(TSE:EIF) July 2017

Price: $33 Market Cap: $1BLN Liquidity: $8MM/day All figures in CAD

WARNING:

Although this presentation makes use of humor, the very real deaths and serious injuries caused by the very real maintenance failures of Exchange Income Corporation’s should be taken with the utmost gravity.

Transport Canada should ground all Perimeter, Bearskin, , and Kewatin Air planes for immediate inspection.

The First Nations peoples deserve safe and reliable air transportation. They deserve better.

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Food for thought: SEC definition of a Ponzi Scheme

What is a Ponzi scheme? A Ponzi scheme is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors. Ponzi scheme organizers often solicit new investors by promising to invest funds in opportunities claimed to generate high returns with little or no risk. In many Ponzi schemes, the fraudsters focus on attracting new money to make promised payments to earlier- stage investors to create the false appearance that investors are profiting from a legitimate business. Why do Ponzi schemes collapse? With little or no legitimate earnings, Ponzi schemes require a consistent flow of money from new investors to continue. Ponzi schemes tend to collapse when it becomes difficult to recruit new investors or when a large number of investors ask to cash out. https://www.sec.gov/fast-answers/answersponzihtm.html

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EIF: OTHER THAN MASSIVE Q1 MISS, WHY CARE NOW?

1. CANNOT AFFORD TO PAY THE DIVIDEND

2. BET AGAINST THE JOCKEYS

3. WHAT GROWTH?

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Dividend Financed by Debt and Equity Issuance

EIF’s Unsustainable Structure

FCF Analysis 2012 2013 2014 2015 2016 TOTAL (C$ MM) CFO (21.1) (6.4) 99.9 107.4 136.8 316.7 Capex 63.3 80.3 84.1 153.9 264.7 646.3 FCF (84.3) (86.7) 15.8 (46.5) (127.9) (329.5)

Dividends 32.7 35.9 37.4 45.2 56.3 207.6 FCF post DVD (117.0) (122.6) (21.6) (91.7) (184.2) (537.1)

Acquisition 23.5 58.1 - 254.1 17.9 353.6 Disposals - - 182.9 - - 182.9 FCF post DVD & post M&A (140.5) (180.7) 161.3 (345.8) (202.1) (707.7)

Net Debt 225.3 412.6 257.2 509.1 653.0 427.7 Issuance of shares 60.9 6.3 8.6 77.0 6.4 232.9

Over the last 5 years the company has increased its debt load by $427MM and issued over $230MM of shares to fund its ~ $700mm deficit

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EIF has never been able to afford its dividend. Will it ever?

Unsustainable Structure

Dividend vs EPS & FCF $3.00

$2.00

$1.00

$-

$(1.00)

$(2.00) C$ per share per C$

$(3.00)

$(4.00)

$(5.00) 2012 2013 2014 2015 2016 FCFPS (pre-M&A) $(3.87) $(4.04) $0.71 $(1.81) $(3.77)

EPS $1.26 $0.42 $0.37 $1.63 $2.15

Dividend $1.50 $1.67 $1.69 $1.76 $2.02

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Poor Allocators of Capital?

Return on Invested Capital (ROIC)

Return on Invested Capital (ROIC) 15%

10%

5%

0%

-5%

Return (%)Return -10%

-15%

-20% 2012 2013 2014 2015 2016 Return on Invested Capital 8% 4% 5% 8% 10% Cash Return on Capital -17% -12% 3% -5% -11%

ROIC = Net Income + Interest Expense / Total Capital Invested 6 Cash Return on Capital = Free Cash Flow / Total Capital Invested

Negative FCF: How Long Can This Continue?

FCF Analysis Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Last 3 Qs of 2017 H1'18

CFO 18.6 43.4 35.3 39.5 6.9 118.2 46.4 Capex 45.4 50.4 71.8 97.1 93.6 219.3 190.8 FCF (26.8) (7.0) (36.5) (57.6) (86.8) (101.1) (144.4)

Dividends 13.3 13.8 14.4 14.9 16.3 49.0 32.7 FCF post DVD (40.0) (20.8) (50.8) (72.5) (103.1) (150.1) (177.1)

Cash 21.1 21.1 21.1 Convertibles 213.2 213.2 213.2

Credit Line Capacity 750.0 750.0 750.0 Credit Line Drawn 440.0 590.1 767.2 Credit Line Unused 310.0 159.9 (17.2)

Net Debt / CF T12M 5.2x 6.4x 7.8x

We took our best shot at projecting free cash flow for the upcoming few quarters…

Will the credit line be fully drawn by early next year?

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BET AGAINST THE JOCKEYS EIF Chairman and CEO were both at Arctic Glacier Income Fund

Arctic Glacier sold ice cubes in a monthly dividend income structure.

