary gateway for communicating relevant andtimely information to members. Currently, the sitereceives an average of almost 100,000 hits amonth. Ninety per cent of the information isposted on the popular Members' Only Websitewhich is accessible to all member companyemployees.

! Education - providing member employees withsessions on the essentials of asset-basedfinancing and leasing as well as seminars andworkshops on specific industry topics. Earlier thisyear, CFLA launched Canadian Lease EducationOn-line (CLEO). This unique 10-session cost-

effective, "learn from theoffice" interactive educationprogram is led by experiencedleasing professionals anddesigned to deliver generalknowledge about all facets ofleasing in Canada.

The good news is that CFLAwill continue to deliver realvalue to members.

Your Association continues togrow but its essential corporateculture remains unchanged. Itis entrepreneurial, producingtangible and measurable resultswhere members can see valuefor their money.

A voluntary association is just that, voluntary.Members choose to join because they see value.That is every association's challenge. CFLA'ssuccess to date is based on an effective formulaof member involvement and a strong return oninvestment. Thank you for making it happen.

In these challenging times, CFLA and ourmembers' commitment is needed more than ever.

Together, we can accomplish more for everyone.

Fred BoothChairman


"Membership inan association

is like aninsurance

policy. You pay premiumsfor when youreally needcoverage."

U.S. leasing veteran Jim Merrilees

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President’s Report

Riding out challenging times … Reiterating first principles

To paraphrase the philosopher Voltaire,if CFLA did not exist, we would haveto invent it. With over $112.3 Billion offinancing in place with Canadianconsumers and businesses,1 the asset-based financing, equipment and vehicleleasing industry is the largest providerof debt financing in Canada after thetraditional lenders (banks and creditunions). The industry is too big and tooimportant to the national economy notto have a strong presence in the publicarena. The other players in the financial servicessector are well-organized with their ownassociations: the bankers, life and propertyinsurers, credit unions, investment dealers andmutual fund industry. It is a very competitivepolitical marketplace that has been and willcontinue to be under an intense publicmicroscope. In this arena, only CFLA will speakfor the interests of the asset-based financing, andleasing industry.

In these unsettling times, we should not forgetthat there is a compelling logic to leasing and thatlogic remains fundamentally sound. From thecustomer's point of view, leasing is an importantalternative to other forms of financing. Theprinciples that make leasing attractive to itscustomers have not been altered by the currenteconomic environment.

It is CFLA's policy role to be present where andwhen the foundational principles underlying thebusinesses of members are being debated. As theChairman pointed out in his report, in thesechallenging times, the industry may be morevulnerable to government regulatory and policychanges. It is important then to reiterate firstprinciples; clearly articulated key principles mustanchor the CFLA position.

! The business playing field should be level (thatis, for leases compared to loans and to ownership).

! Keep the maximum differentiation between loans and leases.

! Lessors as owners of financed assets are not responsible for how they are used.

! De-regulation, not increased regulation, should be the policy direction of choice.

! Where there is regulation, it should support economic growth.

! Foreign-owned finance companies should be welcome in Canada.

The level playing field

The law should not confer any specialadvantage on a loan, lease orownership. When making a choice,

Canadians should be able to decide what makessense for them rather than be influenced bygovernment rules that tip the scales in favour ofone over the others.

Loans, leases - different products

A lease is not a loan. To those active in theindustry, nothing could be more basic. Lendingand leasing are different means for Canadianconsumers and businesses to acquire equipmentand vehicles. Leasing is not simply another formof passive lending, it is a value-added product. Itis a separate, very pro-active commercialdiscipline. It is an asset management-basedbusiness.

Unlike the situation of a traditional lender orowner, under a lease some element of risk isusually managed by the lessor. This value-addedservice can range from technology risk, to residualand remarketing risk, to tax and funding risk. Allcustomers gain through the availability ofleveraged financing options, flexibility in paymentterms, product knowledge and the remarketingexpertise of the lessor. The lessor in this equationis much more than a purveyor of credit; it addsvalue throughout the manufacturing, distributionand customer chain.

Governments, the media and the public at largegenerally do not understand such distinctions butdo have a much better understanding of thebuying process. As a result, there is a tendencyfor policy-makers to want to see leases as littledifferent than loans. If leases become equatedwith loans, the unique benefits of leasing forbusiness and consumer customers will slowly bepared away leaving some hybridized financingproduct that will be indistinguishable from a loan.


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Lessees should be responsible for howleased assets are used

CFLA members provide asset-financing tocustomers. To offer operating or finance leases,lessors must retain formal ownership of the assetover the term of the lease until all its conditionsare met. During the lease term, the lessee haspossession of the asset. No one expects a lessorto control how or when lessees use the assetsthey have leased. It is not unusual, however, forlegislation to impose statutory liability on"owners" of assets for their misuse.

Given that the lessor's ownership of the leasedasset is fundamental to the lease transaction,lessors, as "owners", should not be held legallyliable for how their customers use those assets.The successful national campaign led by CFLA onauto and truck vicarious liability has helpededucate policymakers on the particular nature ofleasing.

Less, not more regulation

In the past, there have been calls for the industryto be regulated in the same ways as banking andinsurance. CFLA has been consistent in presentingthe contrary case, that is, greater liberalization ofthe financing markets.

This industry funds itself not from the publicthrough deposits or insurance premiums, butthrough sophisticated investors --- the capital

markets, banks, insurance companies and pensionfunds. Any industry which deals with consumersis subject to consumer protection laws of generalapplication. But beyond the retail consumersector, there is no apparent public policy rationalefor extending any form of government regulationto our industry.

Where there is regulation, it should supporteconomic growth

A competitive national marketplace stimulatesinnovation, investment and productivity acrossthe domestic economy. Heavy-handed regulationor policies of protectionism stifle competition, notonly raising costs that have to paid by the end-customer, but also inhibiting business innovationand investment driven by the demands ofcompetition.

"Tax policy is critical to capital investmentdecisions. Several tax policy actions have goodpayoffs to the economy, including the eliminationof provincial capital taxes, increased capital costallowances for investments and the removal ofprovincial sales taxes on business capitalspending."2

As reiterated in the 2008 CFLA federal budgetsubmission, too often, tax policies and regulationfreeze "industry in patterns reflecting yesterday'seconomy, inhibiting investment and innovationthat greater competition would unleash."3 Capitaltax is a prime example. The country's politicalleadership appears to understand the problem."Capital taxes are a tax on innovation, onproductivity, on investment and, ultimately, onjobs."4 "Ontario's capital tax, which taxesbusiness investment rather than profits, is widelyrecognized as a barrier to attracting newinvestment and fostering economic growth."5

Yet, whether through complacency or short-term vision, government policy still inhibitscapital investment.

It is taking far too long for governments towean themselves off of these kinds ofdestructive taxes. Ottawa and BritishColumbia have now eliminated the capital taxbut Ontario and Québec continue to drag theirfeet. CFLA will continue to urge support forpolicies that drive a healthy economy.

Another example - most Canadians wouldfind it baffling that the federal and provincialgovernments cannot agree upon a commondefinition of who is a "consumer". It is indeedhard to understand how a "consumer" in NovaScotia is different from a "consumer" in Albertaor Ontario. It is not that governments cannot finda common definition, they do not care to. As a


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direct consequence, the costs of doing businessacross Canada, the ultimate cost to the customer,are higher than they need to be.

Global capital welcome

CFLA believes that the users of financial services,both individuals and businesses, stand to benefitmost if the financial services marketplace:

! Assures an expanding diversity of choice of providers;

! Increases the pool of credit and capital;

! Improves access to credit and capital;

! Ensures access to innovative services and products; and,

! Increases available specialized technical expertise.

Foreign-owned finance companies make asignificant contribution to the Canadian economyand to the standard of living of Canadians. It isclear that the capital needed to grow theCanadian economy cannot be satisfieddomestically. Foreign-owned capital providersbring external capital and competitive expertise tothe Canadian marketplace.

Twenty CFLA Members, each with assets over$500 Million, finance 95% of the market. Ofthose twenty, eighteen are subsidiaries of foreignparents.

In its July 2008 Submission to the federalAdvisory Panel on Canada's System ofInternational Taxation, your Associationresponded strongly to suggestions that limitationsbe placed on foreign-parent guarantees ofCanadian subsidiary borrowings. CFLA assertedthat a parent guarantee is essential to foreignowned members obtaining the lowest cost offunding for use in the Canadian marketplace - tothe benefit of Canadian consumers andbusinesses.

Members are vital in pursuing CFLA's advocacyinitiatives. Members are CFLA's radar - beingproactive - bringing forward intelligence, issues,challenges and opportunities affecting theindustry. Members are CFLA's sounding board,reacting to policy proposals, advising on policyoptions. Members share information, experienceand expertise.

Member support gives us the means to pursue theCFLA mission: to ensure an environment in whichits members can be profitable.

David Powell

President and Chief Executive Officer


1. As at December 31, 2007, estimates prepared by The Centre for Spatial Economics, Milton, Ontario.

2. Dr. Jack Mintz, President of the C.D. Howe Institute and Deloitte Professor of Taxation at the Rotman School of Management, University of Toronto

3. Canadian Workers Need Better Tools: Rating Canada's Performance in the Global Investment Race, W.B.P. Robson and D. Goldfarb, C.D. Howe Institute e-brief #30, June 8, 2006, at page 4

4. Maurizio Bevilacqua, M.P., Chair, House of Commons Finance Committee, The National Post, July 5, 2001

5. Budget, Government of Ontario, March 23, 2006

The 250 members of the CFLA are active in theasset-based financing, equipment and vehicleleasing industry in Canada. Members range fromlarge multinationals to national and regionaldomestic companies, crossing the financialservices spectrum from manufacturers' financecompanies and independent leasing companies, tobanks, insurance companies, and suppliers to theindustry.

The asset-based financing and leasing industry isthe largest provider of debt financing to businesscustomers and consumers in Canada after thetraditional lenders (banks and credit unions).

About 60% of the industry's customers areestimated to be small and medium-sizedbusinesses.

What is asset-based financing?

Asset-based financing is the priority financing ofequipment, vehicles and related assets primarilyby way of lease, but also by secured loan orconditional sales contract.

The specific assets financed are the principalsecurity for the borrower's unconditionalobligation to make payments over the term of theagreement. In this way, users of equipment andvehicles can use the value of the asset assecurity to finance its acquisition. This form offinancing relies on cash-flow-based creditanalysis. Because the financing company retainslegal ownership of the asset until the lease end, itallows a business or person to qualify ongenerated cash flow rather than on a net worthlending formula basis as typically offered bytraditional lenders.

Funding for this industry comes from commercialmarkets, notably from pension funds, insurancecompanies and banks. In addition, well-capitalized manufacturing and servicing companieswith substantial earnings have decided to leveragetheir own equity base and core competenciesrather than using third parties. This has led tomany manufacturers establishing their ownfinancing arms or partnering with those whomanage it for them.

The services of the leasing industry arecomplementary to traditional banking and otherfinancial lending in providing incremental capitalto increase the pool of available credit in Canadaand provide a vital competitive alternative in thefinancial services sector.

CFLA: Who We Are

Industry Profile


6

The industry … at a glance

At December 31, 2007, the industry's portfolio ofassets (owned and managed) was estimated to be worth$112.3 billion1.

According to Statistics Canada, business spending on machinery and equipment in 2007 was $114.45 billion, while $121 billion is planned for M&E investment in 2008, up 5.7%.2 Approximately 22% of annual new investment in machinery, equipment and commercial vehicles is financed by this industry.3

In 2007, of the 1,690,538 total passenger and lightvehicles sold in Canada4, approximately 50% wereacquired by way of lease.

