Canada Research ECN Capital Corp. - Raymond … · has adopted a new corporate strategy involving a...

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Canada Research Published by Raymond James Ltd. Please read domestic and foreign disclosure/risk information beginning on page 41 and Analyst Certification on page 39. Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2 ECN Capital Corp. October 19, 2016 ECN-TSX Company Report - Initiation of Coverage Michael Overvelde CFA, CPA, CA | 416.777.4943 | [email protected] Brenna Phelan CFA, CPA, CA (Associate) | 416.777.7042 | [email protected] Diversified Financials In Transition and Attractively Valued; Initiating at Outperform Recommendation ECN Capital Corp. (ECN) is a major North American equipment finance company with an emerging asset management business. It is a newly independent company comprised of the former Commercial & Vendor, Aviation and Rail Finance businesses of Element Financial, from which it was spun out on Oct-3-16. Coincident with its separation, ECN has adopted a new corporate strategy involving a planned transition into a hybrid leasing and asset management company engaged in structuring and managing investment funds for yield-hungry institutional investors. We expect this transition to involve a partial shift of on-balance sheet exposures into managed funds, and that it will pursue an acquisition of a private debt fund manager in the near term to establish a US Middle-Market Finance presence. While a successful evolution into a less capital intensive, more fee generative and higher ROE business might eventually warrant a higher valuation for ECN, we expect that the risks and earnings volatility associated with the transition process will likely constrain its valuation in the near-term and we establish our target based on 0.9x 4Q17E BVPS. With 51% projected upside, we initiate coverage with an Outperform rating. Analysis An Emerging Growth Company in a Mature Market – Although its current leasing end-markets are mature in nature, we consider ECN to be a growth-oriented company given the growth dynamics of the asset management market it is targeting, its current expansion and acquisition plans, and the track record of its senior management team in aggressively growing similar businesses (e.g., Newcourt Credit and Element Financial), largely via M&A. We Expect Near-Term Earnings and Share Price Volatility – We expect that earnings will be volatile and largely unpredictable in the near-term as ECN goes about transitioning its balance sheet and making acquisitions in alignment with its new corporate strategy. We also believe that its share price might be relatively volatile until its shares transition from former Element holders into the hands of investors interested in owning the stock on its own merits. We Forecast Deal-Driven ROE Expansion in 2017E – Our forecasts anticipate a 2017E ROE of 8.3% (pre-tax adjusted ROE of 11.2%) supported by non-recurring revenues generated by the launch of its first rail fund in 1Q17E and by forecast earnings contribution from a debt fund manager acquisition we are assuming will close in 2Q17E. We estimate a current run rate ROE of 6.2% in 3Q16E. Valuation Our $4.40 target price is based on a multiple of 0.9x 4Q17E BVPS, which considers the quality of its assets, its 2017E ROE of 8.3%, risks related to its strategic repositioning and expected near-term earnings volatility, and the relative valuation of leasing sector peers with comparable profitability. See our Valuation & Recommendation section for details. Adj. 1Q 2Q 3Q 4Q Full Revenues BVPS EPS Mar Jun Sep Dec Year (000s) 2015A NA NA NA NA C$0.40 C$364,241 C$4.12 2016E 0.08A 0.07A 0.07 0.08 0.30 394,526 4.49 2017E 0.11 0.08 0.09 0.12 0.40 465,030 4.85 2018E 0.09 0.10 0.09 0.09 0.38 439,772 5.19 Source: Raymond James Ltd., Thomson One Outperform 2 C$4.40 target price Current Price ( Oct-17-16 ) C$2.95 Total Return to Target 51% 52-Week Range C$3.59 - C$2.86 Suitability High Risk/Growth Market Data Market Capitalization (mln) C$1,140 Current Net Debt (mln) C$4,548 Enterprise Value (mln) C$5,688 Shares Outstanding (mln, f.d.) 390.6 10 Day Avg Daily Volume (000s) 5,915 Dividend/Yield C$0.04/1.4% Key Financial Metrics 2015A 2016E 2017E 2018E P/Adj. EPS 7.3x 9.8x 7.4x 7.8x P/B 0.7x 0.7x 0.6x 0.6x ROE NA 6.8% 8.3% 7.3% Leverage 2.81x 2.56x 2.45x 1.74x AUM (C$ bln) C$7.9 C$9.8 C$13.4 C$13.0 Company Description ECN Capital is a North American equipment finance company with operations in the fields of Commercial & Vendor Finance, Rail Finance and Aviation Finance. In addition to investing directly in equipment loans and leases, ECN also structures and manages funds for institutional investors comprised of long-life, yielding assets. It aims to materially grow the contribution of asset management-related revenues through a combination of new fund issuance and acquisitions.

Transcript of Canada Research ECN Capital Corp. - Raymond … · has adopted a new corporate strategy involving a...

Page 1: Canada Research ECN Capital Corp. - Raymond … · has adopted a new corporate strategy involving a planned transition into a hybrid leasing ... Canada Research ... asset-backed securities)

Canada Research Published by Raymond James Ltd.

Please read domestic and foreign disclosure/risk information beginning on page 41 and Analyst Certification on page 39. Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2

ECN Capital Corp. October 19, 2016 ECN-TSX Company Report - Initiation of Coverage Michael Overvelde CFA, CPA, CA | 416.777.4943 | [email protected]

Brenna Phelan CFA, CPA, CA (Associate) | 416.777.7042 | [email protected]

Diversified Financials

In Transition and Attractively Valued; Initiating at Outperform

Recommendation ECN Capital Corp. (ECN) is a major North American equipment finance company with an emerging asset management business. It is a newly independent company comprised of the former Commercial & Vendor, Aviation and Rail Finance businesses of Element Financial, from which it was spun out on Oct-3-16. Coincident with its separation, ECN has adopted a new corporate strategy involving a planned transition into a hybrid leasing and asset management company engaged in structuring and managing investment funds for yield-hungry institutional investors. We expect this transition to involve a partial shift of on-balance sheet exposures into managed funds, and that it will pursue an acquisition of a private debt fund manager in the near term to establish a US Middle-Market Finance presence. While a successful evolution into a less capital intensive, more fee generative and higher ROE business might eventually warrant a higher valuation for ECN, we expect that the risks and earnings volatility associated with the transition process will likely constrain its valuation in the near-term and we establish our target based on 0.9x 4Q17E BVPS. With 51% projected upside, we initiate coverage with an Outperform rating.

Analysis An Emerging Growth Company in a Mature Market – Although its current leasing

end-markets are mature in nature, we consider ECN to be a growth-oriented company given the growth dynamics of the asset management market it is targeting, its current expansion and acquisition plans, and the track record of its senior management team in aggressively growing similar businesses (e.g., Newcourt Credit and Element Financial), largely via M&A.

We Expect Near-Term Earnings and Share Price Volatility – We expect that earnings will be volatile and largely unpredictable in the near-term as ECN goes about transitioning its balance sheet and making acquisitions in alignment with its new corporate strategy. We also believe that its share price might be relatively volatile until its shares transition from former Element holders into the hands of investors interested in owning the stock on its own merits.

We Forecast Deal-Driven ROE Expansion in 2017E – Our forecasts anticipate a 2017E ROE of 8.3% (pre-tax adjusted ROE of 11.2%) supported by non-recurring revenues generated by the launch of its first rail fund in 1Q17E and by forecast earnings contribution from a debt fund manager acquisition we are assuming will close in 2Q17E. We estimate a current run rate ROE of 6.2% in 3Q16E.

Valuation Our $4.40 target price is based on a multiple of 0.9x 4Q17E BVPS, which considers the quality of its assets, its 2017E ROE of 8.3%, risks related to its strategic repositioning and expected near-term earnings volatility, and the relative valuation of leasing sector peers with comparable profitability. See our Valuation & Recommendation section for details.

Adj. 1Q 2Q 3Q 4Q Full Revenues BVPS EPS Mar Jun Sep Dec Year (000s)

2015A NA NA NA NA C$0.40 C$364,241 C$4.12

2016E 0.08A 0.07A 0.07 0.08 0.30 394,526 4.49

2017E 0.11 0.08 0.09 0.12 0.40 465,030 4.85

2018E 0.09 0.10 0.09 0.09 0.38 439,772 5.19

Source: Raymond James Ltd., Thomson One

Outperform 2 C$4.40 target price

Current Price ( Oct-17-16 ) C$2.95 Total Return to Target 51% 52-Week Range C$3.59 - C$2.86 Suitability High Risk/Growth

Market Data Market Capitalization (mln) C$1,140 Current Net Debt (mln) C$4,548 Enterprise Value (mln) C$5,688 Shares Outstanding (mln, f.d.) 390.6 10 Day Avg Daily Volume (000s) 5,915 Dividend/Yield C$0.04/1.4%

Key Financial Metrics 2015A 2016E 2017E 2018E

P/Adj. EPS 7.3x 9.8x 7.4x 7.8x

P/B 0.7x 0.7x 0.6x 0.6x

ROE NA 6.8% 8.3% 7.3%

Leverage 2.81x 2.56x 2.45x 1.74x

AUM (C$ bln) C$7.9 C$9.8 C$13.4 C$13.0

Company Description ECN Capital is a North American equipment finance company with operations in the fields of Commercial & Vendor Finance, Rail Finance and Aviation Finance. In addition to investing directly in equipment loans and leases, ECN also structures and manages funds for institutional investors comprised of long-life, yielding assets. It aims to materially grow the contribution of asset management-related revenues through a combination of new fund issuance and acquisitions.

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Canada Research | Page 2 of 45 ECN Capital Corp.

Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2

Table of Contents

Investment Highlights .......................................................................................................................................... 3

Company Overview .............................................................................................................................................. 5

Reinventing ECN as an Asset Manager .................................................................................................... 6

Commercial & Vendor Finance ............................................................................................................................ 7

C&V: The Original Element of Element Financial .................................................................................... 7

Divergent Trends – US Growing, Canada Flat ......................................................................................... 8

Industry Demand Remains Sluggish ........................................................................................................ 10

Three Expected Sources of C&V Asset Growth ....................................................................................... 11

An Improving Return Outlook ................................................................................................................. 11

Rail Finance .......................................................................................................................................................... 13

Background: The Trinity Vendor Finance Program ................................................................................. 13

Vision: Rail Finance as a Source of Assets for Managed Funds ............................................................... 14

Financial Trends & Issues ........................................................................................................................ 15

Aviation Finance .................................................................................................................................................. 17

General Aviation Leasing – A Portfolio in Runoff .................................................................................... 17

Commercial Aircraft Fund Management – An Emerging Growth Business ............................................. 19

US Middle-Market Finance – the “Fourth Vertical” ............................................................................................. 20

Planning for an Immediate Entry ............................................................................................................ 25

Capital & Funding ................................................................................................................................................ 26

Forecasts .............................................................................................................................................................. 28

Valuation & Recommendation ............................................................................................................................ 31

Appendix A: Financial Statements ....................................................................................................................... 33

Appendix B: Management & Board of Directors ................................................................................................. 35

Risks ..................................................................................................................................................................... 37

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ECN Capital Corp. Canada Research | Page 3 of 45

Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2

Investment Highlights

Effective Oct-3-16, ECN Capital Corp. (ECN) separated from Element Financial Corp. (Element) and began life as an independent public company trading under the symbol ECN-TSX. ECN today consists of three of Element’s four legacy leasing businesses: Commercial & Vendor Finance, Aviation Finance and Rail Finance. The larger Fleet Management business remains as the sole focus of Element, which has been renamed Element Fleet Management coincident with the separation transaction.

Considering that the assets and management of ECN have simply been carved out of Element, which had been in the public eye as a listed company since Dec-2011, the company in many respects should require no introduction to investors. However, we believe that the ECN of tomorrow will bear very little similarity to the history of its inherited businesses, such that we think a re-introduction in the form of this report is, in fact, warranted.

The most noteworthy change is that ECN has adopted a new corporate strategy that involves transforming its business model from a leveraged, on-balance sheet leasing company into a hybrid company primarily focused on managing third-party investment funds for an institutional clientele. In the process, it intends to significantly reduce its direct exposure to rail and aviation leasing assets while expanding the scope of its business to include a new “vertical” engaged in the structuring and management of private debt funds.

We initiate coverage of ECN with an Outperform rating and a $4.40 target price based on a 4Q17E P/BVPS multiple of 0.9x. Key investment considerations, in our opinion, include the following:

A Growth Orientation in a Mature Market – Although ECN currently operates in relatively mature leasing end-markets and is actively shrinking its exposure in one of its verticals, we still consider the company to be growth-oriented for two reasons. First, the business of structuring and managing investment funds comprised of long-life assets and private debt is growing, driven by growing institutional demand for these asset classes. Second, ECN’s management has an impressive track record of growing similar businesses both organically and via accretive M&A, as it did with Newcourt in the 1990s and in growing Element from scratch into a diversified $6.4 billion market cap financial company (i.e., pre-separation). We expect that M&A will feature heavily in ECN’s growth plans as well, although the earnings accretion potential of future equity-funded acquisitions could be limited until its valuation recovers from its current BVPS discount.

Transition to an Asset Management Model Could Eventually Warrant Multiple Expansion – If ECN is successful in transforming itself into an asset-management focused business, we would expect fees (i.e., from the structuring and management of funds) to grow in its revenue mix and for a reduced level of capital intensity to result in a higher ROE, both of which might eventually warrant valuation multiple expansion, in our opinion. We note, however, that ECN has structured only one such investment fund to date (ECAF I) and that the launch of its second planned fund (ECAF II) has fallen behind schedule due to structuring-related complications. Accordingly, we believe that it remains too early to credit ECN’s valuation for its planned strategic transformation.

We Expect Near-Term Earnings Volatility – We expect that earnings will be choppy and largely unpredictable in the near-term as ECN goes about shifting the focus of its Rail Finance and Aviation Finance businesses in favour of asset management. The disposition of rail and aviation assets would reduce yield-based revenues while potentially generating non-recurring gains, and we expect that management fees earned on the resulting fund-based assets would be far lower than the yield-based revenues they’d be replacing. Accordingly, we expect this transition will initially result in lower earnings than the company would have earned by retaining all assets on its own balance sheet (i.e., before considering the impact of potential acquisitions).

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Canada Research | Page 4 of 45 ECN Capital Corp.

Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2

ECN Plans to be Acquisitive Out of the Gates – Compounding forecasting risk for ECN is uncertainty regarding the likelihood, timing and potential impact of acquisitions that it is considering in the very near-term. Specifically, ECN is considering three separate acquisition targets in the private debt fund management market with AUM varying from ~$500 million to ~$5 billion. ECN estimates that such acquisitions, if priced at book value, could generate an after-tax ROE of over 12.5%, higher than the company’s run rate ROE. In our forecasts, we assume that ECN will acquire a $2 billion AUM debt fund manager in 2Q17E at a price of 1.1x book value, requiring equity investment of ~$200 million.

An Investment Grade Business with Excellent Access to Capital – With the investment grade credit ratings that ECN has already been awarded following its separation from Element, we expect that it will continue to have access to attractively-priced debt as well as to the preferred share market, which it intends to eventually access subject to funding requirements. ECN has historically been successful in securing well-priced securitization funding from both the public (i.e., asset-backed securities) and private markets (e.g., life insurance companies), and the recent establishment of new bank-sponsored securitization vehicles for its Commercial & Vendor assets is expected to result in both higher advance rates and lower funding costs for that business. We believe that ECN will exit 3Q16E with over $100 million of remaining debt capacity (i.e., based on current leverage constraints) which, combined with the capital that we expect will be liberated from the ongoing wind-down of aviation assets and the potential sale of rail assets into a managed fund in 1Q17E, should provide more than adequate liquidity to fund the $2 billion AUM private debt fund manager acquisition we are forecasting for 2Q17E. The issuance of preferred shares in the interim and/or the launch of a larger railcar fund than we are assuming would provide ECN with additional funding to pursue larger or additional acquisitions in establishing its Middle-Market Finance presence.

We Expect a Transition of its Shareholder Base to Cause Near-Term Share Price Volatility – We expect that ECN’s share price will be fairly volatile in the near-term as we believe it could take some time for its shareholder base to transition into the hands of holders that own the stock on its own merits. Immediately following the separation transaction, 100% of ECN’s shares were owned by Element shareholders. Any Element shareholders that owned the stock primarily for exposure to its dominant Fleet Management segment now own that business separately as a pure-play and might not have similar interest in owning ECN. Also, we expect that certain holders of the larger-cap Element stock might not have the interest and/or ability to own shares in a company of ECN’s size. While the determination to sell ECN for either of these two reasons might be made relatively quickly, we expect that it might take somewhat longer for new shareholder demand to build, resulting in a potential selling imbalance in the very near-term. We believe these dynamics are largely responsible for the stock’s current valuation of just 0.7x BVPS, an attractive entry point for opportunistic investors, in our opinion.

We Value ECN Initially at 0.9x 4Q17E BVPS – We estimate that ECN’s run rate ROE (based on 3Q16E) is just 6.2%, or 8.6% on a pre-tax adjusted basis (i.e., excluding share-based comp). Our forecasts anticipate a higher ROE of 8.3% in 2017E (pre-tax adjusted ROE of 11.2%) supported by non-recurring revenues generated by the launch of its first rail fund in 1Q17E and by forecast earnings contribution from a debt fund manager acquisition we are assuming will close in 2Q17E. Based on the valuation of peers with similar end-market exposure and profitability, and considering the relatively high near-term earnings risk associated with its strategic repositioning, we believe that an initial target P/BVPS multiple of 0.9x for ECN is appropriate.

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ECN Capital Corp. Canada Research | Page 5 of 45

Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2

Company Overview

ECN today consists of three leasing-oriented businesses, which it refers to as its Commercial & Vendor (C&V), Rail and Aviation “verticals”. Its current earning assets, consisting of finance receivables and operating leases, are skewed in favour of the Commercial & Vendor (39%) and Rail (40%) verticals, with Aviation now at 21% and declining in the mix as this portfolio is wound down. Exhibit 2 shows the historical evolution of these three portfolios, highlighting that much of its growth since 2013 has come from the Rail vertical. Note that a $766 million portfolio of fleet-related assets was transferred from ECN’s C&V vertical to Element Fleet Management upon separation of the two companies, and is reflected retroactively to 4Q15 in Exhibit 2.

Exhibit 1: Earning Assets by Vertical, 2Q16 Exhibit 2: Historical Earning Asset Growth by Vertical (C$ mln)

Source: ECN Capital Corp., Raymond James Ltd. Source: ECN Capital Corp., Raymond James Ltd.

While each of its existing verticals have recently generated similar levels of profitability on a normalized basis (i.e., excluding the choppy influence of irregular syndication fees), their other operating and investment attributes vary widely, as summarized in Exhibit 3.

Exhibit 3: Key Attributes of ECN’s Existing Verticals

Source: ECN Capital Corp., Raymond James Ltd.

