confidential information memorandum...the following confidential information memorandum (cim) will...

Confidential Information Memorandum

William McNarland, CFA

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Table of Contents

Executive Summary 2

Reason for the Opportunity 3

Competitive Advantages 5

TBX Process 6

Business Plan 7

Key Principals, Management, and Roles 8

Regulations 9

Corporate Structure and Governance 10

Executive Compensation & Potential or PerceivedConflicts of Principals 12

Offering Details 14

Financial Model 15

Key Risks 19

Appendix #1: Stress Tests 20

Appendix #2: Media Reports References 25

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Executive Summary The business practice of Financial Advisors is commonly referred to as their “books.” With a substantial number of financial advisors in Canada and their average age is nearing retirement, a large supply of books is becoming available in the market. While the demand for purchasing these books are extremely high, lack of advisory, brokerage service, and financing options have created a deep barrier for buyers. This barrier provides a profitable opportunity for investors and shareholders of The Book Xchange. The Book Xchange (TBX) is a Canadian company that specializes in providing advisory, brokerage, and financing services to Independent Financial Advisors (IFA) who wish to sell their business practices (for retirement and/or other reasons), or buy a business practice to kick-start or expand their existing practice. In addition, TBX use the capital raised to finance, the purchase and sale of investment dealers, insurance agencies or bridge financing for investment offerings. The following confidential information memorandum (CIM) will provide a summary of the opportunity and will also highlight the key risks and disclose the perceived or potential conflicts of the principals.

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Reasons for the Opportunity There are six main reasons for a great opportunity for TBX.

1. Many books for sell in the market place 2. An aging reality 3. Ample buyers 4. Lack of financing available 5. Low multiples 6. Minimum competition

Many books for sell in the market place The last sizable study on the Canadian marketplace for independent investment and insurance advisors was conducted by PWC in 2014 on behalf of Advocis. The table below shows the landscape of financial advisors in Canada.

The table above breaks out the type of institution, licensing, and advice that the financial advisor is focused on. There is much overlap but in the report, they used their best judgement to classify a financial advisor in one of the categories. The following definitions were used:

Insurance Based: An advisor that mostly provides advice on life insurance and investments that are provided from insurance companies. MFDA Advisor: An advisor that mostly provides advice on investments provided from mutual fund companies. Branch Based Financial Advisor: An advisor that works for one of Canada’s large banks and provides advice from investments provided mostly from the bank they work for. IIROC Non-Bank Based: An advisor that mostly provides advice on investment and may provide investments ranging from stocks, mutual funds, and derivatives. IIROC Bank Based: An advisor that mostly provides advice on investment and may provide investments ranging from stocks, mutual funds, and derivatives. This advisor works for one of the large banks owned IIROC licensed firms.

Categories Number of PeopleInsurance Based 44,074 MFDA Advisor 32,459 Bank Branch Financial Advisor 13,177 IIROC Non Bank Based 6,427 IIROC Bank Based 3,735

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Within the groups above, we are going to focus our attention on the “Independent Financial Advisor” (IFA) which would fall into the category of MFDA, Insurance, or IIROC Non-Bank Based advisor. The number for IFA is estimated to be about 55,000; this is less than the table above as one accounts for the advisors in this category that may be part of a captive salesforce of companies such as Investors Group or Sun Life. An aging reality According to a report from management consulting firm McKinsey & Co., the average age of a US insurance agent is 59. As such, one-fourth of the industry’s work force is expected to retire by 2018. And assuming a related MarshBerry study is correct, balancing out the numbers means hiring three young producers for every producer currently employed. The trends are not as readily available in Canada but research confirms that the aging statistics in Canada are similar for both independent investment and insurance financial advisors. Ample buyers There has been media reports that have speculated the number of buyers may be 10 to 50 times larger than the number of sellers.1 TBX principals have access to the sellers, which is an extreme competitive advantage. Lack of financing available Most IFAs do not have access to finance their books of business. Traditionally, financing is only provided by large firms where the financial advisor is considered an employee. Also, there is no small business financing available from banks. Low multiples The lack of financing mentioned above has created a buyers’ market for those with financing where average price multiples of books of business range between two and three times the annual revenue. This is an equity yield of 33% to 50%. This high earning yield can easily support debt payments in the mid-teens. Minimum competition There is only one other identified company in Canada that offers similar services as TBX. Please refer to Competitive advantage for a full analysis on TBX’s strong competitive advantage over our only competitor.

