The 19th AGM of HKELA was held on 12th July, 2001 at Hotel Furama. The following is the Chairman's Report presented by Mr. Percy Lau.

CHAIRMAN'S REPORT


Last year has been a challenging year for both Hong Kong and the equipment leasing industry. Although Hong Kong economy shows sign of recovery in 2000 and 2001, the GDP growth for the first quarter of 2001 was 2.5%, which was slightly beyond expectation. As a highly externally oriented economy, Hong Kong relies heavily on economic conditions of the U.S and China. On one hand, the outlook of the U.S. economy is uncertain. This would probably affect capital investment, which in return affects demand for financing facilities. On the other hand, in the hope of China accession to the World Trade Organization ("WTO"), the demand for equipment leasing facilities is expected to be enormous. It seems controversial at first glance; however, these two factors will, to a large extent, influence the equipment leasing industry in Hong Kong. The equipment leasing market in Hong Kong will be characterized by fiercer competition, narrowing interest spread and more cross-border business.

The Association, at an aim to promoting co-operation among members and striking for the betterment of the equipment leasing industry as a whole, has initiated several projects and activities. We have been working closely with relevant parties to resolve problems encountered in cross-border financing. Also, seminars were held to update members' knowledge about the industry. In addition, negotiation with CIS for the enhancement of database containing statistics for marketing purpose is in progress. Moreover, the web page for the Association will be launched in the near future to promote professional image of the Association and facilitate communication among members. Before we go into the details of these subjects, I would like to acknowledge members of the Executive Committee for their contribution in the past year.


The Executive Committee

The following members served in the executive committee before this AGM:

Chairman: Mr. Percy Lau - Associates Financial Services (Asia) Ltd.
Vice Chairman: Mr. Kotaro Takamori - Orix Asia Ltd.
Treasurer: Mr. Raymond Wong - Dah Sing Bank Ltd.
Secretary: Mr. Joe Tam - Johnson, Stokes & Master
Member: Mr. Ivan Chak - Trilease International Ltd.
Mr. T Hayano - Tokyo Leasing (HK) Ltd.
Mr. Koji Harada - Sumisho Lease (Hong Kong) Ltd.
Mr. Patrick Wat - GE Capital Finance Ltd.

In the year, Mr. Joe Tam succeeded Mr. David Ellis as the Secretary for the Association, while Mr. Koji Harada replaced Mr. Naoki Ozawa as member of Executive Committee. I hereby extend my warmest gratitude to Mr. Ellis and Mr. Ozawa for their service.


Membership

We regret to see the withdrawal of 2 members, Wayfoong Credit Ltd. and Hewlett-Packard Asia Pacific Ltd. Despite of this, we are glad that CITIC Ka Wah Bank has joined us as full member this year. As of today, we have 29 full members and 10 associate members.

In the following sections, I will introduce to you the tasks accomplished by the Association in the past year.


Completion of Cross-border Finance Documentation

There is no doubt that China is becoming the focus of our business development. Nevertheless, legal protection on leased assets and standardization of legal documentation are among various areas in China that need further improvement. It is not strange that authorities in different localities would adopt different treatments on the same issue. This will inevitably confuse those members with business in China.

Having worked with lawyer and members, some legal documentations regarding equipment leasing business have been standardized. This greatly facilitates our development in China. We will continue to liaise with local authorities so that more extensive protection on leased assets can be adopted.


Liaison with Chinese Government about Registration of Leased Assets

The most controversial issue in developing equipment leasing business in China is that it is difficult, if not impossible, to have sufficient legal protection on leased assets. To tackle this problem, I and Vice Chairman, Mr. Takamori, joined a delegation organized by Chinese Manufacturers' Association of Hong Kong to Guangzhou in April 2001. The delegation was well received by Mr. Tang Bing Quan, the Vice Governor of Guaugdong Province. During the visit, we raised concern about the registration of financed equipment and its enforcement in case of default of leasees. Discussion is ongoing with officials of Commission for Foreign Trade and Economic Co-operation of Guangdong Province. Although we understand that it is not an easy mission, we will continue to work with local authorities on these for further development of leasing business.


Organizing 2 luncheon seminars

Two luncheon meetings were held in the past year.

In October 2000, Mr. William Ho, a partner of Baker & McKenzie, was invited to deliver a speech on the influence on financial institutions for China to join the WTO.

In April 2001, Mr. Rico Chan and Mr. William Ho, partners of Baker & McKenzie, were invited to give a speech on the key legal issues and latest development of equipment leasing in China.


Hosting Asian Leasing Committee Meeting

We hosted the 39th Governing Council Meeting for Asian Leasing Association in December 2000. Representatives from various member countries gathered together to discuss matters concerning development of leasing business in the region. Members exchanged ideas and knowledge about the industry and recent market environment. Communication and co-operation were enhanced among members.


Integrating Statistics and Registration Information of Leased Equipment into Credit Information Services ("CIS")

Currently, unlike vehicle financing, CIS can only provide limited information about leased assets with simple classification that is of little reference value for members. To explore the possibility for CIS to provide support for data generation regarding leased assets, a working group concerning the issue was established.


Launching of HKELA' s Web Page

We are now living in the age of knowledge and information flows. As I mentioned in the last Chairman's Report, we should construct a web page for the Association and address the impact of e-commerce upon the leasing industry. I am glad to disclose that the web page of the Association will be launched by the end of July 2001. In the first phase, the web page aims at promoting the leasing industry in Hong Kong and the region, and serving as an additional channel for communication among members. You are encouraged to visit the web page and furnish us with input for its improvement.


Outlook

I believe that with the recovery of local economy and China's accession to WTO, the equipment leasing industry would be very flourishing. The Association has contributed to the four funding schemes proposed by Small and Medium Enterprises Committee (SMEC) to support the development of small and medium enterprises (SMEs) in Hong Kong. Among the four funding schemes, "SME Business Installations and Equipment Loan Guarantee Scheme" is worth HKD500 million. Under the Scheme, the government would provide 50% repayment guarantees, or a maximum amount of HKD500,000, on companies' bank loans for a maximum of three years. Undoubtedly, these schemes will help the development of SMEs as well as stimulate lending business of member companies.

We also understand that contribution of China-related business in our portfolio will become more significant. To grasp these invaluable opportunities, the Executive Committee will continue to work with related parties to improve the formality and enforceability of legal documentation and registration of leased assets in China.

Also, we will strengthen co-operation with local authorities and industrial bodies in China such as Leasing Business Committee of China Association of Enterprises with Foreign Investment  and China Finance Association Financial Lease Research Society, in an aim to provide members with update China market information.

Moreover, we will urge Trade and Industry Department of HKSAR to assist us in the process of negotiation with Chinese local authorities so as to promote the equipment leasing industry in the region.

Thank you.