Note: $766 million of C&V earning assets were transferred to Element upon separation in Oct-16.

C&V39%

Aviation21%

Rail40%

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 1Q16

C&V C&V - transferred Rail Aviation

Commercial & Vendor Finance Rail Finance Aviation Finance

Earning assets (2Q16) (C$ '000s) 2,995,300 2,236,105 1,197,145

% of total earning assets (2Q16) 39% 40% 21%

% of total lease originations (1H16) 75% 7% 18%

Revenue yield (1H16) 1 8.01% 6.74% 7.35%

Pre-tax ROA (1H16) 1 2.91% 2.30% 3.64%

Average debt advance rate (2Q16) 1 90.3% 79.5% 65.2%

Cost of debt (1H16) 1 3.67% 4.37% 4.40%

Earning asset description

A granular portfolio consisting of various types

of equipment leases ranging in size from

$10,000 - $5 million

A portfolio of leases backed by Trinity-

manufactured railcars, diversified by railcar

type, lessor, industry served, etc.

The existing general aviation portfolio consists

of helicopter and corporate jet leases. The

managed ECAF I Fund is comprised of leases on

large commercial aircraft

Source of lease originations

Multiple capitive vendor financing

relationships that provide an annuity-like

stream of originations

Exclusively through an arrangement with

Trinity Leasing to-date; intends to also begin

originating / acquiring leases from other

sources using an internal team

No longer originating new leases other than

through a captive vendor program with a

single corporate jet manufacturer

Growth dynamics

ECN continues to grow market share in the US

by expanding its stable of OEM vendor

financing relationships; the growth outlook in

Canada is more moderate owing to its already

leading market share and growing bank

competition

The pace of Trinity-source originations has

slowed from ~$1 billion/year over the past

two years to an expected $1 billion over four

years

The on-balance sheet general aviation

portfolio is being wound-down. Future growth

will be focused on the establishment of

additional investment funds

Market presence

ECN claims to have the largest vendor

financing program in Canada and that it is the

third-largest player in this segment in the US

Limited direct presence to date, with all

originations sourced from a single OEM; with

new in-house origination capability, we

expect ECN's presence in the secondary

market will increase

No remaining presence in the general aviation

leasing market other than through a single

ongoing corporate jet vendor financing

relationship

Note 1: As presented in Element's 2Q16 disclosures (i.e., not on a post-separation "carve-out" basis)

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Canada Research | Page 6 of 45 ECN Capital Corp.

Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2

Reinventing ECN as an Asset Manager

Whereas the various business lines of ECN have historically been focused on pure leasing activities, the company has adopted a new corporate strategy that involves repositioning the business to become a hybrid asset manager and lessor. Its aim is to partner with yield-hungry institutional investors to provide them with access to investment funds comprised either of long-life assets such as railcars or commercial aircraft, or of syndicated positions in private debt of US mid-market corporations. ECN aims to generate fees from the structuring and management of such funds while also earning a return on investment in related equity tranches. A successful transition to this model would result in a decreased reliance on spread-based earnings, an increase of fees in the revenue mix, and a reduced level of capital commitment for a given level of AUM.

The near-term implications of this planned transformation to ECN’s business mix and run rate earnings stream are huge, as we expect it will involve two material changes to its capital allocation:

1. We expect its direct investment in on-balance sheet leases will fall sharply as it winds down its general aviation portfolio and sells existing railcar lease assets into managed funds.

2. We expect it to pursue at least one sizeable acquisition to establish a presence in a fourth vertical, US Mid-Market Finance, through which it would become a manager of (and co-investor in) private debt funds.

Accordingly, we expect that ECN’s earnings will be volatile and unpredictable as it undertakes this transformation process. Its earnings run rate could decline as it sacrifices yield-based income in exchange for management fees (i.e., at a lesser yield) with a shift of assets into managed funds. Irregular gains on asset sales and structuring fees earned for launching new funds could add to near-term revenue volatility. Earnings could be further impacted by acquisitions planned in the near-term, the timing, size and economics of which are currently uncertain.

The bottom line is that we expect the ECN of tomorrow will be very different than the business as it exists today. In Exhibit 4 we summarize the expected impact of the new corporate strategy on the outlook for each of ECN’s verticals. In the following pages we provide more detailed discussion of the current status and outlooks for each of its primary lines of business.

Exhibit 4: Implications of New Corporate Strategy to Each Vertical

Source: ECN Capital Corp., Raymond James Ltd.

Commercial & Vendor Finance

We do not expect any material changes to C&V operations and expect its earning assets to remain on ECN's

balance sheet, securitized at a high advance rate that l imits related capital commitment. Based on the average

size and duration of C&V segment equipment leases, we do not believe they are well-suited for inclusion in the

type of investment funds that ECN intends to structure.

Rail Finance

We expect that existing railcar lease assets and future originations will largely be sold into investor funds being

structured by ECN, resulting in reduced on-balance sheet asset levels and a reorientation of the Rail Finance

business in favour of an asset management focus.

Aviation Finance

The existing portfolio of general aviation leases is incompatible with the asset management model and is in the

process of being wound down, with on-balance sheet assets already in decline. Going forward, Aviation

Finance's sole focus will be to structure and manage additional funds comprised of leases of large commercial

aircraft, similar to its initial ECAF I fund.

US Middle Market Finance

ECN intends to enter this l ine of business in the near-term through the acquisition of either an existing private

debt fund management business (highly l ikely, in our opinion) or of a team of experienced professionals that

would use ECN's capital to build such a business from scratch. Based on the size range of deals under

consideration, a larger acquisition could establish this as the largest of ECN's verticals and as its primary

avenue of growth.

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ECN Capital Corp. Canada Research | Page 7 of 45

Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2

Commercial & Vendor Finance

C&V: The Original Element of Element Financial

Commercial & Vendor Finance (“C&V”) was Element’s original line of business, and following the separation of ECN from Element Fleet Management, it will become ECN’s sole remaining focus for on-balance sheet asset growth. This vertical currently accounts for 39% of company-wide earning assets, and in 1H16 it was responsible for 75% of total lease origination volumes. Unlike the portfolios of the Rail and Aviation verticals, which we expect will decline as the company executes its asset management transition strategy, we expect continued growth of the on-balance sheet C&V portfolio funded primarily by securitization programs with high advance rates.

The C&V vertical provides financing for “mid-ticket” equipment acquisitions, defined by the company as those falling in the range of $10,000 to $5 million. Unlike some of its competitors in the mid-ticket leasing space that rely on direct originations (e.g., via third-party brokers), ECN originates C&V leases almost exclusively through the various vendor finance programs that it has established with equipment manufacturers and distributors. These vendor relationships, often codified in the form of multi-year agreements, provide ECN with the exclusive opportunity to offer point-of-sale financing for products sold by those vendors.

This business was initially assembled through the acquisitions of Alter Moneta Group in Aug-2011 for $160 million and of CoActiv Capital Partners in Nov-2012 for $300 million. Alter Moneta provided a mature portfolio of leases, an experienced Quebec-based management team, back-office infrastructure with sufficient capacity to assume significant growth in originations, and a number of customer relationships with which to grow its presence. CoActiv added more than 15 vendor relationships and 11,000 customer relationships, as well as an established US origination platform to complement its existing Canadian presence. The aggregate annualized run rate of originations from these two platforms at point of acquisition was just $230 million. By 2015, Element had expanded its pace of annual C&V originations to $1.9 billion. Growth since 2012 has been primarily organic, coming largely from the addition of new vendor relationships, complemented by smaller business and portfolio acquisitions.

Exhibit 5: Commercial & Vendor Finance – Earning Assets (C$’000s) Exhibit 6: Geographic Breakdown of C&V Earning Assets, 2Q16

Source: ECN Capital Corp., Raymond James Ltd. Source: ECN Capital Corp., Raymond James Ltd.

Vendor Relationships Provide Low Risk, Annuity-Like Deal Flow – The advantages to ECN of originating through vendor programs include: (a) low origination costs, (b) an annuity-like steady stream of deals, (c) low credit losses owing to expertise with the product/market in question, (d) relatively stable margins that are insulated from the rate-based competitive pressures typical of the “direct” channel and (e) vendor support in the form of up front service (e.g., credit & application functions) and end-of-lease equipment remarketing. Vendors also benefit from these arrangements as they can save money by outsourcing the financing function, their clients can obtain more customized financing solutions (which helps the sales function), and they can maintain an ongoing relationship with their customers throughout the lease period (which might be lost if leased through an independent lessor).

Focused End-Market Strategy Minimizes Risk Without Causing Concentration Issues – ECN’s operating strategy in the C&V business has been to maintain focus on a select few end-

Note: Shaded area denotes assets transferred to Element Fleet in Oct-16 (shown to 4Q15).

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 1Q16

U.S.61%

Canada39%

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Canada Research | Page 8 of 45 ECN Capital Corp.

Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2

markets in which it has in-house expertise. By playing to its strengths, Element positions itself to better build deep vendor relationships (supports better revenue growth and stability) and to more effectively underwrite risks. At this point, its chosen areas of specialization are Transportation and Construction (includes material handling), Manufacturing and Industrial, Healthcare (financing equipment, business acquisitions and working capital for practitioners), Office Products and Technology, and Franchise (assistance to franchisee networks).

Despite this focus, the resulting C&V portfolio is reasonably diversified, resulting in modest industry concentration. As shown in Exhibit 7, the only asset classes accounting for more than 10% of total earning assets are construction equipment at 26% and vehicles at 23%, with no other class higher than 10% in the mix. Additional diversification is achieved by the large number of vendors and unique end-customers being served.

Exhibit 7: Diversification of C&V Portfolio Minimizes Concentration Risk (C$’000s)

Source: ECN Capital Corp., Raymond James Ltd.

Divergent Trends – US Growing, Canada Flat

As shown in the charts below, origination activity has been far more impressive in the US than in Canada since 1Q14, in terms of both origination levels and growth rate. Over the past year and a half alone (i.e., since 4Q14), the US has grown in the earning assets mix from 46% to 61% currently, primarily the result of this divergent growth trend.

Exhibit 8: C&V Originations, Canada (C$ ‘000s) Exhibit 9: C&V Originations, US (C$ ‘000s)

Source: ECN Capital Corp., Raymond James Ltd. Source: ECN Capital Corp., Raymond James Ltd.

The dynamics of the US and Canadian mid-ticket equipment leasing markets are different enough that we consider these to be essentially different business lines for ECN. Outside of different economic factors influencing equipment leasing demand trends in each market, we believe there are considerable differences in the competitive dynamics of each market that have prompted ECN to direct incremental capital allocation south of the border over the past couple of years.

In Canada, we believe that ECN competes more directly with commercial banks for business and that competition is relatively rate-driven, resulting in somewhat lower profitability and reducing

7%

6%

6%

6%

7%

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10%

23%

26%

- 100,000 200,000 300,000 400,000 500,000 600,000

Other

Inter-city transportation equipment

Office equipment

Highway tractors

Highway trailers

Healthcare equipment

Restaurant equipment

Vehicles

Construction equipment

Note: 1Q13 includes $84 million from the acquisition of Nexcap Financial Note: 4Q12 includes $299 million from the acquisition of CoActiv Capital Partners

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Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2

the ability to win and maintain business based on superior and specialized service provision. A larger existing market share in Canada also leaves less residual share that might potentially be won. ECN’s C&V origination volumes in Canada stopped growing in late-2013 and have more or less been in decline since then, resuming growth only in the most recent quarter.

In recognition of the relatively lower growth and profitability prospects for its Canadian C&V business, Element initiated a strategic review process in Oct-2015 through which we believe it originally intended to sell this business. Subsequently, three competing Canadian businesses transacted: Ontario-focused Maxium Group was acquired by Canadian Western Bank (CWB-TSX) in Mar-2016, Scotiabank’s (BNS-TSX) Roynat Lease Finance was acquired by Ontario credit union Meridian in Apr-2016, and the Canadian arm of CIT (CIT-NYSE) sold to Laurentian Bank (LB-TSX) in Jun-2016. All three deals involved deposit-taking institutions increasing their exposure to the Canadian leasing industry to capture incremental yield while taking advantage of relatively low funding costs. In the midst of this industry M&A wave, Element ultimately decided to maintain its Canadian C&V operations, eventually deciding to pursue a more comprehensive spinoff of all non-fleet management businesses (i.e., into ECN).

In the US, we believe that vendor finance relationships are somewhat less rate-competitive and are more often won based on other aspects of financing relationships valued by OEMs and their customers, which plays more to ECN’s competitive strengths within its selected verticals. US-based originations grew by 180% in 2014 and 72% in 2015 (in CAD terms), driving the overall growth of ECN’s C&V vertical. We attribute this to a combination of general industry demand growth, market share gained with the addition of new vendor relationships and select portfolio acquisitions. More recently, US-based originations growth turned negative in 2Q16 at (33)% y/y, which we attribute to a corporate-wide deferral of growth immediately ahead of the separation transaction, with volumes expected to recover in 2H17E (discussed separately below).

To illustrate the superior yield profile of the US C&V business, in Exhibit 10 we compare 3Q16E-4Q16E yield forecasts for originations in each of Canada and the US using the midpoints of ECN’s forecast ranges. We expect that the quarter-to-quarter fluctuation in each country relates to the expected composition of originations in each period, with the 4Q16E forecasts reflecting more normalized yield expectations and 3Q16E forecasts based mainly on actual transactions to-date (i.e., including a sizeable franchise segment portfolio added in 3Q16 which likely features above-average yields). The key takeaway is that yields are higher in the US and lower in the more rate-competitive Canadian market.

Exhibit 10: Yield Forecasts for 3Q16E – 4Q16E Originations, Canada vs. US

Source: ECN Capital Corp., Raymond James Ltd.

Although no industry statistics are published, ECN claims to be the largest lease provider in the Canadian C&V space and the third-largest in the US. Ahead of it in the US are Wells Fargo (WFC-NYSE), which achieved its leading position through the acquisition of GE Capital’s commercial leasing business in Mar-2016, and DLL, a global leasing company owned by Dutch bank Rabobank. ECN believes there is currently some degree of market dislocation regarding each of these US competitors that is providing it with incremental market share opportunity.

Unlike its predecessor GE Capital, Wells Fargo is also able to offer pure loans to customers secured through vendor relationships (i.e., potentially bypassing the vendor beyond the initial

Note: Yields represent the mid-point of management's guidance range

6.58%

8.75%

7.23%

7.98%

0%

2%

4%

6%

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10%

3Q16E - Canada 3Q16E - US 4Q16E - Canada 4Q16E - US

Gross yield Fees

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Canada Research | Page 10 of 45 ECN Capital Corp.

Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2

transaction) as an alternative to their existing secured leases. As for DLL, according to a Jan-2016 article published by Bloomberg, Rabobank was reported to be in preliminary talks to sell it for as much as US$4.9 billion in 2H16 in order to raise capital ahead of the implementation of more demanding capital requirements in 2020, although it has since reaffirmed its “strong commitment” to DLL in a Jul-2016 release. We believe that in selecting funding partners for their vendor financing programs, OEMs generally seek stable, long-term partnerships and prefer partners with dedicated financing solutions that help them maintain sticky leasing relationships with their customers.

A final note on the geographic mix of the business is that in our view there may be commercial benefits to maintaining a sizeable presence in each country as it better positions ECN to win vendor financing mandates from OEMs that operate in both Canada and the US. Considering ECN’s apparent willingness to sell the Canadian C&V business in late-2015, however, we believe that this cross-border benefit is more of a “nice to have” than a “need to have” feature in winning new vendor mandates.

Industry Demand Remains Sluggish

According to the Equipment Leasing & Finance Foundation’s (ELFF) latest US Economic Outlook report (Oct-2016), overall equipment and software investment in the US is projected to contract by -0.5% in 2016 vs. growth of 3.8% in 2015. Headwinds cited include slow economic growth, a contraction in trade, political uncertainty and low commodity prices. Its forecasts anticipate Fed interest rate increases later this year, which it would expect to pull forward investment while expanding leasing company yields. Other highlights from this ELFF outlook report that speak to leasing industry demand trends include:

- The ELFF monthly leasing and finance index indicates that year-to-date, cumulative new business volume to Aug-2016 was 5.8% lower y/y.

- Equipment and software investment declined at an annualized rate of 1.2% in 2Q16, following a 5.6% decline in 1Q16.

- Industrial production rose by 1.1% in each of June and July, but was followed by a -0.4% contraction in August, while capacity utilization improved by 60 bp q/q to 75.5% at Aug-2016.

- After improving modestly through July and August 2016, the ELFF’s monthly confidence index for the equipment finance industry fell by 1.0 point to 53.8 in Sep-2016.

On a vertical-by-vertical basis, the ELFF tracks “investment momentum”, a measurement of expected near-term (i.e., 3-6 months) investment growth relative to 10-year average levels. As at Oct-2016, this analysis suggests negative near-term investment momentum for the majority of asset classes, with only the medical, aircraft and software classes showing notable positive momentum:

Exhibit 11: ELFF US Equipment Investment Momentum Monitor

Source: 3Q 2016 Equipment Leasing & Finance U.S. Economic Outlook, Raymond James Ltd.

Although current momentum remains negative overall, this most recent update notes that several equipment verticals, including some that ECN’s C&V business focuses on, should see an improvement in investment climate. Specifically, over the next 3-6 months, the ELFF expects that

Decelerating Neutral Accelerating

Software

Computers

Trucks

Railroad

Ships and Boats

Aircraft

Mining and Oilfield

Medical

Other Industrial

Materials Handling

Construction

Agriculture

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Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2

investment growth “may rebound” for construction machinery, “should remain solid” for healthcare equipment, “should improve” for trucks, and “should rebound” for “other” industrial equipment.

We expect that underlying equipment investment and leasing trends within ECN’s focus verticals in Canada are similar to those in the US considering factors such as the similar interest rate environment and economic growth trends (ex-energy). In any event, we believe that ECN’s origination growth outlook in Canada will be based as much on supply (i.e., the yields it is willing to accept) as demand.

Three Expected Sources of C&V Asset Growth

We do not expect the growth of ECN’s C&V business to mirror general equipment leasing demand trends in North America. Note that it has grown its C&V finance receivables portfolio from $721 million at the end of 2012 to $3.0 billion (i.e., pre-separation) at 2Q16 without the support of major business acquisitions. Looking forward, we expect that this will remain somewhat of a growth business for ECN with underlying market-based growth to be supplemented by the following:

1. A Growing List of Vendor Relationships Should Support Ongoing Asset Growth – Within its chosen sub-verticals, ECN has successfully sought to grow the business both by adding new vendor relationships and by achieving increased volumes from existing relationships. Note that vendor finance had been the original business line of Element predecessor Newcourt and remained its largest unit until that company was eventually sold, by which time it had assembled over 320 relationships with equipment manufacturers in a larger array of end-markets. We believe that ECN’s C&V business today is originating through a much smaller number of vendor programs and that there remains plenty of scope for the C&V business to grow through the ongoing addition of new vendor partners. The experience of Element’s senior management in forging such relationships, as well as the actual relationships that they’ve historically developed and maintained, supports the likelihood that this will be an ongoing source of growth. If anything, we’d expect the recent ownership transition of GE Capital’s vendor finance business and potential ownership changes at DLL to create additional market share opportunity for ECN.