Assets owned and managed 2007 2006 2005 New Business Total ($billions) 46.4 41.5 37.8

Commercial Equipment 19.0 18.6 15.6 Commercial Vehicles 5.6 5.5 5.8 Retail Vehic les 21.7 17.3 16.4

Assets ($billions) 112.3 102.5 95.0 Commercial Equipment 42.1 38.7 35.3 Commercial Vehicles 14.5 14.5 15.7 Retail Vehicles 55.8 49.2 44.1

Estimates prepared by The Centre for Spatial Economics, Milton, Ontario

Public and Private Machinery & Equipment Expenditures Millions of Dollars % Growth 2008F 2007 2008F 2007

Canada 120,940 114,450 5.7% 4.4% Atlantic 6,089 5,962 2.1% 0.4% Quebec 21,515 20,343 5.8% 4.8% Ontario 44,522 43,638 2.0% 4.3%

Manitoba/Saskatchewan 7,917 6,979 13.4% 6.8% Alberta 27,532 24,819 10.9% 3.7%

British Columbia 12,576 12,186 3.2% 6.2% Source: Statistics Canada

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In 1998, the federal (MacKay) Task Force on theFuture of the Canadian Financial Services Sectorreported that the assets of the asset-basedfinancing and leasing industry in 1997 totaled$50 billion.5 In less than a decade, by 2007, thevalue of the assets of the industry had more thandoubled to $112.3 billion.

Leasing activity by equipment type

The table below highlights the distribution ofassets by equipment type for the equipmentlessors. The data do not include the portfolios ofthe independent vehicle lessors or the automotivecaptive finance companies.

A more detailed analysis of industry data is contained in The 2008 Annual Survey of Asset-based Financing and Leasing in Canada, prepared for CFLA by The Centre for Spatial Economics, Milton, Ontario.


CFLA: Who We Are

Industry Profile

Distribution of Reported Equipment Assets by Type(excludes independent & manufacturer vehicle lessors)

Source: The Centre for Spatial Economics

1 Totals may not add up due to rounding.2 Private and Public Investment in Canada, Intentions

2008, Statistics Canada (61-205-XWE), The Daily, February 27, 2008.

3 2008 Annual CFLA Survey: Asset-Based Financing & Leasing in Canada, The Centre for Spatial Economics, Milton, Ontario

4 New Motor Vehicle Sales, June 2008, Statistics Canada (63-007-X)

5 Report of the Task Force on the Future of the Canadian Financial Services Sector, September 1998, at p. 43

Equipment Type: 2007 2006Automotive Total 22% 24%

Trucks 16% 18%Trailers 5% 4%Buses 1% 1%Passenger 0% 0%

Office Equipment 24% 20%Construction 9% 11%Medical, Health Services 7% 0%Manufacturing & Processing 7% 5%Store Furniture, Fixtures, Equip. 4% 5%Office Furniture, Fixtures 4% 4%Forestry 4% 7%Computers (Hardware, Software) 3% 4%Agricultural 2% 2%Materials Handling 1% 1%Aircraft & Related 1% 1%Mining & Petroleum 1% 1%Telecommunications 1% 1%Railway Rolling Stock 1% 1%Water Vessels 0% 0%Hotels, Restaurants, Apartments 0% 0%Other 10% 14%

Asset-based Financing, Productivity andEconomic Growth in Canada

Asset-based financing, investment and economicgrowth in Canada6, a recently publishedgroundbreaking study prepared by The Centre forSpatial Economics, a respected, independentgroup of economists who are also retained by thefederal Department of Finance, has found that:

"the rise in asset-based financing from 1992 to 2002 improved living standards in Canada by 2.3% (or about 8% of the 26.8% increase in Canada's living standards over that period).7"

This study was positively peer-reviewed by Jack Mintz, then Professor of Taxation at the Rotman School of Management at the University of Toronto, and the-then CEO of the C.D. Howe Institute, and by Jim Stanford, Economist in the Research Department of the Canadian Auto Workers (CAW).

Key findings

Investment drives productivity - economic researchstates that machinery and equipment investmentdirectly contributes to labour productivity gains byincreasing the amount of productive capitalavailable for workers to use. Research alsosuggests that machinery and equipmentinvestment is either directly the agent oftechnological change, or else an importantfacilitator in the diffusion of new technology.

Productivity raises living standards - in order to boost living standards either labour productivityneeds to rise, or people need to work harder, ormore people need to become employed, or morepeople of working age need to enter societyrelative to total population. Canadian livingstandard gains rely primarily on labour productivitygrowth.

Financial system development promotes investment - research conducted by the OECDsupports the notion that financial systemdevelopment promotes capital spending and thatcountries with weaker financial systems areunable to effectively channel domestic or globalsavings towards new investment opportunities.

Asset-based financing adds significantly to the financial system - the analysis in this report findsthat asset-based financing was responsible for a2.3% increase in Canada's living standards overthe decade 1992 to 2002 (or about 8% of thetotal increase in Canada's living standards over

that decade). Asset-based financing makes asignificant positive contribution to increasingnational living standards.

Policy Implications

Financial innovation - financial choice andinnovation need to be encouraged in order tomaintain a healthy and growing financial system.A dynamic financial system is one of the keyfactors in promoting investment, raisingproductivity and, therefore, improving ourstandard of living.

Tax policy - government policy in Canada does not encourage investment in machinery andequipment to the degree that the economicresearch suggests would be optimal. Therefore, astrategy of improving the economic climate formachinery and equipment investment should paysignificant dividends in terms of strongereconomic growth, higher productivity and livingstandards for Canadians for many years to come.This could be done in a horizontally equitablemanner by encouraging all forms of investmentspending because of the potential complementarynature of machinery and non-machineryinvestment in boosting economic growth andproductivity.

Further Reference Documents! CFLA Annual Reports 2003-2007. Please go

to: http://www.cfla-acfl.ca/members/annualreport.asp

! CFLA Backgrounder on the Asset-based financing, equipment & vehicle leasing industryin Canada. Please go to: http://www.cfla-acfl.ca/files/public/CFLA_Backgrounder-Jan06.pdf

! Asset-based Financing and Leasing in Canada:an Overview, published in the World Leasing Yearbook 2006. Please go to: http://www.cfla-acfl.ca/reference.asp

! Asset-based financing, investment and economic growth, The Centre for Spatial Economics, Milton, Ontario, December 15, 2004. Please go to: http://www.cfla-acfl.ca/files/public/CFLA-Final_Economic_Report-PDF Dec04.pdf


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CFLA: Who We Are

Industry Profile

6 Asset-based financing, investment and economicgrowth, The Centre for Spatial Economics, Milton,Ontario, December 15, 2004 http://www.cfla-acfl.ca/files/public/CFLA-Final_Economic_Report-PDF-Dec04.pdf7 Ibid., at p. 62

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The Canadian Finance & Leasing Association(CFLA) is the only organization advocating theinterests of the asset-based financing, vehicle andequipment leasing industry in Canada. Throughthe Association, members are able to influencethe shape of the industry's future within thecompetitive financial services sector.

Vision

The Canadian Finance & Leasing Association willbe a relevant association. It will be a united,high-profile and well-managed association.

The Canadian Finance & Leasing Association will:

! Create unity

! Build and retain membership

! Project a strong public image

! Influence government decision-making

! Provide educational services

Mission

The Canadian Finance & Leasing Associationexists to ensure an environment in whgich itsmembers can be profitable.

Priorities:

The Association has four general

! Industry advocacy – to key publics: governments, the media, other associations in thefinancial services sector, and the general public;

! Member information – timely information to members alerting them of changes likely toimpact their businesses;

! Professional education – seminars and workshops on the basics of asset-based financingand leasing and other industry specific topics formember employees; and! Networking – providing a forum and creatingopportunities for industry leaders to meet and talkbusiness.

CFLA's annual national conference (held in theFall) is the leading event of the CFLA calendarbringing together approximately 250-280 industryleaders.

CFLA publishes a voluntary annual survey of theasset-based financing, equipment and vehicleleasing business activity carried on by reportingmembers.

CFLA's Web site has become the industry'selectronic information resource centre with agrowing archive of information focused on thebusiness of asset-based financing and leasing inCanada. The site provides a range of "memberonly" value added services. Changes ingovernment policy, new legislation and regulation,the latest court decisions, legal, accounting andtax commentaries by CFLA professional membersare regularly e-mailed on a timely basis toMembers located across the country. The deliveryof timely information to members is furtheraugmented by our eNewsletter. An enhancementto our communications is our e-Vents Letter thatprovides information on the upcoming CFLAseminars and industry specific events.

Membership Profile

As at June 30, 2008, CFLA had 253 members:64% were Regular Members (that is, membersactive in the business of asset-based financingand leasing), the Associate Members (that is,members who supply services to the RegularMembers such as law and accounting firms,funders, software developers, etc.) made up 32%of the membership. The remaining 4% of themembers were non-residents. Of the RegularMembers, 54% were equipment lessors, 33%vehicle lessors, 7% were both equipment andvehicle lessors, and 6% were primarily brokerswho maintain their own asset portfolios as well.


CFLA: Who We Are

Association Profile

Introduction

The positive economic growth of the last severalyears helped fuel strong growth in the asset-basedfinancing industry. In 2007, equipment lessors newbusiness maintained this positive momentum andgrew by 2%1 . Vehicle lessors enjoyed a strongeryear with new business growing 20%.

The outlook for the next two years (2008-2009) is,however, less promising. The U.S. economy maywell experience a recession in 2008 and Canadamay only narrowly avoid one. Many lessors remaincautiously optimistic for activity in 2008 as publicand private spending on machinery and equipment isexpected to grow 5.7%2 and vehicle sales are alsoexpected to be strong.

Prepared for CFLA by The Centre for SpatialEconomics, this article provides a review of recenttrends along with the outlook for and highlights ofmajor directions in the leasing sector.

Review of recent trends

The Canadian economy grew 2.7% in 2007 slightlyslower than the 3.1% rate in the previous year. Theeconomy in 2007 was led by business investment inmachinery and equipment, government spending,consumer spending and residential investment.Slow export growth coupled with rapid importgrowth led to a decline in net exports of nearly $25billion and reduced Canada's economic growth byabout 1.5%.

This year's survey of industry activity reveals thatequipment lessors experienced a fifth consecutiveyear of rising demand for financing in 2007following the slump at the start of the decade. Aspublic and private spending on capital equipmentrose 4.4% or $4.8 billion in 2007 to $114.5 billion,equipment lessors new business rose 2% to anestimated $19.0 billion.

Spending on motor vehicles and parts led to thenumber of vehicles sold rising to 1.69 million unitsand led to an increase in retail vehicle leasing newbusiness of 25% to $21.7 billion in 2007. New

business for commercial vehicles halted the declinesof the last few years and rose a modest 3% in 2007to $5.6 billion.

Economic and capital investment outlook

Looking forward, Canadian economic growth isexpected to slow to just 1.0% in 2008 and 2.5% in2009. Business investment growth is expected toslow down leaving households and the governmentto hold up the economy. Again the key driving forcebehind the slower growth is the drop in Canada'snet exports. The high value of the Canadian dollarcoupled with reduced U.S. demand for Canadianproducts has had a dramatic impact on Canada'strade balance. The value of Canada's trade balance -the current account - has, however, swollen becauseof the high price Canada's energy and non-energycommodities command on world markets.