1 Please refer to Appendix #2: Media Reports References, for details

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Competitive Advantages TBX has only one competitor in Canada, Queenston Consulting of Winnipeg Manitoba. Their business model earns revenue in two ways. First, by charging sellers an advisory fee to value their books of business. Media reports suggest that this fee can range between $5,000 and $20,000 per file. Second, there is a variable success fee for selling a book of business.2 Media reports suggest that the fee is 10% on the first $100,000 and 5% on amounts above. Queenston works on behalf of sellers and only will sell books on an earn out or partial upfront sales amount. They will not allow IFA to sell their book for a sum up front. Queenston has not been able to find a source of capital to assist advisors in financing their book purchase. TBX has four competitive advantages compared to Queenston.

1. Since there are many more buyers than sellers, TBX naturally charges fees to the buyer and not the seller. There is no fee for the seller to use TBX, and this encourages listings.

2. TBX does not charge any advisory or valuation fees to the seller. Instead, if the buyer wishes to have an advisory service, TBX will refer them to a preferred supplier of advisory or valuation services.

3. TBX has access to capital to be used for leverage that allows it to provide transactions to sellers that include the bulk sale prices upfront. This allows the payments to potentially be considered a capital gain instead of income. This potentially can reduce or completely eliminate any tax consequences of the sales. With IFA books selling at multiples of 2 to 3 times, it makes sense for an IFA buyer to use leverage even though it has a high rate of 14% to 20%.

4. The scope of advisors contacted and approached will be much larger than done by Queenston. TBX’s marketing effort will be able to reach out to over 30,000 identified IFAs across Canada.

2 Please refer to Appendix #2: Media Reports References, for details

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TBX Process The TBX process is explained below for the seller and buyer. Initial Seller Step: Through an extensive marketing effort, the IFA seller finds out about TBX services for IFA that wishes to exit their practice for retirement or other reasons. A seller profile is completed and is made available to all approved buyers. Initial Buyer Step: After paying and completing an application and signing confidential and funding agreement term sheet, they will become an approved buyer. Their unidentified profile will be listed on TBX site for sellers to view. Negotiation and Execution: TBX will offer to provide a professional valuation to help the buyer and seller obtain a fair price. TBX will stay involved in the negotiations and upon completion, will provide the agreed upon financing.

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Business Plan TBX business plan includes the following five steps. Seed Capital: The initial seed capital will be funded by offering a $150K 1.5 Year note that will have a yield of 20% interest and will include 2.5% equity in the company. This note will provide a 5% sales commission. This is expected to be completed within 30 days. Initial Preparation and Set Up: Building website, marketing material, email scripts, legal documents for buyers and sellers, and clearing up all other administrative matters. This is expected to be completed within 30 days after funding. Ongoing Marketing: Data mining and building contact with 30,000 IFAs across the country. Directors follow up with positive interest for buyers, sellers and investors. Enter Profitability: It is expected that the company will be profitable after all expenses and capital costs in the first year. Reduce Cost of Capital: It is expected that after the first year and an audit is performed, the cost of capital of the corporation can be reduced with lower-cost traditional financing that will allow for the early retirement of bonds as they come due.