2. The Entry into Complementary Segments Could Provide Modest Incremental Contribution – ECN intends to grow into two complementary segments of the leasing market which, collectively, have the potential to provide incremental, if modest, asset growth. The first of these initiatives involves expanding its target market to include the financing of smaller-ticket leases in the $25,000-$50,000 range to vendors in its existing verticals. This is a sizeable market that has to-date been untapped by ECN and which is expected to generate superior yields, including higher contribution from fee-based services. ECN will also begin providing floorplan financing for a small number of existing vendors (i.e., just three vendors are currently approved for this program). On a standalone basis, floorplan financing is an unattractive offering that would likely generate an ROA of just ~100 bp. However, by offering this option on a selective basis to certain large vendors on condition of receiving sizeable minimum lease volume commitments, it aims to expand its market presence without sacrificing overall margin.

3. Acquisitions are the Wildcard – ECN’s stated growth strategy for C&V includes an intention to pursue accretive M&A opportunities within its core focus markets. In the context of Element, for which fleet management became its dominant business and its primary M&A focus, we believe there had been limited appetite for meaningful acquisitions in any of its lower-multiple and lower-growth business lines, including C&V. Post-separation, however, C&V will initially represent ECN’s sole area of on-balance sheet growth and we believe acquisition activity could pick up again. In the near-term, we’d expect any incremental investment in this space to be modest and opportunistic in nature and that it will likely be limited to portfolio acquisitions as we expect ECN’s M&A focus and capital will initially be directed toward the establishment of a sizeable commercial lending vertical.

An Improving Return Outlook

ECN’s 18-24 month guidance for the C&V segment calls for a sharp improvement in profitability from run rate levels, as summarized below:

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Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2

Exhibit 12: C&V Vertical - 18-24 Month Profitability Guidance

Source: ECN Capital Corp., Raymond James Ltd.

Over the next two years, the company expects to achieve meaningful improvement in the C&V segment’s return on assets (from 1.76% in 2Q16 to 2.55%) and, assuming a consistent level of leverage, in its ROE (from 8.58% in 2Q16 to 12.43%). This improvement is expected to be achieved despite a moderate increase in the operating expense ratio, with both higher yields and a lower cost of funding contributing to the higher anticipated returns.

Yields Are Expected to Benefit from Planned Initiatives – Beginning in Jul-2016, ECN rolled out a revised pricing schedule to its C&V customers designed to generate incremental fee revenue (e.g., commitment fees, creditor insurance) and a higher resulting revenue yield. The company expects that this new pricing matrix, once implemented, could boost average yields by as much as 45 bp for impacted accounts. The addition of higher-yield, smaller-ticket leases to the mix is also expected to contribute. In total, ECN’s guidance anticipates a 25 bp improvement in the C&V revenue yield over the next 18-24 months, from 7.15% in 2Q16 to 7.40%.

Lower Funding Costs Should be the Biggest Driver of Improved Profitability – ECN anticipates that the C&V segment’s average cost of funding will improve from 3.44% in 2Q16 to 2.80% post-separation, an expected improvement of 64 bp that is more than double the yield improvement it expects to achieve over the same time frame. There are two primary drivers of this expected reduction. The first is that following the separation, C&V will no longer be allocated a portion of the funding costs associated with Element’s convertible debt. This is a relatively high-cost source of financing that will fully remain in the capital structure of Element Fleet Management. The second structural change is that ECN plans to initiate an investment grade securitization program in 4Q16 that will fund US C&V assets, joining a similar program launched in 1Q16 for Canadian assets. These lower-cost bank securitization programs will partially displace the life insurance-provided funding that has historically served as C&V’s primary source of secured borrowing.

Exhibit 13: C&V Originations – 2H16E Guidance vs. 1H16A (C$ ‘000s)

Source: ECN Capital Corp., Raymond James Ltd.

The midpoint of the company’s originations guidance for 3Q16E suggests an improvement from $403 million in 2Q16 to ~$460 million, with Canada expected to remain fairly flat and US volumes expected to rebound following recent new business wins. Based on the yield guidance provided for 3Q16E originations (Exhibit 10) and the expected originations mix in the quarter, the company

2Q16 Actual 18-24 Month Guidance

(As a % of Average Earning Assets)

Yield 7.15% 7.40%

Interest expense 3.44% 2.80%

Net margin 3.71% 4.60%

Opex 1.95% 2.05%

ROA before taxes 1.76% 2.55%

ROA after taxes 1.32% 1.90%

Leverage 5.5x 5.5x

ROE before taxes 11.44% 16.58%

ROE after taxes 8.58% 12.43%

0

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1Q16 2Q16 3Q16E 4Q16ECanada US

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Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2

is suggesting that leases originated in 3Q16E will carry an average revenue yield (including fees) of over 8%, above the portfolio run-rate yield of 7.15%. Guidance for 4Q16E suggests a moderation of both total originations (to ~$390 million) and of the average yield on new leases (to an estimated 7.7%, still higher than 2Q16 levels).

Rail Finance

Background: The Trinity Vendor Finance Program

The Rail Finance vertical was created in Dec-2013 when Element entered into an agreement with Trinity Industries (TRN-NYSE) that provides it with the ongoing opportunity to acquire leases of Trinity-manufactured railcars originally originated by Trinity’s in-house leasing arm, Trinity Industries Leasing Company. Essentially, this represents a vendor finance program in which ECN is allocated a portion of Trinity’s lease originations rather than having exclusivity as sole lease provider. This arrangement provided immediate entry to the railcar leasing market involving no up-front investment and with no real infrastructure requirement on Element’s part.

Under this arrangement, Trinity regularly (i.e., quarterly) presents ECN with a collection of qualifying railcar leases that are diversified (i.e., with limits) in terms of railcar type, end-industry exposure, lease duration, average age, and lessee credit quality. Although most of these leases relate to newly manufactured railcars, they may also include leases on existing railcars and leases of Trinity railcars acquired in the secondary market. While ECN has typically taken up its scheduled level of offered leases, it is not obligated to assume any or all leases offered by Trinity.

Over the initial two years of this arrangement, Trinity was to offer an aggregate of US$2 billion worth of leases to Element, which loosely corresponds to Element’s C$2.1 billion of railcar lease originations over the period 4Q13-4Q15. In Oct-2015 this arrangement was extended, although it was downsized to US$1 billion over four years, representing a 75% decline in the average annual amount of leases to be offered by Trinity to US$250 million. We expect that this decrease in origination commitment was primarily a function of a declining North American railcar industry book-to-build ratio, which had fallen to 0.43x in 3Q15 (i.e., just prior to the reset of Element’s Trinity program), with slowing order levels pointing to reduced external financing needs for Trinity.

Over the first two quarters of this resized arrangement, Element has originated aggregate railcar leases of just $68 million, a material contraction in growth. Management has commented that this slowdown relates, in part, to a move to conserve capital for opportunistic investment in secondary market lease acquisitions later in 2016. Current company guidance calls for total railcar lease originations of $225-$275 million in 2016, suggesting accelerating activity in 2H16, and of $250-$300 million in 2017. We note that any net originations result in growth of the railcar lease portfolio, as there is virtually no runoff of the portfolio given the low age of the assets and very little amortization due to the assets’ long lives.

The charts below show how quickly this portfolio grew over the initial two years of the Trinity vendor program, and also highlight how abruptly that growth has slowed over the past two quarters.

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Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2

Exhibit 14: Rail Finance – Earning Assets (C$ ‘000s) Exhibit 15: Rail Finance - Originations (C$ ’000s)

Source: ECN Capital Corp., Raymond James Ltd. Source: ECN Capital Corp., Raymond James Ltd.

Vision: Rail Finance as a Source of Assets for Managed Funds

We expect the nature of ECN’s Rail Finance business will change in the following material ways going forward:

1. A Shift to Include In-House Originations – Whereas all of its railcar originations to date have been sourced through its Trinity vendor program, we expect that future originations will increasingly be sourced internally and through secondary market purchases. ECN has assembled an in-house team based in Chicago and Montreal with direct origination and servicing capabilities, including the capacity to release railcars upon lease expiration, which is a function currently outsourced to Trinity Leasing for existing assets. This team has yet to originate any assets for Element, however, and until they begin to do so regularly such that we can assess the size, nature, pricing and yields for such assets, we will consider this to be an unproven and uncertain source of future growth.

Based on management’s commentary that the railcar market has recently seen an influx of competition for assets, largely from bank-related investors, we understand that this asset class is becoming more difficult and expensive to acquire. We see this as a double-edged sword for ECN. On one hand, increased competition for assets could make it more difficult to grow in this segment while potentially pressuring the yields on new originations. On the other, the implied valuation of ECN’s existing portfolio should benefit as the bid for railcar assets strengthens.

This suggests the possibility that ECN might trigger gains by selling existing railcar assets into a new fund, as planned for 1Q17E, or by selling assets in the secondary market. ECN is currently testing this market with a $50 million railcar portfolio on offer, for which it expects to achieve a premium of 15%-20% over book value. In addition to price discovery, this process is intended to help to identify interested buyers that might be potential candidates to invest in ECN-managed railcar funds.

2. A Shift from Owned to Managed Assets – We expect that the bulk of future railcar lease originations will eventually be directed into third-party investment funds assembled and managed by ECN, in keeping with the company’s general asset management transition strategy. We also believe that ECN intends to sell a portion of its existing portfolio of railcar leases into future funds, such that its on-balance sheet commitment to this asset class is also likely to fall. We do not expect a complete transition, however, as we would expect ECN to retain direct exposure to this asset class under its new strategy through (a) originated / acquired leases intended for fund inclusion that are being warehoused, and (b) equity tranche investments in ECN-managed funds invested in railcar leases.

ECN is aiming to launch an initial $0.5-$1.0 billion railcar fund in early 2017. In our forecasts, we assume the launch of a US$500 million ($658 million) railcar fund in 1Q17E to be formed through the transfer of existing on-balance sheet assets at an assumed sale price equal to 102% of carrying value (i.e., generating a gain to ECN equal to ~10% of invested capital). In fact, we think there is a reasonable chance that this initial rail fund might be launched as early as 4Q17E as we believe that its failed bid for INFOR Acquisition Corp. (IAC.A-TSX), which would have provided ~$200 million of net cash, leaves an acquisitive ECN in more immediate

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need of the capital that would be liberated from the sale of assets into a fund. An expedited rail fund launch should be possible considering the ready availability of assets, which have already been assembled on ECN’s balance sheet, and currently strong investor appetite for this asset class, according to management. We also assume the launch of a separate US$1 billion railcar fund in 2Q18E with no assumed gain on the related asset transfer.

Financial Trends & Issues

Exhibit 16: Rail Finance – Key Ratios

Source: ECN Capital Corp., Raymond James Ltd.

Yields Have Been In Decline… – As shown in Exhibit 16, the Rail Finance vertical’s Financial Revenue Yield, representing the yield of interest income and rental revenue as an annualized percentage of average earning assets, has been on a declining trend in recent quarters, falling from 8.50% in 1Q14 to 6.59% in 2Q16. We attribute this in part to a generally declining interest rate environment, but we also believe that cyclical rate pressures may have been a factor in recent quarters. The particularly steep decline in 1H16 was attributed by management in part to temporarily elevated maintenance costs, the timing of which tends to be lumpy and unpredictable.

Although railcar leases are long-life assets, they are typically established for periods of roughly four-to-five years, on average, and are typically released regularly by existing lessees. When leases come up for renewal, however, the rental rates and duration of “new” leases are negotiated in the context of the prevailing market, which can lead to cyclicality of lease terms, as indicated by the experience of railcar leasing specialist GATX (GATX-NYSE), as summarized in Exhibit 17.

Exhibit 17: GATX Corp. – Average Lease Rate Reset and Term, by Year of Renewal

Source: GATX Corp., Raymond James Ltd.

This chart shows that the railcar lease market was extremely firm over the past four years, with lease rate increases for GATX’s renewing leases averaging 26%-39% in each year. The market has softened abruptly in recent quarters, however, with GATX’s average lease renewal rate falling by 25% in 2Q16 and with its average renewal lease term falling to a cyclical low of 34 months. GATX cites a growing oversupply of railcars, fewer car loadings and improved railroad velocity as reasons for rising pressure on lease renewal rates as the year progresses. The majority of car types across its fleet are under rate pressure, with cars serving the energy markets under the most severe pressure.

1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Financia l Revenue Yield 8.50% 7.10% 7.40% 7.60% 7.50% 7.40% 7.40% 7.70% 6.89% 6.59%

Net Interest Margin 4.30% 4.60% 4.30% 4.30% 4.10% 4.10% 4.10% 4.50% 3.48% 3.11%

Adjusted Operating Expense Ratio 1.20% 1.00% 1.00% 1.00% 0.90% 1.10% 1.10% 1.00% 0.92% 1.00%

Adjusted Pre-Tax Return on AEA 3.10% 3.60% 3.30% 3.30% 3.20% 3.00% 3.00% 3.50% 2.54% 2.11%

Average debt advance rate 75.0%1 59.4% 75.2% 75.0%1 77.5% 81.7% 78.3% 75.3% 79.8% 78.0%

1 - Contracted debt advance rate

0

20

40

60

80

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 1Q16 2Q16

-30%

-20%

-10%

0%

10%

20%

30%

40%Change in Lease Price Index (LFT Axis)

Renewal Lease Term in Months (RTT Axis)

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An important consideration is that ECN’s railcar lease portfolio has been structured with staggered maturity dates, such that only a small portion of its leases are scheduled for renewal in any given year, largely insulating its average yield from volatility in contract pricing trends. As shown below, just 5% of ECN’s railcar leases as at Dec-2015 were set to expire in 2016 with another 7% expiring in 2017, meaning that it should not be heavily impacted by near-term rate pressure. The modest bulge in the portfolio’s expiration profile around 2020 reflects the timing of its originations, which were almost entirely in 2014-2015. Over time, should the portfolio grow through the steady addition of new leases, we’d expect this expiration profile to level off. As it stands, however, we would expect the impact of prevailing renewal rate changes on average portfolio yield to become more pronounced beginning in 2018.

Exhibit 18: ECN Railcar Lease Expiration Profile (C$ ‘000s)

Source: ECN Capital Corp., Raymond James Ltd.

Other considerations supportive of continued demand for the railcars in ECN’s portfolio (i.e., supportive of pricing resilience) are its diversified nature and the young average age of its assets at just 4.4 years old. ECN reports that its leased railcar portfolio has a current utilization rate of over 99% with investment-grade lessees “dominating the portfolio”.

It should not be immune from industry pricing influences, however, and in the context of a currently soft railcar leasing market we suspect that ECN may be experiencing some modest degree of pricing pressure.

…Resulting in Declining Profitability – The decline in Financial Revenue Yield has essentially fallen straight to the bottom line, as the operating expense ratio has remained consistently low at ~1.0% (as a % of average earning assets) and funding costs have also remained fairly static. As a result, the pre-tax return on AEA has steadily declined from 3.10% in 1Q14 to 2.11% in 2Q16, resulting in a run rate pre-tax ROE of 10.6% (i.e., at a current advance rate of 78%) and an after-tax ROE of 7.9%.

Based on the company’s 18-24 month guidance, Rail segment profitability is expected to remain relatively modest, with ROE forecast to improve by only ~50 bp to 8.44% on a 16 bp improvement in yields (to 6.75%) and no expected changes to operating efficiency, funding costs or leverage. To the extent that assets are sold into funds, freeing up capital while generating gains on sale and fees from the structuring and management of those funds, we’d expect Rail segment profitability to improve in the near-term.

0%

4%

8%

12%

16%

20%

0

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100,000

150,000

200,000

250,000

300,000

350,000

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 >2028

NBV (C$ mln) (LFT Axis) % of Total Fleet (RT Axis)

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ECN Capital Corp. Canada Research | Page 17 of 45

Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2

Exhibit 19: Rail Vertical – 18-24 Profitability Guidance

Source: ECN Capital Corp., Raymond James Ltd.

Accelerated Depreciation of Railcars is a Significant Tax Advantage – An important attribute of the Rail Finance vertical is the sizeable tax deferral benefit arising from its investment in railcar leases. For tax purposes, ECN is permitted to recognize related depreciation over a much shorter time frame than used for conventional accounting purposes, resulting in a significant deferral of cash taxes applicable to the company overall. Prior to the separation transaction, management had estimated that its existing tax shield would protect Element from paying cash taxes for at least 12 years. Given that this shield largely related to rail assets that reside with ECN, we expect that ECN’s tax shield should also be at least 12 years in expected duration. We are uncertain as to how any future sales of rail assets might impact ECN’s ability to fully recognize these tax assets, however.

Unrealized Gains in the Rail Portfolio? – As mentioned above, ECN believes the current market for railcar assets is extremely tight, and it expects to achieve a premium of 15%-20% over book value for the US$50 million railcar package it is currently marketing. If a gain of this size materializes, and if the railcars being sold are representative of its larger portfolio, we suggest that there might be some reasonably sized unrealized gains inherent in ECN’s $2.24 billion railcar investment. For example, a 15% premium on the equity capital supporting its existing asset pool would suggest an unrealized pre-tax gain of ~$75 million (i.e., based on its current advance rate of 78%).

Rated ABS Have Helped to Reduce Funding Costs – Margin in this business has been enhanced and solidified with the issuance of S&P-rated asset-backed securitizations, of which there have been three issuances to date. The first two issuances totaled US$745 million at blended coupon rates of 3.547% (Apr-2014) and 3.460% (Mar-2015), backed by US$878 million worth of railcars (85% advance rate). An additional US$423 million was issued in Mar-2016.

Aviation Finance

ECN’s Aviation Finance vertical is comprised of two distinctly different businesses whose only commonality is that they are both engaged in aircraft leasing. Its legacy Aviation Finance business is general aviation leasing, through which it invests directly in leases of helicopters and corporate jets. This is an on-balance sheet business that is now essentially in runoff mode. Its newer aviation-related business is as an asset manager engaged in the structuring and management of institutional funds that are invested in the leases of large commercial aircraft. This is a predominately off-balance sheet, fee-generative business and will be the vertical’s sole focus of growth going forward. We discuss each of these businesses separately below.

General Aviation Leasing – A Portfolio in Runoff

Element established its Aviation Finance vertical in Jan-2012 and began originating aircraft leases in 1Q12, growing its portfolio to $1,585 million in size by the end of 2015. This business has grown primarily organically through a series of granular lease transactions rather than through M&A, with its only notable portfolio acquisition a US$243 million purchase of helicopter leases from GE Capital in Dec-2013.