The economic outlook varies noticeably across thecountry. Over the next couple of years, Canada'swestern provinces will continue to enjoy high ratesof economic growth while Ontario, and to a lesserextent Quebec, flirt with recession. Fortunes inAtlantic Canada are tied to the development cyclesof their natural resource development projects.

While both energy and non-energy commodity priceshave retreated from their record highs they areexpected to remain high. This means thatinvestment plans to develop and expand rawmaterials production will continue - but at a slightlyless feverish pace than was seen in the last few


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1 Based on estimates derived from a survey of member companies of the Canadian Finance and Leasing Association.

2 2008 Private and Public Investment in Canada, Intentions, Catalogue no. 61-205-X, Statistics Canada, March 2008.

Lean Times Ahead

Canadian Leasing Market Determinants

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Machinery & Equipment Investment (%ch, left)Motor Vehicle Unit Sales (%ch, left)Three Month T-bill Rate (right)

The Year in Review

Canadian Market Overview 2007-2008

years. This is, however, bad news for other sectorsof the economy which have to contend with highraw materials costs, the high value of the Canadiandollar and, to an increasing extent, rising labourcosts as labour shortages continue to develop.

The chart shows the C4SE's forecast for growth inbusiness spending on new machinery andequipment3 slowing to just 0.3% in 2008 and slidingto -0.6% in 2009 from 4.2% last year. The situationfor motor vehicle sales is, in 2008, strikinglydifferent. Unlike our U.S. neighbours, householdfinances in Canada remain sound which is allowingdrivers to switch to more fuel efficient vehicles.Households that are in a position to do so arebringing forward their purchases of new vehicles andthis is expected to boost sales of new vehicles in2008 by more than 3% but at the cost of new salesactivity in 2009.

The Statistics Canada survey of public and privateinvestment intentions for 2008 anticipates stronggains in capital spending over 2007. Public andprivate spending on new machinery and equipmentwas expected to rise 5.7% or $4.8 billion this yearfollowing the 4.4% increase in 2007. CFLA surveyrespondents were also optimistic about newbusiness in 2008, calling for an increase in newequipment leasing business of 7%.

Statistics Canada's survey reported that investmentwill be led by primary and downstream industries;spurred on by high prices and strong global demandfor natural resources and raw materials. The largestgains are expected to occur in the oil and gasextraction sector, pipelines and electricitygeneration.

Public sector investment is expected to grow atmore than twice the rate of growth of the privatesector led by provincial and local government transitand ground passenger transportation investmentinitiatives. Spending by electric power generation,transmission and distribution companies is alsoexpected to be strong as this sector confronts theneed to expand overall capacity and to develop"green" energy sources.

In the manufacturing sector, gains in investment are

expected by about half the industries in the sector.The industries where the strongest gains can beexpected are, however, related to the primary anddownstream industries: petroleum and coal productsmanufacturing and primary metals manufacturing.

Public and private new machinery investment growthis expected to be highest in Alberta, Manitoba andSaskatchewan driven by new investment in thetransportation and warehousing sector. Spending inNewfoundland and Labrador is also expected to bestrong led by the oil and gas sector. Quebec willkeep pace with the national average while slowergrowth is expected throughout the rest of thecountry.

Financial market developments

A significant development for the economy over thepast year has been the spillover of the credit crunchinto Canada's money and bond markets. Lendershave tightened their credit requirements, and even ifconsumers can obtain a loan, they are paying morefor the privilege. This development is illustrated inthe larger spread between mortgage rates and thecorresponding money and bond market instruments.It is likely that there will be a lingering hangoverfrom the credit crunch because of the re-pricing ofrisk by the financial markets and institutions.

Although the asset-backed commercial paperagreement looks likely to survive challenges by somedissatisfied institutions, the market for this paperremains illiquid and there appear to be few prospectsthat this is likely to change for some time even if allchallenges to the Montreal accord are resolved. Theloss of this market has had significant implicationsfor the leasing industry in Canada by removing a keysource of funds for lessors. While the loss of thismarket does nothing to reduce the value of leasingto its customers, it makes it harder for lessors tooperate.


11

3 This data excludes the public sector spending which is included in Statistics Canada's public and private investment intentions data. The C4SE's projection for 2008 is also based on more recent information than was available to the participants in Statistics Canada's intentions survey.

The Year in Review


As for the general cost of funds, the Bank ofCanada (BoC) is expected to stay on hold over theremainder of 2008, which will keep the three monthTreasury bill rate at around 2.4%. The BoC isexpected to push the three month T-bill rate up to3.2% by the fourth quarter of 2009 to counter fearsof rising inflation. Lower short-term rates helped totrim government long-term bond yields to 3.7% bythe second quarter of 2008 but the yield on the tenyear government of Canada bonds is expected riseto 3.9% by the fourth quarter of 2008 and to 4.3%by the fourth quarter of 2009.

Asset-based finance market in Canada

The market size estimates generated based on the2008 Survey of Industry Activity indicate that thevalue of finance assets grew 10% to $112.3 billionwhile new business grew 12% to $46.4 billion.

This strong result can be attributed to the retailvehicle leasing segment. The value of retail vehiclelessor finance assets rose 13% in 2007 to $55.8billion spurred on by a 25% increase in newbusiness. In contrast, new business activity forcommercial equipment and vehicle lessors grew just2% and 3% respectively in 2007.4

The current market estimates indicate that justunder 22% of new business equipment purchased inCanada is financed by the industry. This proportionhas been relatively stable for the last two years.Continued gains in vehicle leasing over the last fewyears led to financed motor vehicle assetsrepresenting approximately 51% of the market in2007.

Survey respondents expect fortunes to be reversedin 2008 with equipment lessors new businessgrowing 7% while vehicle lessors expect a declineof 1%. If, as expected by the C4SE, the demand fornew equipment is less than Statistics Canada'sintentions survey then equipment lessors will face amore challenging business environment. Arestructuring of the industry is likely and thoseparticipants that have access to funds will be in astrong position to finance acquisition and growth.The announced pullback in automobile leasing byseveral prominent market participants makes itappear that even a 1% decline may be optimisticdespite strong expected sales in 2008.

The Centre for Spatial Economics


12

4 The reader is cautioned that the true market for leasing is larger than these estimates because marine, rail and other equipment that is financed offshore has not been included. These figures do, however, include an estimate from Ascend's CASE database of the value of fixed wing aircraft assets in Canada financed by foreign leasing companies.

2007 2006 06-07 %chNew Business Total ($billions) 46.4 41.5 12%

Commercial Equipment 19.0 18.6 2%Commercial Vehicles 5.6 5.5 3%Retail Vehicles 21.7 17.3 25%

Assets ($billions) 112.3 102.5 10%Commercial Equipment 42.1 38.7 9%Commercial Vehicles 14.5 14.5 0%Retail Vehicles 55.8 49.2 13%

Asset-based Financing Market in Canada

The Year in Review


The Year in Review

Industry Advocacy

Industry advocacy to key publics: governments, themedia, other associations in the financial servicessector, and the general public is a top priority at theAssociation. Here is a sampling of the policy issuesCFLA has been working on over the 2007-2008year.

! PPSA security issues

! Tax policy: Thin-capitalization rules under review

! New federal GST/HST reporting requirements for "financial institutions"

! The GAAP rules: Adoption of International Financial Reporting Standards by 2011

! Federal Budget Submission 2008: Reinforcing the foundations for growth and prosperity.

! Acceleration of CCA for machinery & equipment extended into 2011

! Eliminating capital tax across Canada

! National vicarious liability initiative: BC and Alberta "cap" vicarious liability

! Ontario: exemption approved for mortgages for vehicle dealership financing

! Automobile deduction and capital cost limits

PPSA security issues

This past spring, CFLA was notified by twomembers that the Personal Property Security Act(PPSA) Registry in Ontario had been compromised.As this issue was time-sensitive and impacted allmembers with a registered interest in any financedasset, CFLA took immediate action with the Ministerof Government and Consumer Services and theDirector of the Ontario PPSA Registry. The provincialgovernment subsequently raised the issue at the2008 national conference of PPSA Registrars inRegina.

Following several meetings with PPSA staff, a short-term answer was found to tighten the registry'ssecurity system. CFLA will continue to work withthe Ministry to find a secure and practical long-termsolution.

Tax policy: Thin-capitalization rules under review

In November 2007, the federal Minister of Financeannounced the formation of the Advisory Panel onCanada's System of International Taxation to makerecommendations for the international tax policy

framework addressing investment into Canada byforeign businesses as well as investment abroad byCanadian businesses. In April 2008, the Panelreleased "Enhancing Canada's International TaxAdvantage", a consultation paper.

The Income Tax Act (Canada) contains rules thatrestrict the interest deduction that a Canadiansubsidiary can claim on a debt owing to a non-resident shareholder or its affiliate. Under these so-called "thin capitalization" rules, the Canadiansubsidiary can deduct interest to the extent that thedebt does not exceed a 2:1 debt-equity ratio. Nointerest can be deducted on debt in excess of thefixed ratio. The consultation paper suggested thatperhaps parent guarantees should be considered asdebt for the purposes of the 2:1 debt-equity test.

The industry concern was that the Panel, notunderstanding the industry, might recommendmeasures that would undermine the industry's abilityto obtain funding. Capital being the inventory of theindustry.

In June 2007, a CFLA delegation met with twoPanel members and three Panel secretariat members.The goals of the meeting were to familiarize thePanel with the industry, its size and significance tothe Canadian economy, business and consumercustomers, and to demonstrate how foreign parentguarantees are crucial to the viable funding of theindustry at competitive rates for Canadianconsumers.

As noted earlier in the President's Report, in its July2008 submission to the federal Advisory Panel,CFLA responded strongly to suggestions thatlimitations be placed on foreign-parent guarantees ofCanadian subsidiary borrowings. CFLA asserted thata parent guarantee is essential to foreign ownedmembers obtaining the lowest cost of funding foruse in the Canadian marketplace - to the benefit ofCanadian consumers and businesses.

CFLA will continue to monitor this issue.

(The full CFLA submission can be found at:

http://www.cfla-acfl.ca/files/members/CFLA-Taxation-Member_Update-Jul1508.pdf)

The federal Advisory Panel expected to provide itsrecommendations to the Minister of Finance byDecember 1, 2008.


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New federal GST/HST reporting requirements for"financial institutions"

In January 2007, the federal Minister of Financeannounced important changes in the GST reportingrequirements for "financial institutions" (anyfinancing company that earns more than $1 Millionin interest per year from loans to customers).Considered by the CFLA Tax Committee to be themost important GST change to impact the industryin years, member firms with a June 30, 2008 year-end were the first to be affected.

A new mandatory GST information return (theAnnual Information Schedule) has been proposedthat obliges many members to provide business datainformation that is either not collected today orimpossible to collect. According to an initial surveydone by KPMG LLP for CFLA, of the 90 pieces ofdata required under the new proposed form, 40were currently available, 45 were not collected andwould require systems and/or changes in internalprocedures and five pieces of data were notobtainable.

A working group from the CFLA Tax Committee metwith officials from the federal Department of Financeand from the Canada Revenue Agency to determinethe best way to address the new reportingrequirements. In May 2008, CFLA held a detailedbest-practices seminar on how to complete the AISform in time for the June 30th deadline. (SeeProfessional Devleopment Seminars later in thisAnnual Report).

