FORM 20-F
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of a Foreign Issuer
Pursuant to Rule 13 and 15(d) of
the Securities Exchange Act of 1934
For the month(s) of: January 1, 1997 to December 31, 1997
NEWCOURT CREDIT GROUP INC.
BCE Place, 181 Bay Street
Suite 3500, P.O. Box 827
Toronto, Ontario
Canada, M5J 2T3
[Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F.]
Form 20-F /x/ Form 40-F / /
[Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under the
Securities Exchange Act of 1934.]
Yes / / No /X/
[If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b)]
82-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: May 13,1998
NEWCOURT CREDIT GROUP INC.
By: John P. Stevenson
Corporate Secretary
NEWCOURT CREDIT GROUP INC.
RENEWAL ANNUAL INFORMATION FORM
May 1, 1998
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TABLE OF CONTENTS
Page
ITEM 1 - INCORPORATION 1
The Company 1
Principal Subsidiaries 1
ITEM 2 - GENERAL DEVELOPMENT OF THE BUSINESS 2
Newcourt Capital 2
Newcourt Financial 3
Newcourt Services 4
Integration Office 4
Acquisitions and Joint Ventures 4
Income Diversification 5
ITEM 3 - NARRATIVE DESCRIPTION OF THE BUSINESS 6
Overview of the Asset-Based Finance Industry 6
Newcourt Capital 7
Newcourt Financial 9
Newcourt Services 14
Integration Office 18
Finance Asset Portfolio 18
Properties 20
Employees 21
ITEM 4 - SELECTED CONSOLIDATED FINANCIAL
INFORMATION 21
Dividend Record and Policy 22
ITEM 5 - MANAGEMENT'S DISCUSSION AND
ANALYSIS OF OPERATING RESULTS 23
ITEM 6 - MARKET FOR SECURITIES 23
ITEM 7 - DIRECTORS AND OFFICERS 23
Directors 23
Executive Officers 26
ITEM 8 - ADDITIONAL INFORMATION 28
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ITEM 1 - INCORPORATION
The Company
Newcourt Credit Group Inc./Groupe-Credit Newcourt Inc.
("Newcourt" or the "Company") was incorporated in 1984 under the Business
Corporations Act (Ontario). The Company's head office is located at Suite
3500, BCE Place, 181 Bay Street, P.O. Box 827, Toronto, Ontario M5J 2T3.
Following the Company's acquisition of AT&T Capital Corporation in
January, 1998, Newcourt has approximately 5000 employees operating in 24
countries out of 61 offices worldwide, including 10 offices in Canada, 23
offices in the United States and 28 international offices. The Company is also
represented in over 2,000 additional locations across North America at the
premises of equipment manufacturers, dealers and distributors through the on-
site availability of the Company's credit approval software system.
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The Company's restated articles of incorporation dated February 8,
1996 were amended on March 26, 1997 giving effect on April 14, 1997 to a
subdivision on a two-for-one basis of all of the Company's issued and
outstanding Common Shares and all of the Company's Common Shares
reserved for issuance.
Principal Subsidiaries
The following diagram illustrates the relationship of the Company to
its wholly-owned principal operating subsidiaries and the jurisdiction of
incorporation of each such subsidiary:
Subsidiary Graphic
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ITEM 2 - GENERAL DEVELOPMENT OF THE BUSINESS
Newcourt is one of the world's largest independent, non-bank
financial services companies, with over $31 billion in owned and managed
assets. Newcourt originates, sells, co-invests in and manages asset-based
financings. The Company originates the financing of a broad range of
equipment and capital assets by way of secured loans, conditional sales
contracts and financial leases. Newcourt distinguishes itself from traditional
lenders, such as banks, trusts and finance companies, in that Newcourt:
sells and manages, rather than owns, the majority of the finance assets
which it originates, thereby reducing the Company's capital requirements and
credit exposure;
produces a significant portion of its income through revenue from, and
fees relating to, the sale of finance assets, thereby reducing the Company's
dependence on net finance and rental income;
funds its activities through commitments from institutional investors
rather than by accepting deposits from the public; and
offers select, asset-based financing services rather than providing full-
service lending.
The Company operates in two distinct segments of the asset-based
finance market: (i) corporate finance; and (ii) commercial finance.
The current operating structure of the Company and the market
segments in which it operates are the result of a strategy developed in 1989.
At that time, the Company identified two key objectives for the development
of its commercial finance business: (i) target specific segments of the medium
size commercial asset finance market and establish separate marketing units to
cover each segment; and (ii) expand its commercial finance business by
increasing the number of formal vendor programs and by acquiring captive
vendor finance companies.
During the fiscal year ended December 31, 1997, in addition to the
growth and expansion in its current business and the continued diversification
of its loan originations, Newcourt completed several major acquisitions in the
commercial finance segment of the asset-based finance market. In August,
1997, the Company acquired all of the issued and outstanding shares of
Commcorp Financial Services Inc. ("Commcorp"), a Canadian asset finance
and associated management service company. In September, 1997, Newcourt
acquired the Business Technology Finance division of Lloyds Bowmaker
Limited (a United Kingdom-based asset finance company). Also in
September, 1997, the Company acquired the micro-balance origination and
financing division of Lease Finance Group of Chicago, Illinois. In October,
1997, Newcourt acquired the small-balance loan processing capabilities of
Omni Financial Services of America, Inc. In November, 1997, the Company
announced that it had reached an agreement to acquire all of the issued and
outstanding shares of AT&T Capital Corporation ("AT&T Capital") which
acquisition was completed on January 12, 1998.
The Company has organized its activities and operations around three
core businesses: (i) Newcourt Capital; (ii) Newcourt Financial; and (iii)
Newcourt Services. In addition, the Company has established a fourth
business for 1998, the Integration Office, which is responsible for the
integration of Newcourt, AT&T Capital and the other acquisitions completed
by the Company in 1997.
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Newcourt Capital
Newcourt Capital Inc., an Ontario company ("Newcourt Capital") is
the international investment banking business of the Company. Newcourt
Capital operates in the corporate finance market through the funding and
advisory services that it provides to major equipment manufacturers,
corporations, public sector institutions and governments worldwide.
Newcourt Capital's principal structured finance activities include providing
corporate and government structured debt financings, providing financial
services to the commercial and general airline industries, arranging cross-
border lease financings, acquiring and managing asset-based finance portfolios
and financing international equipment acquisitions. Newcourt Capital
primarily funds its originations through direct syndication to institutional
investors and specific investor funds established and managed by Newcourt.
Newcourt Capital provides its corporate finance services through
seven distinct marketing units:
Aerospace Finance - provides financial services in Canada, the United
States and Europe to both the commercial aviation market, with an emphasis
on the regional airline industry, and the general aviation market, with an
emphasis on the corporate aircraft and helicopter market segments;
Rail Finance - provides financing and advisory services to railroads and
industrial rail shippers in Canada and the United States;
Public Sector Finance - provides financing and advisory services in
Canada, the United Kingdom and internationally to governments, public sector
agencies and corporate clients in the infrastructure and institutional
healthcare sectors;
Project Finance - provides limited or non-recourse project specific
financing for institutional and corporate clients in North America and the
United Kingdom;
Structured Finance - provides structured financing services in Canada,
the United States and Europe, including cross-border leases, single investor
leases, synthetic leases and off-balance sheet financings;
Media and Communications Finance - provides debt financing services
to the communications market and various media sectors in North America;
and
Principal Finance - provides financing in North America for
acquisitions, buy-outs and recapitalizations which are done in conjunction with
existing management teams and/or established financial buyers of companies.
Newcourt Financial
Newcourt Financial Ltd., an Ontario company ("Newcourt
Financial") is the Company's business unit responsible for originating loans in
the commercial finance market. Newcourt Financial offers asset-based sales
and inventory financing through select strategic relationships with equipment
manufacturers, dealers, distributors and certain professional bodies and
associations ("vendors"). As at December 31, 1997, Newcourt Financial had
more than 300 vendor finance programs with selected vendors, which are the
primary source of the Company's loan origination business in the commercial
finance market.
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Newcourt Financial provides its lending services through seven
distinct marketing units:
Transportation and Industrial Finance - provides inventory and term
financing in North America in the transportation, construction, industrial and
fleet vehicle leasing marketplaces;
Technology Finance - provides direct and vendor financing in North
America to manufacturers, distributors and resellers of information technology
hardware and software and to their customers;
Telecommunications Finance - provides vendor financing in North
America to the telecommunications industry under an exclusive international
vendor program with Lucent Technologies Inc. a former affiliate of AT&T
Corporation;
Business Finance - provides asset-based sales and inventory financing to
vendors and customers in the commercial, industrial, healthcare and retail
finance markets in North America;
Specialty Finance - provides a variety of financial products to the small
business and healthcare markets in North America through micro-balance
leasing, government supported (SBA and SBLA) programs and intermediary
financial services;
Technology Services - provides other Newcourt business units with the
ability to underwrite operating leases and rental products for the information
technology business sector; and
International and Joint Ventures - provides specialized support in
Europe, Asia Pacific and Latin America for Newcourt's established vendor
programs and develops and manages dedicated joint venture structures.
Newcourt Services
Newcourt Services is the administrative unit of the Company
responsible for managing the capital structure of the Company and for
providing cost-effective growth, control and support services to the Newcourt
Capital and Newcourt Financial business units.
Newcourt Services is divided into eight principal operating units:
Treasury - responsible for funding the loan origination activities of
Newcourt Capital and Newcourt Financial through securitization and
syndication programs and the capital markets;
Credit and Risk Management - responsible for the proper management
of the credit and residual risks to which the Company is exposed;
Financial Reporting and Administration - responsible for the
Company's financial reporting requirements, its fiscal administration, and for
ensuring that the accounting policies and procedures of Newcourt and AT&T
Capital are properly and effectively consolidated;
Human Resources - responsible for the strategic allocation and
management of the Company's human resources, including the Company's
compensation and benefit programs;
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Communications and Marketing - responsible for developing and
managing Newcourt's marketing services, client communication services and
internal communications;
Tax Planning - responsible for providing timely, responsive and superior
domestic and international tax services to all of Newcourt's business units;
Systems Development - responsible for integrating, managing and
developing Newcourt's extensive technology infrastructure; and
Quality Assurance - provides an independent appraisal function within
the Newcourt organization which examines and evaluates the adequacy and
effectiveness of management, financial controls and operations.
