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UNITED STATES ASSET ANDAUTO FINANCE SURVEYRegarding ease of getting credit, the rankings for comparator economies andthe regional average ranking shown in the second chart show how wellregulations and institutions in US support lending and borrowing.How the US and comparator economies rank on the ease of getting creditUnited States4Germany24Canada24Mexico40India40Regional average (OECD high income)41China67Russian Federation981183RankCompetitivenessIn ‘The Global Competitiveness Report 2012-2013’ produced by the WorldEconomic Forum (WEF), the US is ranked in seventh position, down two placesfrom the previous year and marking a continuing slide.The report states: “Although many structural features continue to make itseconomy extremely productive, a number of escalating and unaddressedweaknesses have lowered the US ranking in recent years.”As can be seen in the charts below, US firms rank highly for innovation andsophistication, and for flexibility in the labor market, with higher educationand training systems that dovetail successfully with business. These factorshelp to make the US one of the most competitive global economies. Asset Finance International, All rights reserved.There are weaknesses, most notably apparent in the lack of macroeconomicstability (in 111th place, down even further from 90th last year).However, the report observes: “On a more positive note, measures of financialmarket development continue to indicate a recovery, improving from 31st twoyears ago to 16th this year in that pillar, thanks to the rapid intervention thatforced the deleveraging of the banking system from its toxic assets followingthe financial crisis.”When it came to the most problematic factors for doing business, as perceivedby the Global Competitiveness Report respondents, the main factors selectedare common to the majority of mature economies, such as inefficientgovernment bureaucracy, and issues relating to tax rates and regulations.However, also relatively high on the list is access to financing, a problem thatis increasingly addressed through leasing.8

UNITED STATES ASSET ANDAUTO FINANCE SURVEYGlobal Competitiveness IndexGCI 2012-2013GCI 2011-2012 (out of 142)GCI 2010-2011 (out of 139)Rank out of 144017015004Score (1-7)5.55.45.4Basic requirements (20%)InstitutionsInfrastructureMacroeconomic environmentHealth and primary education0330410141110345.14.65.84.06.1Efficiency enhancers (50.0%)Higher education and trainingGoods market efficiencyLabor market efficiencyFinancial market developmentTechnological readinessMarket ation and sophistication factors (30.0%)Business sophisticationInnovation0170100165.45.35.5Stage of nstitutions765432Market vironmentHealth andprimaryeducationHigher educationand trainingTechnologicalreadinessFinancial marketdevelopmentGoods marketefficiencyLabor market efficiencyUnited StatesInnovation-driven economiesSource: Global Competitiveness Report 2012-2013, World Economic Forum, Switzerland9 Asset Finance International, All rights reserved.1

UNITED STATES ASSET ANDAUTO FINANCE SURVEYMost problematic factors for doing businessInefficient government bureaucracyTax ratesTax regulationsAccess to financingRestrictive labor regulationsInflationInadequately educated workforcePolicy instabilityPoor work ethic in national labor forceInadequate supply of infrastructureForeign currency regulationsGovernment instability/coupsCorruptionCrime and theftPoor public 02.502.201.101.0051015 Asset Finance International, All rights reserved.Source: Global Competitiveness Report 2012-2013, World Economic Forum, Switzerland1020

UNITED STATES ASSET ANDAUTO FINANCE SURVEYThe leasing industry in the USThe equipment finance and leasing industry in the US is represented by theEquipment Leasing and Finance Association (ELFA), which was founded as theAssociation of Equipment Lessors in 1961. Currently, ELFA represents around580 company members, including affiliates, and membership continues togrow.Annual investment in capital goods and software (excluding real estate, whichis not covered in this survey) by American businesses and governmentagencies totals more than 1.2 trillion. Of this, more than half, or anestimated 628bn in 2011, is financed through loans, leases and otherfinancial instruments, which equates to around 4% of US GDP, according toIMF estimates.ELFA publishes an annual Survey of Equipment Finance Activity (SEFA) basedon submissions by reporting members. The 2012 SEFA Report on businessvolumes in 2011 is the basis for the data in the next section. More details ofthe report are at http://www.elfaonline.org/SEFAAnnual new businessThe survey shows that in 2011 new business volume (NBV) grew by 16.5%, to 94.9bn.Of this, banks took just over half ( 47.9bn), captive companies took 31%( 29.6bn), and independent lessors took 18% ( 17.4bn). The greatest rate ofincrease was for independents ( 19.7%), closely followed by banks ( 19.3%)and with captives some way behind ( 10.5%).This was the second consecutive annual rise in NBV, showing a welcomeacceleration over the increase of 3.9% in 2010, which had followed a severedecline of over 30% in 2009.New business volumeIndependents100 94.9 bil. 17.4Captives80 81.4 bil. 19.7%Banks60 29.6 14.5 10.5%40200 19.3% 47.92011 40.1 16.5% overall2010Source: ELFA11 Asset Finance International, All rights reserved. 26.8