2Q16 Actual 18-24 Month Guidance

(As a % of Average Earning Assets)

Yield 6.59% 6.75%

Interest expense 3.48% 3.50%

Net margin 3.11% 3.25%

Opex 1.00% 1.00%

ROA before taxes 2.11% 2.25%

ROA after taxes 1.58% 1.69%

Leverage 4.0x 4.0x

ROE before taxes 10.55% 11.25%

ROE after taxes 7.91% 8.44%

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Canada Research | Page 18 of 45 ECN Capital Corp.

Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2

Exhibit 20: Aviation Finance – Earning Assets (C$ ‘000s) Exhibit 21: Aviation Finance - Originations (C$ ‘000s)

Source: ECN Capital Corp., Raymond James Ltd. Source: ECN Capital Corp., Raymond James Ltd.

Following this business’ formation, the helicopter leasing market in particular became crowded very quickly with the introduction and rapid growth of several new large players in the space of just a few years. For example, Waypoint Leasing, LCI Helicopters, and Macquarie Leasing all entered the market in 2012-2013, and industry leader Milestone Aviation Group, which had only formed in 2010, grew its portfolio of helicopter leases to US$2.8 billion before being acquired by GE Capital in Dec-2014. We believe that this increased level of competition likely played a role in ECN’s reduced capital commitment to its general aviation leasing business.

In early 2016, Element announced plans to discontinue the “majority” of its on-balance sheet aviation leasing business, with designs to reduce its exposure through a combination of syndications, asset sales, natural lease expiration, early buy-outs, and potential transfers of assets to ECN-managed funds. No new general aviation leases are being originated other than corporate jet deals sourced through its enduring vendor financing program with Bombardier (BBD.B-TSX).

Beginning this “wind-down” process with a portfolio of $1.4 billion as at 4Q15, ECN has already trimmed the portfolio to $1.2 billion in size as at 2Q16 and is targeting a reduction of its on-balance sheet exposure to $700 million by 4Q17 and then to $350 million by 4Q19. Based on this business’ 2Q16 debt advance rate of 65%, we estimate that ECN would free up ~$175 million of equity capital for reinvestment elsewhere if it achieves its targeted portfolio reduction of ~$500 million by 4Q17. Dispositions began in 1Q16 and commitments reportedly accelerated in 2Q16, suggesting that early progress is being made.

Exhibit 22: Aviation – Targeted Wind-Down of On-Balance Sheet Exposure (C$ ‘000s)

Source: ECN Capital Corp., Raymond James Ltd.

The only aspect of this “wind-down” strategy that we question is the suitability of ECN’s helicopter and corporate jet lease assets for institutionally-owned investment funds. Compared with the large commercial aircraft that comprise the bulk of current institutional investment in the aviation leasing space, helicopters and corporate jets represent relatively niche segments

Note: 4Q13 includes US$243 million helicopter portfolio acquisition from GE Capital

-

200,000

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600,000

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1,000,000

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1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 1Q16

-

100,000

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500,000

600,000

1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 1Q16

0

150,000

300,000

450,000

2H16E 2017E 2018E 2019E Thereafter

Asset reduction Cumulative capital liberated

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ECN Capital Corp. Canada Research | Page 19 of 45

Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2

featuring yield and utilization characteristics that might vary more widely depending on the companies leasing them and the industries that they operate in. We suspect that for these reasons, institutional interest in these asset classes might not be as broad as for larger jets, which might impact the marketability of any related funds comprised of them.

In Exhibit 23 we show the historical yield and profitability trends of the Aviation Finance vertical, which is of limited relevance to our forecasts considering the strategic shift taking place in this business. Trends in Aviation Finance have tended to be relatively volatile from quarter to quarter owing to issues such as the lumpy nature of originations and related syndication revenues, and to the non-recurring fees earned for structuring the ECAF I fund in 1H15. The yield deterioration experienced in 1H16 has been attributed in part to a mix shift resulting from the removal of higher-yielding assets in the first phase of the portfolio wind-down.

Exhibit 23: Aviation Finance – Key Ratios

Source: ECN Capital Corp., Raymond James Ltd.

Although this vertical’s pre-tax return on average earning assets of 3.64% for 1H16 was higher than for either the Rail Finance (2.30%) or Commercial & Vendor (2.91%) verticals, its average debt advance rate at 65% has also been much lower than those of the other verticals at 80% and 90%, respectively. Based on these metrics, Aviation Finance earned an adjusted pre-tax ROE of roughly 10.5% in 1H16.

Regarding the near-term outlook, we highlight that ECN had repossessed five helicopters from CHC Helicopters in 2Q16 following its bankruptcy that require remarketing. With an aggregate value of US$59 million, these leases represent over 6% of the vertical’s total earning assets, big enough in the mix to potentially influence overall portfolio yield in coming quarters depending on the timing and terms at which these aircraft can be leased to new customers.

Commercial Aircraft Fund Management – An Emerging Growth Business

ECN’s focus in the aviation leasing square has shifted entirely to the structuring and management of investment funds for institutional owners, consistent with its general shift in corporate strategy. This is a relatively capital-light approach to participating in the leasing industry, involving a modest degree of direct equity tranche investment and generating fee income related to the structuring and management of funds rather than interest and rental income on the underlying assets.

ECN has an in-house team with structuring expertise and relationships that enable it to structure and place this sort of investment vehicle. This team has experience in acquiring aircraft leases in the secondary market, and of assembling funds that are both appropriately diversified in several respects (e.g., type and age of aircraft, maturity of lease terms, and lessee characteristics including creditworthiness and geographic focus) and that are structured in marketable and rated investment tranches. Just as importantly, it also has relationships with third-party institutions that invest in this niche asset class, enabling it to secure investment in its funds.

Under this model, ECN will earn a structuring fee up front for originating the leases and structuring the transaction, and will then earn an ongoing management fee related to the administration of the fund. The actual servicing of underlying leases, including functions such as aircraft maintenance and re-leasing, will be outsourced. ECN’s direct investment will be limited to a portion of the equity tranche, of which it intends to own less than 20%. The company’s target IRR on ECAF (i.e., Element Commercial Aircraft Fund) family funds is in the “mid-teens”, consistent with the 16% equity return it forecasts for its ECAF I fund.

To date ECN has structured one such fund, the US$1.6 billion ECAF I Fund, which closed in Jun-2015. As outlined below, this fund was structured with three different classes of ABS notes, including US$1.05 billion of senior notes with A/A- ratings and $160 million of BBB-rated junior notes, in addition to a $320 million equity tranche. The ABS notes are tradable securities with

1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Financia l Revenue Yield 7.80% 6.90% 6.70% 9.00% 9.40% 8.60% 8.60% 8.30% 7.35% 7.25%

Net Interest Margin 6.30% 5.20% 3.30% 6.40% 5.60% 5.80% 5.80% 5.70% 3.89% 3.37%

Adjusted Operating Expense Ratio 0.70% 1.00% 0.70% 0.80% 0.80% 0.80% 0.80% 0.70% 0.85% 0.72%

Adjusted Pre-Tax Return on AEA 5.60% 4.20% 2.60% 5.60% 4.80% 5.00% 5.00% 5.00% 4.32% 3.46%

Average debt advance rate 65.0%1 42.0% 55.3% 65.0%1 60.7% 61.6% 63.7% 65.2% 62.5% 68.9%

1 - Contracted debt advance rate

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Canada Research | Page 20 of 45 ECN Capital Corp.

Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2

CUSIPs, enhancing their liquidity to investors. A total of 25 institutional investors participated in the transaction, including 20 ABS investors.

The fund itself is comprised of leases on 48 current generation, in-production commercial passenger aircraft manufactured by Boeing (53%) and Airbus (47%). At point of structuring, the aircraft had a weighted-average age of 6.6 years and the average remaining lease term was 5.9 years. The 48 aircraft were being leased to 37 different airlines based in 26 different countries, which contributes to the diversification of the portfolio.

Exhibit 24: ECAF I Structure

Source: Bloomberg, Raymond James Ltd.

Between 1Q15 and 2Q15, ECN earned total structuring fees of $15.4 million (including a small amount of management-related fees), representing ~75 bp of the total US$1.6 billion size of the fund. In more recent quarters, the ongoing management fees related to this fund have represented an annualized rate of ~25 bp of the fund’s average AUM. This is broadly consistent with ECN’s expectation that future funds should generate up-front structuring fees equal to 50-75 bp of AUM and ongoing management fees at an annualized rate of 25-75 bp of average AUM.

Exhibit 25: ECAF I AUM and Related Structuring Fee Revenue

Source: Bloomberg, Raymond James Ltd.

We expect that future investment funds, whether comprised purely of aircraft or of other transportation equipment, will be structured similarly to ECAF I. The company’s second equipment lease fund will be another aviation fund, ECAF II, which is expected to be up to $2.0 billion (i.e., ~US$1.5 billion) in size and very similar in composition and structure to ECAF I. Originally targeted for a 2Q16 launch, ECN now expects to close ECAF II in 4Q16, which could provide decent earnings and strategic momentum (i.e., in favour of its new asset management model) in its early days as an independent public company. In our forecasts, we incorporate the launch of the ECAF II fund in-line with the company’s guidance.

US Middle-Market Finance – the “Fourth Vertical”

Following its separation from Element, ECN plans to add a fourth major “vertical” to its business mix, and it expects to do so in the very near term. Specifically, ECN has its sights set on establishing a US middle-market commercial finance platform engaged primarily in the structuring and management of funds comprised of corporate debt.

The business model of this new vertical, consistent with the overall strategic direction of the company, will be to assemble diversified pools of syndicated loan investments into funds that will

Class A-1 Class A-2 Class B-1 Equity

Ratings (S&P / Fitch) A(sf) / A-(sf) A(sf) / A-(sf) BBB(sf) /BBB(sf) N/A

Size (US$ million) $459 $591 $160 $320

Weighted Average Life 3.57 years 6.97 years 5.49 years N/A

Coupon 3.473% 4.947% 5.802% N/A

Advance Rate 66.8% 66.8% 77.0% N/A

0.00%

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AUM (US$ mln) Advisory fees as % of AUM (annualized)

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ECN Capital Corp. Canada Research | Page 21 of 45

Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2

be structured into multiple tranches with varying risk and yield attributes for investment by institutions.

The investment focus of ECN’s US Middle-Market Finance vertical will be on syndicated positions in $50-$150 million loans representing senior debt of mid-market US companies. It expects that the average yield of its loan investments will initially be in the 6.75%-7.50% range, an investment zone for which ECN believes there is substantial institutional investor demand. Note that this represents lower yield and risk levels than the average investment portfolios of most BDCs.

Rather than originating and underwriting corporate loans itself, ECN plans to acquire syndicated positions in loans originated by primary mid-market lenders in the US (e.g., BMO Harris Bank). In addition to directing loan investments into managed funds, ECN plans to carry a balance of warehoused loans on its own balance sheet, funded at a leverage ratio of roughly 4:1 using investment-grade debt that we expect should provide a comfortable spread. It also plans to directly invest in up to 20% of the equity tranches of the open-ended commercial loan funds that it structures. In addition to earning a return on these investment stakes, ECN would also earn fees for the ongoing management of its funds (it is targeting a management fee rate of ~1.25%/year of AUM). Overall, it is targeting a pre-tax return on equity of ~17% from its Commercial Finance vertical once it has been established.

Based on its current plans, the managed funds and warehoused loan portfolio of ECN’s Commercial Finance vertical will be structured as follows:

Exhibit 26: Indicative Structures of Planned Commercial Finance Funds

Source: ECN Capital Corp., Raymond James Ltd.

In entering the mid-market commercial lending market in an asset management role, ECN is looking to capitalize on two trends supporting a favourable growth outlook in this area: (1) reduced involvement of US banks in the mid-market lending square, creating a growth opportunity for alternative lenders, and (2) growing levels of institutional investment in private debt, providing demand for the type of funds ECN plans to manage.

The Supply-Side Factor: Reduced Competition from US Banks – The partial withdrawal of US banks from the mid-market lending arena in recent years has opened the door for increased participation of alternative lenders in this space. Generally speaking, increased regulatory scrutiny and more demanding capital adequacy requirements have reduced banks’ willingness to invest in this asset class in recent years, as indicated in Exhibits 27-28 below.

Bank Warehouse Vehicle($1 billion, held on ECN's balance sheet)

Senior bank debt - 80%> Maximum single exposure of 3%

> Element ratings methodology > LIBOR + 170 bps

Equity - 20%> ECN Capital - 100%

Public Canadian-Listed Vehicle($1-2 billion, managed by ECN)

Senior bank debt - 80%

> Term matched> Rated

> Two debt tranches

Equity - 20%> ECN Capital - 20%; Investors - 80%

Institutional Investor Private Fund

($1-2 billion, managed by ECN)

Single or multiple investors

> Potential for levered or unlevered funds

> Levered Funds:> Rated Senior and Junior Notes

> Equity tranche

> Closed End

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Canada Research | Page 22 of 45 ECN Capital Corp.

Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2

Exhibit 27: Level 3 Assets for Capital Markets Firms (US$ bln) Exhibit 28: Leveraged Loan Funding by Entity

Source: Apollo Investment Corp., Raymond James Ltd. Source: S&P Global Market Intelligence, LCD Quarterly Leveraged Lending Review: 2Q16, Raymond James Ltd.

While BDCs have traditionally served as an important alternative source of funding for the US mid-market, their ability to fund growth, in general, might currently be more constrained than in the past considering (1) valuations that currently average just 0.9x P/NAV (i.e., such that equity financing might represent a fairly high cost of capital, (2) dividend payout ratios averaging 97% (i.e., representing limited earnings retention to internally fund growth), and (3) debt-to-equity ratios averaging 81% (i.e., fairly full leverage in relation to permitted levels).

Exhibit 29: US BDCs – Price-to-NAV (as of Oct-17-16)

Source: Factset, SNL Financial, Raymond James & Associates, Raymond James Ltd.

0

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ECN Capital Corp. Canada Research | Page 23 of 45

Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2

Exhibit 30: US BDCs – Dividend Payout Ratio (NTM)

Source: Factset, SNL Financial, Raymond James & Associates, Raymond James Ltd.

Exhibit 31: US BDCs – Debt-to-Equity Ratio

Source: Factset, SNL Financial, Raymond James & Associates, Raymond James Ltd.

Another offsetting consideration is that competition has ratcheted higher among private debt fund managers attempting to take advantage of the same opportunity that ECN sees. According to the 2016 Preqin Global Private Debt Report, there were 260 private debt funds attempting to raise more than $123 billion as at Feb-2016. In its 2016 outlook, this report concluded that “competition is set to remain fierce, especially for newer firms and those lacking strong track records”. In competing for investors’ investment commitments, we would expect that managers with lengthy tenure in this field that can point to a history of competitive risk-adjusted returns should generally have an advantage in raising funds. With this in mind, we believe it will be important for ECN to enter this market by acquiring an existing business with strong reputational value rather than attempting a greenfield expansion.

The Demand-Side Factor: Growing Interest from Institutional Investors – The primary driver of ECN’s interest in the commercial debt fund segment appears to be that this is a business that is not only aligned with its own strategic direction, but is also an area to which its institutional investing clientele is increasingly allocating assets. Compared with straight-up fixed income investments, private debt funds generally offer higher risk-adjusted returns (i.e., in part because mid-market borrowers are typically too small to secure credit ratings that might lower their lending costs), embedded diversification, and the ability to invest in senior fund tranches that feature superior downside protection.

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Canada Research | Page 24 of 45 ECN Capital Corp.

Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2

On a global basis, the number and aggregate size of private debt funds (based on committed capital) has grown at a 7% CAGR from 2010 to 2015, indicating that this investment class has been attracting growing attention from institutional investors since the financial crisis.

Exhibit 32: Annual Private Debt Fundraising, 2010 - 2015

Source: Preqin Global Private Debt Report, Raymond James Ltd.

Exhibit 33 shows the type of institutions that invest in private debt, breaking down the global investor base of which, for this asset class, 62% are based in North America (i.e., ECN’s target market). One third of this target market is represented by the two largest investor types, private and public pension funds, for which private debt currently represents an estimated 3.1% and 2.7% of total AUM, respectively. The estimated AUM allocation to this asset class by other investor types is 11.0% for family offices, 6.6% for wealth managers, 4.5% for foundations, 4.4% for asset managers and 4.0% for endowment plans.

Exhibit 33: Institutional Investors in Private Debt by Investor Type

Source: Preqin Global Private Debt Report, Raymond James Ltd.

Even before potentially acquiring existing businesses or teams of experienced professionals that would bring their own buy-side contacts, ECN will be entering this new venture with a large stable of existing institutional investor relationships that it has established in the course of business in its existing verticals. Based upon ongoing dialogue with these investing clients, ECN perceives a high level of demand from certain of these investors to partner with it as co-investors in planned commercial debt funds.

85 88

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$38.3$45.2

$62.3

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$85.2

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ECN Capital Corp. Canada Research | Page 25 of 45

Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2

Planning for an Immediate Entry

We believe that ECN intends to establish its US Middle-Market Finance vertical as soon as practically possible following its separation from Element and its raising of required capital. According to management, ECN has already identified and is in the process of reviewing several specific opportunities that would give it immediate entry to this market.

One option will be to acquire an existing business that would come complete with fee-generating managed funds, a balance sheet including proprietary investments, a stable of institutional investor relationships, and an infrastructure complete with professionals responsible for investment management, risk management, capital raising, etc. ECN claims to be considering three separate acquisition opportunities for businesses with AUM ranging from $500 million - $5 billion.

The other option will be to grow its presence in the private debt fund management segment from scratch through the hiring of experienced professionals that would attempt to put capital to use on a more gradual basis. ECN claims to be in discussions along these lines with two separate teams that both have significant experience in the field and that have previously built similar businesses.

We believe that ECN should prefer the “buy” option over the “build” option for several reasons, including the following:

- An acquisition would allow ECN to establish a meaningful market presence immediately, enabling it to take advantage of currently favourable market conditions.

- An acquisition would allow ECN to put a higher level of capital to work immediately to the benefit of both ROE and EPS, as a gradual buildout of the Middle-Market Finance business from scratch could result in a near-term ROE drag.

- We expect that the investment track record of a business would be more portable than that of individual managers, a relevant consideration regarding its ability to attract investor capital going forward.

- We believe there would be less operating risk associated with acquiring a business that has an existing infrastructure than with building a business from the ground up.

We believe that ECN intends to pursue the “buy” option and, in fact, that it may already have identified the business that it would like to acquire. Part of its rationale in bidding for INFOR was the immediacy of the funding that this would have provided, a consideration that should only have been important if ECN had already identified a near-term use of funds, in our view.