Integration Office
The Integration Office is responsible for ensuring the success of the
acquisition and subsequent merger of AT&T Capital and Newcourt and the
subsequent merger of their respective businesses and operations. The
Integration Office is responsible for both establishing an overall vision for
the combined entity and for outlining and communicating to all employees of
Newcourt the revised business units, compensation philosophies, desired
culture and behaviour, and the growth, efficiency, customer service and
profitability targets. The Integration Office is also responsible for ensuring
that all reasonable consolidation and cost containment initiatives are
successfully implemented in a manner which ensures the rapid and seamless
integration of Newcourt and AT&T Capital.
Acquisitions and Joint Ventures
Acquisitions
On August 29, 1997, Newcourt acquired all of the issued and
outstanding common shares of Commcorp, a Canadian asset finance and
associated management service company, for approximately $366 million. On
September 5, 1997, Newcourt acquired the Business Technology Finance
Division of Lloyds Bowmaker Limited, a United Kingdom-based asset finance
company, for $493 million. On September 30, 1997, Newcourt acquired the
micro-balance origination and financing business of the Lease Finance Group
of Chicago, Illinois for $13 million. On October 22, 1997, Newcourt
acquired the small-balance loan processing capabilities of Omni Financial
Services of America, Inc. for $10 million.
On November 17, 1997, Newcourt agreed, subject to the satisfaction
of certain conditions, to acquire all of the issued and outstanding shares of
AT&T Capital for $2.4 billion. On January 12, 1998, the Company
completed the acquisition of AT&T Capital with the result that Newcourt
acquired:
AT&T Capital's diversified portfolio of approximately US$13.9 billion
(as at December 31, 1997) in owned and managed assets representing over
500,000 customers and covering a broad spectrum of equipment;
over 130 additional vendor programs;
additional principal offices in Brussels, Frankfurt, Hong Kong, London,
Mexico City, Milan, Paris, Sydney, Toronto and throughout the United States;
and
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more than 2,800 additional employees.
As this acquisition was completed subsequent to December 31, 1997,
Newcourt's financial statements for the year ended December 31, 1997 do not
reflect the financial results, costs or contribution to earnings of AT&T
Capital.
Joint Ventures
Since 1994, Newcourt's business plan has been to expand its loan
origination business by entering into strategic joint ventures with established
manufacturers and distributors. In 1997, Newcourt renewed, initiated or
established joint venture arrangements with vendors such as Dell Computer
Corporation. In addition, the Company's existing joint venture with Western
Star Trucks was expanded to the United Kingdom and Australia.
The most significant joint venture completed in 1997 was the joint
venture with Dell Computer Corporation ("Dell"). Pursuant to this
arrangement, Newcourt will provide financing to Dell's corporate and retail
customers through Dell Financial Services, a separate business unit established
by Dell and the Company. The initial term of this arrangement is 5 years, and
it provides for a renewal period of a further 5 years. The initial agreement
with Dell related only to Dell's United States' operations; however, Dell and
Newcourt have recently agreed to extend the arrangements to Dell's
international sales, including Canada, Europe, and Australia.
Income Diversification
The Company increased its commercial finance loan originations
from $3,308 million in 1996 to $5,319 million in 1997. Corporate finance
business volumes increased from $2,496 million in 1996 to $3,593 million in
1997. In 1997, approximately 59% of the Company's commercial finance
volumes and 29% of the Company's corporate finance volumes were
generated in the United States, as compared to 55% and 54%, respectively, in
1996.
The Company derives asset finance income primarily through: (i)
gains and fees from the origination of asset-based financings and their
subsequent sale through securitization and syndication; (ii) fees from the
ongoing management of these financings both directly and through affiliated
companies; and (iii) net finance or "spread" income earned on financings
which are retained or temporarily warehoused by the Company. The
Company's total asset finance income in 1997 was $318.4 million ($171.6
million in 1996) composed of: (i) $188.8 million of securitization and
syndication income ($87.5 million in 1996); (ii) $45.3 million of income from
affiliated companies and management fees ($31.7 million in 1996); and (iii)
$84.3 million of net finance income ($52.4 million in 1996).
ITEM 3 - NARRATIVE DESCRIPTION OF THE BUSINESS
Overview of the Asset-Based Finance Industry
The Company operates in two distinct segments of the asset-based
finance market: (i) corporate finance; and (ii) commercial finance.
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Corporate Finance Market
The corporate finance market is a segment of the asset-based finance
market which generally involves large structured asset finance transactions.
Financing in this market is required by corporations, institutions and
governments acquiring capital assets such as aircraft, toll highways, railway
rolling stock and transportation fleets. Transactions in this market differ
significantly from those in the commercial finance market in terms of their
complexity. Funding is usually provided by banks, other private market
lenders such as life insurance companies and through public capital markets.
The principal intermediaries in the corporate finance market are investment
bankers. Most transactions involve syndications, whereby several
institutional investors participate in each financing transaction. These
financings can involve the use of financial derivative products such as
interest rate and currency swaps.
The corporate finance market has experienced strong growth over the
past several years. This growth is the result of corporate and institutional
borrowers seeking to diversify their sources of debt capital by dealing
directly with asset-based lenders. As well, asset-based lenders have been
ggressively pursuing lending opportunities as a means of diversifying their
investment portfolios. Investment bankers, such as Newcourt Capital, have
played an integral role in this market by providing the link between
borrowers and non-bank lenders and designing and arranging the asset-based
structures necessary for these financings.
Commercial Finance Market
The commercial finance segment of the asset-based finance market
involves the provision of direct and indirect financing for the acquisition of
commercial equipment. This segment of the asset-based finance market
involves the financing of equipment as such assets move through the
distribution channel from the manufacturer to the dealer to the ultimate end
- -user of the equipment. Asset-based financing within the commercial finance
segment of the market is provided by a wide variety of market participants,
including banks, captive finance companies and independent finance
companies. The commercial finance segment of the market has experienced
strong growth in recent years as a result of increased capital and
infrastructure spending, increased machinery and equipment expenditures and
the continuing trend of consolidation in the industry as larger participants
build market share through acquisitions and the outsourcing by equipment
manufacturers, dealers and distributors of their asset-based financing
requirements. Within the commercial finance market, the Company has focused
its activities on establishing formal vendor finance programs as a basis for
originating asset finance business.
Vendor finance programs are agreements with equipment
manufacturers, dealers, distributors and professional organizations ("vendors")
which provide a finance company with preferred access to financing
transactions relating to a vendor's equipment. These financings are generally
offered to: (i) the ultimate end-user of the equipment; and (ii) the vendor's
dealers and distributors through inventory or "floorplan" financing. Vendor
finance arrangements provide a steady, reliable flow of new business with
lower costs of origination than asset-based financings marketed directly to end-
users. Vendors often provide various forms of support to the finance company
under these programs, including credit support and equipment repurchase and
remarketing arrangements. Vendor finance programs can also take the form
of a referral relationship which is less formal and typically does not include
credit support from the vendor. For vendors, these programs are attractive as
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the financing is tailored to the vendor's particular product line and industry,
thereby helping to promote equipment sales. The close relationship between
credit sources and the vendor allows the vendor to maintain contact with the
customer. These programs are often a less expensive alternative to a vendor
maintaining its own captive finance company.
Vendor finance is typically provided for the small and medium size
transaction markets. Small size market transactions principally involve office
equipment purchases and are serviced mainly by the captive finance companies
of the various equipment manufacturers. Medium size market transactions
cover a wide range of equipment purchases and are serviced by a variety of
financial institutions.
Newcourt Capital
Newcourt Capital is the Company's specialized investment banking
business unit. This unit provides structured asset-based financings ranging in
value from $10 million to over $1 billion. The principal activities of
Newcourt Capital include providing funding and advisory services for the
acquisition of large capital assets such as commuter aircraft and public
transit equipment, as well as for the development and operation of major
capital projects such as power facilities and toll highways. In early 1997,
Newcourt established a US $500 million Project Finance Fund in co-operation
with three U.S. life insurance investors to finance major capital projects in
the United States, Canada and the United Kingdom, for which Newcourt will
act as originator and manager of transactions.
Newcourt Capital's income is generated primarily by fees earned
from: (i) advisory services it provides on transactions, (ii) the syndication
and management of the asset-based financings which it originates, and (iii) net
finance income on assets which it retains. Unlike most investment banks,
Newcourt Capital retains a minority interest (usually between 5% and 15%) in
individual transactions which it originates and usually retains on-going
management responsibility for these financings. Newcourt Capital believes that
its policy of retaining an interest in the transactions which it originates
represents a significant factor in its ability to syndicate the balance of
these transactions to institutional investors. See "Funding Arrangements -
Term Funding - Corporate Finance" in "Management's Discussion and Analysis" on
page 22 of the Annual Report to Shareholders of the Company for the year
ended December 31, 1997 (the "Annual Report").
Newcourt Capital's activities are conducted through its principal
offices in Toronto, Montreal, Chicago, New York, Morristown, New Jersey,
London, England and Bridgetown, Barbados. Newcourt Capital's Toronto
office has been in existence since the Company's founding in 1984. The
Chicago office was opened in early 1993, and Newcourt Capital's Montreal
office was established in 1994 in order to better serve the Company's Quebec
clients. Each of the New York and London offices was established in early
1996. The New York office is staffed with 9 experienced structured finance
professionals and is primarily engaged in providing financing and services
relating to project financings. The Bridgetown office originates, funds and
manages international equipment financings.
In 1997, Newcourt Capital participated in and advised on a number
of significant transactions, including: (i) rail and public financings in
which Newcourt Capital provided U.S. $80 million of financing to Trinity
Industries Inc. for approximately 1,500 rail cars and agreed to act as the
lead arranger and underwriter of the international financing for the
construction of a US$1.1
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billion highway in Israel; (ii) regional airline financings, of which Newcourt
Capital financed a total of $1.4 billion during 1997, including $214 million of
refinancing and advisory services for ATR, and secured an exclusive financing
mandate for approximately US$300 million of financing for the acquisition of
16 regional jets by Mesa Air Group Inc.; and (iii) cross-border lease
financings, in which the Company continued to focus on U.S. tax-based leases
with equity investors from the United States and institutional debt
participants. In addition, Newcourt Capital announced in August 1997 its
first project under its new Project Finance Fund - the financing of US$160
million for the construction by MCN Investment Corporation of a natural gas
storage facility near Detroit, Michigan.