UNITED STATES ASSET ANDAUTO FINANCE SURVEYNBV by size of organization100 81.4 bil. 94.9 bil. 0.4 5.6 9.580-58.6% 32.4 27.7 %% 1.0 4.2 7.4 15.4%60Under 50 mn in NBV 50 to 250 mn n NBV 250 mn to 1 bn in NBV40 79.4 68.8Over 1bn in NBV20020112010 16.5% overallSource: ELFAIn terms of growth by size of organization, there was growth in all marketsegments during 2011, except for the smallest. Organizations with over 1bnin NBV grew by 15.4%, taking 79.4bn of the total; those with NBV of 250mto 1bn rose 27.7% to 9.5bn; those with NBV of 50-250m rose 32.4% to 5.6bn; but the smallest segment (less than 50m NBV) fell 58.6% to 0.4bn.100NBV by size of market segment 14.28060 12.9Big-ticketMedium-ticket 49.5 40.6Small-ticket40Micro-ticket20 Asset Finance International, All rights reserved.0 26.7 4.52011 23.2 4.7Source: ELFA2010Similarly, looking at growth by market segment, all segments showed growthin NBV apart from the smallest. NBV grew 10.2% to 14.2bn in the largeticket segment; 21.8% to 49.5bn in the middle ticket segment; 15.2% to 26.7bn in the small ticket segment; but fell 4.8% to 4.5bn in the microsegment.12

UNITED STATES ASSET ANDAUTO FINANCE SURVEYPercentage of all respondents whose new business volumes grew or 2.2%2028.3%Source: ELFA0201120102009In all, 75.7% of respondents to the survey saw NBV increase in 2011,compared to 28.3% in 2010.New business volume by origination channel ( bn)100Third partiesCaptive programsVendor programs 11.4 16.8% 10.4%80 30.060 21.9%Direct40 27.2 22.3 19.8%20 9.9 18.3 31.2 26.0201120100In terms of asset type, the equipment types with the greatest growth in NBVwere: construction; trucks & trailers; and computer equipment. End-userindustries with the greatest growth in NBV were: industrial & manufacturing(metal & machine); wholesale/retail; and finance, insurance and real estate.Looking at volumes by origination channel, the direct channel was the largestoriginator of NBV in 2011, rising 19.8% to 31.2bn and overtaking captiveprograms, which rose by only 10.4% to 30.0bn. The other channels alsoshowed higher rates of growth than captives, with vendor programs rising21.9% to 22.3bn, and third parties rising 16.8% to 11.4bn.13 Asset Finance International, All rights reserved.Source: ELFA

UNITED STATES ASSET ANDAUTO FINANCE SURVEYOverall assets under management250 233.2 bn 232.0 bn 31.1 bn 30.9 bnOperating lease assets200Net earning assets150100Total off balance sheetassets 190.5 bn 186.8 bn 11.6 bn2011 14.3 bn500Source: ELFA2010For the industry as a whole, assets under management remained at a similarlevel to the previous year, increasing by just 0.6% to 233.2bn.Return on average : ELFA0% Asset Finance International, All rights reserved.20112010200920082007Although the return on average equity fell in 2011 compared to 2010, itremained at a healthy 15.5%.14