Arctic gamed investors' thirst for income stream and established a dividend policy which was not supported by its cash flows. In 2008 the company had to reach an agreement with its lenders to increase quarterly leverage covenants, and creditors compelled a decrease in the size of the credit facility on a monthly basis.

In 2009 Arctic entered into an agreement with the Antitrust Division of the U.S. Department of Justice. Arctic agreed to plead guilty to one charge of customer allocation and to pay a fine of $9MM. 17 other States were investigating the matter.

In February 2012 Arctic filed for the Canadian equivalent of Chapter 11, the Companies’ Creditors Arrangement Act (CCAA).

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We’ve seen this movie before

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Arctic Glacier Income Fund Stock Price Performance

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Key difference: Although slower than ice cubes, what happens if you don’t maintain 30 year old planes in order to pay the dividend? 2 Fatal Airliner Crashes – correlated to low maintenance cap ex?

December 22 2012, a aircraft, operator by Perimeter crashed during a second landing attempt, causing the death of an infant.

November 10 2013, a Bearskin Metroliner crashed on approach to airport, killing five of seven people aboard. The Transportation Safety Board of Canada concluded that there was a total failure of the left engine about 500 feet above ground due to an internal component. This slowed the aircraft and caused it to stall.

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TUG and TOW BAR INCIDENT A Perimeter airplane took off at high speed on the runway and surface with the tug and towbar attached. The tug then collided into both props and totally damaged them (see pics). There’s an online discussion among aviation experts on this website (AV Canada) in which they blame EIF for cost cutting and sub standard safety.

SOURCE: AV CANADA January 29th 2017

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Does EIF management ride Calm Air or any of their own airlines? Incidents for airline Calm: Calm AT72 at Thompson on Oct 17th 2016, both engines shut down uncommandedly Calm AT72 near Island Lake on Jul 4th 2016, engine shut down in flight Calm AT42 near Rankin Inlet on Mar 4th 2016,hydraulic leak results in flaps up landing Calm AT72 at Rankin Inlet on Feb 24th 2016, unexpected migration Calm AT42 at Thompson on Jan 22nd 2016, bleached aircraft Calm AT72 near Rankin Inlet on Jan 18th 2016, engine shut down in flight Calm AT42 at The Pas on Feb 17th 2015, engine shut down in flight Calm AT42 near Coral Harbour on Jan 6th 2015, engine shut down in flight Calm AT42 near Churchill on Jul 2nd 2014, engine shut down in flight Calm AT42 at Churchill on Mar 9th 2014, main gear collapsed during taxi Calm AT42 at on Apr 16th 2013, engine shut down on final approach Calm AT42 near Thompson on Mar 18th 2013, engine shut down in flight Calm SF34 near Rankin Inlet on Jul 9th 2012, engine shut down in flight

Calm Air has 15 planes and 13 serious incidents in the last 5 years. Competitor has 24 planes and only 3 incidents.

SOURCE https://www.aeroinside.com/incidents/airline/calm

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Wrong casket shipped to First Nation, chiefs call for change

SOURCE: Shaw Media, January 29, 2016

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Numerous Departures: Done with Experience, Welcome Millennials!

AVIATION MANAGEMENT DEPARTURES

SUBSIDIARY POSITION DATES NAME EXPERIENCE (Yrs) NOTE

Exchange CFO 2014-2015 Ed Mahood CA, MBA, 30yrs Resigned after 1 year and 2 months

Exchange EVP Corp Finance Michael J. Swistun CFA Head of M&A just left in April 2017…

Exchange Board, Audit Jeff Olin HSBC, Wellington West

Perimeter President 2005-2014 Mark Wehrle 40 yrs Son of founder, was the "heart beat" of the company Replaced by 30 yr old with no aviation experience Perimeter VP Finance 2001-2016 Denis Lavallee CPA, 36 yrs

Perimeter VP Maintenance Role filed in 2016 by a 32 yr old

Calm Air VP Maintenance 1989-2015 Sieg Abele 44 yrs with company Replaced by 35 yr old

Calm Air VP Operations Craig Hoffman 20+ yrs with company Was let go without severance, but settled in September 2016

Bearskin Chief Pilot 2011-2016 Jason Friesen Son of founder

Calm Air’s new VP Maintenance…

15 Meet Perimeter’s new President

Is the following an Undisclosed Related Party Transaction?