Newcourt Capital generated operating income of $39.2 million in
1997, an increase of 54% over 1996 operating income of $25.4 million, with
the majority of such income derived from its activities in corporate and
government debt financings and regional airline financings. In such
activities, syndication fees were the largest source of revenues for '
Newcourt Capital.
Newcourt Capital's business strategy is based on two trends in the
corporate finance market. First, many institutional investors perceive a need
to diversify their long-term, secured fixed income portfolios. This need is
currently not being satisfied by many of the securitized products available in
North America and internationally as they are predominantly medium-term in
nature. Second, to obtain more competitive funding, corporate and
institutional borrowers are increasingly seeking more diversified sources of
funding and more innovative financing structures.
The Company believes that the success of Newcourt Capital is
attributable to: (i) the expertise of the unit's executives in a variety of
technical disciplines, including taxation, derivatives, treasury and cross-
border financing issues, (ii) the strong relationships it has developed with
institutional investors, borrowers and lessees, (iii) its ability to provide
institutional investors with secure, long-term investments which meet their
portfolio and credit requirements, (iv) its ability and willingness to
underwrite and retain an interest in debt transactions which it originates,
and (v) its ability to tailor its financings to the specific needs of its
customers.
Newcourt Capital believes that it successfully differentiates itself
from its competitors by focusing on the creation of international financing
structures which are specifically tailored to the financing requirements of
borrowers and by offering to arrange funding on either an underwritten or
partially underwritten basis. See "Funding Arrangements - Term Funding -
Corporate Finance" in "Management's Discussion and Analysis" on page 22
of the Annual Report.
Newcourt Capital's seven marketing units are described in more
detail below.
Aerospace Finance
The Aerospace Finance unit provides financial services to two core
markets: (i) commercial aviation, with an emphasis on regional aircraft; and
(ii) general aviation, with an emphasis on corporate aircraft and helicopters.
The services which the Aerospace Finance unit provides to the
commercial aviation market include asset-based financing and advisory
services for equipment, such as regional jets and turbo prop aircrafts. Debt
and capital lease financings are highly structured and range in size from
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$25,000,000 to $500,000,000. In the general aviation market, Aerospace
Finance unit provides either debt financings or lease financings in the
range of $1,000,000 to $50,000,000 to the manufacturers, operators and
owners of corporate aircraft and helicopters. In order to improve services
to existing clients and to take advantage of new opportunities in the
general aviation market, Newcourt Capital has established an office in
Witchita, Kansas.
Rail Finance
The Rail Finance unit provides a wide variety of underwriting and
advisory services to railroads and industrial rail shippers. The Rail Finance
unit's financial products include secured term debt financings, leveraged
leases, synthetic leases (off-balance sheet loans) and single investor leases.
In addition to the marketing of Class I and shortline railroads, the Rail
Finance unit focuses on industrial rail shippers in the agricultural and
food processing, coal, utility and petrochemical industries. The Rail
Finance unit targets industrial rail shippers which typically have
investment grade credit, operate large rail fleets and are financed by both
long and short term methods.
Public Sector Finance
The Public Sector Finance unit provides financing and advisory
services to governments, public sector agencies and corporate clients in the
infrastructure and institutional health care sectors. The Public Sector
Finance unit operates in three key markets: International Infrastructure; '
Canadian Institutional Healthcare; and UK Private Finance Initiative.
Within these key markets, the Public Sector Finance group focuses on
providing its financial services to selected market segments, including
infrastructure.
The services provided by the Public Sector Finance unit include
structured debt financing, sale and leaseback transactions, credit tenant
leases, cross border and leveraged lease transactions, equipment rental and
donor/foundation financing for institutional healthcare and a wide range of
associated advisory services. The Public Sector Finance unit services its
clients principally through the Toronto and London offices.
The Public Sector Finance unit has established formal alliances with
such significant developers as AGRA Inc. (general infrastructure), SHL
SystemHouse (information systems), Allied Water (water and wastewater
systems) and Canadian Highways International Corporation (highway
infrastructure).
Project Finance
The Project Finance unit provides a wide range of limited or non-
recourse project specific finance products and services to institutional and
corporate clients in Canada, the United States and the United Kingdom, with a
particular focus on the power, infrastructure, international
telecommunications, energy and petrochemicals, metals and mining and forest
products industry sectors. The Project Finance unit's products and services
include the Project Finance lease, structured and secured non-recourse debt
financing, project bidding support and funding services, commodity or
merchant based project financing, and contract or franchise based project
financing.
The Project Finance unit targets transactions which range from
$40,000,000 to $200,000,000 in size and which have a term of 10 to 30 years.
The majority of the unit's project specific financing transactions are funded
<PAGE>
and managed through the auspices of Newcourt Capital's Project Finance
Fund, which was established in early 1997 in order to provide the Company's
clients with efficient access to the capital resources of several major U.S.
based insurance companies. The first project under this fund was announced
in August, 1997, when Newcourt Capital undertook to provide US$160
million in financing for the construction of a natural gas storage facility by
MCN Investment Corporation.
The Project Finance unit serves its clients through a staff of financial
professionals who are principally located in the Company's New York,
London and Toronto offices.
Structured Finance
The Structured Finance unit operates out of the Company's Toronto
and Chicago offices. It provides a broad range of structured financing
services, including cross-border leases, single investor leases, synthetic
leases and off-balance sheet financings in support of capital asset
acquisitions, expansions and refinancings in Canada, the United States and
internationally.
Media and Communications Finance
The Media and Communications Finance unit provides debt financing
services for equipment acquisitions and other growth requirements to the
communications market and various media sectors in North America. Within
the telecommunications industry, the focus of the Media and Communications
Finance unit is on companies which are developing fibre optic or wireless
networks to serve urban and regional markets. In the media market, which is
presently undergoing a process of consolidation, the Media and
Communications Finance unit focuses on funding the acquisitions of
independently owned radio and television stations.
Principal Finance
The Principal Finance unit provides senior and subordinated secured
debt and working capital loans in the range of US$15,000,000 to
US$75,000,000 for acquisitions, buy-outs and recapitalizations by the
Company's North American clients. These financings are undertaken in
conjunction with existing management teams and/or established financial
buyers of companies that have established successful operations, supported by
capable and proven management. The Principal Finance unit typically
underwrites these transactions and syndicates them, while retaining 10% to
25% of each transaction. In addition, the Principal Finance unit regularly
receives an equity interest of 5% to 15% in the target company.
Newcourt Financial
Newcourt Financial, the Company's business unit servicing the
commercial finance market, continued to experience strong growth in 1997.
The Company currently has over 300 vendor programs with equipment
manufacturers, dealers, distributors and professional associations in a variety
of industries throughout North America, Europe, Latin America and Asia-
Pacific. In 1997, the Company retained all its existing vendor programs and
established or acquired in aggregate over 130 new programs. The Company is
not dependent on any single vendor for more than 10% of new business
volumes. Newcourt Financial generated new asset-based originations of $5.3
billion in 1997, an increase of 61% over 1996 ($3.3 billion).
<PAGE>
The Company's commercial finance marketing executives have
extensive industry specific experience in financing equipment for the markets
served by the Company. Newcourt Financial's executives participate in the
activities of trade associations for these industries and otherwise seek to
enhance recognition of the Company's services among industry participants.
As a result, these individuals have developed relationships with vendors and
end-users and have knowledge of customer needs, local conditions and
competitor advantages and disadvantages. The Company believes that the
experience, knowledge and relationships of its executives and managers
enables it to compete effectively on the basis of customer service.
As part of developing and enhancing vendor relationships, the
Company seeks to establish itself as a business partner of its vendors through
the establishment of comprehensive arrangements designed to promote
equipment sales. The Company provides the vendor with expertise related to
interest rates, downpayments, repayment maturities, documentation,
collections, liquidations, marketing and related matters. Although the
Company seeks and often obtains a preferred relationship with vendors
pursuant to these programs, these arrangements do not obligate the Company
to approve any financing transactions which do not meet the Company's credit
standards or require the vendor to refer all of its financing transactions
to the Company.
The Company continuously seeks to expand the financing services
offered under its existing vendor programs. For example, the Company was
designated in 1993 as the first non-traditional approved lender under the Small
Business Loans Act ("SBLA"). The SBLA program is an initiative of the
Canadian federal government designed to encourage new equipment purchases
of up to $250,000 by small businesses. As an approved SBLA lender,
Newcourt is able to provide government-insured loans to purchasers of health
care, transportation, office and commercial equipment. Since making its first
SBLA loan in October 1993, the Company has originated and approved $328
million of SBLA loans.
Continuing a trend that began in 1994, the Company has entered into
several strategic joint ventures with established manufacturers and
distributors. Through Newcourt, manufacturers are able to form their own
captive finance companies providing sale and inventory financings, as well
as a complete range of portfolio services.
The Company believes that the success and uniqueness of Newcourt
Financial is attributable to: (i) the specific industry and asset knowledge of
Newcourt Financial's account executives, (ii) the unit's primary focus on
vendor asset finance services and formal vendor focused relationships and,
(iii) its international reputation combined with its regional delivery
structure.
Newcourt Financial's seven marketing units are described in more
detail below.
Transportation and Industrial Finance
The Transportation and Industrial Finance unit provides vendor
finance in the transportation, construction, industrial and fleet vehicle
leasing marketplaces to such customers as Western Star Trucks and Hyster.
The Transportation and Industrial Finance unit is an amalgamation of Newcourt
Financial's former Transportation and Construction Unit, a portion of its
former Commercial and Technology Unit and AT&T Capital's industrial and
construction vendor programs.
<PAGE>
Transportation and Industrial Finance unit's two primary products
are: (i) inventory financing to manufacturers' dealers prior to the sale of
equipment to end-users; and (ii) term financing for manufacturer and dealer
referred customers. Inventory financing services offered by the
Transportation and Industrial Finance unit include both floor plan and
rental/lease fleet financing on a floating rate basis with deferred principal
reductions. All inventory financing is structured on a "full payout" basis
with security taken on the specific assets financed. Each item of inventory
is individually financed to accommodate payout at the time of retail sale and
physical inventory audits are regularly scheduled in order to ensure adequate
control of the underlying security. Term Financing (i.e. fixed repayment
term) is primarily targeted towards manufacturer relationships and dealer
referred customers as it provides attractive financing spreads and acceptable
return margins. Most transactions are conditional sale or lease financings
with a wide range of flexible, but structured, repayment terms. The
customer base ranges from corporate fleets and municipalities to individual
unit purchasers.