In a Sep-2016 investor presentation, ECN provided the “illustrative economics” of a potential US middle market finance acquisition that we believe might well approximate the size and shape of an actual investment opportunity already in its sights. This hypothetical acquisition would be for a business with AUM of $3 billion including $2.1 billion of AUM in managed funds and $900 million of warehoused corporate loans held on its balance sheet. In our estimation, assuming an acquisition priced at 1.0x book value, this scenario would require an equity investment totaling $264 million, including $180 million to fund warehoused loans at a 4:1 leverage ratio plus an $84 million investment in the equity tranches of managed funds (assuming a 20% interest). We summarize the “illustrative economics” of this hypothetical acquisition along with underlying assumptions, as initially presented by ECN, below.

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Canada Research | Page 26 of 45 ECN Capital Corp.

Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2

Exhibit 34: Illustrative Economics of Acquiring a Private Debt Fund Manager (C$ mln)

Source: ECN Capital Corp., Raymond James Ltd.

The biggest takeaway from this analysis, in our view, is that the company believes an acquisition on these terms would generate an after-tax ROE of 12.7%, which would skew the company-wide ROE higher based on our forecasts.

Capital & Funding

As at 2Q16, ECN’s debt funding structure consisted of the following facilities:

Exhibit 35: Secured Borrowings Outstanding, 2Q16 (C$ ‘000s)

Source: ECN Capital Corp., Raymond James Ltd.

- Life insurance company term funding facilities are securitization funding vehicles provided by insurers and used to finance certain Commercial & Vendor assets. This is how the company has traditionally funded its C&V portfolio, but ECN has been reducing its usage of this funding source following the recent introduction of new lower-cost bank securitization facilities. As at 2Q16, the average interest rate on these facilities was 3.23% and ECN had access to $133 million of additional financing capacity.

- ECN recently established bank securitization programs to help finance Commercial & Vendor assets, with separate facilities set up for Canadian and US dollar borrowings. The weighted-average interest rate on these facilities is currently just 2.21%, and ECN exited 2Q16 with $477 million of available funding capacity.

- ECN has multiple issuances of asset-backed securities outstanding backed by aviation and rail assets, with each issuance consisting of multiple tranches and carrying credit ratings. Considering ECN’s plans to transition each of these lines of business into off-

Assumption / Input

Middle market loans owned & managed by the acquired company:

On-balance sheet (warehoused loans) $900 30% of managed loans; held on balance sheet, funded at a 4:1 leverage ratio

Off-balance sheet (AUM of managed funds) $2,100 70% of managed loans; comprised 80% of debt tranches + a 20% equity tranche

$3,000

Funding requirements for assets added to ECN's balance sheet:

Debt funding for warehoused loans $720 80% of $900 (i.e., 4:1 leverage)

Required equity investment:

Equity funding for warehoused loans $180 20% of $900 (i.e., 4:1 leverage)

Direct investment in equity tranches of managed funds $84 20% stake of equity tranches comprising 20% of the $2,100 AUM of managed funds

$264

Illustrative returns:

Gross revenue, on-balance sheet assets $65 7.25%/year average gross yield earned on warehoused loans

Fee income from managed assets $26 1.25%/year management fee based on managed fund AUM of $2,100

Income earned from retained interest in fund $10 12%/year return on ECN's direct investment in equity tranches of managed funds

$102

Interest expense ($19) 2.7%/year interest rate cost on the debt funding warehoused loans

Net revenue $82

Operating expenses ($38) 1.25%/year operating expense ratio (as a % of total managed assets of $3,000)

Pre-tax income $45

Tax ($11) 25% tax rate

Net income $33

Profitability metrics:

ROA, % of on-balance sheet assets

Pre-tax 5.0%

Post-tax 3.7%

ROE, % of equity invested

Pre-tax 16.9%

Post-tax 12.7%

Balance Outstanding Wtd. Avg. Interest Rate

Life insurance company term funding facilities 348,273 3.23%

Securitization programs 1,094,863 2.21%

Asset-backed securities 1,434,542 3.88%

Term senior credit facility 1,537,407 2.52%

4,415,085 2.94%

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ECN Capital Corp. Canada Research | Page 27 of 45

Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2

balance sheet, asset management models, we expect this type of funding will diminish in the mix.

Effective upon its separation from Element, ECN replaced its allocated portion of Element’s term senior credit facility with its own US$2.5 billion senior three-year revolving facility. This facility will enable advances in both Canadian and US dollars and will be available for general corporate purposes. As at 2Q16, ECN’s outstanding senior bank debt of $1.5 billion was only at roughly half the level permitted under its newly-arranged facility.

Based on current debt capacity and the leverage constraints of each asset class, we estimate that ECN will exit 3Q16E with access to at least $100 million of capital available for reinvestment.

Immediately following its separation from Element, ECN received investment-grade issuer credit ratings from each of DBRS Limited (BBB (low) with a Stable Trend) and Kroll Bond Rating Agency (BBB with a Stable Outlook). It has also established an initial dividend payout of $0.01/quarter, representing a relatively low dividend yield of 1.4% that is still large enough to qualify the stock for potential income fund inclusion. Considering its acquisition-oriented growth strategy, we expect that ECN will be a capital-hungry company and will opt to retain almost all of its distributable cash flow for the foreseeable future.

Notably absent from ECN’s current capital structure are preferred equity and convertible debentures, each of which had featured in Element’s capital mix and remain with Element Fleet Management. Compared with the interest rates available on its remaining debt-related financing vehicles, those were relatively high cost funding sources, and without being allocated a portion of those costs, ECN’s overall cost of funding should immediately fall following its separation from Element.

ECN has indicated an intention to eventually issue preferred shares, aided by the company’s investment grade credit ratings. Management estimates that its current balance sheet could ultimately handle up to ~$300 million of preferred equity. We do not anticipate the issuance of convertible debentures.

Another consideration regarding ECN’s ability to fund near-term potential acquisitions is that the planned wind-down of its general aviation portfolio would liberate capital (i.e., of ~35% of assets sold), a process that could likely be accelerated, if necessary. Similarly, a planned transfer of at least $500 million of rail assets into an ECN-managed fund in 1Q17E would also free up capital (i.e., at ~25% of assets sold) that could be used to support growth in other verticals.

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Canada Research | Page 28 of 45 ECN Capital Corp.

Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2

Forecasts

We summarize our forecasts in Exhibit 36, followed by some high-level observations and discussion of some of the key underlying assumptions.

Exhibit 36: Summary Earnings Forecasts

Source: ECN Capital Corp., Raymond James Ltd.

Our Forecasts are Subject to Above-Average Risk – The first and most important comment we make about our forecasts is that they are based upon a number of material assumptions that we acknowledge are somewhat speculative in nature. Specifically, and as discussed separately below, we have assumed (1) an ongoing wind-down of the existing aircraft lease portfolio in-line with the company’s current plans, (2) the issuance of four new equipment leasing funds by the end of 2018E, of which plans for only two have been indicated by the company to-date, (3) the sale of the majority of the company’s on-balance sheet rail portfolio into two separate managed funds, and (4) the acquisition of a private debt fund manager to establish a Middle-Market Finance vertical. While each of the above are consistent with the

($ thousands, unless otherwise noted) 2014 2015 2016E 1Q17E 2Q17E 3Q17E 4Q17E 2017E 2018E

Net Financial Income

Interest income and net rental revenue 205,311 312,390 363,187 86,489 89,114 95,321 96,006 366,930 340,044

Interest expense 85,412 128,843 162,832 39,558 39,174 41,924 42,146 162,802 144,894

Net interest income before provision for credit loss 119,899 183,547 200,356 46,930 49,940 53,397 53,860 204,127 195,150

Provision for credit loss 14,462 17,730 23,169 6,722 6,717 6,682 6,636 26,757 26,767

Net interest income 105,437 165,817 177,187 40,208 43,223 46,715 47,224 177,370 168,383

Other revenue items 36,576 51,851 31,339 30,920 15,341 18,987 32,852 98,100 99,727

Net financial income 142,013 217,668 208,525 71,129 58,564 65,702 80,076 275,471 268,111

Operating Expenses

Salaries, wages and benefits 29,280 32,799 27,526 7,046 8,568 10,659 10,774 37,047 40,258

General and administrative expenses 16,043 24,058 29,579 7,046 8,568 10,659 10,774 37,047 38,967

Adjusted operating expenses 45,323 56,857 57,106 14,091 17,136 21,318 21,549 74,094 79,225

Share-based compensation 5,659 10,366 8,254 2,114 2,142 2,284 2,309 8,849 9,798

Total operating expenses 50,982 67,223 65,359 16,205 19,278 23,602 23,858 82,943 89,023

Amortization of intangible assets from acquisitions 305 1,719 650 - - - - - -

Transaction and integration costs 3,077 - - - - - - - -

Total expenses 54,364 68,942 66,009 16,205 19,278 23,602 23,858 82,943 89,023

Income (loss) before income taxes 87,649 148,726 142,516 54,924 39,286 42,100 56,218 192,528 179,088

Provision for (recovery of) income taxes 22,233 32,530 32,930 12,632 9,036 9,683 12,930 44,281 41,190

Net income (loss) for the period 65,416 116,196 109,586 42,291 30,250 32,417 43,288 148,247 137,897

Adjusted Operating Income:

Net financial income 142,013 217,668 208,525 71,129 58,564 65,702 80,076 275,471 268,111

Adjusted operating expenses 45,323 56,857 57,106 14,091 17,136 21,318 21,549 74,094 79,225

Adjusted operating income 96,690 160,811 151,420 57,037 41,428 44,384 58,527 201,377 188,886

Taxes applicable to adjusted operating income 24,526 35,173 33,764 12,548 9,114 9,765 12,876 44,303 41,555

After-tax adjusted operating income 72,164 125,638 117,655 44,489 32,314 34,620 45,651 157,074 147,331

FINANCIAL RATIOS:

Diluted EPS $0.28 $0.37 $0.28 $0.11 $0.08 $0.08 $0.11 $0.38 $0.35

Adjusted operating EPS (diluted) $0.31 $0.40 $0.30 $0.11 $0.08 $0.09 $0.12 $0.40 $0.38

Pre-tax adjusted operating EPS (diluted) $0.42 $0.52 $0.39 $0.15 $0.11 $0.11 $0.15 $0.51 $0.48

ROE 7.1% 9.0% 6.8% 9.6% 6.8% 7.1% 9.3% 8.3% 7.3%

Adjusted ROE 7.8% 9.8% 7.3% 10.1% 7.2% 7.6% 9.8% 8.8% 7.8%

Pre-tax adjusted ROE 10.5% 12.5% 9.4% 13.0% 9.2% 9.7% 12.6% 11.2% 10.0%

Financial revenue yield (as % of AEA) 7.6% 7.3% 6.4% 7.9% 6.8% 7.1% 7.9% 7.4% 7.4%

Weighted-average common shares O/S (diluted) 230,145 311,381 390,857 391,688 391,688 391,688 391,688 391,688 391,688

Leverage ratio 3.09x 2.81x 2.56x 2.16x 2.52x 2.48x 2.45x 2.45x 1.74x

BVPS $3.73 $4.12 $4.49 $4.59 $4.66 $4.74 $4.85 $4.85 $5.19

EARNING ASSETS:

Commercial & Vendor Finance 1,627,624 2,067,892 2,468,999 2,520,411 2,575,199 2,635,891 2,702,161 2,702,161 2,937,374

As a % of total 42% 35% 42% 47% 42% 43% 44% 44% 56%

Rail Finance 1,153,672 2,342,058 2,373,396 1,799,950 1,861,082 1,921,908 1,982,430 1,982,430 971,475

As a % of total 30% 40% 40% 34% 31% 31% 32% 32% 19%

Aviation Finance 1,093,227 1,440,860 1,073,222 1,036,874 952,497 878,688 836,134 836,134 650,452

As a % of total 28% 25% 18% 19% 16% 14% 13% 13% 12%

Mid-Market Finance - - - - 678,195 678,195 678,195 678,195 678,195

As a % of total - - - - 11% 11% 11% 11% 13%

Total earning assets 3,874,523 5,850,810 5,915,617 5,357,236 6,066,974 6,114,683 6,198,921 6,198,921 5,237,497

Managed fund AUM - 2,067,577 3,847,809 4,443,058 5,806,728 5,723,030 7,218,279 7,218,279 7,731,064

Total AUM 3,874,523 7,918,387 9,763,427 9,800,294 11,873,702 11,837,713 13,417,200 13,417,200 12,968,561

Average Earning Assets 2,982,643 4,724,828 5,784,299 5,636,427 5,712,105 6,090,829 6,156,802 5,944,878 5,566,670

Average AUM 2,982,643 6,237,217 8,109,205 9,781,860 10,836,998 11,855,708 12,627,457 11,352,659 13,189,762

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Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2

company’s current plans and the general strategic direction of the business, the timing, extent and occurrence of each is uncertain. The resulting forecasting risk is one reason for basing our valuation on BVPS rather than on our earnings forecasts. Over time, as the company executes on its transition strategy and the related impacts on its earnings become more evident, we expect that related forecasting risk will fall.

We Assume a Wind-Down of Aviation Assets In-Line with Current Plans – Our forecasts assume that the wind-down of on-balance sheet general aviation assets will progress more or less in-line with the company’s current plan, which calls for total aircraft leases in this vertical to fall from $1.2 billion in 2Q16 to $1.0 billion by 4Q16E, $0.7 billion by 4Q17E and $0.5 billion by 4Q18E.

We Forecast 9%/Year Asset Growth in Commercial & Vendor Finance – Based on the mid-point of the company’s 2H16E origination forecasts for both Canada and the US, we expect total earning assets of the Commercial & Vendor Finance vertical will grow by 11% over the next two quarters. We anticipate 9%/year earning asset growth over the following two years based on our origination growth forecasts of 5% for 2017E and 8% for 2018E.

We Assume Four New Commercial Equipment Lease Funds Will be Launched by 4Q18E – Our forecasts assume the launch of four new managed funds consisting of commercial aviation and railcar leases between now and 4Q18E, as summarized in Exhibit 37. While the company has specified plans for the near-term launches of its ECAF II fund (targeted for 4Q16E) and its initial railcar fund (targeted for 1Q17E), visibility on the potential timing and size of future equipment fund launches is low. Considering the complexities of forming and marketing new aviation funds, as evidenced by how long it has taken to launch the ECAF II fund, we assume it will take another year to get a third ECAF fund off the ground. Similarly, we expect it might take over a year to launch a second railcar fund, especially if it is as large as we’re forecasting (i.e., AUM of US$1 billion).

Exhibit 37: New Managed Fund Launches Included in Our Forecasts

Source: ECN Capital Corp., Raymond James Ltd.

We Expect the Majority of Rail Assets Will Eventually be Sold into Managed Funds – While we assume that railcar lease originations will total $280 million in each of 2017E and 2018E, we expect that the level of rail assets held on balance sheet will fall from $2.2 billion currently to $0.9 billion exiting 2018E following the expected sale of assets into ECN’s first two railcar lease funds (i.e., of $0.7 billion in 1Q17E and of $1.3 billion in 2Q18E). As a result, we expect that ECN will exit 2018E with its on-balance sheet portfolio of warehoused rail assets representing roughly a third of total railcar lease AUM. Based on management’s recent commentary that it believes the prevailing fair market value of its railcar leases is higher than book value, we expect that it will generate gains of 10% (i.e., on invested capital) upon the expected sale of US$50 million of assets in 4Q16E into the secondary market and on a transfer of US$500 million in 1Q17E into a managed fund.

We Assume a Private Debt Fund Manager Will be Acquired in 2Q17E – Consistent with the company’s plans to establish a new Middle-Market Finance vertical via a near-term acquisition, we have assumed that the company will acquire an existing business with AUM of $2 billion in 2Q17E, including ~$1.4 billion in managed funds. The economics we have assumed for this acquisition, including the expected impact on annualized earnings, are essentially the same as depicted in Exhibit 34, which reflects the “illustrative economics” of a hypothetical acquisition as presented by ECN in a Sep-2016 presentation, with two notable differences. First, we’ve downsized the assumed acquisition (i.e., vs. ECN’s illustrative example) to recognize a lower level of capital availability than would have been available had the proposed INFOR acquisition been completed. Second, considering that ECN should be targeting a well-functioning fund manager with a successful track record as its platform in this new market, we assume that it will pay a premium to book value (i.e., 1.1x), resulting in goodwill of $18 million. As for timing, we have assumed 2Q17E for this acquisition as this would follow the expected launch of a rail fund that would free up a significant amount of

Asset type Expected launch Expected AUM (US$ mln)

ECAF II Commercial aviation leases 4Q16 $1,500

Commercial Rail Fund I Railcar leases 1Q17 $500

ECAF III Commercial aviation leases 4Q17 $1,200

Commercial Rail Fund II Railcar leases 2Q18 $1,000

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Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2

capital, making an acquisition of this size more easily funded using existing capacity. We estimate that this acquisition would require a total equity investment of ~$195 million.

We expect a materially higher level of “other” revenues in 2017E due to the inclusion of structuring fees expected from the launch of two new managed funds, gains we are forecasting from the expected sale of rail assets and income attribution we are forecasting from investments in the equity tranches of new managed funds. With only one new managed fund assumed for launch in 2018E and no gains assumed on the transfer of rail assets into a second rail fund in 2Q18E, our forecasts call for very little growth of “other” revenues in 2018E.

We Conservatively Do Not Forecast Enough Asset Growth to Drive Leverage Higher – Contrary to the company’s plans to achieve higher leverage ratios supportive of ROE improvement, the company’s leverage ratio will fall from 2.81x at 2Q16 to 2.45x by 4Q17E and to 1.74x by 4Q18E based on our forecasts. The reason for this is that following the assumed acquisition of a private debt fund manager in 2Q17E, we do not incorporate any material reinvestment of capital. Meanwhile, we expect the amount of capital available for reinvestment will grow through a combination of earnings retention and further asset disposition, including a continued wind-down of general aviation assets and further sales of rail assets into managed funds. To the extent that management is able to continue sourcing profitable reinvestment opportunities to make productive use of available capital, our leverage, earnings and ROE estimates could prove to be conservative, especially for 2018E.

We forecast ROE improvement from the current run rate estimated at below 7% to 8.3% in 2017E, supported mainly by an expected spike in “other revenues” related to structuring fees on new fund launches and gains that we expect to be realized on the sale of rail assets. Our 2018E ROE forecast is lower at 7.3%, as we anticipate fewer lumpy “other” revenues, a net reduction in revenues related to the transfer of rail assets into managed funds, and a falling leverage ratio as discussed above. In Exhibit 36 we also present our pre-tax adjusted ROE forecasts, which more closely approximates the cash return on equity that we expect ECN to generate considering its sizeable cash tax shield. Our pre-tax adjusted ROE forecasts are notably higher at 11.2% for 2017E and 10.0% for 2018E.

