Carfinco Announces Sixth Consecutive Quarter of Record Earnings

TSX: CFN.UN

EDMONTON, Oct. 28 /CNW/ - Carfinco Income Fund, Canada's leading automotive specialty finance income fund, today announced its results for the third quarter of 2010.

The third quarter was the 6^th consecutive quarter of record net earnings for the Fund. The trend started in the second quarter of 2009 with $1.8 million in net earnings and has continued with $4.6 million in net earnings for the third quarter of 2010. These results reflect strong monthly loan originations and increasing finance receivables, combined with a significant decrease in delinquent accounts.

Return on unitholders' equity on an annualized basis was in excess of 70% for the third quarter of 2010 coming in at 72.1%.

HIGHLIGHTS

• Net earnings for the quarter were $4.6 million, up 112.5% from the $2.2 million for the third quarter of 2009;
• Earnings per fund unit for the quarter were 19 cents, or 76 cents on an annualized basis;
• Return on unitholders' equity for the quarter on an annualized basis was 72.1%;
• Total cash distributions to unitholders for the quarter were 16 cents per fund unit;
• Loan originations were $25.8 million, a 43.5% increase from the third quarter of 2009;
• Finance receivables were $133.3 million, increasing 17.8% year to date;
• 31+ days delinquent accounts for the quarter were 3.0% a decrease of 33.3% from 4.5% at the end of the third quarter of 2009.

Net earnings of $4.6 million during the third quarter of 2010, represents a 7.0% increase over the previous record of $4.3 million reached in the second quarter of 2010 and a 112.5% increase over the $2.2 million achieved in the third quarter of 2009. As mentioned, this continues the trend of record breaking quarterly earnings for the Fund: $1.8 million, $2.2 million, $2.6 million, $3.6 million, $4.3 million and $4.6 million respectively for the last six quarters.

Earnings per unit for the quarter were 19 cents, up 111.1% from the 9 cents recorded for the third quarter of 2009.

Revenues of $9.8 million for the third quarter of 2010 represent an increase of 6.3% from the $9.2 million for the second quarter of 2010 and a 17.5% increase from the $8.3 million for the third quarter of 2009.

Loan originations of $25.8 million for the quarter represents an increase of 2.8% over the loan originations of $25.1 million for the second quarter of 2010 and an increase of 43.5% over the loan originations of $18.0 million for the third quarter of 2009.

We are pleased with the monthly loan originations and the effect they have had on the growth of the finance receivables. The finance receivables grew by 6.3% during the third quarter of 2010 to $133.3 million. During the first nine months of 2010 the finance receivables grew by 17.8%, or 23.7% annualized. Earlier in the year, management stated a goal of 15% to 20% growth in the finance receivables during 2010.

During the first nine months of 2010 the Fund has paid out 41.5 cents in cash distributions per fund unit held. Combining the monthly distributions with the special distributions, the Fund distributed an average of 4.61 cents per month for the first nine months of 2010. The 41.5 cents distributed for the first nine months of 2010 represents an 85.5% payout ratio of the distributable cash earned for the period.

As Carfinco has stated in the past, it intends to maintain a minimum monthly distribution of 2 cents per unit to Unitholders after it becomes taxable in 2011. It is also important to note that once Carfinco becomes a taxable entity in 2011, cash distributions to Unitholders will receive a more favorable personal tax treatment than is currently the case. Distributions paid after January 1, 2011 will be treated as eligible Canadian dividends for tax purposes, resulting in a lower effective tax rate in the hands of a taxable investor.

Please review the MD&A for further financial comparisons and information.

As the Fund continues to achieve the financial targets set by management, we are very optimistic about the future growth and performance of the Fund's finance receivables.

About Carfinco Income Fund

Carfinco focuses on providing consumer vehicle loans to borrowers unable to obtain financing through traditional lending sources.  A network of select independent and franchise dealerships offer Carfinco's payment plan to their customers who must, along with the vehicle, meet Carfinco's underwriting guidelines. The units of the Fund trade on The Toronto Stock Exchange under the symbol "CFN.UN".

Caution Regarding Forward-Looking Statements - This news release contains certain forward-looking statements, including statements regarding the business and anticipated financial performance of the Fund.  These statements are subject to a number of risks and uncertainties.  Actual results may differ materially from results contemplated by the forward-looking statements.  When relying on forward-looking statements to make decisions, investors and others should carefully consider the foregoing factors and other uncertainties and should not place undue reliance on such forward-looking statements.