David Filmon, son of EIC’s Chairman Gary Filmon

• Chair of MLT Aikins • Collected fees on over $400mm of transactions

MLT Aikins (Aikins MacAulay & Thorvaldson LLP merged with MLT)

• Legal Counsel to EIC • Advised on most EIC transactions on: its December 2016 $85mm capital raise for “general corporate purposes;” its 2015 $244mm acquisition of Provincial; its 2015 $46mm acquisition of Ben Machine • Carmele Peter, EIC’s President was formerly at Aikins • Dianne Spence, EIC’s Corporate Secretary was formerly at Aikins • Edward Warkentin, Board member and member of Compensation committee was formerly at Aikins 16

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With planes crashing in Manitoba why buy R1, a company in Miami? • RegionalOne (R1) is a chop shop • In the words of National Bank on June 22, 2017, it’s “EIF’s largest subsidiary (~35% of overall EBITDA) and the primary recipient of growth capex. The central purpose of this company is to arbitrage the value of parts in used aircraft by purchasing planes for liquidation value, with additional upside from either selling refurbished aircraft that still have useful life or leasing them out.” • EIF acquired R1 for US$90m • R1 acquisition announced Feb 28, 2013 • On Mar 5, 2013, EIF notified regulators that Deloitte & Touche LLP, the company’s auditor, had resigned. • On Mar 27, 2013 EIF notified its shareholders of the auditor’s resignation.

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Questions that make you go “hmm?”

1. Is RegionalOne really worth a billion dollars?

2. If the airplane chop shop business is so good, why is one of the largest factors in the industry getting out of the business?

3. Does a chop shop business deserve a high multiple? How is it different than a butcher who breaks down sides of beef and sells the cuts? Do butchers deserve high multiples?

4. Why does the CEO of RegionalOne consider himself a real estate developer? Why does he spend only a few hours a day on RegionalOne?

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“Borrowing for growth capex” means buying EIF stock is buying a call option on R1

RegionalOne (R1) is “the primary recipient of growth capex” at EIF according to National Bank on June 22, 2017, who continues “management has no interest in being a leasing company (not RegionalOne’s core competency).” Therefore even assuming R1 is legitimate, EIF shareholders should know they are not buying AerCap (leasing is AerCap’s core competency) but a “lottery ticket” call option on AerCap’s AeroTurbine, a chop shop business like R1 which AerCap liquidated in 20153:

BEST CASE BEST CASE BEST CASE BEST CASE Sum of the parts: EBITDA ‘17E Comp/Multiple Value Aerospace & Aviation $229m1 Airlines $121m2 /4x1 $484m Regional One (R1) $108m2 AeroTurbine/? ???? Manufacturing $26m1 Enerflex/7x1 $182m Corporate -$18m1 2x? -$36m Total EV less R1 630m -Net Debt -$631m =Equity Value =R1 Is R1 really worth more than 8x what they paid for it 4 years ago? This is BEST CASE. Air Canada and Enerflex are much higher quality than EIF. 1. Bloomberg Consensus Estimates and May 17, 2017 TD Securities Research Report 2. Q1 2017 Earnings Call CEO Mike Pyle said, “We have stated many times that Regional One was 20 purchased off at EBITDA of approximately $16 million U.S. By the end of 2017, we expect that we'll generate an annual total of approximately 5x that amount,” which is $108m at 1.35 CAD FX spot rate. 3. https://airlineaftermarket.com/aercap-nearly-done-with-aeroturbine-downsizing/

If marked to market, maybe R1 is worth less over the last 3-5 years…

Zerohedge and Financial Times report on June 25, 2017: “Prices for second-hand private jets, many of which have barely been flown, have dropped as much as 35 per cent over three years to the end of April. The average price of a pre-owned business jet has fallen from $13.7m in April 2014 to $8.9m, according to research by Colibri Aircraft, which specializes in the marketing, resale and purchase of pre-owned private aircraft.

Owners have lost millions of dollars on the value of their existing business jets as a glut of planes came on to the market in the wake of the economic downturn. The resale price of a Bombardier Global XRS, which sold for $50m, has dropped from $31.3m to $20.4m — down just under 35 per cent, according to Colibri’s figures.

The collapse of the private-jet bubble isn’t a new phenomenon, though the markdowns that some owners face are probably even larger than what the FT is reporting: Back in 2015, Delta purchased a used Boeing 777 for just $7.7 million, equivalent to a 97.2% discount off its list price of $277.3 million.” http://www.zerohedge.com/news/2017-06-25/sales-prices-used-jets-are-cratering

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Especially run by a CEO who is distracted, conflicted, or worse? • Doron Marom, Founder and CEO of R1 • Doron was born in 1959 and issued a Social Security Number in 1986 or 87. Doron Mukhtar used the same SSN. • Marom is 4th highest paid executive at EIF • He admits he spends only a few hours a day on R1 • He is also involved in at least 28 other entities • For example, he controls CRJ Capital Corp. • CRJ Capital Corp. is listed at the same address as R1

SOURCE: Deposition of Doron Marom, July 6, 2016, Marom vs. North Miami Avenue Realty 22

Self dealing? Or Worse? • R1 owns 52% of CRJ10054 Holdings LLC • CRJ Capital Corp. (controlled by Morom) controls CRJ10054 Holdings LLC • R1 owns 24.67% BridgeWater Engine Ownership II LLC • BridgeWater Engine Ownership II LLC is headquartered at a Connecticut liquor store, so is BridgeWater Engines III LLC • BridgeWater Engine Ownership III has a 14% term loan out with a BDC • Why does Regional One own part of BridgeWater Engines II?