For more information, please go to:

http://www.cfla-acfl.ca/files/members/CFLA-Taxation-Member_GST_HST_Update-Jun0308.pdf

The GAAP rules: Adoption of International FinancialReporting Standards by 2011

In April 2008, a joint meeting of the InternationalAccounting Standards Board (IASB) and the U.S.Financial Accounting Standards Board (FASB) tookplace in London, England. The consensus was tocomplete changes on the "big accounting issues" byJune 2011 to avoid a double transition in the UnitedStates. Rather than adopting the current body ofInternational Financial Reporting Standards (IFRS) in2011 and then making further changes in the nextfollowing years, the intention was to focus on thekey standards seen to be problematic (includingleasing standards) that needed to be addressed now.

In June 2008, the IASB published its joint Work Planwith the U.S. Financial Accounting Standards Board(FASB) for new standards and major projects. Adiscussion paper on a new lease accountingstandard is scheduled for Q4 2008, an exposuredraft in 2010 with a final standard scheduled forJune 30, 2011.

It appears that the IASB and FASB will considerchanges to lessee accounting only, leaving changesto lessor accounting until an undetermined date afterJune 2011. The IASB has indicated that it will takea final decision on splitting consideration of lesseeand lessor accounting at it next meeting on July 21,2008.

The new standard on Revenue Recognition which isexpected to adopt principles that will impact lessoraccounting is scheduled to move more quickly: adiscussion paper is scheduled by September 30,2008, an exposure draft in the second half of 2009and a final standard by June 2011.

Earlier in 2008, during a regular telephoneconference call meeting chaired by CFLA, theequipment and vehicle leasing associations of theUnited States, the United Kingdom, Leaseurope,Japan, Australia and Canada all agreed tocommunicate with the IASB to underline theirserious concerns of adopting a process that wouldbring substantial changes to lessee accounting byJune 30, 2011, while postponing any considerationof the implications for lessor accounting to anundetermined later date.

In May 2008, with the advice of the CFLAAccounting Committee, CFLA wrote to the Chairmenof the IASB and of the Canadian AccountingStandards Board expressing concerns that withoutsymmetry between lessee and lessor accounting,there was a real risk of confusion that wouldundermine the desired results of transparency,disclosure and accountability. The Associationstrongly recommended that lessee and lessoraccounting standards be developed in parallel toassure that the accounting standards for lesseesproperly mirror that for lessors.

CFLA also pointed out that the proposal would posea significant challenge for the Canadian leasingindustry, requiring companies to adapt to three setsof successive fundamental accounting changes overa relatively short period of time. Canada formally


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The Year in Review

Industry Advocacy

implements IFRS as of January 1, 2011. Financialstatements for 2010 will have to be prepared inaccordance with IFRS for comparative purposes. Aconversion from Canadian leasing requirements tocurrent IFRS requirements will be necessary at thattime. It would appear that the new lesseeaccounting requirements will be implemented in2011 or 2012 with further changes to lessoraccounting at some unknown later date.

CFLA will continue to monitor this issue closelythroughout the coming year.


http://www.cfla-acfl.ca/files/members/CFLA-Accounting-CFLA_Member_Update-Jun0208.pdf

Federal Budget Submission 2008

After consultation with members, CFLA forwardedits submission to the Standing Committee onFinance of the House of Commons under the title"Reinforcing the foundations for growth andprosperity". The themes presented by CFLAreflected the continuing focus on productivity andthe important role that the asset-based financing,equipment and vehicle leasing industry play in thenational economy: "Working Smarter for Tomorrow.Partners in Productivity - Enabling Canadians to worksmarter."

In the submission, CFLA congratulated thegovernment for its tax policy decisions encouragingcapital investment. In its 2006 pre-Budgetsubmission, the Association had reiterated itslongstanding recommendation that the elimination offederal capital tax and of the corporate tax beaccelerated. In its May 2006 Federal Budget, thegovernment decided to eliminate the capital taxretroactively to January 1, 2006, two years aheadof schedule, and to eliminate the corporate surtax asof January 1, 2008.

The CFLA also congratulated the government for its2007 Budget introduction of a temporary incentivefor investment in eligible machinery and equipmentuntil the end of 2008. Businesses engaging inmanufacturing or processing are eligible to claimaccelerated capital cost allowance, permitting theseinvestments to be written off over a two-year periodon average. The Association applauded thegovernment's intent to provide a more favourableclimate for manufacturing and processing businessesto accelerate or increase their investment in

machinery and equipment. Although CFLAquestioned the adequacy of the limited 21-monthwindow to properly test the effectiveness of such ameasure.

In summary, CFLA recommended:

"The federal government: catalyst and champion for "growth and prosperity"

The Government should lead a national coalition forgrowth and prosperity, enlisting the voices andresources of the many individuals and organizations -from business and labour - that share these goals.CFLA, for one, would be pleased to support such aninitiative.

Enhancing productivity, growth and prosperity isultimately founded on innumerable individual andbusiness choices. This is not a national challengewhere the federal government acting alone has theanswer. The successful solution is a much biggertask and the key role for the federal government isas catalyst and champion.

Pursue policy options to encourage capital investment

Tax policy is critical to capital investment decisions.The Government is to be congratulated for its taxpolicy decisions encouraging capital investment in its2006 and 2007 Budgets. We do question whethera 21-month window is sufficient to properly test theeffectiveness of such a measure. If this measuredoes have effect of accelerating or increasinginvestment in machinery and equipment, it should beaggressively pursued. We recommend thatCanada's tax rates on capital investment be furtherreduced.

Enhance the positive strengths of a competitive marketplace in Canada

Government policies of protectionism stiflecompetition. Not only do these policies raise coststhat have to paid by the end-customer, they inhibitbusiness innovation and investment driven by thedemands of competition.

Too often, tax policy and regulation freeze "industryin patterns reflecting yesterday's economy, inhibitinginvestment and innovation that greater competitionwould unleash. Whether through complacency orshort-term vision, government policy still inhibitscapital investment and Canadian companies toooften seem slower to invest than their foreigncompetitors."


15

The Year in Review

Industry Advocacy

16


http://www.cfla-acfl.ca/files/members/CFLA-Taxation-Federal_Budget_Update-Aug2007.pdf

Acceleration of CCA for machinery & equipmentextended into 2011

After several years of CFLA pre-budget submissions,the March 2007 federal budget introduced atemporary incentive for investment in eligiblemachinery and equipment (which was extended inthe February 2008 federal budget in a modified formuntil 2011). Businesses engaging in manufacturingor processing are now eligible to claim acceleratedcapital cost allowance at a rate of 50 per cent on astraight-line basis. The proposed rate will allowthese investments to be written off over a two-yearperiod on average (after taking into account the half-year rule, which treats assets as if they had beenpurchased in the middle of the year). Thegovernment's intent is to provide a more favourableclimate for manufacturing and processing businessesto accelerate or increase their investment inmachinery and equipment. Ontario has followed thefederal lead.

Eliminating capital tax across Canada

For over a decade, CFLA has been pressinggovernments to eliminate capital taxes. The CFLAposition has been consistent: capital taxes are adisincentive to investment in productivity-enhancing,environmentally-efficient machinery, equipment andvehicles.

As the message from CFLA andother voices became louder,governments began to shift. BCeliminated its capital tax in2002. The federal governmentbegan reducing its capital tax in2004 and eliminated it in full asof January 1, 2006. In its 2008budget (retroactive to 2007),Ontario eliminated the capital taxfor companies primarily engagedin manufacturing and resourceactivities. The province remains on track toeliminate this tax for all businesses as of July 1,2010. Quebec is committed to a longer termtimetable to eliminate the capital tax.

National vicarious liability initiative

Following successful efforts to obtain legislation inOntario in 2006 to "cap" vehicle lessor vicariousliability, the CFLA-led international coalitioncomposed of the associations of vehiclemanufacturers, vehicle rental companies andprovincial auto dealers as well as the U.S. truckrental and leasing association, addressed the issue inBritish Columbia and Alberta, the largest marketswhere the lessor as vehicle "owner" remained fullyliable for the lessee's negligent use of the leasedvehicle. (For more detailed information, please go tothe online CFLA Vicarious Liability Status Report athttp://www.cfla-acfl.ca/members/automotive.asp?s=90).

BC "caps" vicarious liability. Following a majoreighteen month advocacy campaign with the notableassistance of CFLA Members Ford Motor Companyof Canada, Ltd. and Ford Credit Canada Limited (seeMembers of the Year 2006-2007 later in this AnnualReport) and the New Car Dealers Association ofBritish Columbia, the lessor and rental companyvicarious liability $1Million cap legislation came intoforce on November 8, 2007.

As in Ontario, taxis and limousines were excludedfrom the protection of the BC cap. Unexpectedly,buses were also excluded from the cap. Thegovernment did not raise the proposal with CFLAnor did it seek any industry comment. There mayalso be a concern over the primacy of insurance forout-of-province leased or rented vehicles under the

legislation.

CFLA will continue to pursuethese issues.

Alberta "caps" vicariousliability. Building on the Ontarioand BC experiences, CFLAcoordinated the advocacy effortin Alberta, again with thesubstantial assistance of CFLAMembers Ford Motor Companyof Canada, Ltd. and Ford CreditCanada Limited together withthat of the Motor Vehicle

Dealers' Association of Alberta.

Alberta Bill 49 (the Traffic Safety Amendment Act,2007) received Royal Assent on December 7, 2007.The legislation adopted an Ontario/BC style $1Millioncap to limit the vicarious liability of vehicle lessors


The Year in Review

Industry Advocacy

17

and lenders/conditional sellers. An order of payment(primacy of insurance) based on the Ontario model isexpected to be included in the Regulations. Forreasons unexplained, rental vehicles will NOT beincluded under the cap but may be included underthe re-arrangement of the order of payment.

The cap provisions of Bill 49 are not expected totake effect and have force of law until theregulations are approved sometime in 2008.

Ontario: exemption approved for mortgages forvehicle dealership financing

The financing affiliates of the auto manufacturersbecame concerned that the Ontario MortgageBrokerages, Lenders and Administrators Act mightimpede their ability to take mortgages on real estateas a part of security for loans for buildingimprovement or expansion loans made to theirfranchised dealers. For such limited purposes, thesemembers questioned the need to register asmortgage brokers and be regulated as such underthe Act.

After twenty months of discussions with the OntarioMinistry of Finance, a new regulation was adoptedin June 2008, that largely followed what CFLA hadrecommended, granting an exemption under the Actto listed auto manufacturer finance companies forthe mortgage financing of dealers.

From the outset, CFLA was aware that otherprovinces were following Ontario's progress in thisreform and it was important to ensure that apositive precedent was set here.

Automobile deduction and capital cost limits

Each December, the federal Department of Financesets the automobile deduction limits and prescribedrates for determining the taxable benefit onautomobile operating expenses for the next calendaryear.

To assist the Department, CFLA conducts an annualsurvey of CFLA fleet members to provide actual dataon all off-lease fleet vehicles (autos, vans, etc.) soldin the twelve months from July 1, of the previousyear to June 30, of the current year. Thisinformation is then combined with data collectedsince July 1, 1996.

The current limits were set in 2001. The latest CFLAfleet surveys, however, have revealed a serious

trend: the combination of a significant decline inused automobile prices coupled with higher mileageon leased automobiles will raise depreciation ratessubstantially. That trend has only accelerated sincethe last survey was completed for the year endedJune 30, 2007. (For more information, please go to:http://www.cfla-acfl.ca/files/members/CFLA-Automotive-Auto_Member_Memo-Dec2407.pdf).

This fall, the CFLA Fleet Committee will have toreview the survey results to recommend the bestcourse of action.

For more detailed information on these and otherindustry issues, please go to the CFLA Website:www.cfla-acfl.ca. Members are encouraged to bringforward issues of industry interest to CFLA PresidentDavid Powell at [email protected] or toVanessa Foran, CFLA’s Director of Policy [email protected].