The transportation and construction activities of the Transportation
and Industrial Finance unit are focused on the provision of financing programs
to established North American vendors operating primarily in the school bus,
truck/trailer, construction equipment, material handling, specialty vehicle and
fleet vehicle markets. In addition, the Transportation and Industrial Finance
unit provides inventory financing to manufacturers' dealers prior to the sale
of the equipment to customers. The types of equipment which are typically
financed includes heavy and medium duty trucks, highway trailers, school
buses, lift trucks equipment and a variety of construction equipment and fleet
vehicles.
The industrial activities of the Transportation and Industrial Finance
group focus on the provision of vendor financings to established U.S. vendors
and the machine tool, woodworking and plastic markets. The type of
equipment which is typically financed includes horizontal machining centres,
milling machines, lathes, electrical discharge machines and panel saws. The
underlying long term value of this type of equipment makes it very attractive
to finance companies.
Transportation and Industrial Finance's major vendor programs are
set out below:
Transportation and Industrial Finance - Major Vendor Programs
Vendor Equipment
Western Star Trucks Highway Trucks
Hyster Material Handling
JCB Excavators Medium duty construction equipment
Champion Road Machinery Motor graders and compaction equipment
Mack Highway Trucks
John Deere Medium and heavy duty construction
equipment
Transcraft Construction trailers
Trail King Construction and commercial trailers
Timberjack Forestry equipment
Thomas School buses
Snap-On Tools Machine tools
SCMI Woodworking
Toyota Material handling
<PAGE>
Technology Finance
The Technology Finance unit of Newcourt Financial provides direct
and indirect vendor financing services to customers of established vendors of
information technology hardware, software and services, value added resellers
and original equipment manufacturers and distributors. The Technology
Finance unit is an amalgamation of Newcourt Financial's former Commercial
and Technology unit with AT&T Capital's Leasing Services group and the
Advanced Technology Financing Solutions group.
The Technology Finance unit offers two distinct products: wholesale
vendor financing and retail vendor financing. With wholesale vendor
financing, the vendor provides the Company with the customer credit
information and negotiates the financing terms and conditions. The Company
then purchases the accumulated finance transactions either "as is" or with the
vendor's support in order to offset any deficiencies. With retail vendor
financing, the Company sells the financial product directly to the end-user
through a vendor referral.
The major Technology Finance vendor programs include the
following:
Technology Finance - Major Vendor Programs
Vendor Equipment
NCR Hardware
Platinum Software
Oracle Software
Gateway Pcs
Amdahl Hardware
Baan Software
Sybase Software
Peoplesoft Software
Sprint Hardware
Avnet Hardware
Telecommunications Finance
The Telecommunications Finance unit provides vendor finance
services to the telecommunications industry, principally through an exclusive
relationship with Lucent Technologies Inc. ("Lucent"), a former affiliate of
AT&T Corporation. Lucent is the leading manufacturer of
telecommunications equipment in North America, producing network systems,
business communications systems, micro-electronic systems and consumer
products.
On March 9, 1998, Newcourt signed a new five-year agreement with
Lucent (the "1998 Lucent Agreement") which expands the global financing
program established to serve Lucent's business systems customers. The term
of the 1998 Lucent Agreement is from October 1, 1997 through September 30,
2002. The 1998 Lucent Agreement replaces the previous operating agreement
between AT&T Capital and Lucent and the letter agreements between AT&T
Capital and Lucent, the initial terms of which were scheduled to expire on
August 4, 2000. In addition to the extended term of the 1998 Lucent
Agreement, other changes from the previous Lucent operating agreement
include: (i) Newcourt being the preferred provider of financing services for a
<PAGE>
greater portion of Lucent's equipment and related product sales and; (ii) a
change in the methodology in calculating the amount required to be paid to
Lucent (based upon specific financial, service and performance levels).
Business Finance
The Business Finance unit specializes in providing structured asset-
based financing to vendors and customers in the commercial, industrial
healthcare and retail finance markets. The Business Finance unit focuses on
the supervision and execution of North American vendor programs within
Canada and for the international extension of existing Canadian vendor
programs. The Business Finance unit offers its products and services through
strategic relationships with manufacturers, distributors, dealers and
professional associations who have been selected because of their ability to
source acceptable loans, their products and market positions and their
ability to support product and recourse obligations over the longer term.
In addition to its strategic vendor relationships, the Business Finance
unit manages separate joint ventures and sourcing arrangements with three
Charter I banks in Canada. Under these joint ventures and sourcing
relationships, the Company provides lease finance products and services to the
banks' clients.
The Business Finance unit has been organized into business groups
that are based either on specific market sectors, on specified product lines or
on joint ventures. The principal business groups within this marketing unit
are briefly described below:
Commercial and Industrial (Mid-Ticket): provides structured asset
- -based financing for Canadian commercial and industrial vendor programs for
transactions that exceed $50,000. The principal vendor programs within this
group include:
Business Finance: Commercial and Industrial - Major Vendor Programs
Vendor Equipment
Heidelberg Printing presses
SHL/MCI Computer
Mazak Machine tools
Club Car Golf carts
Healthcare: specializes in providing structured asset-based financing
to Canadian healthcare practitioners, vendors and institutions. The Company
has entered into a unique partnership with Promed Leasing Inc. to be
Newcourt's exclusive agent in the healthcare market in Quebec. The main
vendor programs of this group are:
Business Finance: Healthcare - Major Vendor Programs
Vendor Equipment
Credident Dental
Quebec Dentaire Dental
Uniprix Pharmacy
Equity Dental
<PAGE>
CIBC Equipment Finance: is dedicated to providing direct lease
financing to existing and prospective clients of Canadian Imperial Bank of
Commerce. This group is completely integrated within the bank and is aligned
to the bank's corporate and commercial operations across Canada.
Inventory Finance: provides manufacturer - sponsored financing
programs to dealers of high quality manufactured products around the world.
Inventory financing includes new floorplan and rental/used financing on a
floating rate basis with pre-arranged principal reductions. All inventory
lending is structured on a "full payout" basis with security taken on the
specific assets financed. Since this group was founded in 1995, 125
manufacturer arrangements have been established, including eight exclusive
joint ventures. This group's principal vendor programs include:
Business Finance: Inventory Finance - Major Vendor Programs
Vendor Equipment
Yamaha Motorcycles, snowmobiles, marine engines
watercraft
Fleetwood Travel trailers, motor homes
Brunswick Boats & marine engines (Mercury, SeaRay,
Bayliner)
Coachmen Travel trailers, motor homes
Vermeer Construction equipment
Office Products (Small Balance Commercial): provides smaller loans
through vendor, manufacturer or dealer sponsored programs that provide
customers with the financing necessary to purchase office and industrial
equipment. In particular, this group has a relationship with a major Canadian
chartered bank under which its clients have access to a wide range of leasing
and term loan products. The main vendor programs of this group are:
Business Finance: Office Products - Main Vendor Programs
Vendor Equipment
Toshiba Copiers, fax
Royal Bank Various
OE/Ricoh Office products
Danka Industries Office products
Retail Finance: provides term financing for the purchase of
equipment at the retail store level through Newcourt's unique CreditLink
system. This group also supervises Newcourt's arrangement with the Bank of
Montreal, whereby the bank purchases the group's receivables from selected
programs and administers and collects these loans. This group's significant
vendor relationships include:
Business Finance: Retail Finance - Major Vendor Relationships
Vendor Equipment
Yamaha Motorcycles, snowmobiles
Packard Bell Computers
3D Micro Computers
NEC Computers
<PAGE>
Specialty Finance
The Specialty Finance unit provides a variety of financial products in
the United States to small businesses and the healthcare market. In
particular, this marketing unit: (i) provides government sponsored end-user
financing products designed to support small and medium-sized businesses in
need of financing for equipment, real estate, business acquisitions and
working capital;
(ii) provides micro-balance leasing of draft capture equipment (credit card
processing and automatic debit card machines) in the United States; and (iii)
finances equipment acquisitions within the U.S. dental finance market.
In addition, the Specialty Finance unit manages Capita Finance, the
Company's joint venture with American Express. This joint venture
commenced in 1997 and provides a vehicle whereby small balance leasing
products are marketed to American Express' 1.6 million commercial credit
card holders.
Technology Services
The Technology Services unit provides the Company's other
marketing units with the ability to underwrite operating and finance leases and
provides asset-management services within the information technology sector.
The Technology Services unit is divided into three distinct service groups:
Rental, Direct Leasing and Vendor Support. The Rental group provides
customers with a range of options for renting computer components, products
and services. The Direct Leasing group provides various financing, asset
management and technology consulting services to users of equipment
manufactured by companies such as IBM, Amdahl, and Hewlett Packard. The
Vendor Support group is responsible for managing large balance technology
vendor programs which require operating lease products and asset
management services. Some of the Company's significant vendor
relationships that are driven by these products include:
Technology Services - Major Vendor Relationships
Vendor Equipment
SHL Financial Services Personal computers and related equipment
Amdahl Mainframes, disk storage and Sun Equipment
SGI Midrange Unix and related equipment
Avnet Digital, PCs, IBM, Laptops
EDS PCs, printers, tapes
International and Joint Ventures
The International and Joint Ventures marketing unit's mandate is to
provide international support for the Company's North American vendor
programs, including significant joint ventures. The International and Joint
Ventures unit is divided into two distinct segments. The first segment is the
international unit, which is responsible for all of the operations of Newcourt
Financial outside of North America and for the execution of the international
strategies of Newcourt Financial's vendors. The operations of the
international unit are presently focused on Europe, Asia Pacific and Latin
America. The most significant of the Company's vendor programs which
require global solutions are:
<PAGE>
International and Joint Ventures - Vendor Programs
Vendor Equipment
Dell Computers Information Technology
Western Star Trucks Highway Trucks
Picker Medical Equipment
JLG Construction Equipment
Yamaha Motor Recreational Equipment
The second segment is the joint venture unit, which is responsible for
overseeing the operations of significant joint ventures. The most significant
joint venture completed in 1997, and the first established by the Company as a
separate business unit, is Dell Financial Services, the Company's joint venture
with Dell.
