“Cashing In From Auto Financing”

October 2009

Carfinco Income Fund

“Cashing In From Auto Financing”

Carfinco Income Fund

A Welcome Addition To The Howard Group Client Portfolio

(CFN.UN – TSX) (www.carfinco.com)

Units issued and fully diluted – 23.33 million

Current monthly distributions - $0.015 Current annualized yield based on trading price (Oct/09) – 10%

Prior to getting into the business discussion, let us simply state that Carfinco makes money and its stakeholders are enjoying the benefits. While we will get into greater detail on the nature of the business, the attractiveness of the company to the investor comes down to earnings, distributions and return on equity. Of critical importance is that the Trust is steered by a highly capable, committed, and heavily invested management group, and Board of Trustees. There’s the old saying that a wise investor always “buys the people”. Management and Trustee bio’s are at the end of this commentary. On that note, we are disclosing at the outset that members of The Howard Group and the associated Insight Limited Partnership II are unit holders.

To understand how and why cash flows to unit holders, one must appreciate the nature of Carfinco’s business. “Carfinco is Canada’s leading specialty finance income Fund. We provide vehicle financing to consumers who are not able to obtain it from more traditional lending sources. Carfinco purchases loans made by select independent and franchised vehicle dealers in most provinces of Canada.” In addition to the above description, it must be pointed out that auto dealers obviously see the merits of the Carfinco programs, as they share some of the risk as their profits come near the end of the loan. Until recently it was unknown to us and, in turn, likely by the majority of the population, that a little more than one-third of people in the country have a very low or no credit score whatsoever.

This begs the question of how this group obtains credit to buy large ticket items such as a car, which is a necessity for most people if for no other reason than to get to and from work. The answer is the non-prime market and the area where Carfinco essentially holds an unchallenged position.

Of course servicing this segment of the market is not without its risks, as many people have a deservedly bad credit rating or none at all because they are just starting to financially establish themselves. In somewhat of a turn on the old saying that, “the greater the risk the greater the potential returns”, Carfinco must charge a much higher interest rate as late payments or loan defaults are well above the norm compared to people who have established their credit worthiness. What is to be appreciated about the business is that yes, the objective is to be profitable, but it affords people, who otherwise would not be able to do so, an opportunity to own a vehicle, and it also assists them to re-establish or improve their credit ratings. There are a number of keys to a higher risk finance organization remaining profitable with the most notable being money management. In addition, Carfinco has given itself an edge by employing technology. For example, there is automatic call center escalation in default situations and starter-interrupt systems that serve as a stark reminder to tardy borrowers. These initiatives reduce expenses while simultaneously increasing collection rates.

As you can see from the above slide that with the exception of Quebec, Carfinco has the market covered coast to coast. From its early days in 1996, with operations directed from headquarters in Edmonton, Alberta, the company steadily grew its loan programs province to province. It went public in 1997 and ultimately graduated to the TSX as an income fund, where it had been enjoying predictable and steady growth until storm clouds began gathering in late 2007. The Howard Group team has spent a considerable amount of time with Carfinco’s management. It’s clear that foresight, combined with pro-active and aggressive measures, made the difference between not only surviving but emerging from the chaos with a stronger business. The world changed quickly and so did valuations and fundamentals. As you can see from the stock chart, the units hit a high in mid-2007, briefly touching $4.75 just before the dark days descended upon the globe. At the time the high was reached, Carfinco was distributing $0.027 per month or slightly more than $0.32/unit annualized.

Carfinco management saw the early warning signs that the economy was beginning to come off the rails as loan losses were rising. Those at the lower end of the social-economic scale were the first group to be hit. The key was to move quickly before the dominos started falling or it would be too late. In early 2008 distributions were halted and unit values tumbled and continued to slide right through the fourth quarter of that year and into early 2009. The units briefly bounced along a bottom of $0.25. In addition to conserving cash, a number of measures were taken to right the ship. A summary of those critical steps is below.

Carfinco not only made it through the typhoon, but the storm also changed the landscape. Its competitors in the non-prime lending space either abandoned ship altogether or moved to grab a share further up the credit rating ladder. The reputation Carfinco had already established among car dealers, due to its credit programs, further expanded in reach and scope. The company’s auto finance programs have gone well beyond the independent dealers that were the mainstay of the early days. Now Carfinco is well established and gaining new ground with the large franchise dealers. The whole automobile industry has changed almost overnight. In a few very short months, the world has changed for GM and Chrysler, and to varying degrees every vehicle manufacturer. In spite of a ravaged economy, Carfinco is making headway to the extent that this past August it re-instituted monthly distributions of $0.015. Its loan portfolio is showing slight but admirable growth so soon after the darkest days.

Earnings are central to this story for investors - as go earnings so goes the future of distributions. Reflecting the period from early 2008 through to the last few months is the earnings chart below, which clearly illustrates the story as outlined above. What stands out is the fact that in the first six months of 2009, Carfinco had earnings per unit of $0.11, which is outstanding in context of the gut wrenching days since early 2008.