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Key Principals, Management, and Roles William McNarland, Director and President Besides being on the board of directors, William will take on a leadership role as President and interim CFO. William brings more the 20 years of finance experience and was the founder of ExemptAnalyst, original shareholder of Pinnacle Wealth Brokers, Co-Founder of Eiffel Peak Capital, and a director of Rethink and Diversify Securities. Jason Park, Director Besides being on the board of directors, Jason will take on a business development leadership role. Jason brings his experience from his roles at Raymond James, Wellington West Capital, and National Bank Financial. Jason is also the founder and CEO of Rethink and Diversify Securities. Chris Boyle, Director Besides being on the board of directors, Chris will take on a business development leadership role. Chris is a Principal at Oaktree Financial where he provides Financial Planning advisory services for high net worth clients. Previous to Oaktree Financial, Chris was a branch manager at Pinnacle Wealth Brokers. Derek Fuller, Vice President As Vice President, Derek focuses on providing business development leadership at TBX. Derek brings over 16 years of finance experience with multiple licenses from the Investment Funds Institute of Canada, the Insurance Councils of Saskatchewan, and the Canadian Association of Accredited Mortgage Professionals. Qian Zhang, Vice President Qian will take on a business development leadership role at TBX. Qian brings her media and marketing skills that were highlighted at the Beijing and Vancouver Olympic Games. Qian also is a co-founder and President of Eiffel Peak Capital and a shareholder of Rethink and Diversify Securities.

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Regulations Securities Law: This offering is only available to accredited investors and close business associates and friends of the Directors or Vice President. Business Corporations Act: The company is obligated to follow the Business Corporations Act. There is no Unanimous Shareholders Agreement that allows for options not to follow the act. The most current update to the Act can be found at the below link: http://www.bclaws.ca/Recon/document/ID/freeside/02057_00

http://www.bclaws.ca/Recon/document/ID/freeside/02057_00

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Corporate Structure and Governance TBX has both unlimited authorized series A and series B voting shares. Currently, there are 1,000,000 issued series A shares and no series B shares. Any current shares issued to new investors will come from the owners of the current 1,000,000 shares or newly authorized shares. The current ownership structure is shown in the table below:

TBX must have a minimum of three directors. Currently, there are four directors. If there is any matter that involves a conflict for one of the directors, the matter must be voted on by the other directors. An annual meeting must be held within 120 days of the calendar year end. Normally, only the directors and shareholders are in attendance but an invitation will be provided to bond holders as well. The President will take the lead in making sure a quarterly communication is made available for all shareholders. This will outline the activities to date and any progress or challenges with the underlying investments. There will be no audited financial information, but there will be internally prepared financial statements to review. Each common share has one vote. There are no special voting structures. The material matters outlined in the British Columbia Business Corporations Act that require voting will be followed. Each annual meeting will hold a reconfirmation or election of the current or new directors. The company currently has 1,000,000 voting common class A shares outstanding and has an unlimited authorized amount of common class A shares. The company has unlimited voting common class B shares authorized but none have been issued. The company has authorized unlimited non-voting cumulative preferred shares. The current dividend policy will target common share dividends of 50% of net income each year. This will be payable to voting common A or B holders of record on the date the dividend is declared. The company will manage one bank account at the Bank of Montreal. The account will require one signature which currently will be that of the President. The signatory will not process any payment that is not approved by the board of directors and is documented in the minutes of the

Class A Shares Owner %Qian Zhang Controlled Corporation 19.50%Jason Park Controlled Corporation 19.50%Derek Fuller Controlled Corporation 19.50%Chris Boyle Controlled Corporation 19.50%R&D Securities 19.50%Seed Investor 2.50%

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board of directors or in this CIM. The other directors will have log in information for the bank account and may access it at any time. The President will have authority to execute within the capital constraints as outlined in this plan without further board direction. If there are any financial matters outside of this plan, the President must seek a vote from the board of directors.

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Executive Compensation & Potential or Perceived Conflicts of Principals During the first year, no executive or director will have received any salary or retainers for their work. The following demonstrates how each executive may receive compensation for their efforts and any conflicts are disclosed below as well. This final document is approved by the board of directors and any changes require approval of the board and an updated CIM for former investors. Derek Fuller, Director and Vice President

• Derek may receive variable compensation for finding book buyers or sellers, buyer profiles, referral of advisory work, and may receive a bonus for finding capital at a lower cost of capital than offered in this CIM. For retail capital, Derek will receive 80% of the corporation saving and 50% of the saving from institutional firms.