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ECN Capital Corp. Canada Research | Page 31 of 45

Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2

Valuation & Recommendation

We initiate coverage on ECN with an Outperform rating and a $4.40 target price that is based on a multiple of 0.9x 4Q17E BVPS. The stock is currently trading at a P/BVPS multiple of 0.7x and there is 51% projected upside to our target price.

We opted for a book value-based valuation rather than an earnings-based valuation for the following reasons:

- We expect ECN’s earnings to be somewhat volatile and unpredictable in the near-term as it executes its strategic transformation, including a partial shift of assets from its balance sheet into managed funds, and potentially involving acquisitions. In our opinion, there is too much risk in resulting earnings forecasts to rely upon them as a primary basis of valuation.

- ECN has no trading history as a standalone entity, and therefore does not have an established historical valuation range to provide context in establishing a P/E-based target multiple. At this point, we prefer the absolute nature of a BVPS-based valuation for ECN.

- For reasons discussed below, we believe ECN’s book value is well supported, providing strong valuation support for the stock regardless of its near-term earnings outlook.

In our opinion, ECN initially warrants a P/BVPS multiple of 0.9x based on the following considerations:

- The balance sheet consists primarily of earning assets (i.e., 94% of total assets) and related funding plus a small amount of working capital and very little intangible assets (i.e., goodwill and intangible assets represent less than 1% of total assets).

- Its Rail Finance portfolio (40% of current earning assets) has been assembled over the past two and a half years and features both a 99% utilization rate and a relatively young average fleet age, factors supportive of current book value, in our opinion. In fact, management expects that a small portfolio of rail assets that it is currently marketing will achieve a gain over carrying value in a secondary market sale, and that the rest of its portfolio might similarly be worth more than book value based on potential liquidation values.

- The Commercial & Vendor Finance vertical (39% of earning assets) is profitable and growing, with a divisional ROE (2Q16) of 8.6% that the company expects will expand to over 12% within the next 18-24 months due to a combination of lower funding costs, which are essentially locked in, and slightly higher asset yields. While we can’t count on this degree of ROE expansion from the C&V vertical, we do expect its ROE to trend higher in the near-term and believe that its current ROE is already supportive of a 1.0x P/BVPS multiple on a standalone basis.

- Its existing Aviation Finance portfolio is in runoff, such that the liquidation value represented by a 1.0x BVPS multiple for this portfolio makes sense to us as long as it is able to continue achieving proceeds equal to at least book value upon lease dispositions.

- After factoring in all corporate level expenses, including stock-based compensation, our 2017E ROE forecast for the company overall is 8.3%. Our 2018E ROE forecast, which features fewer non-recurring gains related to managed fund launches and asset sales and is also burdened by a growing level of excess capital (i.e., we do not assume reinvestment of capital liberated by on-balance sheet asset reductions beyond 2Q17E), is slightly lower at 7.3%. In all periods, our ROE forecasts understate the actual level of cash returns we expect ECN to generate, as we expect its existing tax shield will protect it from a cash tax burden for the foreseeable future.

- In Exhibit 38 we present relevant profitability and valuation metrics for an expanded list of companies that we broadly consider to be peers of ECN for valuation purposes. The broad leasing company peer group, excluding outlier Grenke which trades at an unusually high P/BV of 4.0x, is expected to generate an average 2017E ROE of 9.4% and is currently valued at an average P/BV multiple of 1.0x. Considering the lower projected profitability of ECN vs. this peer group average as well as the near-term risks and expected earnings volatility associated with its planned strategic transformation, we believe a target P/BVPS multiple of 0.9x is warranted.

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Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2

Exhibit 38: Relative Valuation vs. Select Peers (US$ unless otherwise noted)

Source: Bloomberg, Raymond James Ltd.

As a final note on valuation, we point out the relatively high 5.0x average P/BVPS multiple of US-based alternative asset managers listed in Exhibit 38. While we believe it is far too premature to begin factoring ECN’s asset management ambitions into its valuation, and do not expect its business to become truly comparable to these “peers”, we highlight the directional influence that a growing management fee base might have on ECN’s valuation if it is able to eventually transition its primary source of earnings from leasing to asset management.

Price Mkt Cap. Dividend

17-Oct-16 ($ mln) Yield 2016E 2017E 2018E 2016E 2017E 2018E 2016E 2017E 2018E P/BV 2016E 2017E

Leasing Companies

Equipment and Diversified Leasing

Century Tokyo Leasing Corp ¥3,540.00 ¥377,451 2.7% ¥379.35 ¥412.33 ¥440.16 14% 9% 7% 9.3x 8.6x 8.0x 1.2x 13.0% 12.6%

CIT $36.09 $7,290 1.7% $3.25 $3.57 $3.85 11% 10% 8% 11.1x 10.1x 9.4x 0.7x 4.8% 5.6%

Grenke AG $165.70 $2,448 0.9% $6.67 $7.77 $9.02 22% 17% 16% 24.9x 21.3x 18.4x 4.0x 15.5% 15.7%

Marlin Business Services $19.56 $245 2.9% $1.41 $1.66 $1.89 1% 18% 14% 13.9x 11.8x 10.3x 1.6x 11.2% 12.2%

McGrath RentCorp $30.46 $728 3.3% $1.62 $1.81 $2.21 0% 12% 22% 18.8x 16.8x 13.8x 1.9x 10.1% 11.8%

Mitsubishi UFJ Lease & Finance Corp ¥512.40 ¥7,260,121 3.5% ¥74.96 ¥65.82 ¥68.59 1% (12%) 4% 6.8x 7.8x 7.5x 0.5x 6.1% 6.1%

NewStar Financial $9.57 $447 na $0.47 $0.69 $0.93 15% 47% 35% 20.4x 13.9x 10.3x 0.7x 3.4% 4.7%

PacWest Bancorp $41.45 $4,991 4.8% $2.83 $3.02 $3.16 2% 7% 4% 14.6x 13.7x 13.1x 1.1x 7.7% 7.9%

Group Average 2.8% 8% 13% 14% 15.0x 13.0x 11.4x 1.4x 9.0% 9.6%

Railcar Leasing

GATX Corporation $44.39 $1,793 3.6% $5.60 $4.60 $4.00 25% (18%) (13%) 7.9x 9.7x 11.1x 1.4x 17.6% 13.7%

Container Leasing

Textainer Group Holdings $7.15 $404 13.4% $0.34 $0.81 $1.29 (88%) 136% 59% 20.8x 8.8x 5.5x 0.3x 4.2% 4.5%

Aircraft Leasing

Aercap Holdings $39.16 $7,227 na $5.98 $6.32 $7.15 (5%) 6% 13% 6.5x 6.2x 5.5x 0.9x 11.8% 13.8%

Air Lease Corporation $28.40 $2,921 0.7% $3.39 $3.73 $4.36 24% 10% 17% 8.4x 7.6x 6.5x 0.9x 11.5% 11.3%

Aircastle Ltd. $19.48 $1,532 4.9% $1.77 $2.20 $2.66 (20%) 24% 21% 11.0x 8.8x 7.3x 0.9x 7.5% 9.2%

Group Average 2.8% (0%) 13% 17% 8.6x 7.6x 6.4x 0.9x 10.2% 11.4%

Leasing Companies Average ex. Grenke 4.2% (2%) 21% 16% 12.5x 10.3x 9.0x 1.0x 9.1% 9.4%

Alternative Asset Managers

Apollo Global Management $17.49 $7,127 8.5% $1.64 $1.97 $2.56 44% 20% 30% 10.7x 8.9x 6.8x 4.7x 48.3% 38.3%

Ares Management $17.65 $3,737 6.3% $1.23 $1.70 $1.79 27% 39% 5% 14.4x 10.4x 9.8x 5.2x 87.3% nmf

Blackstone Group $23.52 $27,726 6.1% $1.91 $2.89 $3.26 1% 51% 13% 12.3x 8.1x 7.2x 4.5x 18.8% 20.2%

Carlyle Group $14.40 $4,680 17.5% $1.27 $1.90 $2.07 3% 49% 9% 11.3x 7.6x 6.9x 3.0x 22.0% 21.4%

Fortress Investments $5.05 $1,950 7.1% $0.89 $1.03 $0.90 11% 16% (13%) 5.7x 4.9x 5.6x 4.1x 16.1% na

Oaktree Capital $40.00 $6,197 5.8% $2.53 $3.02 $4.17 54% 19% 38% 15.8x 13.2x 9.6x 8.3x 30.0% 25.9%

Group Average 23% 32% 14% 11.7x 8.9x 7.7x 5.0x 37.1% 26.5%

ECN Capital Corp 1 (C$) $2.95 $1,141 1.4% $0.30 $0.40 $0.38 (23%) 32% (10%) 9.8x 7.4x 7.8x 0.7x 6.8% 8.3%1 - Raymond James Ltd. EPS estimates; all others Bloomberg consensus EPS estimates

Adjusted EPS Earnings Growth P/E Multiples ROE

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Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2

Appendix A: Financial Statements

Exhibit 39: Summary Income Statement

Source: ECN Capital Corp., Raymond James Ltd.

Exhibit 40: Summary Balance Sheet

Source: ECN Capital Corp., Raymond James Ltd.

($ thousands, unless otherwise noted) 2014 2015 2016E 1Q17E 2Q17E 3Q17E 4Q17E 2017E 2018E

NET FINANCIAL INCOME

Interest income 142,666 178,557 193,176 49,820 55,537 60,707 60,361 226,424 247,958

Rental revenue, net 62,645 133,833 170,011 36,669 33,578 34,614 35,645 140,506 92,207

205,311 312,390 363,187 86,489 89,114 95,321 96,006 366,930 340,166

Interest expense 85,412 128,843 162,820 39,524 39,127 41,875 42,098 162,624 144,765

Net interest income before provision for credit loss 119,899 183,547 200,368 46,965 49,987 53,445 53,908 204,305 195,401

Provision for credit loss 14,462 17,730 23,169 6,722 6,717 6,682 6,636 26,757 26,782

Net interest income 105,437 165,817 177,199 40,243 43,270 46,763 47,272 177,548 168,619

Other revenue items 36,576 51,851 36,273 34,210 15,341 18,987 32,852 101,390 99,776

Net financial income 142,013 217,668 213,472 74,453 58,611 65,751 80,124 278,938 268,395

OPERATING EXPENSES

Salaries, wages and benefits 29,280 32,799 27,526 7,046 8,568 10,659 10,774 37,047 40,272

General and administrative expenses 16,043 24,058 29,579 7,046 8,568 10,659 10,774 37,047 38,980

Adjusted operating expenses 45,323 56,857 57,106 14,091 17,136 21,318 21,549 74,094 79,252

Share-based compensation 5,659 10,366 8,254 2,114 2,142 2,284 2,309 8,849 9,802

Total operating expenses 50,982 67,223 65,359 16,205 19,278 23,602 23,858 82,943 89,053

Amortization of intangible assets from acquisitions 305 1,719 650 - - - - - -

Transaction and integration costs 3,077 - - - - - - - -

Total expenses 54,364 68,942 66,009 16,205 19,278 23,602 23,858 82,943 89,053

Income (loss) before income taxes 87,649 148,726 147,462 58,248 39,333 42,149 56,266 195,996 179,341

Provision for (recovery of) income taxes 22,233 32,530 34,067 13,397 9,046 9,694 12,941 45,079 41,248

Net income (loss) for the period 65,416 116,196 113,395 44,851 30,286 32,455 43,325 150,917 138,093

ADJUSTED OPERATING INCOME

Net financial income 142,013 217,668 213,472 74,453 58,611 65,751 80,124 278,938 268,395

Adjusted operating expenses 45,323 56,857 57,106 14,091 17,136 21,318 21,549 74,094 79,252

Adjusted operating income 96,690 160,811 156,366 60,362 41,475 44,433 58,575 204,844 189,143

Taxes applicable to adjusted operating income 24,526 35,173 34,853 13,280 9,124 9,775 12,887 45,066 41,611

After-tax adjusted operating income 72,164 125,638 121,513 47,082 32,350 34,658 45,689 159,779 147,531

FINANCIAL RATIOS:

Diluted EPS $0.28 $0.37 $0.29 $0.11 $0.08 $0.08 $0.11 $0.39 $0.35

Adjusted operating EPS (diluted) $0.31 $0.40 $0.31 $0.12 $0.08 $0.09 $0.12 $0.41 $0.38

Pre-tax adjusted operating EPS (diluted) $0.42 $0.52 $0.40 $0.15 $0.11 $0.11 $0.15 $0.52 $0.48

ROE 7.1% 9.0% 7.0% 10.2% 6.7% 7.1% 9.3% 8.4% 7.3%

Adjusted ROE 7.8% 9.8% 7.6% 10.7% 7.2% 7.6% 9.8% 8.9% 7.8%

Pre-tax adjusted ROE 10.5% 12.5% 9.7% 13.7% 9.2% 9.7% 12.6% 11.4% 10.0%

Financial revenue yield (as % of AEA) 7.6% 7.3% 6.5% 8.1% 6.8% 7.1% 7.9% 7.4% 7.4%

Weighted average common shares O/S (diluted) 230,145 311,381 390,857 391,688 391,688 391,688 391,688 391,688 391,688

($ thousands, unless otherwise noted) 2014 2015 2016E 1Q17E 2Q17E 3Q17E 4Q17E 2017E 2018E

ASSETS

Cash - - 29,562 29,858 30,157 30,458 30,763 30,763 32,012

Restricted funds 186,486 222,530 207,638 191,521 216,894 218,600 221,611 221,611 204,604

Finance receivables 2,577,845 3,129,794 3,228,924 3,248,960 3,222,247 3,211,757 3,178,065 3,178,065 3,255,085

Equipment under operating leases 1,279,670 2,692,731 2,683,572 2,078,770 2,134,943 2,190,891 2,246,615 2,246,615 1,164,600

Commercial finance loans - - - - 620,301 620,301 620,301 620,301 620,301

Equity investment in managed funds - - 78,947 105,263 163,158 163,158 226,316 226,316 278,947

Accounts receivable and other assets 21,496 44,853 41,387 37,294 37,500 37,819 37,973 37,973 30,938

Notes receivable 23,925 27,338 26,606 23,975 24,107 24,312 24,411 24,411 19,889

Derivative financial instruments 1,702 4,014 784 784 784 784 784 784 784

Property, equipment and leasehold improvements 374 678 1,299 1,315 1,332 1,348 1,365 1,365 1,435

Intangible assets 21,524 25,565 24,114 24,114 24,114 24,114 24,114 24,114 24,114

Deferred tax assets 14,571 16,674 25,782 25,782 25,782 25,782 25,782 25,782 25,782

Goodwill 5,720 8,074 7,839 7,839 26,034 26,034 26,034 26,034 26,034

Total assets 4,133,313 6,172,251 6,356,456 5,775,476 6,527,354 6,575,358 6,664,134 6,664,134 5,684,524

LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities

Accounts payable and accrued liabilities 83,084 57,080 88,734 80,359 91,005 91,720 92,984 92,984 78,694

Derivative financial instruments 9,985 17,747 29,772 29,771 29,771 29,771 29,771 29,771 29,771

Secured borrowings 3,047,300 4,471,392 4,443,341 3,827,646 4,540,322 4,556,745 4,602,496 4,602,496 3,504,773

Deferred tax liabilities 7,451 34,621 54,078 54,078 54,078 54,078 54,078 54,078 54,078

Total liabilities 3,147,820 4,580,840 4,615,925 3,991,853 4,715,175 4,732,314 4,779,329 4,779,329 3,667,315

Net investment 985,493 1,591,411 1,740,531 1,783,623 1,812,178 1,843,044 1,884,805 1,884,805 2,017,209

Total liabilities and equity 4,133,313 6,172,251 6,356,456 5,775,476 6,527,353 6,575,358 6,664,134 6,664,134 5,684,524

FINANCIAL RATIOS:

BVPS $3.73 $4.12 $4.50 $4.61 $4.68 $4.76 $4.87 $4.87 $5.21

Leverage ratio 3.09x 2.81x 2.55x 2.15x 2.51x 2.47x 2.44x 2.44x 1.74x

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Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2

Exhibit 41: Summary Cash Flow Statement

Source: ECN Capital Corp., Raymond James Ltd.

($ thousands, unless otherwise noted) 2014 2015 2016E 1Q17E 2Q17E 3Q17E 4Q17E 2017E 2018E

OPERATING ACTIVITIES

Net income (loss) for the period 65,416 116,196 109,586 42,291 30,250 32,417 43,288 148,247 137,946

Items not affecting cash: - - - - - - - - -

Share-based compensation 4,516 8,253 7,402 2,114 2,142 2,284 2,309 8,849 9,802

Depr'n of property & equipment 232 283 156 - - - - - -

Amortization of intangible assets (3,534) 550 (105) - - - - - -

Amortization of deferred lease costs 12,589 9,984 6,297 - - - - - -

Amortization of deferred financing costs 7,056 10,448 14,296 5,486 4,999 4,930 4,868 20,282 15,179

Amortization of equipment under operating leases 19,995 48,147 68,514 16,907 13,827 14,052 14,277 59,062 46,225

Gain on sale of earning assets

Provision for credit losses 14,462 17,730 23,169 6,722 6,717 6,682 6,636 26,757 26,782

120,732 211,591 222,737 73,520 57,934 60,365 71,378 263,197 235,934

Changes in non-cash operating working capital:

Accounts receivable and other assets 26,770 (20,435) 13,596 4,093 (206) (318) (154) 3,415 7,035

Accounts payable and accrued liabilities 50,497 (34,528) 34,363 (8,376) 10,646 716 1,264 4,250 (14,290)

Investment in finance receivables (2,006,987) (1,940,626) (1,844,655) (417,553) (424,479) (436,287) (461,490) (1,739,809) (1,848,521)

Repayments of finance receivables 1,066,968 1,537,729 1,446,585 383,295 394,475 380,096 438,546 1,596,412 1,577,218

Investment in equipment under operating leases (1,005,443) (1,084,076) (341,736) (80,000) (80,000) (80,000) (80,000) (320,000) (320,000)

Proceeds on disposals of equipment under

operating leases 4,543 63,614 106,897 10,000 10,000 10,000 10,000 40,000 40,000

Syndications of finance receivables 259,996 34,799 129,560 7,500 50,000 60,000 50,000 167,500 167,500

Transfer of assets to managed fund - - - 657,895 - - - 657,895 1,315,789

Investment in commercial loans - - - - (620,301) - - (620,301) -

Deferred tax assets 12,939 (2,417) (10,944) - - - - - -

Deferred tax l iabilities 5,016 26,757 19,582 - - - - - -

Derivative financial instruments 6,474 7,388 (5,162) - - - - - -

Cash provided by (used in) operating activities (1,458,495) (1,200,204) (229,176) 630,375 (601,930) (5,429) 29,542 52,558 1,160,666

INVESTING ACTIVITIES

Equity investment in managed fund - - (78,947) (26,316) (57,895) - (63,158) (147,368) (52,632)

Business acquisition (1,120) (1,890) - - - - - - -

Decrease/(increase) in restricted funds (94,120) (20,667) 12,019 16,117 (25,373) (1,706) (3,012) (13,973) 17,008

Increase in notes receivable (4,753) (3,413) 732 2,631 (133) (205) (99) 2,195 4,522

Purchase of capital assets (337) (501) (858) (16) (16) (17) (17) (66) (70)

Disposals of capital assets and intangible assets 159 - 35 - - - - - -

Purchase of intangible assets (410) (492) (114) - (18,195) - - (18,195) -

Cash used in investing activities (100,581) (26,963) (67,134) (7,584) (101,612) (1,927) (66,285) (177,408) (31,171)

FINANCING ACTIVITIES

Dividends paid (3,873) (3,873) (3,873) (3,873) (15,491) (15,491)

Change in owner's net investment 11,297 340,238 85,631 - - - - - -

Issue (repayment) of secured borrowings, net 1,556,214 895,730 287,803 (660,637) 712,235 13,167 50,186 114,951 (1,125,794)

Increase in deferred financing costs (8,435) (8,801) (47,562) 42,015 (4,521) (1,637) (9,266) 26,591 13,038

Cash provided by financing activities 1,559,076 1,227,167 325,872 (622,495) 703,841 7,658 37,047 126,051 (1,128,247)

Net increase in cash during the period - - 29,562 296 299 301 304 1,201 1,249

Cash, beginning of period - - - 29,562 29,858 30,157 30,458 29,562 30,763

Cash, end of period - - 29,562 29,858 30,157 30,458 30,762 30,763 32,012

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Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2

Appendix B: Management & Board of Directors

Management

Steven Hudson is the Chief Executive Officer of ECN Capital. Most recently, he held the position of CEO of Element Financial Corporation from its founding in 2011 to the separation of the company in Oct-2016. Previously, Mr. Hudson had founded and served as CEO of Newcourt Credit Group, an equipment and asset finance company with assets of $36 billion at the time it was sold in 1999. Mr. Hudson holds an Honours Bachelor of Business Administration from York University and is a Fellow of the Institute of Chartered Accountants of Ontario.