Newcourt Services
Newcourt Services is the administrative unit of the Company.
Newcourt Services directly supports the Company's corporate and commercial
finance businesses with a wide range of growth, control and support services
such as credit and risk management, customer service, financial reporting and
systems development. In addition, Newcourt Services is responsible for
managing the capital structure of the Company, including the management of
Newcourt's various funding programs with institutional investors. In certain
circumstances, some of these services are also offered to third parties. The
growth in the number of employees in the Newcourt Services unit has
paralleled the growth in the Company's new business loan origination
volumes.
The Company believes that Newcourt Services' direct contribution to
the success of the Company is attributable to: (i) the expertise of the unit's
executives in their specialized fields; (ii) the strong working relationships
which have been developed between Newcourt Services and the Company's
other businesses, as well as with the Company's institutional investors; and
(iii) the degree to which Newcourt Service's functions and products have been
given a clear customer focus.
Newcourt Services' eight principal operating units are described in
more detail below.
Treasury
The Company's Treasury unit is responsible for identifying,
arranging and satisfying the Company's capital and loan funding
requirements, including interim and long-term funding and cash and financial
risk management. The Treasury unit arranges required interim funding from
a number of public and private sources, including bank lines, commercial
paper and medium term note programs. Term funding is arranged for the
Company's originated commercial finance assets through securitization
vehicles while corporate finance transactions are generally syndicated to
institutional investors. Newcourt's funding requirements, both interim and on
a term basis for Newcourt Financial and Newcourt Capital, are described in
"Funding Arrangements" in "Management's Discussion and Analysis" in the
Annual Report, which section is incorporated herein by reference.
<PAGE>
To ensure that the Company would be in a position to fund its
originated finance assets and as a means of further diversifying its sources of
capital, Newcourt established a program in April 1993 to securitize its
assets. Under this program, commercial finance assets are sold at regular
intervals to public and private securitization vehicles. See "Funding
Arrangements - Term Funding - Commercial Finance" in "Management's
Discussion and Analysis" on page 22 of the Annual Report, which section is
incorporated by reference herein. An important consequence of this program
is that income from the Company's commercial finance business is derived
principally from gains on the sale of finance assets to the securitization
vehicles and from management fees relating to these assets. During the
"warehousing" period (typically not more than two months) between
origination and transfer of such assets to the securitization vehicles,
the Company will also earn net finance income on such assets. Newcourt has
maintained consistent interest rate spreads and asset quality on its
originated assets, whether retained for the Company's own account or
transferred to securitization vehicles.
In addition, on April 13, 1998, Newcourt established the following
three new credit facilities with a syndicate of international banks: (i) a 364-
day, $1,200,000 credit agreement; (ii) a 364-day US$1,535,000,000 credit
agreement for AT&T Capital; and (iii) a five year US$765,000,000 credit
agreement for AT&T Capital. On April 28, 1998, Newcourt and AT&T
Capital filed a combined registration statement with the U.S. Securities and
Exchange Commission registering for distribution in the United States in
aggregate principal amount up to US$5,000,000,000 (or the equivalent thereof
in other currencies) of debt securities of AT&T Capital, guaranteed as to
payment of principal, premium, if any, and interest by Newcourt. On April
28, 1998, AT&T Capital filed a prospectus supplement to the prospectus
within the registration statement in respect of the issuance of up to
US$5,000,000,000 Medium Term Notes, Series F due 9 months or more from
the date of issue.
Credit and Risk Management
The Company believes that effective credit and risk management, as
evidenced by loss and arrears history, is critical to the successful
syndication and securitization of transactions to investors, as these
investors require financial products with high credit ratings.
The Board of Directors of the Company engages in active corporate
governance and has reviewed and approved, through its investment committee,
a credit manual which sets forth business and credit philosophies and credit
standards for each marketing unit. The Company's credit adjudication policy
requires strict adherence to this credit manual. The credit evaluation
process, as specified in the credit manual, sets out detailed procedures by
which proposed transactions are presented, reviewed and assessed by a credit
officer and ultimately approved or declined. The credit manual is regularly
reviewed and approved by the investment committee, a majority of the members
of which are independent directors. The investment committee meets as required
(generally bi-weekly) to review specific investment transactions. The
Company has also entered into an investment agreement with The Mutual Life
Assurance Company of Canada ("The Mutual Group"), Canadian Imperial
Bank of Commerce ("CIBC") and Hercules Holdings (Cayman) Limited
("Hercules") pursuant to which each of The Mutual Group, CIBC and
Hercules has the right, in certain circumstances, to review and approve the
Company's credit manual and to approve certain individual transactions,
including transactions acquired for future securitization, which exceed certain
credit exposures as set out in the credit manual.
<PAGE>
In late 1996, the Company began an on-going process of
decentralizing the credit and risk management process across selected
marketing units in order to ensure that credit responsibilities were dealt with
on a regional basis within the appropriate marketing unit. Accordingly, the
Credit and Risk Management unit of Newcourt Services is divided into
individual units which mirror the Company's marketing units. Each
"regional" unit has a senior credit manager together with supporting credit
officers, each of whom is experienced within the industry in which the
marketing unit operates. However, the governing philosophies, standards and
guidelines of the credit and risk adjudication process remain unchanged.
To ensure credit quality both initially and on an on-going basis, the
Company applies a two-part credit and risk grading system regardless of the
size of the proposed transaction. The first part, known as the covenant-based
rating, is based on a detailed analysis of the borrower's financial stability
and general ability to repay. The second part, known as the asset-based
rating, focuses on the nature of the collateral and the term of the
financing. Minimum thresholds must be met under both rating systems before
a transaction is approved. Where an independent credit rating agency such
as Moody's, Standard & Poor's, Canadian Bond Rating Service or Dominion Bond
Rating Service has provided a rating of a borrower, this rating is used to
supplement the internal rating system. Annual written credit reviews,
including updated, detailed financial analyses, are performed by a credit
officer on individual borrowers with outstanding principal amounts of
greater than $500,000. For accounts under $500,000, annual financial
statements are reviewed by a credit officer and, where warranted, follow-up
steps are taken, including equipment inspections and discussions with
management of the borrower.
In view of the large size of Newcourt Capital's financings, its
borrowers must have high creditworthiness satisfactory to both the Company
and the institutional investors to whom these financings are sold. All
material financings underwritten by Newcourt Capital must be approved
unanimously by the Company's investment committee.
Financial Reporting and Administration
The Financial Reporting and Administration unit is responsible for a
wide range of regulatory, organizational and supervisory services for all of
the Company's businesses. The primary focuses of the Financial Reporting
and Administration unit are on ensuring that: (i) the accounting policies and
procedures of Newcourt and AT&T Capital are properly and effectively
integrated; (ii) all financial information required either internally or
externally is prepared on a timely and accurate basis; and (iii) new
business fundings do not occur until all credit and documentation
requirements are satisfied and Newcourt's security is perfected.
In terms of financial reporting, fundamental services provided by the
Financial Reporting and Administration unit include cash and payroll
management, co-ordination of budgets and other financial planning, preparing
and issuing management reports, accounting and financial analysis, internal
and external financial and other regulatory reporting, tax compliance,
securitization and syndication accounting and reporting, reporting to investors
and the management of the Company's external auditors.
In terms of administrative functions, the Financial Reporting and
Administration unit is responsible for providing the following services:
document administration; review and approval; fundings; account set-up and
activation; account maintenance and invoicing; correspondence and insurance
tracking; security registrations; and document scanning and retention.
<PAGE>
Within the Financial Reporting and Administration unit, there is a
Lease Accounting Group which is responsible for maintaining monthly
reconciliations of all lease/loan application systems to the general ledger and
for ensuring that reconciling items are identified and cleared on a timely
basis. This group ensures the integrity of financial information booked to
the general ledger for all owned and managed asset portfolios. This group
is also responsible for ensuring that all of the Company's cash resources
are applied in a timely and accurate manner and that rejected or returned
items are reported and cleared from the Company's ledger.
The administrative processes of Newcourt's Canadian-based
marketing units are conducted at the Company's Toronto and Burlington
locations. During 1997, the number of lease and loan contracts managed by
the Canadian administration division increased from approximately 43,000 to
approximately 180,000. Newcourt's American based administrative
processes are centralized within the Company's Indianapolis service centre.
During 1997, the number of lease and loan contracts managed by the
Indianapolis service centre increased from approximately 25,000 to
approximately 69,000. Newcourt's U.K. based administrative processes are
centralized in Bristol, England. Approximately 39,000 contracts are
administered by the Bristol service centre. Newcourt believes that one of the
principal strengths of both the Canadian, U.S. and U.K. service centres is
their ability to effectively adapt the loan management structure to meet the
needs of Newcourt's clients and end-user based activities.
Human Resources
The Human Resources unit is responsible for the strategic allocation
and management of the Company's human resources, including the
Company's compensation, benefit and employee ownership programs,
recruitment practices, job evaluations, succession policies and career
development programs.
Communications and Marketing
The Communications and Marketing unit of Newcourt Services is
responsible for developing and managing the Company's marketing materials
and services, corporate promotions, client and investor relations, public
affairs and government relations, media relations and advertising, and internal
communications.
Tax Planning
The Tax Planning unit is responsible for providing timely, responsive
and superior domestic and international tax services to all of Newcourt
Services' business units, as well as directly to Newcourt Capital and
Newcourt Financial.
Systems Development
The Information Technology department has responsibility for
supporting Newcourt's global technology requirements. Providing a wide
range of services, supporting all areas of Newcourt's operations, Information
Technology manages maintenance and operations support of Newcourt's
sophisticated Lease Administration systems, New Application development
and existing system enhancements. In addition, IT has the responsibility to
manage and control all "technology aspects" of Newcourt's global
infrastructure, such as advanced telecommunications networks, and Internet
and Intranet systems. To assist the IT department staff in maintaining a high
<PAGE>
level "availability" for all systems and technologies, IT uses a number of
third party service providers, such as SystemHouse ("SHL"), Sybase, Comdisco
and AT&T Solutions.