• Part of the marketing budget may be allocated to a corporation owned by Derek Fuller to provide retained marketing services.

Chris Boyle, Director

• Chris may receive variable compensation for finding book buyers or sellers, buyer profiles, referral of advisory work, and may receive a bonus for finding capital at a lower cost of capital than offered in this CIM.

• Chris as a EMD registrant may earn up to 12.5% commission on raising capital for TBX. • Chris may become a lending client of TBX to finance an IFA practice. The terms are

required to be the same as with other clients of IFA. The other directors would require a vote to approve this non arm’s length transaction.

Jason Park, Director

• Jason may receive variable compensation for finding book buyers or sellers, buyer profiles, referral of advisory work, and may receive a bonus for finding capital at a lower cost of capital than offered in this CIM.

• Jason as a EMD registrant may earn up to 12.5% commission on raising capital for TBX. • Jason may become a lending client of TBX to finance an IFA practice. The terms are

required to be the same as with other clients of IFA. The other directors would require a vote to approve this non arm’s length transaction.

• Jason is a Director of R&D Securities. • Jason is a majority shareholder of R&D Securities.

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Qian Zhang, Vice President

• Qian may receive variable compensation for finding book buyers or sellers, buyer profiles, referral of advisory work, and may receive a bonus for finding capital at a lower cost of capital than offered in this CIM. For retail capital, Qian will receive 80% of the corporation saving and 50% of the saving from institutional firms.

• Qian is also a shareholder of R&D Securities due to her majority ownership of Eiffel Peak Capital.

William McNarland, Director and President

• William may receive variable compensation for finding book buyers or sellers, buyer profiles, referral of advisory work, and may receive a bonus for finding capital at a lower cost of capital than offered in this CIM. For retail capital, William will receive 80% of the corporation saving and 50% of the saving from institutional firms.

• For approved activities that do not allow for variable compensation, William will receive $100 per hour to a maximum of $2000 a month without seeking additional board approval. This currently includes time used when conducting banking services, reviewing and executing agreements on behalf of the company, CRA communication, board minute updates, registry services, and other non-administration supervision services.

• For supervisory of consultants hired for bookkeeping, legal, investor relations, and marketing, William may earn a supervisory fee of up to 18% of the third party invoices to supervise and review the work being done.

• William is a director of R&D Securities. • William also provides retained consulting services to R&D Securities.

Rethink and Diversify Securities

• R&D will be reimbursed $20,000 for the cost to create the offering documents. This potentially may be higher or lower than the cost paid to retain Eiffel Peak to create the offering documents.

• R&D may earn up to 12.5% commission on raising capital for TBX. Eiffel Peak Capital

• William McNarland prepared the documents for this offering while being retained by R&D Securities.