Jim Nikopoulos is Chief Operating Officer and General Counsel for ECN Capital. Most recently, he had been Senior Vice President, General Counsel and Corporate Secretary at Element Financial Corp, from 2013. Previously, he had been Vice President, Corporate Development and General Counsel at TeraGo Inc., and was a partner at Davies Ward Phillips and Vineberg LLP where he practiced M&A, corporate finance and securities law. Mr. Nikopoulos holds an Honours Bachelor of Arts degree from the University of Toronto and a Juris Doctris degree from Osgoode Hall Law School.

Michel Beland is the Chief Financial Officer of Element Fleet Management and is also acting as such for ECN Capital through a shared services agreement between the companies. Prior to joining Element Financial Corp. as its Chief Financial Officer in 2011, he had served as CFO at each of MMV Financial (a specialty finance firm), Isacsoft (a business software solutions provider) and Newcourt Credit Group. Mr. Beland earned a Bachelor of Business Administration from the Universite du Quebec and became a member of the Comptables Agrees du Quebec in 1984.

David McKerroll holds the position of President, Rail and Aviation Finance at ECN Capital. He had previously held the same position at Element Financial Corporation. Mr. McKerroll was one of the founders of Newcourt Credit Group and had served as the President of Newcourt Capital, which focused on providing structured finance and advisory services in the aerospace, rail, energy and infrastructure industries. He also held the role of Group CEO of CIT Structured Finance and later as the Group CEO of CIT Capital Finance. Mr. McKerroll holds a Bachelor of Commerce degree from McMaster University and the CPA, CA designation.

Don Campbell is the President of ECN’s US Commercial and Vendor Finance business. Most recently, he was President of Element Financial (USA), the C&V Finance business of Element Financial Corp. Previously, Mr. Campbell co-founded CoActiv Partners, which was acquired by Element Financial in Nov-2012. He also previously served as the CEO of Tokai Financial Services and as President of Commerce Commercial Leasing, First Fidelity Leasing Group and ITT Financial Middle Market and Large Ticket Capital Market Group.

Board of Directors

William Lovatt is the Chairman of the Board of Directors of ECN Capital. He previously chaired the Board of Directors of Element Financial Corporation, from 2015, and remains on the board of Element Fleet Management. Previously, Mr. Lovatt was the Executive Vice President and Chief Financial Officer of Great-West Lifeco Inc. Mr. Lovatt holds a Bachelor of Commerce Degree from the University of Saskatchewan, he holds the CFA designation and he is a Fellow of the Certified General Accountants Canada.

Steven Hudson – Refer to Management section.

Bradley Nullmeyer is the Vice-Chairman of ECN Capital and the President and CEO of Element Fleet Management Corporation. Prior to the separation transaction, he had been President of Element Financial Corporation. Mr. Nullmeyer was previously a co-founder of Newcourt Credit Group, where he had lead responsibility for corporate acquisitions and the development of international vendor finance programs. He had also been President of Vendor Finance for CIT USA and the Co-CEO of OTEC Research limited. Mr. Nullmeyer holds a Bachelor of Commerce degree from McMaster University and the CPA, CA designation.

Paul Stoyan, an Independent Director of ECN Capital, is the Chairman of Gardiner Roberts LLP, a Canadian law firm. Mr. Stoyan practices business law with a special emphasis on mergers and acquisitions, corporate finance and corporate governance, and also serves on the board of directors of Enghouse Systems Ltd. Mr. Stoyan holds a Bachelor of Laws and a Bachelor of Arts from the University of Toronto.

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Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2

Pierre Lortie is an Independent Director of ECN Capital and a Senior Business Advisor at Dentons Canada LLP. Mr. Lortie’s previous roles included a number of senior executive positions at Bombardier, CEO of Provigo Inc., and CEO of the Montreal Stock Exchange. Mr. Lortie holds an MBA from the University of Chicago, a license in applied economics from the Université Catholique de Louvain, Belgium, and a Bachelor’s degree in applied sciences from Université Laval. He is a Fellow of the Canadian Academy of Engineering and a member of the Order of Canada.

Gordon Giffin is an Independent Director of ECN Capital. He is a former US Ambassador to Canada and currently serves as the chair of Dentons’ US Public Policy and Regulation practice and co-chair of Dentons’ global Energy sector team. He also serves on the Board of Directors of Canadian National Railway, CIBC, Canadian Natural Resources and TransAlta Corporation, of which he is the Chairman.

David Morris is an Independent Director of ECN Capital. He is a recently retired partner at Deloitte & Touche LLP where he had served in the audit practice dealing extensively with global financial institutions and public companies.

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Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2

Risks

Funding Risk – ECN is dependent upon its ability to secure funding for its leases to customers, and to fund existing obligations. Funding to date has been obtained from the issuance of equity, through term funding facilities and a warehouse line, and from the securitization and syndication of lending assets. Should access to these or other forms of funding become limited, Element might not be able to fund future asset growth. Should its cost of capital increase, it might negatively impact profitability as well as Element’s ability to compete for profitable business.

Exposure to Economic Cycles – A deterioration of conditions may materially adversely affect businesses and industries that collectively constitute a significant portion of ECN’s customer base and may make it more difficult for ECN to maintain new business origination and credit quality. Volatility in financial markets related to an economic downturn may also adversely affect ECN’s ability to raise capital necessary to fund new business.

Reliance on Key Senior Managers – ECN’s performance is highly dependent on the performance of its highly experienced executive management team and other senior employees. The loss of service of any of these senior managers could harm Element’s future performance with respect to new business generation, acquisition identification and execution, business integration, etc.

Competition Risk – ECN’s market segments are highly competitive, with competitors including independent lease finance companies, manufacturers’ captive finance companies, banks and third-party brokers, some of which have greater financial capacity, access to capital (potentially at lower finance costs) or broader service offerings. ECN competes largely on the basis of pricing, terms and structure, factors that restrict the ability to establish a sustained competitive advantage.

Interest Rate Risk – Should ECN fail to adequately match the duration and structure of interest rates earned on finance assets with interest expense paid on its secured borrowing facilities (as per normal operating policy), it would expose earnings to fluctuations in interest rates. In the regular course of business, ECN is exposed to interest rate risk on finance receivables in the warehousing period prior to achieving matched funding, although this risk is limited through limitations on the level of warehoused receivables.

Strategic Risks – An important aspect of ECN’s strategic plan is to materially grow its asset management business through the formation and issuance to institutional investors of funds comprised of leased assets. There is no assurance that ECN will be able to source either a sufficient quantity of appropriate assets or adequate investor commitment to fulfill its fund issuance objectives. There is also uncertainty as to the availability, size and valuation of potential acquisition targets, as well as to ECN’s ability to finance acquisition-oriented growth.

Credit Risk – ECN’s investment in finance assets exposes it to the risk of credit losses should customers and counterparties fail to discharge their contractual obligations due to reasons such as adverse economic conditions, business failure or fraud. While most of its loans and leases are secured by a lien on specified collateral, there is no assurance that the value of this collateral will fully insulate ECN from losses in the event of default.

Concentration Risk – ECN specializes in certain broad industry segments, and as a result, its portfolio has and may develop concentrations of risk exposure related to those industry segments. A deterioration of business conditions in any industry to which ECN has concentrated exposure might negatively impact the growth and credit quality of its portfolio.

Currency Risk – Given that ECN hosts a significant portion of its business in the US, it faces significant currency risk against the US dollar.

Risks Related to the Trinity Vendor Program – The success of the Trinity Vendor Program to ECN is determined largely by the volume of acceptable railcar lease financing opportunities presented by Trinity and on the quality of the railcar assets acquired. The terms offered by Trinity on future tranches of railcar assets may not be attractive to ECN, and the predetermined diversification criteria for such tranches may cease to benefit ECN. There is also risk that Trinity may fail to meet expected standards in their reporting on and servicing of the railcar assets.

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Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2

Company Citations

Company Name Ticker Exchange Currency Closing Price RJ Rating RJ Entity

Airbus Group AIR.PA EPA € 52.71 1 RJEE/RJFI Alcentra Capital Corporation ABDC NASDAQ US$ 12.73 1 RJ & Associates Apollo Investment Corp. AINV NASDAQ US$ 5.86 3 RJ & Associates Ares Capital Corp. ARCC NASDAQ US$ 15.16 2 RJ & Associates Bombardier Inc. BBD.B TSX C$ 1.74 3 RJ Ltd. CM Finance Inc. CMFN NASDAQ US$ 9.10 2 RJ & Associates Element Fleet Management Corp. EFN TSX C$ 12.79 1 RJ Ltd. Fidus Investment Corporation FDUS NASDAQ US$ 15.50 1 RJ & Associates Fifth Street Finance Corp. FSC NASDAQ US$ 5.46 3 RJ & Associates GAIN Capital Holdings, Inc. GCAP NYSE US$ 5.63 3 RJ & Associates Goldman Sachs BDC, Inc. GSBD NYSE US$ 21.65 2 RJ & Associates Golub Capital BDC, Inc. GBDC NASDAQ US$ 18.45 2 RJ & Associates Hercules Capital, Inc. HTGC NYSE US$ 13.44 2 RJ & Associates Horizon Technology Finance Corporation HRZN NASDAQ US$ 13.60 3 RJ & Associates Main Street Capital Corp. MAIN NYSE US$ 33.44 2 RJ & Associates Monroe Capital Corp. MRCC NASDAQ US$ 14.92 2 RJ & Associates Newtek Business Services Corp. NEWT NASDAQ US$ 13.95 2 RJ & Associates Prospect Capital Corporation PSEC NASDAQ US$ 8.00 4 RJ & Associates Stellus Capital Investment Corporation SCM NYSE US$ 11.05 3 RJ & Associates TCP Capital Corp. TCPC NASDAQ US$ 16.19 2 RJ & Associates THL Credit, Inc. TCRD NASDAQ US$ 9.22 2 RJ & Associates TPG Specialty Lending, Inc. TSLX NYSE US$ 17.57 2 RJ & Associates Triangle Capital Corporation TCAP NYSE US$ 19.11 3 RJ & Associates Wells Fargo & Co. WFC NYSE US$ 44.50 4 RJ & Associates

Notes: Prices are as of the most recent close on the indicated exchange and may not be in US$. See Disclosure section for rating definitions. Stocks that do not trade on a U.S. national exchange may not be registered for sale in all U.S. states. NC=not covered.

Glossary

AUM Assets Under Management

ABS Asset-backed security

OEM Original Equipment Manufacturer

BDC Business development company

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Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2

IMPORTANT INVESTOR DISCLOSURES Raymond James & Associates (RJA) is a FINRA member firm and is responsible for the preparation and distribution of research created in the United States. Raymond James & Associates is located at The Raymond James Financial Center, 880 Carillon Parkway, St. Petersburg, FL 33716, (727) 567-1000. Non-U.S. affiliates, which are not FINRA member firms, include the following entities which are responsible for the creation and distribution of research in their respective areas; In Canada, Raymond James Ltd. (RJL), Suite 2100, 925 West Georgia Street, Vancouver, BC V6C 3L2, (604) 659-8200; In Latin America, Raymond James Argentina S.A., San Martin 344, 22nd Floor, Buenos Aires, C10004AAH, Argentina, +54 11 4850 2500; In Europe, Raymond James Euro Equities, SAS, 40, rue La Boetie, 75008, Paris, France, +33 1 45 61 64 90, and Raymond James Financial International Ltd., Broadwalk House, 5 Appold Street, London, England EC2A 2AG, +44 203 798 5600.

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RATINGS AND DEFINITIONS

Raymond James Ltd. (Canada) definitions: Strong Buy (SB1) The stock is expected to appreciate and produce a total return of at least 15% and outperform the S&P/TSX Composite Index over the next six months. Outperform (MO2) The stock is expected to appreciate and

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outperform the S&P/TSX Composite Index over the next twelve months. Market Perform (MP3) The stock is expected to perform generally in line with the S&P/TSX Composite Index over the next twelve months and is potentially a source of funds for more highly rated securities. Underperform (MU4) The stock is expected to underperform the S&P/TSX Composite Index or its sector over the next six to twelve months and should be sold.

Raymond James & Associates (U.S.) definitions: Strong Buy (SB1) Expected to appreciate, produce a total return of at least 15%, and outperform the S&P 500 over the next six to 12 months. For higher yielding and more conservative equities, such as REITs and certain MLPs, a total return of at least 15% is expected to be realized over the next 12 months. Outperform (MO2) Expected to appreciate and outperform the S&P 500 over the next 12-18 months. For higher yielding and more conservative equities, such as REITs and certain MLPs, an Outperform rating is used for securities where we are comfortable with the relative safety of the dividend and expect a total return modestly exceeding the dividend yield over the next 12-18 months. Market Perform (MP3) Expected to perform generally in line with the S&P 500 over the next 12 months. Underperform (MU4) Expected to underperform the S&P 500 or its sector over the next six to 12 months and should be sold. Suspended (S) The rating and price target have been suspended temporarily. This action may be due to market events that made coverage impracticable, or to comply with applicable regulations or firm policies in certain circumstances, including when Raymond James may be providing investment banking services to the company. The previous rating and price target are no longer in effect for this security and should not be relied upon.

Raymond James Argentina S.A. rating definitions: Strong Buy (SB1) Expected to appreciate and produce a total return of at least 25.0% over the next twelve months. Outperform (MO2) Expected to appreciate and produce a total return of between 15.0% and 25.0% over the next twelve months. Market Perform (MP3) Expected to perform in line with the underlying country index. Underperform (MU4) Expected to underperform the underlying country index. Suspended (S) The rating and price target have been suspended temporarily. This action may be due to market events that made coverage impracticable, or to comply with applicable regulations or firm policies in certain circumstances, including when Raymond James may be providing investment banking services to the company. The previous rating and price target are no longer in effect for this security and should not be relied upon.

Raymond James Europe (Raymond James Euro Equities SAS & Raymond James Financial International Limited) rating definitions: Strong Buy (1) Expected to appreciate, produce a total return of at least 15%, and outperform the Stoxx 600 over the next 6 to 12 months. Outperform (2) Expected to appreciate and outperform the Stoxx 600 over the next 12 months. Market Perform (3) Expected to perform generally in line with the Stoxx 600 over the next 12 months. Underperform (4) Expected to underperform the Stoxx 600 or its sector over the next 6 to 12 months. Suspended (S) The rating and target price have been suspended temporarily. This action may be due to market events that made coverage impracticable, or to comply with applicable regulations or firm policies in certain circumstances, including when Raymond James may be providing investment banking services to the company. The previous rating and target price are no longer in effect for this security and should not be relied upon.

In transacting in any security, investors should be aware that other securities in the Raymond James research coverage universe might carry a higher or lower rating. Investors should feel free to contact their Financial Advisor to discuss the merits of other available investments.

Suitability Ratings (SR)

Medium Risk/Income (M/INC) Lower to average risk equities of companies with sound financials, consistent earnings, and dividend yields above that of the S&P 500. Many securities in this category are structured with a focus on providing a consistent dividend or return of capital.

Medium Risk/Growth (M/GRW) Lower to average risk equities of companies with sound financials, consistent earnings growth, the potential for long-term price appreciation, a potential dividend yield, and/or share repurchase program.

High Risk/Income (H/INC) Medium to higher risk equities of companies that are structured with a focus on providing a meaningful dividend but may face less predictable earnings (or losses), more leveraged balance sheets, rapidly changing market dynamics, financial and competitive issues, higher price volatility (beta), and potential risk of principal. Securities of companies in this category may have a less predictable income stream from dividends or distributions of capital.

High Risk/Growth (H/GRW) Medium to higher risk equities of companies in fast growing and competitive industries, with less predictable earnings (or losses), more leveraged balance sheets, rapidly changing market dynamics, financial or legal issues, higher price volatility (beta), and potential risk of principal.

High Risk/Speculation (H/SPEC) High risk equities of companies with a short or unprofitable operating history, limited or less predictable revenues, very high risk associated with success, significant financial or legal issues, or a substantial risk/loss of principal.

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RATING DISTRIBUTIONS

Coverage Universe Rating Distribution* Investment Banking Distribution

RJL RJA RJ Arg RJEE/RJFI RJL RJA RJ Arg RJEE/RJFI

Strong Buy and Outperform (Buy) 68% 54% 56% 53% 42% 17% 11% 0%

Market Perform (Hold) 31% 42% 44% 35% 22% 7% 0% 0%

Underperform (Sell) 1% 4% 0% 12% 0% 5% 0% 0%

* Columns may not add to 100% due to rounding.

RAYMOND JAMES RELATIONSHIP DISCLOSURES

Raymond James Ltd. or its affiliates expects to receive or intends to seek compensation for investment banking services from all companies under research coverage within the next three months.