The Year in Review

Industry Advocacy

18

The Year in Review

In February2008, CFLA launched Canadian Lease Education On-line (CLEO). This unique education program coversall facets of leasing in Canada. It is designed forindividuals entering the industry in Canada, and forthose already in the leasing business who want toincrease their knowledge or learn about otheraspects of leasing. CLEO provides a generalunderstanding and overview of the business inCanada.

CLEO is made up of ten sessions that follow the lifecycle of a lease.

! Marketing & Sales and the Selling Process ! Lease Pricing

! Vendor Relationships & the Lease vs. Buy Decision Process

! The Credit Process

! Financial Statements

! Collections & Portfolio Management

! Lease Company Management & Sources of Financing for a Leasing Company

! Leasing Law & Lease Documentation

! Financial and Tax Accounting for Leases

! Insurance for Leasing Companies

Since its launch, the Association has held ten CLEO sessions. Feedback has been very positive on thequality of instructors, program content, ease ofaccess to sessions, and the networking opportunitiesCLEO provides. "I like having access to the sessions at home and at

the office," said one CLEO participant. "Also,questions are answered by the instructor and thenopened to the group allowing for networking withindividuals in other companies."

During the first set of sessions, CFLA faced sometechnology challenges over the registration processand program delivery. Since then, the Associationhas switched service providers to a web-based audioand conferencing system. CFLA is confident thischange will make the program more user friendly.

CFLA would like to thank the many members thathelped create this new initiative including MurrayDerraugh, CLEO's Editor-in-Chief, Hugh Swandel,Swandel and Associates, Bill Barlett for his valuablefleet perspective, and Premier Lease and LoanServices and HKMB HB International for theircontribution to CLEO's insurance module for bothCFLA and our U.S. partner, the United Associationof Equipment Leasing (UAEL).

CFLA would also like to thank the instructors whovolunteered their time, expertise and experience togive back to the industry. Without them, CLEOwould not be possible.

Thank you …

Angela ArmstrongForest Leasing Inc.Edmonton, AB

Kevin BowmanEquirex Leasing Corp.Oakville, ON

Moe DanisSun Life FinancialWaterloo, ON

Murray DerraughDerraugh ConsultingWinnipeg, MB


Michel LévèsqueCiticorp Vendor Finance, Ltd.Toronto, ON

Karl SigeristTravelers Financial Corp.Burnaby, BC

Judy SmileyMaxium Financial Services Inc.Richmond Hill, ON

Ezio TrauneroQuestor Financial CorporationConcord, ON

For more information about the CLEO Program or if youare interested in becoming an instructor, please go to theCLEO section of the CFLA web site or contact the CFLADirector of Events & Member Services, Mary LouiseJosey at [email protected].

Canadian Lease Education On-line

19

Professional Development SeminarsGST Annual Information Schedule for FinancialInstitutions - April 22, 2008

Considered by the CFLA Tax Committee to be themost important GST change to impact the industryin years, David Schlesinger (KPMG LLP) and JasonCooper (PricewaterhouseCoopers LLP) examined theproposed GST Annual Information Schedule (AIS)line by line and provided a best-practices approachfor members considered to be, for GST purposes, afinancial institution.

A copy of their presentation is posted on the CFLAweb site at

http://www.cfla-acfl.ca/files/members/CFLA-Taxation-Member_GST_HST_Update-Jun0308.pdf

ABCP in Canada - Past, Present & Future. - CFLA"Taking the Pulse" Breakfast Series June 18, 2008

Maria B.C. Rabiasz, Senior Director, CanadianStructured Finance Ratings at Standard & Poor's,gave an insider's view of rating ABCP to the firstCFLA "Taking the Pulse" Breakfast. Ms. Rabiasz'spresentation is posted on the CFLA web site at http://www.cfla-acfl.ca/files/members/CFLA-Legal-MRabiaz_Presentation-Jun1808.pdf.

The "Taking the Pulse" series is a new professionaldevelopment initiative proposed by CFLA's Educationand Programme Committee to bring timely, business-relevant information to members. The Committeehopes to offer more "Taking the Pulse" sessions in2008/2009. If you have any suggestions forspeakers or future topics for this series, pleasecontact the CFLA Director of Events & MembersServices, Mary Louise Josey at [email protected].

National Conference 2007 - Banff, Alberta - September 16-18The 2007 National conference, held at the RimrockHotel and Resort in the beautiful rocky mountains ofBanff, was a great success - with the highestdelegate registration to date, peaking at over 300.With 23 sponsors, sponsorship revenue exceededthat of previous years.

The opening speakers complemented each other.Jack Canfield, best-selling author of Chicken Soupfor the Soul, spoke on what makes peoplesuccessful, what motivates them, what drives them,and what inspires them. Don Bell, co-founder ofWestJet and the airline's just-retired Executive Vice-President, Corporate Culture, gave a heartfeltsession on motivating people to create andsuccessfully grow the business of their dreams - in ahighly competitive environment.

When the major market turmoil began a monthbefore the conference, a special session was addedto the conference - "The Liquidity Crunch: Whatdoes it mean?" - led by Fabrice Taylor, a researcherfor investment house Pollitt & Co. and a columnistfor The Globe and Mail's Report on Business, andToronto business lawyer David Chaiton of CFLAAssociate Member Torkin Manes Cohen Arbus LLP.

Roger Gibbons, President of the Canada WestFoundation, one of the country's leading think tanksfor non-partisan economic and public policyresearch, talked of the challenges of rapid growthfor western Canadian provinces and for the rest ofCanada; how the economics and politics ofConfederation were being rearranged.

As new technologies continue to transform howbusiness is done, Tod Maffin, social mediaconsultant, a popular blogger and respectedtechnology expert, back by popular demand,provided his whirlwind tour of the impact oftechnological change and innovation on business andthe economy.

The former premier of Alberta and Senior BusinessAdvisor, Borden Ladner Gervais LLP, the Hon. RalphKlein closed the conference with his prescription forCanada achieving peak performance.

The 10 concurrent workshop sessions presented bymembers provided a variety of timely and thoughtfulbusiness-relevant information.


The Year in Review

Professional Developments and Events

20

At the Chairman's banquet, the electronic CanadianLeasing Trivia Challenge had everyone engaged andthe competitive juices flowed.

For the first time in CFLA's history, two companies,instead of an individual, were named CFLA'sMembers of the Year. Congratulations to Ford MotorCompany of Canada, Limited and Ford CreditCanada Limited for their very strong support on thevicarious liability issue in British Columbia andAlberta.

For conference details: http://www.cfla-acfl.ca/members/eventdetails.asp?EventID=55

Conference presentations are posted at::http://www.cfla-acfl.ca/members/whatsnew.asp?s=222

The Conference photo album can be found at: http://www.cfla-acfl.ca/images/conference2007images/slideshow2007.html

Thank you to all the member-sponsors of CFLAConference 2007.

Resolve CorporationSecurcor CorporationSun Life FinancialManulife FinancialCanadian Black BookFirst Canadian TitleTorkin Manes Cohen Arbus LLPStonebridge Financial CorporationIrwin Commercial FinanceEquirex Leasing Corporation & Kempenfelt CapitalPitney Bowes Global Credit ServicesMCAP LeasingBlake, Cassels & Graydon LLPBMO Nesbitt BurnsPHH ArvalARI Financial Services Inc.Premier Lease & Loan ServicesJim Pattison LeaseSwandel and AssociatesNorthStar Leasing CorporationConstellation Financing Systems CorporationCIBC World Markets Inc.HKMB HUB International

2007 CFLA Conference Showcase (Exhibitors)

Recombo Inc.Casitron LimitedBMO Nesbitt BurnsSecurcor CorporationDakota FinancialLeaseTeam Inc.Asset Inc.PayNet, Inc.White Clarke North AmericanLandmark Vehicle LeasingFirst Canadian TitleSekurus Canada Inc.Decisioning Solutions

Toronto Golf Tournament - May 12, 2008

Some 264 golfers participated in the 2008 CFLAToronto Golf Tournament held again at the TorontoBoard of Trade Country Club in Woodbridge,Ontario.

Most of the innovations introduced at the 2007tournament were repeated, notably the severalquality food stations including an oyster shuckingstation and a sushi bar. A new addition to enteringthe "Beat the Pro" competition was a donation toThe Children's Wish Foundation. Over $900 wasraised and sent to the Foundation.

Generous member support contributed sponsorshipsthat exceeded budgeted revenue by over 38%. Theassociation essentially offers the tournament and itsbanquet at cost to members. The only surplusearned comes from sponsorships.


The Year in Review

Professional Developments and Events

21

The Year in Review

For the golf tournament photo album, please go to:http://www.cfla-acfl.ca/images/golf2008images/golf_slideshow2008.html

For the golf tournament results, please go to:http://www.cfla-acfl.ca/files/members/CFLA-Events-GOLF_Tournament-2008-Results.pdf

Thank you to the member-sponsors for their supportof the 2008 golf tournament.

Torkin Manes Cohen Arbus LLP

Sun Life Financial

ARI Financial Services Inc.

LeaseTeam, Inc.

Maxium Financial Services Inc.

De Lage Landen Financial Services Canada Inc.

Stonebridge Financial Corporation

Key Equipment Finance Canada Ltd.

Swandel and Associates

Wilson Vukelich LLP

Asset Inc.

PHH Arval

Irwin Commercial Finance (Toronto)

Premier Lease & Loan Services

PLLS Canada Insurance Brokers Inc.

BAL Global Finance Canada Corporation

Canadian Credit Protection Corporation

Jim Peplinski's Leasemaster

KPMG LLP

Blake, Cassels & Graydon LLP

Honda Canada Finance Inc.

Manheim Canada

Miller Thomson LLP

Gowling Lafleur Henderson LLP/s.r.l.

ADESA Canada

New MembersThis was another successful year for CFLA in termsof membership. As at June 30, 2008, theAssociation had 253 Members. The following newmembers joined CFLA in 2007-2008:

Aada Leasing, A Division of Tony Graham Motors(1980) Ltd.

Able Leasing (2001) Ltd.

Canadian Credit Protection Corporation

CapitalWest Finance & Leasing Corp.

Cars on Credit.ca Inc.

CoActiv Capital Partners Canada Inc.

CustomFirst Software Inc.

Dakota Financial

Element Financial Corporation

Ensign Pacific Lease Ltd.

Execucor Financial Limited

Financière Globale

First Class Drivers and Truck Rental Services Ltd.

Fuller Landau LLP

Graphic Arts Financial, a Division of Gorda Financial Corporation

Mertin Leasing

Nascorp Leasing Ltd.

Nexcap Finance Corporation

PPSA Canada Inc.

Recombo Inc.

Sekurus Canada Inc.

Summit Leasing Corporation

Torkin Manes Cohen Arbus LLP

Vista Credit Corp.


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The Year in Review

Vanessa Foran, CAE, CFLA's new Policy Director

In September 2007, Vanessa Foran, joined CFLA asDirector of Policy. She works with the CFLAPresident on policy issues and manages theAssociation's seven policy committees.

Prior to joining CFLA,Vanessa worked forCanadian DiabetesAssociation as its NationalManager, Programs andServices, and before thatfor a leading nationalpublic relations firm. Shealso worked for The

Society of Management Accountants of Ontariowhere she promoted the merits of the CertifiedManagement Accountant (CMA) designation to thepublic. She managed the pre-professional designationcourses across Ontario and served as a studentadvisor and on-site coordinator for the Society'seducation program.

She obtained her Certified Association Executive(CAE) professional designation from the CanadianSociety of Association Executives in 2003.