Carfinco Income Fund
Consolidated Balance Sheets
		September 30, 2010	December 31, 2009
		(unaudited)	(audited)
Assets
Finance receivables		$       133,332,249	$       113,222,303
	Allowance for credit losses	(11,900,000)	(12,400,000)
	Dealer reserve	(6,426,996)	(5,237,091)
Finance receivables - net		115,005,253	95,585,212
Cash		551,852	467,674
Other assets		1,115,021	1,093,006
Equipment		393,015	373,433
Future income taxes		187,871	167,361
		2,247,759	2,101,474
		$       117,253,012	$         97,686,686
Liabilities
Bank credit facility		$         87,807,146	$         68,438,145
Accounts payable and accrued liabilities		864,628	694,519
Deferred dealer obligation		1,727,348	1,847,863
Derivatives		673,683	1,096,128
Subordinated debentures		-	2,143,000
		91,072,805	74,219,655
Unitholders' Equity
Unitholders' capital		31,282,161	31,186,595
Deficit		(5,101,954)	(7,719,564)
		26,180,207	23,467,031
		$       117,253,012	$         97,686,686

Carfinco Income Fund
Consolidated Statements of Earnings, Comprehensive Income and Deficit
			Three months ended Sept. 30			Nine months ended Sept. 30
			2010		2009	2010	2009
			(unaudited)		(unaudited)	(unaudited)	(unaudited)
Financial Revenue
	Interest revenue		$ 9,142,466		$ 7,728,018	$ 25,725,732	$ 22,498,202
	Administration fees		640,674		596,311	1,886,053	1,570,842
			9,783,140		8,324,329	27,611,785	24,069,044
Financial Expenses
	Interest expense		1,112,652		1,012,678	3,117,874	3,212,465
Financial income before provision for credit losses			8,670,488		7,311,651	24,493,911	20,856,579
	Provision for credit losses		1,667,333		3,073,993	5,120,423	10,075,004
Net financial income before
	operating expenses and income taxes		7,003,155		4,237,658	19,373,488	10,781,575
Operating Expenses
	General and administrative		2,437,906		2,198,220	7,125,549	6,615,216
	Gain on derivatives		(114,028)		(195,777)	(422,445)	(705,675)
	Amortization of equipment		42,688		49,366	130,870	138,685
			2,366,566		2,051,809	6,833,974	6,048,226
Net earnings before income taxes			4,636,589		2,185,849	12,539,514	4,733,349
Income Taxes
	Future		(8,593)		-	(20,510)	-
			(8,593)		-	(20,510)	-
Net earnings and comprehensive income			$ 4,645,182		$ 2,185,849	$ 12,560,024	$ 4,733,349
Earnings per fund unit:
	Basic and diluted		$ 0.19		$ 0.09	$ 0.52	$ 0.20
Deficit, beginning of period			$ (5,912,439)		$ (6,813,807)	$ (7,719,564)	$ (9,361,307)
	Net earnings		4,645,182		2,185,849	12,560,024	4,733,349
	Cash distributions on fund unit equity		(3,834,697)		(700,017)	(9,942,414)	(700,017)
Deficit, end of period			$ (5,101,954)		$ (5,327,975)	$ (5,101,954)	$ (5,327,975)

Carfinco Income Fund
Consolidated Statements of Cash Flows
				Three months ended Sept. 30		Nine months ended Sept. 30
				2010	2009	2010	2009
				(unaudited)	(unaudited)	(unaudited)	(unaudited)
Increase (decrease) in cash
Operating activities
	Net earnings			$ 4,645,182	$ 2,185,849	$ 12,560,024	$ 4,733,349
	Items not affecting cash:
		Provision for credit losses		1,667,333	3,073,993	5,120,423	10,075,004
		Amortization of equipment		42,688	49,366	130,870	138,685
		Amortization of deferred transaction costs		43,914	62,732	112,254	213,364
		Gain on derivatives		(114,028)	(195,777)	(422,445)	(705,675)
		Future income taxes		(8,593)	-	(20,510)	-
		Unit based compensation expense		4,100	-	28,900	-
		Change in non-cash balances		608,107	523,961	1,687,983	1,968,833
Net cash provided by operating activities				6,888,703	5,700,124	19,197,499	16,423,560
Investing activities
	Funds advanced on finance receivables			(21,091,382)	(14,618,829)	(59,321,990)	(40,180,097)
	Principal collection on finance receivables			13,068,442	10,962,560	37,816,021	31,701,296
	Change in finance receivable reserves and transaction costs			(1,671,454)	(1,237,022)	(4,694,899)	(4,354,758)
	Purchase of equipment			(2,058)	(20,609)	(150,452)	(73,388)
Net cash used in investing activities				(9,696,452)	(4,913,900)	(26,351,320)	(12,906,947)
Financing activities
	Advances on bank credit facility			6,440,166	1,759,262	19,398,675	3,562,277
	Repayments on bank credit facility			-	(1,300,000)	-	(5,600,000)
	Repayments on subordinated debt			-	-	(2,143,000)	(157,000)
	Deferred transaction costs			(36,928)	-	(141,928)	-
	Proceeds on exercise of unit options			-	-	66,666	-
	Proceeds on unit purchase financing			-	-	-	51,666
	Fund unit cash distribution			(3,834,697)	(700,017)	(9,942,414)	(700,017)
Net cash provided by (used in) financing activities				2,568,541	(240,755)	7,237,999	(2,843,074)
Net increase (decrease) in cash				(239,208)	545,469	84,178	673,539
Cash, beginning of period				791,060	157,232	467,674	29,162
Cash, end of period				$ 551,852	$ 702,701	$ 551,852	$ 702,701
Supplemental cash flow information:
	Interest paid			$ 1,068,738	$ 950,021	$ 3,017,950	$ 2,999,943

%SEDAR: 00019164E

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