Company Name Disclosure

ECN Capital Corp. Raymond James Ltd - the analyst and/or associate has viewed the material operations of ECN.

Element Fleet Management Corp. Raymond James & Associates received non-securities-related compensation from EFN within the past 12 months.

Raymond James Ltd - the analyst and/or associate has viewed the material operations of EFN.

STOCK CHARTS, TARGET PRICES, AND VALUATION METHODOLOGIES

Valuation Methodology: The Raymond James methodology for assigning ratings and target prices includes a number of qualitative and quantitative factors including an assessment of industry size, structure, business trends and overall attractiveness; management effectiveness; competition; visibility; financial condition, and expected total return, among other factors. These factors are subject to change depending on overall economic conditions or industry- or company-specific occurrences.

Target Prices: The information below indicates our target price and rating changes for ECN stock over the past three years.

Valuation Methodology: We value ECN Capital Corp. on a BVPS multiple basis which takes into account asset quality, ROE, relevant near-term risks and relative peer valuation.

The information below indicates target price and rating changes for other subject companies included in this research.

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Valuation Methodology: For Element Financial we use a Sum of Parts methodology which utilizes a forward Price/Earnings multiple on our Adjusted Operating EPS forecast for the Fleet Management Business, taking into account its growth potential, earnings quality and visibility, acquisition opportunities, risk profile, historical trading range and the market valuations of select comparable companies, and a Price/Book multiple on the Commercial Finance business which is based on our ROE outlook for this business.

RISK FACTORS

General Risk Factors: Following are some general risk factors that pertain to the businesses of the subject companies and the projected target prices and recommendations included on Raymond James research: (1) Industry fundamentals with respect to customer demand or product / service pricing could change and adversely impact expected revenues and earnings; (2) Issues relating to major competitors or market shares or new product expectations could change investor attitudes toward the sector or this stock; (3) Unforeseen developments with respect to the management, financial condition or accounting policies or practices could alter the prospective valuation.

Risks - ECN Capital Corp. Funding Risk – ECN is dependent upon its ability to secure funding for its leases to customers, and to fund existing obligations. Funding to date has been obtained from the issuance of equity, through term funding facilities and a warehouse line, and from the securitization and syndication of lending assets. Should access to these or other forms of funding become limited, Element might not be able to fund future asset growth. Should its cost of capital increase, it might negatively impact profitability as well as Element’s ability to compete for profitable business. Exposure to Economic Cycles – A deterioration of conditions may materially adversely affect businesses and industries that collectively constitute a significant portion of ECN’s customer base and may make it more difficult for ECN to maintain new business origination and credit quality. Volatility in financial markets related to an economic downturn may also adversely affect ECN’s ability to raise capital necessary to fund new business. Reliance on Key Senior Managers – ECN’s performance is highly dependent on the performance of its highly experienced executive management team and other senior employees. The loss of service of any of these senior managers could harm Element’s future performance with respect to new business generation, acquisition identification and execution, business integration, etc. Competition Risk – ECN’s market segments are highly competitive, with competitors including independent lease finance companies, manufacturers’ captive finance companies, banks and third-party brokers, some of which have greater financial capacity, access to capital (potentially at lower finance costs) or broader service offerings. ECN competes largely on the basis of pricing, terms and structure, factors that restrict the ability to establish a sustained competitive advantage.

Interest Rate Risk – Should ECN fail to adequately match the duration and structure of interest rates earned on finance assets with interest expense paid on its secured borrowing facilities (as per normal operating policy), it would expose earnings to fluctuations in interest rates. In the regular course of business, ECN is exposed to interest rate risk on finance receivables in the warehousing period prior to achieving matched funding, although this risk is limited through limitations on the level of warehoused receivables.

Strategic Risks – An important aspect of ECN’s strategic plan is to materially grow its asset management business through the formation and issuance to institutional investors of funds comprised of leased assets. There is no assurance that ECN will be able to source either a

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sufficient quantity of appropriate assets or adequate investor commitment to fulfill its fund issuance objectives. There is also uncertainty as to the availability, size and valuation of potential acquisition targets, as well as to ECN’s ability to finance acquisition-oriented growth.

Credit Risk – ECN’s investment in finance assets exposes it to the risk of credit losses should customers and counterparties fail to discharge their contractual obligations due to reasons such as adverse economic conditions, business failure or fraud. While most of its loans and leases are secured by a lien on specified collateral, there is no assurance that the value of this collateral will fully insulate ECN from losses in the event of default.

Concentration Risk – ECN specializes in certain broad industry segments, and as a result, its portfolio has and may develop concentrations of risk exposure related to those industry segments. A deterioration of business conditions in any industry to which ECN has concentrated exposure might negatively impact the growth and credit quality of its portfolio.

Currency Risk – Given that ECN hosts a significant portion of its business in the US, it faces significant currency risk against the US dollar.

Risks Related to the Trinity Vendor Program – The success of the Trinity Vendor Program to ECN is determined largely by the volume of acceptable railcar lease financing opportunities presented by Trinity and on the quality of the railcar assets acquired. The terms offered by Trinity on future tranches of railcar assets may not be attractive to ECN, and the predetermined diversification criteria for such tranches may cease to benefit ECN. There is also risk that Trinity may fail to meet expected standards in their reporting on and servicing of the railcar assets.

Risks - Element Fleet Management Corp. Funding Risk - Element is dependent upon its ability to secure funding for its loans and leases to customers, and to fund existing obligations. Funding to date has been obtained from the issuance of equity, lending through term funding facilities and a warehouse line, and the securitization and syndication of lending assets. Should access to these or other forms of funding become limited, Element might not be able to fund future asset growth. Should its cost of capital increase, it might negatively impact profitability as well as Element’s ability to compete for profitable business. Exposure to Economic Cycles - A deterioration of economic conditions may materially adversely affect businesses and industries that collectively constitute a significant portion of Element’s customer base and may make it more difficult for Element to maintain new business origination and credit quality. Volatility in financial markets related to an economic downturn may also adversely affect Element’s ability to raise capital necessary to fund new business. Reliance on Key Senior Managers - Element’s performance is highly dependent on the performance of its highly experienced executive management team and other senior employees. The loss of service of any of these senior managers could harm Element’s future performance with respect to new business generation, acquisition identification and execution, business integration, etc.

Competition Risk - Element’s market segments are highly competitive, with competitors including independent lease finance companies, manufacturers’ captive finance companies, banks and third-party brokers, some of which have greater financial capacity, access to capital (potentially at lower finance costs) or broader service offerings. Element competes primarily on the basis of pricing, terms and structure, factors that restrict the ability to establish a sustained competitive advantage.

Interest Rate Risk - Should Element fail to adequately match the duration and structure of interest rates earned on finance assets with interest expense paid on its secured borrowing facilities (as per normal operating policy), it would expose earnings to fluctuations in interest rates. In the regular course of business, Element is exposed to interest rate risk on finance receivables in the warehouse period prior to achieving matched funding, although this risk is limited through limitations on the level of warehoused receivables.

Integration Risk - Element has made a number of significant acquisitions in recent years, and there are no assurances that integration with existing businesses will result in the expected levels of cost synergies and earnings accretion. There are also unknown or undisclosed risks inherent in any acquisition. The increased complexity and scale of the business following a period of rapid acquisition-supported growth poses the risk of senior management distraction to the potential detriment of adequate financial and business controls.

Credit Risk - Element’s investment in finance assets exposes it to the risk of credit losses should customers and counterparties fail to discharge their contractual obligations due to reasons such as adverse economic conditions, business failure or fraud. While most of its loans and leases are secured by a lien on specified collateral, there is no assurance that the value of this collateral will fully insulate Element from losses in the event of default and subsequent foreclosure.

Concentration Risk - Element specializes in certain broad industry segments, and as a result, its portfolio has and may develop concentrations of risk exposure related to those industry segments. A deterioration of business conditions in any industry to which Element has concentrated exposure might negatively impact the growth and credit quality of its portfolio.

Currency Risk - Given that Element hosts a significant portion of its business in the US, it faces significant currency risk against the US dollar.

Risks Related to the Trinity Vendor Program - The success of the Trinity Vendor Program to Element will be determined largely by the volume of acceptable railcar lease financing opportunities presented by Trinity and on the quality of the railcar assets acquired. The terms offered by Trinity on future tranches of railcar assets may not be attractive to Element, and the predetermined diversification criteria for such tranches may cease to benefit Element. There is also risk that Trinity may fail to meet expected standards in their reporting on and servicing of the railcar assets.

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Additional Risk and Disclosure information, as well as more information on the Raymond James rating system and suitability categories, is available for Raymond James at rjcapitalmarkets.com/Disclosures/index and for Raymond James Limited at www.raymondjames.ca/researchdisclosures.

INTERNATIONAL DISCLOSURES

FOR CLIENTS IN THE UNITED STATES:

Any foreign securities discussed in this report are generally not eligible for sale in the U.S. unless they are listed on a U.S. exchange. This report is being provided to you for informational purposes only and does not represent a solicitation for the purchase or sale of a security in any state where such a solicitation would be illegal. Investing in securities of issuers organized outside of the U.S., including ADRs, may entail certain risks. The securities of non-U.S. issuers may not be registered with, nor be subject to the reporting requirements of, the U.S. Securities and Exchange Commission. There may be limited information available on such securities. Investors who have received this report may be prohibited in certain states or other jurisdictions from purchasing the securities mentioned in this report. Please ask your Financial Advisor for additional details and to determine if a particular security is eligible for purchase in your state.

Raymond James Ltd. is not a U.S. broker‐dealer and therefore is not governed by U.S. laws, rules or regulations applicable to U.S. broker‐dealers. Consequently, the persons responsible for the content of this publication are not licensed in the U.S. as research analysts in accordance with applicable rules promulgated by the U.S. Self Regulatory Organizations.

Any U.S. Institutional Investor wishing to effect trades in any security should contact Raymond James (USA) Ltd., a U.S. broker‐dealer affiliate of Raymond James Ltd.

FOR CLIENTS IN THE UNITED KINGDOM:

For clients of Raymond James & Associates (London Branch) and Raymond James Financial International Limited (RJFI): This document and any investment to which this document relates is intended for the sole use of the persons to whom it is addressed, being persons who are Eligible Counterparties or Professional Clients as described in the FCA rules or persons described in Articles 19(5) (Investment professionals) or 49(2) (High net worth companies, unincorporated associations etc) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended) or any other person to whom this promotion may lawfully be directed. It is not intended to be distributed or passed on, directly or indirectly, to any other class of persons and may not be relied upon by such persons and is therefore not intended for private individuals or those who would be classified as Retail Clients.

For clients of Raymond James Investment Services, Ltd.: This report is for the use of professional investment advisers and managers and is not intended for use by clients.

For purposes of the Financial Conduct Authority requirements, this research report is classified as independent with respect to conflict of interest management. RJA, RJFI, and Raymond James Investment Services, Ltd. are authorised and regulated by the Financial Conduct Authority in the United Kingdom.

FOR CLIENTS IN FRANCE:

This document and any investment to which this document relates is intended for the sole use of the persons to whom it is addressed, being persons who are Eligible Counterparties or Professional Clients as described in “Code Monétaire et Financier” and Règlement Général de l’Autorité des Marchés Financiers. It is not intended to be distributed or passed on, directly or indirectly, to any other class of persons and may not be relied upon by such persons and is therefore not intended for private individuals or those who would be classified as Retail Clients.

For clients of Raymond James Euro Equities: Raymond James Euro Equities is authorised and regulated by the Autorité de Contrôle Prudentiel et de Résolution and the Autorité des Marchés Financiers.

For institutional clients in the European Economic Area (EEA) outside of the United Kingdom: This document (and any attachments or exhibits hereto) is intended only for EEA institutional clients or others to whom it may lawfully be submitted.

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This report is provided to clients of Raymond James only for your personal, noncommercial use. Except as expressly authorized by Raymond James, you may not copy, reproduce, transmit, sell, display, distribute, publish, broadcast, circulate, modify, disseminate or commercially exploit the information contained in this report, in printed, electronic or any other form, in any manner, without the prior express written consent of Raymond James. You also agree not to use the information provided in this report for any unlawful purpose.

This report and its contents are the property of Raymond James and are protected by applicable copyright, trade secret or other intellectual property laws (of the United States and other countries). United States law, 17 U.S.C. Sec.501 et seq, provides for civil and criminal penalties for copyright infringement. No copyright claimed in incorporated U.S. government works.

Additional information is available upon request. This document may not be reprinted without permission.

RJL is a member of the Canadian Investor Protection Fund. ©2016 Raymond James Ltd.

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RAYMOND JAMES LTD. CANADIAN INSTITUTIONAL EQUITY TEAM WWW.RAYMONDJAMES.CA EQUITY RESEARCH HEAD OF EQUITY RESEARCH

DARYL SWETLISHOFF, CFA 604.659.8246

CONSUMER

CONSUMER & RETAIL KENRIC TYGHE, MBA 416.777.7188

ENERGY

OIL & GAS ENERGY SERVICES, HEAD OF ENERGY RESEARCH ANDREW BRADFORD, CFA 403.509.0503 TIM MONACHELLO (ASSOCIATE) 403.509.0562

OIL & GAS PRODUCERS KURT MOLNAR 403.221.0414 GORDON STEPPAN, CFA (SR ASSOCIATE) 403.221.0411

OIL & GAS PRODUCERS JEREMY MCCREA, CFA 403.509.0518 MICHAEL SHAW, CFA (ASSOCIATE) 403.509.0534

SR. OIL & GAS PRODUCERS | ENERGY INFRASTRUCTURE CHRIS COX, CFA 416.777.7175 MICHAEL BARTH, CFA (ASSOCIATE) 403.509.0511

POWER & UTILITIES DAVID QUEZADA, CFA 604.659.8257

INDUSTRIAL & TRANSPORTATION

INDUSTRIAL | TRANSPORTATION, HEAD OF INDUSTRIAL RESEARCH BEN CHERNIAVSKY 604.659.8244 EDWARD GUDEWILL, CFA (ASSOCIATE) 604.659.8280

INFRASTRUCTURE & CONSTRUCTION FREDERIC BASTIEN, CFA 604.659.8232 BRIAN MARTIN, CFA (ASSOCIATE) 604.654.1236

TRANSPORTATION | AGRIBUSINESS & FOOD PRODUCTS STEVE HANSEN, CFA, CPA, CMA 604.659.8208 DANIEL CHEW, CFA, CPA, CA (ASSOCIATE) 604.659.8238

MINING

BASE & PRECIOUS METALS ALEX TERENTIEW, MBA 416.777.4912 KYLE FRANKLIN, MBA (ASSOCIATE) 416.777.7144

PRECIOUS METALS PHIL RUSSO 416.777.7084 BRANDON THROOP (ASSOCIATE) 416.777.7165

PRECIOUS METALS CHRIS THOMPSON, M.SC. (ENG), P.GEO 604.659.8439 JUSTIN STEVENS (ASSOCIATE) 604.659.8470

FINANCIAL SERVICES

DIVERSIFIED FINANCIALS MICHAEL OVERVELDE, CFA, CPA, CA 416.777.4943 BRENNA PHELAN, CFA, CPA, CA (ASSOCIATE) 416.777.7042

FOREST PRODUCTS

FOREST PRODUCTS DARYL SWETLISHOFF, CFA 604.659.8246 BRYAN FAST, CFA (ASSOCIATE) 604.659.8262

REAL ESTATE

REAL ESTATE & REITS KEN AVALOS, MBA 727.567.1756 JOHANN RODRIGUES (ASSOCIATE ANALYST) 416.777.7189

TECHNOLOGY & COMMUNICATIONS

TECHNOLOGY, ALTERNATIVE ENERGY & CLEAN TECH STEVEN LI, CFA 416.777.4918 JONATHAN LO (ASSOCIATE) 416.777.6414

EQUITY RESEARCH PUBLISHING SENIOR SUPERVISORY ANALYST

HEATHER HERRON 403.509.0509 HEAD OF PUBLISHING | SUPERVISORY ANALYST

CYNTHIA LUI 604.659.8210

TYLER BOS (SUPERVISORY ANALYST | EDITOR) 647.624.1596 INDER GILL (RESEARCH EDITOR) 604.659.8202 KATE MAJOR (RESEARCH PRINCIPAL | EDITOR) 416.777.7173 ASHLEY RAMSAY (SUPERVISORY ANALYST |EDITOR) 604.376.2291

INSTITUTIONAL EQUITY SALES HEAD OF SALES

MIKE WESTCOTT 416.777.4935 GREG JACKSON (ECM, BUSINESS MANAGER) 416.777.7172 MICHELLE MARGUET ( ECM, INSTITUTIONAL MARKETING) 416.777.4951

TORONTO (CAN 1.888.601.6105 | USA 1.800.290.4847)

SEAN BOYLE 416.777.4927 JEFF CARRUTHERS, CFA 416.777.4929 RICHARD EAKINS 416.777.4926 JONATHAN GREER 416.777.4930 DAVE MACLENNAN 416.777.4934 ROBERT MILLS, CFA 416.777.4945 BRADY PIMLOTT 416.777.4993 NICOLE SVEC-GRIFFIS, CFA (U.S. EQUITIES) 416.777.4942 NEIL WEBER 416.777.4931 ORNELLA BURNS (ASSISTANT) 416.777.4928 SATBIR CHATRATH (ASSISTANT) 416.777.4915 MARIA STEPANOVA (ASSISTANT) 416.777.4949

VANCOUVER (1.800.667.2899)

SCOT ATKINSON, CFA 604.659.8225 NICK POCRNIC 604.659.8230 TERRI MCEWAN (ASSISTANT) 604.659.8228

MONTREAL (514.350.4450 | 1.866.350.4455)

JOHN HART 514.350.4462 DAVID MAISLIN, CFA 514.350.4460 TANYA HATCHER (ASSISTANT) 514.350.4458

LONDON

ADAM WOOD 0.207.426.5612

INSTITUTIONAL EQUITY TRADING

CO-HEAD OF TRADING BOB MCDONALD, CFA 604.659.8222 ANDREW FOOTE, CFA 416.777.4924

TORONTO (CANADA 1.888.601.6105 | USA 1.800.290.4847) MARK ARMSTRONG 416.777.4981 PAM BANKS 416.777.4923 OLIVER HERBST 416.777.4947 ANDY HERRMANN 416.777.4937 MATT MALOWNEY 416.777.4941 ERIC MUNRO, CFA 416.777.4983 BOB STANDING 416.777.4921 PETER MASON (ASSISTANT) 416.777.7195

VANCOUVER (1.800.667.2899) NAV CHEEMA 604.659.8224 FRASER JEFFERSON 604.659.8218 DEREK ORAM 604.659.8223

MONTREAL (514.350.4450 | 1.866.350.4455) JOE CLEMENT 514.350.4470 PATRICK SANCHE 514.350.4465

INSTITUTIONAL EQUITY OFFICES

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