Vanessa has a B.A. in Biomedical Ethics from theUniversity of Toronto and a certificate in PublicRelations from Ryerson.


Staff Appointment

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At the 2007 national conference in Banff, Alberta, Ford Motor Company of Canada, Limited and Ford Credit Canada Limitedwere named the Association's Members of the Year.

This Award recognizes volunteers from member companies, who work quietly for the Association, committed to its goals.Through their generous efforts, CFLA is able to face the challenges confronting the entire asset-based financing and leasingindustry.

As CFLA Chairman Joe LaLeggia stated, the 2006-2007 award represented something of a departure for CFLA. "Each andevery year since this award was first established, the Member of the Year has been an individual, a representatives from amember who has worked quietly for your association, committed to its work. They don't seek attention; rather theygenerally get their satisfaction simply from a job well done. The departure this year: the honoree is a member, that is acompany; two companies to be precise."

Several years ago, CFLA took on the challenge of building and leading an international coalition of associations including theauto manufacturers, provincial dealers and the rental sector to push for changes in the laws impacting vehicle vicariousliability. Last year, we were successful in capping lessor and rental company vicarious liability in Ontario. Then, our focusshifted to BC and Alberta - the two remaining large market provinces where vicarious liability remains a major concern.

CFLA President David Powell reported to the Board of Directors, "while the Association was able to mobilize the argumentsand legislative solutions for BC and Alberta, it took the commitment of Ford - the personal involvement of Ford CanadaPresident Bill Osborne, and Ford Credit Canada President Peter Sinuita, with the strong support of Caroline Hughes, Directorof Government Relations, and Paula Rietta, General Counsel at Ford Credit, to personally convince the Premiers of BC andAlberta of the urgent need for a solution. They did it and that made a difference."

"The members of a business association are all competitors. The strength of a business association lies in working togetherfor a common goal to the benefit of the industry as a whole … and this is what Ford has done" said Mr. LaLeggia.

The CFLA Chairman concluded: "the industry is very fortunate in having so many, from the most senior executives toindustry newcomers, rolling up their sleeves and pitching in. There are over 150 talented people who serve on committeesand working groups. The contribution of so many members volunteering their time and ideas in support of their industryensures that the Association makes a difference."

Previous Honorees

2005-06 Hugh Swandel (Swandel & Associates)

2004-05 Peter Freill (Securcor Group of Companies)

2003-04 Mark Robinson (DaimlerChrysler Services Canada Inc.)

2002-03 Diane Sekula (CIT Financial) and Bob Westlake (GE Capital)

2001-02 David Chaiton (Chaitons, LLP), Tom Hopkirk* (HKMB Capital Solutions) and Raja Singh (Pitney Bowes Global Credit Services)

2000-01 Brian Stevens (MFP Financial Services)

1996-97 Serge Mâsse (Crédit-Bail Findeq)

1995-96 Tom Simmons (Commcorp Financial Services)

1994-95 Greg Korsos (Sako Leasing Inc.)

1993-94 Tom Hopkirk* (Barclays Bank of Canada Leasing Division)

*Tom Hopkirk has been named Member of the Year twice: in 1993-94 and 2001-02.


Ford Motor Company of Canada, LimitedFord Credit Canada Limited

The Year in Review

Members of the Year 2006-2007

Board of Directors

Peter AndrewGeneral Motor Acceptance Corporation ofCanada, LimitedToronto, Ontario

Ginter BacafinanciaLinx CorporationToronto, Ontario

Gerry BargOAC LeasingKitchener, Ontario

Eugene Basolini*MCAP LeasingBurlington, Ontario

Fred Booth*ARI Financial Services Inc.Mississauga, Ontario

Jim CaseTravelers Automotive FinanceBurnaby, British Columbia

David ChaitonTorkin Manes Cohen & ArbusToronto, Ontario

Michael CollinsDealerTrack Canada, Inc.Mississauga, Ontario

Moe DanisSun Life Assurance Company of CanadaWaterloo, Ontario

Bill HallDe Lage Landen Financial Services Canada Inc.Oakville, Ontario

Jim HallidayPHH ArvalMississauga, Ontario

Rod HamiltonSoftware Capital Corp.Vancouver, British Columbia

Jeffrey Hartley*Foss National LeasingThornhill, Ontario

Richard JefferyBank of Nova Scotia - Leasing DivisionToronto, Ontario

Ken JohnsonGE Fleet ServicesMississauga, Ontario

Steve KleinCitiCapital Commercial CorporationToronto, Ontario

Joe Laleggia*/**Irwin Commercial FinanceVancouver, British Columbia

Daryl MacLellanCIT Financial Ltd.Toronto, Ontario

Serge Mâsse*FinTaxi, sec/lpAnjou (Québec)

Richard McAuliffeKey Equipment finance Canada Ltd.Burlington, Ontario

Larry MlynowskiEquirex Leasing Corp.Oakville, Ontario

Patrick PalermeGE Capital Solutions CanadaMontréal (Québec)

Tom Edward PundykNational LeasingWinnipeg, Manitoba

Dave Ralph*Wells Fargo Equipment Finance CompanyToronto, Ontario

Ron Rubinoff*Lease-Win Automotive Group Inc.Toronto, Ontario

David SharplessHKMB Capital Solutions Corp.Toronto, Ontario

Tom Simmons**Jim Pattison LeaseScarborough, Ontario

Benjamin SkuyADESA CanadaMississauga, Ontario

Michael StewartKPMG LLPToronto, Ontario

David SudburyHonda Canada Finance Inc.Scarborough, Ontario


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CFLA is a federal non-profit corporation located in Toronto, Ontario. Established in September 1993 through themerger of the Canadian Automotive Leasing Association and the Equipment Lessors Association of Canada, theAssociation has grown from 61 members in 1993 to 256 today.

There are three classes of membership: Regular Members, Associate Members and Non-resident Members. RegularMembers are enterprises in the active business of asset-based financing and leasing. Associate Members areenterprises that provide services to the industry (such as law and accounting firms, funders, software developers,auction houses, etc.) Non-resident Members are interested in the asset-based financing and leasing industry in Canadabut are not resident in this country.

CFLA policies are determined by a Board of Directors. The Directors are nominated from the membership and electedby the Members for two-year terms. The Board is composed of business leaders representing a cross-section of theindustry in terms of market size, area of business and geographical location. The By-laws of the Association providefor a minimum of 10 and a maximum of 32 Directors.

There is an Executive Committee composed of the Chairman, the Immediate Past Chairman, the Vice-Chairmen, theSecretary-Treasurer with one or more members at large plus the President. The Executive Committee is appointed bythe Board.

*Member of the Executive Committee ** Former Chairman

Governance

25

ChairmanFred Booth President ARI Financial Services Inc.Mississauga, Ontario

President & CEODavid PowellCanadian Finance &Leasing AssociationToronto, Ontario


Executive Committee Member Dave RalphManaging DirectorWells Fargo Equipment FinanceToronto, Ontario

Vice Chairman Jeffery Hartley PresidentFoss National Leasing Thornhill, Ontario

Vice Chairman Serge MâssePrésident etDirecteur general Fin Taxi, sec/lpVille d'Anjou,Québec

CFLA Staff

David PowellPresident & CEO

Sherry Jia-Hatheway, MBADirector, Finance &Administration

Mary Louise JoseyDirector, Events & MembersServices

Charlene FordeAdministrative Assistant

Vanessa ForanDirector, Policy

Secretary/TreasurerEugene BasoliniPresident & CEOMCAP LeasingMississauga, Ontario

Executive Committee Member Ron RubinoffPresident & CEOLease-Win AutomotiveGroup IncToronto, Ontario

Immediate Past Chairman Joseph LaLeggia President Irwin Commercial FinanceVancouver, BC

Past chairmen2004 -- 2007 Joseph LaLeggia (Irwin Commercial Finance, Vancouver, BC)2001 - 2004 Mike Goddard (PHH Arval, Mississauga, ON)1999 - 2001 Nick Logan (National Leasing Group, Winnipeg, MB)1997 - 1999 Tom Simmons (Newcourt Credit Group, Burlington, ON)1995 - 1997 Tim Hammill (AT&T Capital Canada Inc., Willowdale, ON)1994 - 1995 Peter Kidd (AT&T Capital Fleet Services, Mississauga, ON)1993 - 1994 Hugo Sorenson (Triathalon Leasing, Toronto, ON)

Governance

Executive Committee & Officers

CFLA's Committees are the primary source of the Association's knowledge on issues, trends and changes to theindustry. They are advisory and consultative, their mandate is to give advice and make recommendations toCFLA management for action, and where required, CFLA management submits the recommendations to theChairman, the Executive Committee, the Board of Directors and/or to the membership as a whole.

Committee members are senior management professionals who volunteer many hours of service. CFLA wouldlike to thank all Committee members for their contribution and dedication to the Association, without which,CFLA's success would not be possible

The Committees are:

! CFLA's radar - being proactive - bringing forward intelligence, issues, challenges and opportunities affecting the industry;

! CFLA's sounding board - to react to issues and advise on policy options;

! To exchange information, experience and expertise; and

! To disseminate information relevant to the industry.

The Association has seven policy committees.

Accounting Committee

Automotive Finance Working Group

Fleet Committee

Government Relations Committee

Legal Committee

Small Ticket Funders' Committee

Taxation Committee

The Association also has three administrative committees:

Education & Program Committee

Membership Committee

Technology Committee

Most policy committees and the Education & Program Committee meet three to four times a year betweenSeptember to June. The other administrative committtees meet as required.


26

Governance

Committees

Governance

Accounting Committee

Objectives

! To provide useful and timely information on accounting matters of interest to the asset-based financing, equipment and vehicle leasing industry.

! To provide information and support on issues within the area of interest and expertise of the asset-based financing and leasing industry when requested by the Accounting Standards Committee of the Canadian Institute of Chartered Accountants.

! To provide technical support to the Board, Executive and Committees of CFLA as requested.

Chair

Ralph Selby Toronto, Ontario

Member

Maureen AdamsNissan Canada Finance, a Division of Nissan Canada Inc.Mississauga, Ontario

Michel BouvierGE Capital Solutions CanadaMontréal (Québec)

Sean ConnorPHH ArvalMississauga, Ontario

Tony DenningFord Credit Canada Ltd.Oakville, Ontario

Teresa HewerBMW Group Financial Services Canada, aDivision of BMW Canada Inc.Whirby, Ontario

Ivan JuricPHH ArvalMississauga, Ontario

Loraine McIntoshDeloitte & Touche Chartered Accountants LLPToronto, Ontario

Raja SinghBodkin Leasing CorporationMississauga, Ontario

Janet TrogdonABN AMRO LeasingBurlington, Ontario


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28

Governance

Automotive Finance Working Group

Member

David AdamsAssociation of International AutomobileManufacturers of CanadaToronto, Ontario

Richard AdamsDaimlerChrysler Financial Services Canada Inc.Mississauga, Ontario

Peter R. AndrewGeneral Motors Acceptance Corporation ofCanada, LimitedToronto, Ontario

Larry BaldesarraToyota Credit Canada Inc.Markham, Ontario

Charles BilyeuFord Credit Canada Ltd.Oakville, Ontario

Brian ChillmanDaimler Chrysler Financial Services Canada Inc.Windsor, Ontario

Miriam ChristieGeneral Motors of Canada LimitedOshawa, Ontario

Alan CusworthFord Credit Canada Ltd.Oakville, Ontario

George EllinidisToyota Credit Canada Inc.Markham, Ontario

Pat ForgioneMcMillan Binch Mendelsohn LLPToronto, Ontario

James HigginsNissan Canada Finance, a Division of Nissan Canada Inc.Mississauga, Ontario

Jean-Marc LeclercHonda Canada Finance Inc.Scarborough, Ontario

Patrick LefebvreVW Credit Canada Inc.St. Laurent (Québec)

Sarah PalmerCanadian Vehicle Manufacturers' AssociationToronto, Ontario

Wende RapsonGeneral Motors Acceptance Corporation of Canada, LimitedToronto, Ontario

Paula RiettaFord Credit Canada Ltd.Oakville, Ontario

James RowlandFord Credit Canada Ltd.Oakville, Ontario

John ShapardanovBMW Group Financial Services Canada, a Division of BMW Canada Inc.Whitby, Ontario

Jeff Van DammeNissan CanadaMississauga, Ontario

Jason VanderheydenAssociation of International AutomotiveManufacturers of CanadaToronto, ON

Paige A. WaddenBMW Group Financial Services Canada, a Division of BMW Canada Inc.Whitby, Ontario

Tom WilsonNissan Canada Finance, a Division of Nissan Canada Inc.Mississauga, Ontario

Matthew WilsonCanadian Vehicle Manufacturers' AssociationToronto, Ontario


A joint working group with the Canadian Vehicle Manufacturers Association (CVMA) and the Association ofInternational Automobile Manufacturers of Canada (AIAMC).