Newcourt currently operates a global information technology
environment with a number of Data Centers located in Canada, the United
States, the United Kingdom, Germany, Australia and Mexico. Each Data
Center is primarily responsible for providing all operational data processing
services necessary for their respective geographic regions. Additional
responsibilities include regularly scheduled Disaster Recover tests and
planning. A frame-relay network, provided by Bell/AT&T/MCI, links all
Newcourt locations into a consolidated global network. Where operational
efficiencies are achievable by centralizing functions, IT supports these
functions from the North American locations.
In addition to the Information Technology department's operational
mandate, IT is tasked with aggressively implementing Newcourt's Integration
Strategy of consolidating systems in order to achieve operational efficiencies,
cost reduction, and to minimize Year 2000 costs and exposures. This
consolidation of systems and infrastructure is expected to both ensure
compliance of Newcourt's applications and infrastructure for Year 2000, and
provide a significant competitive advantage by enabling Newcourt to rapidly
respond to market pressures and client requirements.
Quality Assurance
The Quality Assurance unit is an independent appraisal service within
the Newcourt organization. Its mandate is to examine and evaluate the
adequacy and effectiveness of the Company's management, financial controls
and operations, particularly in those areas in which the Company is exposed
to significant risks.
Legal Services
Newcourt's legal department provides specialized and comprehensive
legal services and support to each of the Company's marketing units for both
North American and international transactions. The legal department also
oversees the corporate governance of the Company. The department presently
employs 43 lawyers.
Integration Office
The Integration Office is responsible for ensuring the success of the
acquisition and subsequent merger of AT&T Capital and Newcourt. The
ultimate objective of the Integration Office is the development and
implementation of a plan which encompasses all reasonable consolidation and
cost containment initiatives while still ensuring that AT&T Capital and
Newcourt are rapidly and seamlessly integrated. This mandate requires that
the Integration Office establish an overall vision for the combined entity and
that it communicate this vision, along with the revised business units,
compensation philosophies, desired culture and behaviour and the growth,
efficiency, customer service and profitability targets, to every employee of
Newcourt. The Integration Office will aggressively manage and employ both
internal and external resources and services in order to achieve its
objective. It is presently expected that the Integration Office will be
maintained until the end of 1999.
<PAGE>
Finance Asset Portfolio
The asset portfolio for which the Company has responsibility consists
of those assets which it owns and those which it manages. Owned finance
assets consist primarily of the Company's share of larger transactions which it
has syndicated, participation in securitizations and finance assets which are
retained on the balance sheet. Managed assets comprise those portions of
syndicated assets which the Company does not retain and commercial finance
assets sold to securitization vehicles. Certain of the financial features and
financial performances of the asset portfolios summarized below have a direct
impact on the Company's cost of funds and its ability to generate new
financing transactions.
The concentration of the asset portfolio by industry is shown in the
following chart:
<TABLE>
<CAPTION>
Owned and Managed Finance Assets Portfolio by Industry
(as at December 31, 1997)
Owned<fn1> Managed Owned and
Industry Finance Assets Finance Assets Managed Assets
(in millions of dollars)
<S> <C> <C> <C> <C> <C> <C>
$ % $ % $ %
Governments/Hospitals 212.4 5.7 352.4 4.6 564.8 5.0
Road Transport 454.7 12.2 1,794.9 23.5 2,249.5 19.8
Manufacturers Finance 268.3 7.2 551.2 7.2 819.5 7.2
Air Transport 346.6 9.3 416.0 5.5 762.6 6.7
Manufacturing 648.4 17.4 332.6 4.3 981.2 8.7
Rail Transport 126.7 3.4 797.0 10.4 923.7 8.1
Healthcare 201.2 5.4 437.6 5.7 638.8 5.6
Power Production 85.7 2.3 29.4 0.4 115.1 1.0
Distribution 78.3 2.1 359.4 4.7 437.7 3.9
Construction 74.5 2.0 416.3 5.5 490.8 4.3
Printing 193.8 5.2 233.6 3.1 427.4 3.8
Financial Institutions 11.2 0.3 117.4 1.5 128.6 1.1
Resource Based 48.4 1.3 133.7 1.8 182.1 1.6
Bus Transport 44.7 1.2 82.5 1.1 127.2 1.1
Communications 126.7 3.4 156.7 2.1 283.4 2.5
Information Technology 540.0 14.5 580.7 7.6 1,120.7 9.9
Other 265.1 7.1 838.3 11.0 1,103.3 9.7
Total 3,726.7 100.0 7,629.7 100.0 11,356.4 100.0
Note:
<fn1> Includes investment in finance assets, assets held for securitization
and syndication and investment in affiliated companies.
</fn1>
</TABLE>
<PAGE>
The credit loss history of the Company's investment in finance
assets is shown in the following chart:
<TABLE>
<CAPTION>
Credit Loss History - Investment in Finance Assets
Average Credit Loss Book
Investment Investment as a % of Value of Recovery
in in Owned Average Credit Recovery as a % of
Year Ending Finance Finance Credit Investment in Loss on Credit Book
December 31 Assets Assets Loss Finance Assets Assets Loss Assets Value
(in thousands of dollars)
$ $ $ % $ $ %
<S> <C> <C> <C> <C> <C> <C> <C>
1997 2,461,401 1,775,600 8,943 0.50 14,958 6,015 40.2
1996 1,072,277 949,800 3,120 0.33 14,775 11,655 78.9
1995 704,622 688,566 1,914 0.28 4,628 2,714 58.6
1994 477,066 519,100 1,476 0.28 4,374 2,898 66.3
1993 424,334 420,270 1,401 0.33 2,688 1,287 47.9
</TABLE>
The Company's policy is to suspend accruing finance income in
respect of any finance asset on the earlier of the date when the Company first
becomes aware that payment is unlikely and 90 days after the initial default
date. Finance income continues to be accrued in respect of any finance asset
which is subject to a creditworthy guarantee.
<TABLE>
<CAPTION>
Credit Arrears History - Investment in Finance Assets
Amount in Arrears as
Investment in Amount in a % of Investment
Year Ending December 31 Finance Assets Arrears<fn1> in Finance Assets
(in thousands of dollars)
$ $ %
<S> <C> <C> <C>
1997 2,461,401 13,619 0.55
1996 1,072,277 6,353 0.59
1995 704,622 1,162 0.16
1994 477,066 272 0.06
1993 424,334 266 0.07
<fn1>Amount in 90 day arrears excludes owned finance assets which have
been repossessed by the Company and written down to their estimated net
realizable value.
</fn1>
</TABLE>
<PAGE>
The Company's policy has been to establish a credit loss reserve for
future credit losses. This reserve has been established by charges to income
and is summarized in the following chart:
<TABLE>
<CAPTION>
Credit Loss Reserve History - Investment in Finance Assets
Credit Loss Reserve
Investment in Credit Loss as a % of Investment
Year Ending December 31 Finance Assets Reserve in Finance Assets
(in thousands of dollars)
$ $ %
<S> <C> <C> <C>
1997 2,461,401 38,563 1.6
1996 1,072,277 16,465 1.5
1995 704,622 5,089 0.7
1994 477,066 4,604 1.0
1993 424,334 4,782 1.1
</TABLE>
In addition to the credit loss reserve of $38.6 million at December
31, 1997, the Company has an additional specific credit loss reserve of $1.6
million. This additional credit loss reserve is a provision against the
Company's long term securitization receivable of $351.1 million, which
represents the Company's interest in the CIP I, II, III, IV, V and VI
securitization vehicles described under "Funding Arrangements" in
"Management's Discussion and Analysis" incorporated by reference herein.
The Company utilizes interest rate swaps and other financial
management techniques to match all Company assets and liabilities in respect
of interest rate, currency and term to maturity. See "Funding Arrangements -
Market Risk Management" in "Management's Discussion and Analysis"
incorporated by reference herein.
Properties
The Company presently has the following principal offices: 10 in
Canada; 23 in the United States; 5 in the United Kingdom; 4 in Australia;
plus offices in Argentina, Austria, Barbados, Belgium, Brazil, Columbia,
Czech Republic, France, Germany, Hong Kong, Hungary, Italy, Mexico,
The Netherlands, New Zealand, Poland, Russia, Singapore and Spain. The
Company has 11 other offices in Canada, located in Vancouver, Surrey,
Kelowna, Calgary, Edmonton, Burlington, Markham, Mississauga, Laval,
Montreal and Halifax. In the United States, Newcourt has 23 offices located
in Bloomfield Hills, Burlingame, Chicago, Dallas, Danbury, Fort
Washington, Framingham, Golden, Indianapolis, Irvine, Kennesaw, Lake
Oswego, Memphis, Meridian, Miami Lakes, Morristown, New York,
Parsippany, Phoenix, Pleasanton, Reston, Tucker, and Westboro. All of the
premises are under leases for varying terms with arm's-length landlords.
<PAGE>
Employees
Newcourt's workforce at January 31, 1998 consisted of
approximately 5,000 employees of which 74% are situated in Company
offices outside Canada. The Company employs 1,282 people in Canada,
2,927 people in the United States, 447 people in Europe and 331 people
throughout Asia-Pacific, Latin American and the Caribbean.
ITEM 4 - SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following selected financial information has been derived from
the consolidated financial statements of the Company for the five years ended
December 31, 1997. The information should be read in conjunction with
"Management's Discussion and Analysis" and the consolidated financial
statements and accompanying notes of the Company which are contained in its
Annual Report to Shareholders for the year ended December 31, 1997.
<TABLE>
<CAPTION>
SELECTED SUMMARY FINANCIAL INFORMATION
(in thousands of Canadian dollars, except per share amounts)
Year Ended December 31
1997<fn7> 1996 1995 1994 1993
<fn3>
Income Statement Data $ $ $ $ $
<S> <C> <C> <C> <C> <C>
Securitization and syndication fees 188,837 87,506 44,372 34,338 24,135
Net income from affiliated companies
and management fees 45,249 31,697 18,102 8,690 7,411
Net finance income 84,349 52,386 29,686 15,930 12,619
Total asset finance income 318,435 171,589 92,160 58,958 44,165
Operating income <fn6> 119,074 64,150 36,438 24,610 21,940
Net income 36,421 50,681 29,405 18,737 14,268
Earnings per Common and Special Share 1.33 0.96 0.76 0.60 0.67
<fn1><fn4><fn5> <fn6>
Fully diluted earnings per Common and
Special Share <fn2><fn5> 0.52 0.96 0.76 0.60 0.67
As at December 31
1997 1996 1995 1994 1993
Balance Sheet Data<fn8> $ $ $ $ $
<S> <C> <C> <C> <C> <C>
Total assets 6,183,016 2,213,376 1,360,088 733,970 547,423
Debt 2,789,816 1,592,026 1,061,911 516,881 417,309
Shareholders' equity 3,061,493 515,934 245,194 160,964 28,011
<fn5>
Notes:
<fn1> Based on the weighted average number of Common Shares and
Special Shares outstanding during the period.