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Why can’t R1’s CFO get his background straight?

Was he really Controller? Kurt Brulisauer This article from Feb 2015 refers to him as “District Director” http://stdrd.ru/crane-worldwide-logistics-growing-in- columbus-thanks-to-auto-parts-makers-columbus-business- first/ Was Finance really part of his title? This article calls him “Director of Customer Service” http://parcelindustry.com/print-article-1251- permanent.html

Which is it?  Or  Does either look like a good CFO education? 25

Acumen Aviation Americas claims Regional One as a client. Can CFO Kurt Brulisauer tell us why Acumen has the same phone number as Regional One?

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Can CFO Kurt Brulisauer tell us why Acumen Aviation Americas is registered at the same address as Regional One?

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WHAT GROWTH? Weak Underlying Business Leading to Q1 Miss

Q1 2017 CONSENSUS ACTUAL SURPRISE EPS $0.41 $0.25 -39% REVENUE $225 million $223 million Nil EBITDA $50 million $43 million -14% CAPEX $35 million $94 million +276% EBITDA-CAPEX $15 million -$51 million -440%

• Management blamed “weather” and the need for “heavy overhauls”

• Reality is that their fleet is ~ 33 years old on average, and one large customer disclosed that Perimeter admitted the company’s own errors, not bad weather, caused cancellations and delays (see page 32). Is Transport Canada paying extra attention to them?

• A fleet this old will need “heavy overhauls” on a quarterly basis.

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WHAT GROWTH? ’ Decline Since Acquired in 2011

2011 2017

• Serviced 18 cities • Services 11 cities • 285 employees • 200 employees • Purchased for $32 million • Amalgamated into Perimeter • Was “merger” a last resort?

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WHAT GROWTH? Regional Airlines: Volumes Down and Cancellations Up

MONTH PERIMETER CALM AIR BEARSKIN (y/y) Flight Count Cancellations Flight Count Cancellations Flight Count Cancellations October 2016 -1% +61% -16% +147% -5% +8% November -14% +46% -7% +123% +11% +18% December -32% +11% -10% +52% -3% +30% January 2017 -27% +39% -5% +33% +1% +98% February -11% +13% -7% +27% +17% +77% March -12% +28% -13% +24% -3% +42% April +3% +32% -8% -13% -3% +130% May -53% -58% -11% -21% +3% +102% Average -18% +21% -10% +50% +3% +61%

Note: Perimeter represents approximately 40% of regional airlines revenues, and Calm Air and Bearskin 30% each 31 Source: FlightAware

Perimeter’s flight cancellations and maintenance problems became a public issue in the fall of 2016.

The Company publicly blamed the weather and maintenance needed for the busy season…but according to MKO Grand Chief (Sheila)North Wilson: “Perimeter Aviation said it was the airline's errors, not weather, that contributed to the delays and cancellations”. - CBC, 12/16/16

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MKO grand chief demands public apology from Perimeter after weeks of delayed, cancelled flights SOURCE: CBC NEWS, December 16, 2016 Manitoba Keewatinowi Okimakanak Grand Chief Sheila North Wilson met with representatives of Perimeter Aviation on Monday. "I'm trying to be patient with the company but it's hard to be patient when you have people, elders, sitting in airports for 12 hours without access to good, healthy food for them and their safety and comfort is at risk all the time," she said. "That's very problematic." In just one community in November, 112 people either missed their medical appointments or had them cancelled because of the airline, North Wilson said. In the same community in the first nine days of December, there were 67 more missed appointments. “They need to come up with a quality assurance statement ... and even [a] commitment to offer a better, more reliable service that our people can rely on to say that they are being taken care of,” North Wilson said.

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WHAT GROWTH? Ripping off First Nations Aboriginals?

• To go from Winnipeg to requires two stops

• New entrant to offer direct service

• First Nations very upset at quality of service

• Winnipeg to St. Theresa Point return ticket costs $700 • 1 hour 20 min flight • Winnipeg to London UK ticket can be found at $662 !!! • 12 hours flight

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