29

Governance

Education and Program Committee

Objectives

! To serve as a forum for advice and ideas for CFLA on education seminars, workshops and the Annual General Meeting and Conference.

ChairRichard McAuliffeKey Equipment Finance Canada Ltd.Burlington, Ontario

John BarracloughMaxium Financial Services Inc.Richmond Hill, Ontario

Gary BatchelorCIT Financial Ltd.Burlington, Ontario

John EsteyStonbridge Financial Corporation Toronto, Ontario

Doug McKenzieBAL Global Finance Canada CorporationToronto, Ontario

Alan MorganABN AMRO Leasing, Division of ABN AMROBank N. V., Canada BranchBurlington, Ontario


30

Governance

Fleet Committee

Objectives

! To establish strong working relationships with all motor vehicle manufacturers to maintain an ongoing dialogue on issues related to legislation, fleet policies, allocations and overall relations with franchised dealers.

! To communicate effectively with all members on matters of interest and respond to all members' inquiries on any aspect of their business.

! To participate in industry discussions regarding plain language lease agreements, cost of credit

disclosure, open-end leases, Federal deduction limits for vehicle leases, and issues being raised as part

of Federal financial services sector reform.

! To recommend to the Board of Directors, policies and strategies that have evolved from the work of the Committee.

Chair

Dennis KuystenTransportAction Lease Systems Inc.Toronto, Ontario

Tim AshbyGE Fleet ServicesMississauga, Ontario

Ted DavisDealerTrack Canada, Inc.Mississauga, Ontario

Mark EminLandmark Vehicle LeasingMarkham, Ontario

Roy GaysekARI Financial Services Inc.Mississauga, Ontario

Grey GrantPHH ArvalMississauga, Onatario

Terry GreenHav-A-Kar Leasing Ltd.Toronto, Ontario

Jim HallidayPHH ArvalMississauga, Ontario

Alex JohnstonfinanciaLinx CorporationToronto, Ontario

Bruce LindsayJim Pattison LeaseScarborough, Ontario

Robert LoucksAddison LeasingMissisauga, Ontario

Doug MooreSomerville National Leasing & Rentals Ltd.Toronto, Ontario

Peter OparJim Peplinski's LeasemasterToronto, Ontario

Ron RubinoffLease-Win Automotive Group Inc.Toronto, Ontario

Stuart ShermanMorrison Acceptance CorporationDon Mills, Ontario

Mike SiegerNisco National LeasingBurlington, Ontario

Tom SimmonsJim Pattison LeaseScarborough, Ontario

Benjamin SkuyADESA CanadaMississauga, Ontario

Steve SomersWheels, Inc.Mississauga, Ontario



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Government Relations Committee

Objectives

! To provide CFLA with public policy advice and recommended contacts.

! To monitor the political environment and identify key issues affecting the industry.

! To advise and assist in the creation of submissions and strategies to address the issues.

Tom SimmonsJim Pattison LeaseScarborough, Ontario

Robert WeeseGE Capital SolutionsMissisisauga, Ontario

Legal Committee

Objectives

! Education and information - to provide useful and timely information on legal matters of interest to the asset-based financing, equipment and vehicle leasing industry.

! Advice and consultation - to serve as a resource available to work with other CFLA Committees and to respond to legal issues which are regarded by members as significant to the industry.

Members

Andy Ayotte Wilson Vukelich LLPMarkham, Ontario Jennifer Babe Miller Thomson LLPToronto, OntarioStephen Bowman Bennett Jones LLPToronto, Ontario Michael E. Burke Blake, Cassels & Graydon LLPToronto, Ontario David Chaiton Chaitons LLPToronto, Ontario

Pierre Denis Lavery, de Billy S.E.N.C.R.L.AvocatsMontréal, Québec

William Hartley Edwards, Kenny & Bray LLPVancouver, British ColumbiaDavid Kierans Gowling Lafleur Henderson LLPMontréal, Québec Rod H. McCloy Shapiro Hankinson & KnutsonVancouver, British Columbia

Francis Meagher Marchand Melançon ForgetS.E.N.C.R.L., AvocatsMontréal, QuébecRobert Metcalfe McCarthy Tétrault LLPMontréal, QuébecD. James Papadimitriou Blake, Cassels & Graydon LLPMontréal, QuébecJohn Penhale Gowling Lafleur Henderson LLPMontréal, Québec

Jean-Yves Simard Lavery, de Billy S.E.N.C.R.L.AvocatsMontréal, QuébecRobert Swift Davis & Company LLPVancouver, British ColumbiaMichael Templeton McMillan Binch Mendelsohn LLPToronto, Ontario John Tobin Torys LLPToronto, OntarioSheryl Watson ADESA CanadaMississauga, Ontario Steve Weisz Blake, Cassels & Graydon LLPToronto, Ontario

Governance


32

Governance

Membership CommitteeObjectives

! To support and build the CFLA membership base.

! To plan and implement membership drives and programs as a way of strengthening and developing the current membership base.

CHAIRPeter FreillSecurcor CorporationBurlington, Ontario

Jim CaseTravelers Automotive FinanceBurnaby, British Columbia

Jeff PolovickDRIVING FORCEEdmonton, Alberta

Kathy WardCanadian Black BookMarkham, Ontario

Small Ticket Funders' Committee

MandateThis Committee is composed of CFLA Members who fund and manage portfolios of small to mid-size commercial leasing transactions.

Members

Janice Boulet National LeasingWinnipeg, MBMark Cannon Irwin Commercial FinanceVancouver, BC Kim Carter De Lage Landen Financial ServicesCanada Inc.Oakville, OntarioGreg Clark GE Vendor Financial ServicesMississauga, OntarioBruce G. Collingwood Northstar Leasing CorporationBarrie, OntarioCarl CrechioloMCAP LeasingBurlington, OntarioRemo d'Aloisio MCAP LeasingBurlington, OntarioEd Dias Leasebank Credit CorporationBurlington, OntarioGinny Finlay Leasecor Equipment Finance Inc.Burlington, Ontario

Martin KibseyCoActiv Capital Partners Canada Inc.Burlington, OntarioMichel Levesque Citicorp Vendor Finance, Ltd.Toronto, OntarioMike MattinaCIT Financial Ltd.Burlington, Ontario P.J. McMahonIrwin Commercial Finance (Toronto)Toronto, OntarioLarry Mlynowski Equirex Leasing Corp.Oakville, OntarioMarcelle Newstadt Enable Capital CorporationToronto, OntarioGary ReynoldsDe Lage Landen Financial ServicesCanada Inc.Oakville, Ontario Phil Rubinoff Northstar Leasing CorporationBarrie, OntarioJames Schenk De Lage Landen Financial ServicesCanada Inc.Oakville, Ontario

Raja Singh Bodkin Leasing CorporationMississauga, OntarioBrian Somer Equirex Leasing Corp.Oakville, OntarioLui Spizzirri Irwin Commercial Finance (Toronto)Toronto, OntarioGreg Van de Kraats CLE Canadian Leasing Enterprise -Crédit-Bail CléBurlington, OntarioTerry WensleyConcentra Financial, CommercialLeasingRegina, SaskatchewanJanis Wilkinson De Lage Landen Financial ServicesCanada Inc.Oakville, OntarioDaniel Wittlin Enable Capital CorporationToronto, OntarioMarc Woodworth Citicorp Vendor Finance, Ltd.Toronto, Ontario

33

Governance

Taxation Committee

Chair

Diane SekulaCIT Financial Ltd.Toronto, Ontario

Dalton J. AlbrechtMiller Thomson LLPToronto, Ontario

Steven BaumMcCarthy Tétrault LLPToronto, Ontario

Norman BaxterFord Credit Canada Ltd.Oakville, Ontario

Monica BiringerOsler, Hoskin & Harcourt LLPToronto, Ontario

Stephen BowmanBennett Jones LLPToronto, Ontario

Michael BussmannGowling LaFleur Henderson LLPToronto, Ontario

Sean ConnorPHH ArvalMississauga, Ontario

Jason CooperPricewaterhouseCoopers LLPToronto, Ontario

David DaubarasGE Capital SolutionsMissisisauga, Ontario

John DolsonCitigroup CanadaToronto, Ontario

Mark ElstonDe Lage Landen Financial Services Canada Inc.Oakville, Ontario

Allan GelkopfBlake, Cassels & Graydon LLPToronto, Ontario

Sebastian GrassaCIT Financial Ltd.Toronto, Ontario

Teresa HewerBMW Group Financial, a Division of BMWCanada Inc.Whitby, Ontario

James HigginsNissan Canada Finance, a Division of NissanCanada Inc.Mississauga, Ontario

Tony ItalianoKPMG LLPToronto, Ontario

Ivan JuricPHH ArvalMississauga, Ontario

Gordon LeonardCorpfinance International LimitedToronto, Ontario

Karen McDougallBodkin Leasing CorporationMississauga, Ontario


Objectives

! To monitor and assess new taxation matters pertaining to the asset-based financing, equipment and vehicle leasing industry.

! To be a resource available to CFLA members with a tax enquiry that affects many members.

! To advise CFLA of its recommendations for changes in Federal and Provincial taxation.

! To assist in CFLA representations to government departments regarding specific industry tax matters.

! To report to the CFLA membership, new taxation issues and changes that may have a bearing on accounting for taxes.

(continues on page ...34)

34

Governance

Taxation Committee (continues from page... 33)

Owen J. MoherFinance Technologies Inc.Toronto, Ontario

Kathleen PennyBlake, Cassels & Graydon LLPToronto, Ontario

Sunil PurbhooGE Capital SolutionsMissisisauga, Ontario

Michael StewartKPMG LLPToronto, Ontario

John ThomasFoss National LeasingThornhill, Ontario

John TobinTorys LLPToronto, Ontario

Janet TrogdonABN AMBRO LeasingBurlington, Ontario

Russ WatsonGE Capital Solutions CanadaMontréal (Québec)

Lynne WordenGeneral Motors of Canada LimitedOshawa, Ontario


Technology Committee

Member

Owen J. MoherFinance Technologies Inc.Toronto, Ontario

Steven SadgroveTurnford Systems Inc.Burlington, Ontario

Dan SchoenbauerInternational Decision Systems Inc.Minneapolis, Minnesota

Larry ShredCanadian Black BookMarkham, Ontario

Hugh SwandelSwandel and AssociatesWinnipeg, Manitoba

Objectives

! To provide useful and timely information on new technologies of interest to the asset-based financing, equipment and vehicle leasing industry.