Where Does It Go From Here? 1) Investors are looking for cash flow and, as such, Carfinco qualifies on that point with a current annualized yield of approximately 10%. 2) Is the economy still fragile? The answer must be yes, but how fragile is still hotly debated among the leading minds. However, as it relates to Carfinco the fact is that the distribution and dealer network is growing, as is demand for its loan programs. 3) Is Carfinco in a high-risk area? Yes, but as in life the key is how one mitigates risk. Management’s pro-active moves to avoid disaster speak volumes about its capabilities. 4) Is Management fully committed? Without a doubt, as management and directors own 5,752,098 units or ~25%. The units were bought with hard cash and there are NO options. 5) Could distributions grow?

A) The loan portfolio is growing and is profitable. B) The best answer we have is point number 4 and Carfinco has a history

of higher distributions. Money management at this point is critical, but there’s no doubt that earnings and distribution growth is paramount in the minds of those who have a large vested interest. In that vein, the insiders and the unit holders’ interests are completely aligned.

Management and Trustees

David Rosenkrantz (Chairman) David is a co-founder of Patica Securities Limited and Patica Corporation. He has served as President and Director of Patica Securities Limited since 2001, and Chairman of Patica Corporation since 1993. In addition, David has served as a Director of Stellar Pharmaceuticals Inc., PreMD Inc., Versent Corporation (Chairman since 2004) and RAS Completions Inc.

Tracy Graf (President & Trustee) Tracy was appointed President of the Carfinco Group in November 1998, after a long history as a principal and founder of several successful businesses. These included past roles as General Manager of Graf Management and Cattle Co. Ltd., a Board position with Canadian Simmental Association, including one year as President, and a director of Casablanca Capital Corp., which was traded on the TSX Venture Exchange. Daryl MacLellan (Trustee) Daryl is President of CIT Canada, a unit of CIT Group Inc. (NYSE: CIT), a leading global commercial and consumer finance company. Daryl is also President of CIT Group Securities (Canada) Inc. A graduate of the University of Waterloo, Daryl is a Chartered Accountant and serves on the Board of Directors of the Canadian Financing Lease Association, as well as a number of other private and public companies. Brent Channell (Trustee) Brent is a co-founder of Thales Alternative Investments Inc., a specialist in alternative investment strategies. He has over 24 years of experience in alternative investments, structured finance, corporate finance and derivatives, primarily with the Royal Bank of Canada and Citibank Canada. Prior to co-founding Thales, Brent was Managing Director of Structured Finance with Citibank Canada. Maurice Kagan (Trustee) Maurice is currently President of Sparkle Solutions Income Fund. In addition to his role as a Board member at Carfinco, he is the Chairman of Carfinco’s Audit Committee. Until June 2004, Maurice was CFO of Residential Equities Real Estate Investment Trust (ResREIT) and served as Vice President, Corporate at CapREIT until February 2006. David Prussky (Trustee) David has been a Director of numerous public and private companies. His Board experience includes postings as a Director at Patica Securities Limited and Patica Securities Inc., a securities dealer. From 1993 to the present, David has been a Director of Patica Corporation, a merchant banking firm, specializing in the small-to-mid-cap market.

Simon Serruya (Trustee) Simon is co-owner of Yogen Früz/Swensen’s International, a foodservice firm with 1,100 locations in over 30 countries worldwide. He has been with the company since 1987, and was instrumental in the growth of Yogen Früz, both domestically and internationally, taking the company public in 1994, and recently taking it back privately. Troy Graf, B.Comm., C.A. (Vice President & Chief Financial Officer) Mr. Graf is responsible for all financial reporting, internal controls and management information systems. Mr. Graf brings a strong skill set and financial discipline to the Carfinco organization. Mr. Graf completed his Bachelor of Commerce at the University of British Columbia in 1993 and completed his qualifications as a Chartered Accountant in 1996. Mr. Graf articled with Grant Thornton LLP (formerly Doane Raymond), in Vancouver where he gained experience as an auditor for industrial firms, financial institutions (primarily credit unions), and numerous small business organizations.

The links below will allow you to reach The Howard Group when you require investor information: Toll Free: (888) 221-0915 Email: info@howardgroupinc.com Website: www.howardgroupinc.com Newsletter Direct: http://howardgroupinsightnewsletter.blogspot.com/

This presentation contains certain statements that may be deemed "forward-looking statements". All statements in this document, other than statements of historical fact, that address events or developments that the Company expects to occur, are forward looking statements. Forward looking statements are statements that are not historical facts and are generally, but not always, identified by the words "expects", "plans", "anticipates", "believes", "intends", "estimates", "projects", "potential" and similar expressions, or that events or conditions "will", "would", "may", "could" or "should" occur. Although the Company believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results may differ materially from those in the forward-looking statements. Factors that could cause the actual results to differ materially from those in forward looking statements include, failure to successfully negotiate or subsequently close such transactions, inability to obtain required shareholder or regulatory approvals, uncertainty with respect to findings under exploration programs and general economic, market or business conditions. Investors are cautioned that any such statements are not guarantees of future performance and actual results or developments may differ materially from those projected in the forward-looking statements. Forward looking statements are based on the beliefs, estimates and opinions of the Company's management on the date the statements are made. The Company undertakes no obligation to update these forward-looking statements in the event that management's beliefs, estimates or opinions, or other factors, should change.