UNITED STATES ASSET ANDAUTO FINANCE SURVEYRecent new businessELFA’s Monthly Leasing and Finance Index (MLFI-25) shows that new businessvolume in 2012 has fluctuated, although, as can be seen in the chart below,the trend is an upward one. A year-on-year comparison shows NBV for the firsteight months of 2012 up by 15.5% on the same period in 2011.MLFI-25 new business volume (year-on-year comparison) 12.0 10.8 10.0 9.0 8.0 8.0 7.3 6.0 5.6 5.7 4.1 4.5 4.0 5.1 6.0 5.7 5.1 6.8 6.2 6.9 6.2 5.7 4.9 5.0 6.6 6.12011: 43.9 bn cumulative YTD2012: 50.7 bn Cumulative YTD% change 15.5% 4.2 pr-11Mar-11Feb-11Jan-11Dec-10Nov-10Oct-10Sep-10 0.0Aug-10Source: ELFAHowever, the Equipment Leasing & Finance Foundation’s latest Q4 Outlook,released in October 2012, forecast growth in equipment and softwareinvestment for 2012 at a rate of 6.7%, down from the 2011 growth rate of11.0%.Its revised projection for investment in 2013 is for growth of 4.5%, down fromthe original forecast of 8%. On a slightly more optimistic note, the reportstated: “Although growth in equipment and software investment slowed to anannualized rate of 4.8% in the second quarter from 5.4% in Q1, it continues tobe a driver of growth in an otherwise subdued economy.”15 Asset Finance International, All rights reserved. Billions 6.2 5.6 7.1

UNITED STATES ASSET ANDAUTO FINANCE SURVEYInsiders’ views of the industryAsset Financial International spoke to a number of senior executives in theequipment finance and leasing industry in the US to get their opinions on thecurrent state of the market, and the opportunities and challenges they see itfacing in the coming months.The effect of the current economic situation on the marketThe most immediate concerns expressed across the board were that theeconomy was in danger of slowing further due to continuing fluctuationsglobally, in particular in the Eurozone, coupled with political and legislativeuncertainty - all of which would have an inevitable effect on the leasingindustry.David Merrill, president of Fifth Third Equipment Finance Company, began bystressing the economic uncertainty: “I see continued hesitation in makingcommitments to purchase equipment until there is clarity in the economicpicture both here and abroad. The market would like to see definitivemovement from policy makers on what they will do to fix the ailing economy.I predict a slowdown in activity for 2013.“Having said that, there is still a moderate amount of activity in themarketplace. The competition is fierce, which will lead to margin compressionand weaker structures. Portfolio quality will remain strong unless we seefurther deterioration in the economy.”This point was also made by Adam Warner, president of Key EquipmentFinance: “From a liquidity perspective, US asset finance companies are in verygood shape. The challenge many lenders face today is a lack of demand dueto the economic uncertainty.“In general, businesses felt more optimistic about growth a year ago than theydo today. This has already started to result in lower confidence of purchasingmanagers, who will ultimately begin delaying equipment purchases withoutstronger signs from the global economy.”Small business sector Asset Finance International, All rights reserved.The point of view of small and medium-sized enterprises (SMEs) was made byChris Enbom, CEO of Allegiant Partners: “Our customers are primarily smallcompanies in the US, and with them demand for commercial equipmentseems to rise and fall based on the Wall Street Journal headlines. I thinkthese companies are waiting for a clear indication that there will be growth inthe US economy over the next few years, and then they will start expandingagain.“This being said, many small companies have actually paid down considerableamounts of debt and have survived the recession in pretty good shape. Whena real rebound occurs, I think it will be pretty dramatic. Once the USPresidential election is done and the US budget is figured out we will also seean uptick, assuming the rest of the world continues to hold together.”16