! To assist in the education of members on the use of new technologies in the asset-based financing, equipment and vehicle leasing industry.

! To recommend to the Board of Directors public policy positions on the commercial use of new technologies.

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CFLA Members

401 Auto Dealers Exchange & Remarketing7 Park Avenue Financial941315 Alberta Ltd - Forest Leasing Inc.Aada Leasing a Division of Tony Graham Motors (1980) Ltd.Able Leasing (2001) Ltd.ABN AMRO Leasing, Division of ABN AMRO Bank

N.V., Canada BranchAccurate Leasing Ltd.ADD Capital Corp.Addison LeasingADESA CanadaAdmiralty Leasing Inc.Advant Leasing LimitedAird & Berlis LLPAlter Moneta CorporationAmericredit CanadaAmerifleet Transportation CanadaAMT Finance Inc.Applewood National LeasingARI Financial Services Inc.Asset Inc.Atticus Financial GroupAureus Financial Corp.AutoOne Lease IncAutoVin Canada Corp.Aylesworth LLPBAL Global Finance Canada CorporationBank of MontrealBank of Nova Scotia - Leasing DivisionBank WestBaylore Acceptance CorporationBCG Business Capital Group Inc.Bennett Jones LLPBlake, Cassels & Graydon LLPBlaney McMurtry LLPBMW Group Financial Services Canada, a Division ofBMW Canada Inc.Bob Leighton & AssociatesBodkin Leasing CorporationCAG VancouverCanadian Automotive Fleet MagazineCanadian Black Book (Wm. Ward Publishing Ltd.)Canadian Capital Leasing Inc.Canadian Credit Protection CorporationCanadian Lease CorporationCapgemini Financial ServicesCapital Underwriters CorporationCapitalWest Finance & Leasing Corp.Capmor Financial Services Corp.Cardel Leasing LimitedCARFINCO INC.Cars on Credit .ca Inc.Cars4u.comCasitron LimitedCassels Brock & Blackwell LLPCaterpillar Financial Services Ltd.Central Technology Services CorporationChecker Flag Leasing Inc.CHP ConsultingCIBC World Markets Inc.Cisco Systems Capital Canada Co.CIT Financial Ltd.CitiCapital Commercial CorporationCitiCapital Technology Finance LtdCiticorp Vendor Finance, Ltd.

Classic Capital Inc.CLE Canadian Leasing Enterprise - Crédit-Bail CléCLI Leasing CorporationCoActiv Capital Partners Canada Inc.Commercial Funding Group Inc.Concentra Financial, Corporate Banking, Leasing ServicesConstellation Financing Systems Corp.Corpfinance International LimitedCourtesy Chevrolet Ltd.Credit Bureau of Canada CollectionsCSI Leasing Canada Ltd.CustomFirst Software Inc.DaimlerChrysler Financial Services Canada Inc.Dakota FinancialDataScan Field ServicesDavis LLPDCFS Canada Corp.De Lage Landen Financial Services Canada Inc.DealerTrack Canada, Inc.Dell Financial Services (Canada)Deloitte & Touche Chartered Accountants LLPDirect Funding CorporationDominion Leasing Software LLCDon Valley North Automotive Inc.DRIVING FORCEDSM Leasing Ltd.EASYLEASE CORP.Ecologic Leasing Solutions Inc.Edwards, Kenny & Bray LLPElement Financial CorporationEnable Capital CorporationEnsign Pacific Lease LtdEquirex Leasing Corp.Essex Capital Leasing Corp.Execucor Financial LimitedFinance Technologies Inc.Financial Transport Inc.financiaLinx CorporationFinancière GlobaleFinTaxi, sec/lpFirst Canadian TitleFirst Capital Leasing Ltd.First Class Drivers and Truck Rental Services Ltd.First Mutual Leasing Corp.First Union Rail CorporationFord Credit Canada Ltd.Ford Motor Company of Canada Ltd.Foss National LeasingFraser Milner Casgrain LLPFuller Landau LLPGE Capital Solutions CanadaGE Fleet ServicesGE Rail Services CanadaGE Vendor Financial ServicesGeneral Leasing & Financial ServicesGeneral Motors Acceptance Corporation of Canada, LimitedGeneral Motors of Canada LimitedGold Key Pontiac Buick (1984) Ltd.Gowling Lafleur Henderson LLP/s.r.l.Graphic Arts Financial, a Division of Gorda FinancialCorporationGreybrook Credit CorporationHarrison PensaHav-A-Kar Leasing Ltd.HKMB HUB International


36

CFLA Members

HKMB HUB InternationalHonda Canada Finance Inc.Horne LLP Chartered AccountantsHowson Auto LeasingHSBC Bank CanadaImpact Auto Auctions Ltd.IndCom Leasing Inc.Industrial Credit CorporationInternational Decision Systems Inc.Irwin Commercial FinanceJim Pattison LeaseJim Peplinski's LeasemasterJohn Deere Credit - CanadaKamsel Leasing Inc.Key Equipment Finance Canada Ltd.KPMG LLPLandmark Vehicle LeasingLavery, de Billy S.E.N.C.R.L. AvocatsLease Administration CorporationLease Link Canada Corp.Lease Plus Services Inc.Lease-Win Automotive Group Inc.Leasebank Capital CorporationLeaseTeam, Inc.Liftcapital CorporationLionhart Capital Ltd.London Leasing, division of 3413331 Canada Inc.MacAnders Capital Finance Corp.Manheim CanadaManulife FinancialMapelLease Financial Services Ltd.Marchand Melançon Forget S.E.N.C.R.L., AvocatsMaxium Financial Services Inc.MCAP LeasingMcCarthy Tétrault LLPMcLean & Kerr LLPMcMillan Binch Mendelsohn LLPMercado Capital CorporationMerrill Lynch Capital Canada Inc.Mertin LeasingMicrosoft FinancingMiller Thomson LLPMintage Financial CorporationMintz & Partners LLPMoney in Motion Inc.MonsterLease.ca Inc.Morrison Acceptance CorporationNascorp Leasing LtdNassau Asset ManagementNational City Commercial Capital Corp.National LeasingNelson Investment GroupNewport Leasing LimitedNexcap Finance CorporationNisco National LeasingNissan Canada Finance, a Division of Nissan Canada Inc.North York Chevrolet CorvetteNorthstar Leasing CorporationO'Regan's National LeasingOAC LeasingOracle Financing DivisionOsler, Hoskin & Harcourt LLPPacific and Western Bank of CanadaPallett Valo, LLPPDP Group Inc.PHH Arval

Pitney Bowes Global Credit ServicesPolaris Leasing Ltd.PPSA Canada Inc.Practice Solutions Credit Services a division of

Practice Solutions Ltd.Premier Lease & Loan ServicesPrestige MotorsPricewaterhouseCoopers LLPQuestor Financial CorporationRecombo Inc.Repair Industry Finance CorporationResolve CorporationRiordan Leasing Inc.Roderick H. McCloy Law Corp/Shapiro Hankinson & KnutsonRothenberg Capital Leasing Inc.RouteOne CanadaRoyal Bank Financial GroupRSM Richter, LLPRyzn Enterprise Systems Inc.Savaroy Universal Corp.Sawka Group of CompaniesScott Capital Group Inc.Securcor CorporationSecurefactSekurus Canada Inc.Shaw Lease & Truck RentalsSITE Finance Inc.Software Capital Corp.Somerville National Leasing & Rentals Ltd.Sovereign Leasing CorporationSPAR Leasing (Credit-Bail SPAR Inc.)Stonebridge Financial CorporationSummit Credit CorporationSUMMIT LEASING CORPORATIONSummit-Northlake Canadian Leasing Corp.Sun Life FinancialSwandel and AssociatesTextron Financial Canada LimitedThe Leasing Group Inc.TIP CapitalTorkin Manes Cohen Arbus LLPTorys LLPToyota Credit Canada Inc.TransportAction Lease Systems Inc.Travelers Financial CorporationTricor Lease & Finance CorporationTurnford Systems Inc.Universal Leasing, division of UL Capital CorpVantageOne Capital Inc.VFC Inc.Vista Credit CorpVolvo Financial ServicesVW Credit Canada Inc.Walkaway Canada IncorporatedWalker Credit Canada Ltd.Waterpoint Financial Group Inc.Wells Fargo Equipment Finance CompanyWestana Leasing CorporationWestport Leasing CorporationWheels, Inc.White Clarke North AmericaWilliamson LeasingWilson Vukelich LLPWS Leasing Ltd.


37


! The Canadian Finance & Leasing Association represents equipment and vehicle leasing and asset-based finance companies in Canada. There are fundamental standards of practice, which should serve as guiding principles for all engaged in the business of leasing and asset-based financing.

! At all times conduct our activities with integrity, dignity and professionalism and encourage such conduct by others in the leasing industry.

! Maintain respect for keen competition and seek no unfair advantage by dishonest or unethical means.

! At all times adhere to the specific terms of funding commitments, commission agreements and purchase orders.

! Not knowingly make false or misleading statements or withhold information vital to an intelligent business decision concerning any aspect of a leasing transaction.

! Disclose all relevant information as to the terms and conditions of the lease, which may effect the lessee's decision.

! Treat in a fiduciary capacity all funds received from the lessee, which may be returned to the lessee.

! Hold in strict confidence all financial information supplied by the lessee on a confidential basis.

! Not make payments directly to an employee of a vendor or business source without that company's knowledge.

! L'Association canadienne de financement et delocation représente les intérêts des entreprises actives dans le secteur du financement basé sur l'actif et du crédit-bail. Il existe des normesfondamentales de pratique qui devraient servir de principes directeurs à toute personne qui travaille dans ce secteur

! En tout temps, les activités doivent être exercées avec intégrité, dignité et professionnalisme et on doit encourager le même comportement des autres personnes actives dans ce secteur.

! Il faut respecter la concurrence vigoureuse et ne pas chercher à obtenir un avantage indu pardes moyens malhonnêtes ou immoraux.

! On doit se conformer en tout temps aux modalités précises des engagements de financement, des ententes de commission et des bons de commande.

! Il ne faut pas sciemment faire une déclaration fausse ou trompeuse ni retenir des renseignements essentiels à une décision d'affaires éclairée qui touche un aspect d'une transaction.

! En ce qui concerne les modalités et les conditions d'un contrat, on doit divulguer au crédit-preneur tous les renseignements pertinents qui pourraient influencer sa décision.

! Toute somme reçue d'un crédit-preneur qui lui serait potentiellement remboursable devra être détenue en qualité de fiduciaire.

! Il faut garder sous le sceau du secret tout renseignement financier fourni à ce titre.

! On ne doit pas faire de paiements directement à un employé d'un vendeur ou d'une source d'affaires sans que cette entreprise ne le sache

Governance

Code of Ethics Code de déontologie


15 Toronto Street, Suite 301, Toronto, Ontario M5C 2E3Telephone: (416) 860-1133 • Toll-free: 1(877) 213-7373 • Fax: (416) 860-1140 E-mail: [email protected] • Web site: www.cfla-acfl.ca

15, rue Toronto, bureau 301, Toronto (Ontario) M5C 2E3Téléphone: (416) 860-1133 • Sans-frais:1(877) 213-7373 • Telecopieur: (416) 860-1140 c.elec: [email protected] • Site Web: www.cfla-acfl.ca

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