</fn1>
<PAGE>
<fn2> Based on the weighted average number of Common Shares and
Special Shares outstanding during the period after giving effect to the
exercise of outstanding stock options.
</fn2>
<fn3> The 1993 figures include a $3.4 million gain ($1.9 million after
provision for income taxes or $0.18 per share), attributable to the
securitization of pre-1993 commercial finance assets.
</fn3>
<fn4> On November 30, 1995, 1,611,000 Special Shares were
converted into 1,611,000 Common Shares. On December 27, 1995,
1,411,675 Special Shares were converted into 1,411,675 Common shares.
On July 2, 1996, the remaining 199,325 Special Shares were converted into
199,325 Common Shares. On December 11, 1995, the Company redeemed
and cancelled all issued and outstanding Preference Shares.
</fn4>
<fn5> Effective April 14, 1997, the Company subdivided on a two-for
- -one basis all of the Company's issued and outstanding Common Shares and
all of the Company's Common Shares reserved for issuance. The Selected
Summary Financial Information set out in the above table has been adjusted
to reflect the stock split.
</fn5>
<fn6> Before restructuring charges of $103 million and taxes.
</fn6>
<fn7> Results do not reflect the acquisition by the Company of AT&T
Capital Corporation, which acquisition was completed on January 12, 1998.
</fn7>
<fn8> Amounts have been reclassified to conform to the presentation'
adopted in current year.'
</fn8>
</TABLE>
The following chart sets forth for each of the eight quarters ending
December 31, 1997, information relating to revenue, net income and earnings
per Common and Special Share:
<TABLE>
<CAPTION>
1997 1996
Dec. 31 Sept. 30 June 30 Mar. 31 Dec. 31 Sept. 30 June 30 Mar. 31
(in thousands of dollars<fn1>)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total Asset Finance Income 126,214 80,667 62,889 48,665 56,539 48,508 37,011 29,531
Net Income/(Loss) 3,286 (856) 19,866 14,125 17,571 13,882 11,225 8,003
Earnings/(Loss) per Common
and Special Share<fn2> 0.02 (0.04) 0.31 0.23 0.30 0.26 0.22 0.17
Fully Diluted Earnings/(Loss)
per Common and Special Share 0.02 (0.04) 0.31 0.23 0.30 0.26 0.22 0.17
<fn2>
<fn1>Except per share amounts.
</fn1>
<fn2>Adjusted to reflect a 2 for 1 subdivision of all of the issued
and outstanding Common Shares effective April 14, 1997.
</fn2>
</TABLE>
<PAGE>
Dividend Record and Policy
Other than restrictions on the payment of dividends imposed by law,
there are no restrictions which would prevent the Company from paying
dividends. The Company's board of directors has established a policy to pay
dividends on the Company's equity shares (Common Shares and Special
Shares) of between 10% and 20% of the Company's after-tax net income
(after providing for the payment of dividends on any of the Company's
Preference Shares). Any payment of dividends (and the amounts thereof) is at
the discretion of the board of directors and is dependent upon the Company's
results of operations, financial conditions and other factors that the board of
directors deems relevant.
Since completion of the Company's initial public offering in
February, 1994, the Company has declared and paid a quarterly dividend of
$0.05 per equity share (Common and Special Shares) in May, August and
November of 1994 and in February, May and August of 1995, a quarterly
dividend of $0.06 per equity share in November of 1995 and February, May
and August of 1996, and a quarterly dividend of $0.07 per equity share in
November 1996 and February 1997. Following the two for one subdivision of
the Company's Common Shares in April 1997, the Company paid a quarterly
dividend of $0.035 per equity share in May and August of 1997 and a
quarterly dividend of $0.04 per equity share in October 1997 and February
1998.
Since 1993, the Company has paid the following dividends on its
Preference Shares:
<TABLE>
<CAPTION>
Year Amount per Agregate
Preference Share Amount
$ $
<S> <C> <C>
1997 0 0
1996 0 0
1995 0 0
1994 56.99 311,000
1993 80.00 545,000
</TABLE>
All of the issued and outstanding Preference Shares were purchased
and cancelled by the Company in December, 1995.
ITEM 5 - MANAGEMENT'S DISCUSSION AND
ANALYSIS OF OPERATING RESULTS
Reference is made to the section entitled "Management's Discussion
and Analysis" on pages 15 to 28 of the Annual Report to the Shareholders of
the Company for the year ended December 31, 1997 which section is
incorporated herein by reference.
<PAGE>
The section of "Management's Discussion and Analysis" entitled
"Outlook" on page 26 of the Annual Report contains, in accordance with
applicable Canadian securities laws and policies, certain forward-looking
information about the Company's business and expected trends in the asset
finance industry. Such disclosure amounts to forward-looking statements
within the meaning of the United States Private Litigation Reform Act of 1995
and accordingly, such forward-looking information is subject to significant
risks and uncertainties. There are a number of factors that could cause actual
results to differ materially from historical results and results anticipated by
the forward-looking statements contained in the "Outlook" section. Such
factors and risks include those listed under "Risk Factors" in "Management's
Discussion and Analysis". Readers should carefully review the risk factors
described in the other documents the Company files from time to time with
Canadian securities regulatory authorities and the United States Securities and
Exchange Commission.
ITEM 6 - MARKET FOR SECURITIES
The Common Shares of the Company are listed on The Toronto
Stock Exchange, The Montreal Exchange and the New York Stock Exchange.
The Company's Common Shares trade under the stock symbol "NCT" on all
such exchanges.
ITEM 7 - DIRECTORS AND OFFICERS
Directors
The following table sets forth the names, municipality of residence,
principal occupation and period of service of each of the directors of the
Company:
<TABLE>
<CAPTION>
Name and Municipality
of Residence Principal Occupation Period of
Directorship
<S> <C> <C>
DAVID F. BANKS<fn1><fn3><fn5>
Toronto, Ontario Chairman of the Board Director since
February 1998
DAVID J. SHARPLESS<fn1>
North York, Ontario Deputy Chairman of the Board Director since
April 1993
STEVEN K. HUDSON<fn1><fn4><fn5>
Toronto, Ontario Officer of the Company Director since
June 1988
BRADLEY D. NULLMEYER<fn4>
Toronto, Ontario Officer of the Company Director since
February 1991
<PAGE>
Name and Municipality
of Residence Principal Occupation Period of
Directorship
<S> <C> <C>
DAVID D. MCKERROLL <fn3>
Toronto, Ontario Officer of the Company Director since
April 1995
THOMAS S. AXWORTHY<fn5>
Montreal, Quebec Executive Director, Director since
The CRB Foundation April 1995
(charitable foundation)
GERALD E. BEASLEY<fn4>
Mississauga, Ontario Senior Executive Vice Director since
President, Risk Management, October 1997
Canadian Imperial Bank
of Commerce
GUY HANDS<fn1><fn4>
Sevenoaks, England Managing Director, Principal Director since
Finance Group, Nomura February 1998
International plc
(international investment bank)
ROBERT F. KILIMNIK<fn4><fn5>
Waterloo, Ontario Vice President, Investments, Director since
The Mutual Life Assurance April 1993
Company of Canada
(life insurance company)
DAVID A. MACINTOSH<fn1><fn2>
Waterloo, Ontario Executive Vice President, Director since
The Mutual Life Assurance April 1993
Company of Canada
(life insurance company)
RONALD A. MCKINLAY<fn1><fn2><fn3>
Toronto, Ontario Former Chairman of the Company Director since
Former Chairman of Canada January 1993
Deposit Insurance Corporation.
PAUL G. MORTON<fn3><fn4>
Toronto, Ontario President, Security Investment Director since
Corporation Ltd. April 1995
(private investment company)
BRUCE I. ROBERTSON<fn2><fn4>
Toronto, Ontario President, B.I. Robertson & Director since
Associates Ltd. April 1995
(asset management company)
TAKUMI SHIBATA<fn2>
London, England President, Nomura International Director since
plc (international investment March 1998
bank)
DR. STEVEN C. SMALL<fn2><fn3>
Toronto, Ontario Founder and Senior Partner, Director since
Dental Anaesthesia Associates April 1995
(dental services company)
RICHARD E. VENN<fn1>
Toronto, Ontario Chairman and Chief Director since
Executive Officer, CIBC Wood October 1997
Gundy Securities Inc.
(investment dealer)
WILLIAM D. WALSH<fn5>
Atherton, California General Partner, Sequoia Director since
Associates (investment firm) December 1993
Notes:
<fn1> Member of the Executive Committee'
</fn1>
<fn2> Member of the Audit Committee
</fn2>
<fn3> Member of the Compensation and Conduct Review Committee
</fn3>
<fn4> Member of the Investment Committee'
</fn4>
<fn5> Member of the Long Range Planning Committee
</fn5>
All directors of the Company serve until the next Annual General
Meeting of Shareholders. The background of each member of the Company's
board of directors is described below:
David F. Banks, Chairman, was appointed as Chairman of the
Board of Directors on February 4, 1998 following the acquisition by Newcourt
of AT&T Capital. Mr. Banks has over twenty-five years of senior financial
services experience in the United States and international markets. Prior to
assuming the position of Chairman, Mr. Banks had served as President and
Chief Executive Officer of AT&T Capital since 1997. From 1994 to 1997
Mr. Banks served as Chief Executive Officer of Penna Holdings plc and
advisor to Nomura International plc. Prior to this, he served as Chief
Financial Officer of General Atlantic Group Ltd.
David J. Sharpless, Deputy Chairman, joined the Company on a full-
time basis on February 1, 1997. Mr. Sharpless was appointed Deputy
Chairman on February 4, 1998. Prior to joining the Company, Mr. Sharpless
was a senior partner with the law firm of Blake, Cassels & Graydon where he
practised corporate and commercial law, with particular emphasis on the
financial services and equipment leasing industries. He is a director of a
number of companies and serves as Chairman of the Board of Directors of
Dell Financial Services. Mr. Sharpless served as Vice Chairman of the Board
of Directors of the Company from October, 1995 to March, 1997 and as
Chairman of the Board from March 25, 1997 to February 4, 1998.