UNITED STATES ASSET ANDAUTO FINANCE SURVEYRon Arrington, president of CIT Global Vendor Finance, continued this theme:“One of the challenges in the marketplace is that small and medium-sizedbusinesses in the US continue to be cautious and reluctant to invest capitalbecause of the continued uncertainties around healthcare, taxes and thegeneral economic environment, particularly in this election year.“That said, CIT recently conducted a study in the US that showed four out offive companies have made at least one capital goods acquisition of significantvalue in the past year with nearly the same number planning to in the next sixto 18 months. As companies have kept equipment longer, the need formaintenance will compel businesses to upgrade their equipment at somepoint. As confidence increases, releasing pent-up demand for new equipment,companies can benefit from leasing.”“Interesting dynamics”Bill Stephenson, chairman of De Lage Landen Vendor Finance division, seesconflicting forces: “The market is exhibiting some really interesting dynamics.On one hand you have the pace of recovery in the US, which until recentlywas moving in the right direction, albeit at a painfully slow pace. Even theFederal Reserve was motivated enough to announce a third round ofquantitative easing in mid-September, and not wait until after the USPresidential elections or early 2013. Their action was truly telling.He added: “At the end of the day, these actions are meant to apply furtherpressure on long-term interest rates and push more capital into the market. Soon the supply side of our market, I do not believe liquidity will be a limitingfactor in the near to medium term.“On the other hand you have uncertainty, which is becoming more pervasiveon all fronts, whether economic, regulatory or political. This uncertainty, andthe resultant drop in confidence it drives with US businesses, is starting torein in the activity levels our industry experienced earlier this year. Afterenjoying double-digit growth in the first half of 2012, most of the majorindices within the US leasing industry started cooling down in July andAugust. Activity levels are still above what we experienced in the same periodlast year, but they are slowing and appear positioned to continue slowing inthe second half of 2012.”“The key,” he explained, “is in knowing how to find them, and then takingadvantage of them. My sense is that many people in our industry – and inmany other industries as well – are still somewhat paralyzed by uncertainty.They look at Dodd-Frank, the FASB changes to lease accounting, the economy,the election – the list goes on – and wonder what’s going to happen.“My feeling is that you need to move beyond that. The economy seems to beinching along, at a slow but steady pace. And regardless of the uncertaintythat exists, businesses are still buying equipment. Equipment financecompanies need to make sure that we are ready, willing and able to fundthose purchases.”17 Asset Finance International, All rights reserved.A final view, emphasizing that gradual improvement can be detected, camefrom Crit DeMent, chairman and CEO, LEAF Commercial Capital, who sees asituation “filled with opportunities”.

UNITED STATES ASSET ANDAUTO FINANCE SURVEYChallenges faced by the marketIt is hardly surprising that the interviewees saw the primary constraint as thesustainability of economic recovery and what that entails in terms of liquidityand its effect on demand. The immediate Presidential election andsurrounding uncertainty regarding fiscal policy was another front-runner. ChrisEnbom put it succinctly: “I think demand for equipment is the primarychallenge, and this is dependent on political and economic clarity.”This point was expanded on by others. Ron Arrington said: “The continueduncertainties and pending policy changes and how they might affect thedecisions of small and medium-sized business to make capital purchases arethe main challenges. Companies are optimistic and want to grow theirbusinesses and as the economic and political landscape becomes morecertain you will see them invest.”The theme was taken up by Kurt Ruhlin, COO Americas of software solutionsand consulting services provider White Clarke Group, who said: “Small andmedium-size businesses are trying to adopt strategies to enable them tobecome more competitive by reducing costs and increasing productivity. Theysee this can be achieved by acquiring new equipment and restructuring andrationalizing processes, but unlike the large corporations, they need themeans to finance this and to have confidence in the markets.”Stimulating growthDemand was also picked out by Adam Warner, along with how to stimulategrowth: “The two biggest challenges I see are: 1) demand; and 2) interestrates. In regards to demand, equipment loan growth has been significantlyoutpacing the US GDP growth rate for quite some time. This has beenprimarily due to pent-up equipment demand during the recession. Withoutstronger economic indicators, loan and lease growth will start to wane and, atsome point, come more in line with real economic growth.“As for interest rates, the US Federal Reserve has committed to keep interestrates low through 2015. While this could be helpful to stimulate moreborrowing, it is

equipment finance and leasing industry. In fact, leasing was first developed in the US in the 1950s and has since been successfully exported to developed economies and increasingly to emerging markets around the globe. The equipment leasing industry has grown to become a major force in the US economy, with an estimated value of 628bn in 2011.