Steven K. Hudson, Chief Executive Officer, is a founding principal of
Newcourt and has directed the Company's development since 1984. Mr.
Hudson has fifteen years of experience in the asset finance industry. He
currently serves as Chairman of the Board of Directors of the Toronto
Community Foundation and is a member of the Board of Directors of AGRA
Inc., The Royal Ontario Museum Foundation and the St. Joseph's Health
<PAGE>
Centre Foundation of Toronto. Mr. Hudson also serves as a member of the
Executive Committee of the Canadian Finance and Leasing Association and as
a Director of the Foundation for Leasing Education. Mr. Hudson is a
chartered accountant.
Bradley D. Nullmeyer, President of Newcourt Financial, is a founding
principal of Newcourt. Mr. Nullmeyer joined the Company in 1986 and is
currently responsible for the overall management and direction of the
Company's commercial finance business, known as Newcourt Financial.
Prior to joining the Company, Mr. Nullmeyer was a financial officer with a
major transportation company and a chartered accountant with Ernst & Young.
David D. McKerroll, President of Newcourt Capital, is a founding
principal of Newcourt and joined the Company in 1987. Mr. McKerroll is
currently responsible for the overall management and direction of the
Company's corporate finance business, known as Newcourt Capital. Prior to
joining the Company, Mr. McKerroll was a chartered accountant with Ernst &
Young.
Thomas S. Axworthy is currently Executive Director of the CRB
Foundation in Montreal and an Adjunct Lecturer at the John F. Kennedy
School of Government, Harvard University, where he has held numerous
appointments since 1984. Mr. Axworthy was formerly Principal Secretary to
the Office of the Prime Minister.
Gerald E. Beasley has served as Senior Executive Vice President, Risk
Management of The Canadian Imperial Bank of Commerce ("CIBC") since
1994 and has been an officer of CIBC since 1968.
Guy Hands has served as Managing Director of Nomura International
plc's Principal Finance Group ("Nomura") since 1994. From 1982 until 1994,
Mr. Hands worked at Goldman Sachs International in various capacities,
including as the Head of Global Asset Structuring.
Robert F. Kilimnik has served as Vice President, Investments of The
Mutual Group since 1991 and has been associated with The Mutual Group for
over 20 years.
David A. MacIntosh has served as Executive Vice President of The
Mutual Group since 1987, has been associated with The Mutual Group since
1963 and is a director of a number of subsidiaries and affiliates of The Mutual
Group.
Ronald A. McKinlay, served as Chairman of the Board from December
12, 1994 to March 25, 1997 and has been a director of the Company since
1993. Mr. McKinlay retired as chairman of the Canada Deposit Insurance
Corporation in December 1991, having served in such position since 1985.
For several years prior to 1985, Mr. McKinlay served as chairman of The
Clarkson Company Limited (now Ernst & Young Inc.).
Paul G. Morton is President of Security Investment Corporation Ltd.,
co-founder and former President of Global Communications Limited and
former Chairman of the Stadium Corporation of Ontario.
<PAGE>
Bruce I. Robertson is President of B.I. Robertson and Associates Ltd., a
company which specializes in the management of real estate and mortgages on
behalf of financial institutions and other clients. Prior to assuming this
position, Mr. Robertson was associated for over 11 years with a major
chartered accounting firm.
Takumi Shibata has served as President of Nomura International plc
("Nomura") since 1997 and has been an officer of Nomura since 1976.
Dr. Steven C. Small is a Doctor of Dental Surgery, Fellow of the
American Dental Society of Anaesthesia, founder and senior partner of Dental
Anaesthesia Associates and the President of Thorngard Capital Corporation, a
private merchant banking and venture capital firm. Dr. Small is one of the
founding shareholders of the Company.
Richard E. Venn is Chairman and Chief Executive Officer of CIBC
Wood Gundy Securities, Inc. ("CIBC Wood Gundy") and has served in
various executive capacities with CIBC Wood Gundy since 1975.
William D. Walsh is founder and general partner of Sequoia Associates,
a private California investment firm established in 1982. Mr. Walsh is a
director of a number of private and public Canadian and U.S. companies.
The board of directors of the Company has established five principal
committees. The Executive Committee, comprising seven board members,
four of whom are independent of and unrelated to management of the
Company, meets as required when the Board is not in session and is
responsible for advising senior management on specific business and
managerial issues. The Executive Committee is also responsible for
establishing criteria and procedures for recommending nominees for election
to the Board. The Audit Committee, comprising five independent and
unrelated board members, oversees the actions of the Company's independent
auditors and internal controls and is responsible for reviewing the Company's
external audit plan, internal auditing process, accounting standards and
practices, financial risk management and financial reporting and statements.
The Compensation and Conduct Review Committee, comprising five
board members, three of whom are independent and unrelated board members,
reviews the level and form of the compensation payable to the senior officers
of the Company and establishes human resource and conduct policies for the
Company. This Committee also oversees the Company's corporate
governance procedures and monitors the Company's processes relating to
conflicts of interest, business ethics and customer relations. The Investment
Committee, comprising seven board members, five of whom are independent
directors, oversees the Company's investment and lending practices and
annually reviews the Company's credit guidelines, underwriting procedures
and portfolio management processes as codified in the Company's credit
manual. The Long Range Planning Committee comprises five directors, three
of whom are unrelated to management, and is responsible for recommending
longterm objectives and strategies to the Board and senior management based
on an assessment of national and international market trends and social-
economic and political factors.
<PAGE>
Executive Officers
Name and Municipality of Residence Position with the Company
DAVID F. BANKS Chairman of the Board of Directors
Toronto, Ontario
STEVEN K. HUDSON Chief Executive Officer
Toronto, Ontario
BRADLEY D. NULLMEYER President, Newcourt Financial
Toronto, Ontario
DAVID D. MCKERROLL President, Newcourt Capital
Toronto, Ontario
DANIEL A. JAUERNIG President, Newcourt Services and
Toronto, Ontario Chief Financial Officer
DAVID J. SHARPLESS Deputy Chairman of the Board
North York, Ontario of Directors
BORDEN D. ROSIAK Executive Vice President
Toronto, Ontario
SCOTT J. MOORE Senior Vice President, Legal
Morristown, New Jersey and General Counsel
PAUL W. CURRIE Executive Vice President
Toronto, Ontario
MICHAEL A. DEBARNARDI Executive Vice President, Credit &
Toronto, Ontario Risk Management
JOHN B. SADLER Executive Vice President
Toronto, Ontario
GLENN A. VOTEK Executive Vice President &
Morristown, New Jersey Treasurer
Except as described below or elsewhere in this information form,
each of the officers of the Company has been an officer of, or served in
another capacity with, the Company for the past five years. Other relevant
business experience of senior management of the Company is also set forth
below or elsewhere:
Daniel A. Jauernig joined the Company in 1991. Prior to becoming
President of Newcourt Services and Chief Financial Officer of the Company,
Mr. Jauernig was responsible for the Company's treasury department. Prior
to joining the Company, Mr. Jauernig specialized in audit and taxation with
Arthur Andersen & Co.
<PAGE>
Borden D. Rosiak joined the Company in September 1994, prior to
which he served as chief financial officer and in other capacities with a major
Canadian life insurance company since 1990. Prior to 1990, Mr. Rosiak was
senior vice president, finance of a Canadian chartered bank.
Scott J. Moore joined the Company in June, 1997 and was appointed
General Counsel in January, 1998. Prior to joining the Company, Mr. Moore
was a partner with the law firm Sidley & Austin in Chicago.
Paul W. Currie joined the Company in January, 1998 and has overall
responsibility for the Integration Office. Prior to joining the Company he
served as a senior partner responsible for the financial services practice of
Coopers and Lybrand.
Michael A. DeBernardi joined the Company in January, 1998 upon the
acquisition of AT&T Capital. Prior to his appointment as Executive Vice
President, Credit & Risk Management, Mr. DeBernardi was chief credit
officer of AT&T Capital, a position he held since 1985.
John B. Sadler joined Newcourt in 1993 and has overall responsibility
for Newcourt's corporate affair's office. Prior to joining the Company, Mr.
Sadler was employed as vice president of Burson-Marsteller Ltd. and as the
Director of Policy and Communications for the Government of Canada's
privatization department.
Glenn A. Votek joined Newcourt in January, 1998 upon the acquisition
of AT&T Capital. Prior to joining the Company, Mr. Votek held a number of
different offices in AT&T Capital's treasury group, most recently as AT&T
Capital's treasurer.
As at February 4, 1998, the directors and senior executive officers of
the Company as a group beneficially owned, directly or indirectly, 8,358,719
Common Shares, representing approximately 6.0% of the Common Shares
outstanding as at such date.
ITEM 8 - ADDITIONAL INFORMATION
Additional information including directors' and officers'
remuneration and indebtedness, options to purchase securities, interests of
insiders in material transactions and principal holders of the Company's
securities, where applicable, is contained in the Company's management
information circular dated February 4, 1998 for the Company's annual
general meeting of shareholders on March 25, 1998. Additional financial
information is provided in the comparative financial statements for the
financial year ended December 31, 1997 and the notes thereto and the report
of the Company's auditors thereon and in "Management's Discussion and
Analysis" contained on pages 15 to 28 inclusive in the Annual Report to the
Shareholders of the Company for the year ended December 31, 1997. Copies
of such documents, together with copies of any interim financial statements of
the Company subsequent to the financial statements for the year ended
December 31, 1997, copies of this Renewal Annual Information Form and
copies of any documents or the pertinent pages of any documents incorporated
by reference in this Renewal Annual Information Form, are available upon
request from the Company's secretary, provided that the Company may
require payment of a reasonable charge if the request is made by a person
who is not a security holder of the Company. At any time when securities of
<PAGE>
the Company are in the course of a distribution pursuant to a short form
prospectus or a preliminary short form prospectus has been filed in respect of
a distribution of its securities, a copy of the foregoing documents, together
with a copy of any other documents that are incorporated by reference into the
short form prospectus or the preliminary short form prospectus may be
obtained without charge upon request from the Company's secretary.
</TABLE>