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Offering Details

Term 3 Months 6 Months 1 Year 2 Years 3 Years 4 Years 5 Years

Min $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000

Annual Yield 4% 5% 6% 7% 8% 9% 10%

Commission 0.63% 1.25% 2.50% 5.00% 7.50% 10.00% 12.50%

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Financial Model The financial model below shows the base case assumptions for the first five years in business. First, below is an explanation of the key variables used in the model. Capital Raised: This is the amount of capital raised each year. Redemptions: This is the amount of redemptions each year from notes coming due. Total Capital: The is the capital raised in the current year, less redemptions plus the total capital from the previous year. Interest Income Average Yield: This is the rate at which books are financed. Less Cash Drag: The full amount of capital will not be able to be deployed. There will be capital that has been raised sitting in cash earning no return. This is the percentage that is invested. Net Interest Income: This is the interest income earned on capital that has been lent out. Net Placement/Lending Revenue % of Capital Raised: This is the fee charged to the buyer of the book for TBX finding a book for sale. Less Referral Fee on Net Placement: This is the fee that is shared with finders of either the IFA buyer or seller. It is assumed that 1% each would go to the finder of the buyer and 3% to the finder of the seller. Net Placement/ Lending Revenue: This is the 10% fee charged less the 4% in total paid to the individual that found the buyer and seller of the IFA book. Due Diligence, Valuation, and Advisory: This would be fees received from buyer for due diligence, advisory, and valuation work to help them decide on an offer or acceptance price from the seller. Less Due Diligence, Valuation, and Advisory Work Fee Split: This is the cost of having a professional perform the above service. Less Due Diligence, Valuation, and Advisory Work Fee Referral: This is the finder’s fee paid to the individual who sourced the retained work. Combined Less Due Diligence, Valuation, and Advisory Work Fee Split and Referral: This is the sum of the two items above. Profile of Book Buyers: This is a paid service to have the profiles of the buyers highlighted on the website. It is expected that they pay $1000 per year to be highlighted.

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Profile of Book Buyers Referral Fee: This is the percentage paid to the individual who sourced the person that has agreed to pay for this fee. Less Profile of Book Buyers Commission Fee: This is the actual fee when the percentage formula above is used. Interest Expense: Total capital multiplied by the cost of capital. Non-Variable Administration: This is the cost of administration that is estimated and is not based on the amount of capital raised. This is the fixed cost. Administration % of Total Capital: The variable cost of administration that increases with the amount of capital raised. Administration: Dollar amount of administration when taking the percentage and multiplying by the total capital. Non-Variable Marketing: Fixed cost for marketing not affected by the amount of capital raised. This will support initial marketing role out. Marketing % of New Capital Raised: Variable percentage allocated to marketing. Marketing: Allocation percentage multiplied by capital raised. Offering and Trustee Costs: Cost of producing a CIM, Deck, Legal Fees for the offering, and Olympia Trust fees. Operation Legal % of New Capital Raised: Variable percentage allocated to legal costs. Operation Legal: Allocation percentage multiplied by capital raise. Non Variable Legal: Fixed cost for legal not affected by the amount of capital raised. Investors Relations Expense: Fee to have someone keep in contact with and update previous investors. Bridge Loan Finance and Offering Costs: This is the cost of the bridge loan that pays off the offering costs. Commission and Corporate Finance Fee: Total commission and corporate finance fee paid to R&D Securities and other dealers for raising the capital. This is an estimate based on the weighted average of the commission based on the term lengths.

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Commission Expense: The variable fee times the amount of capital raised. Allocation to 1, 2 ,3, 4, 5 Notes: This is an estimate of the terms investors choose to invest in; the longer the note, the higher the cost of capital. Cost of Capital: Weighted average of the note allocations and specific costs of capital. Commission and Corporate Finance Fee 1, 2, 3, 4, 5 Year Notes: The cost of all commission based on the term investors choose to invest in. The longer the term, the higher the cost of commissions. Average Commission: Weighted average of commission based on the note allocation and specific commissions. Below are the results of the base case model. It is observed that even in the first year of business, TBX is profitable. See Appendix #1 for stress tests.

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Base Case Model

Year 1 2 3 4 5

Capital Raised 10,000,000.00$ 15,000,000.00$ 20,000,000.00$ 25,000,000.00$ 30,000,000.00$ RedemptionsTotal Capital 10,000,000.00$ 25,000,000.00$ 45,000,000.00$ 70,000,000.00$ 100,000,000.00$

Revenue

Interest Income Average Yield 17.0% 17.0% 17.0% 17.0% 17.0%Less Cash Drag 95.0% 95.0% 95.0% 95.0% 95.0%Net Interest Income 1,615,000.00$ 4,037,500.00$ 7,267,500.00$ 11,305,000.00$ 16,150,000.00$ Net Placement/Lending Revenue % of Capital Raised 10.0% 10.0% 10.0% 10.0% 10.0%Less Referral Fee on Net Placement Seller 3% 3% 3% 3% 3%Less Referral Fee on Net Placement Buyer 1% 1% 1% 1% 1%Net Placement/Lending Revenue 999,999.96$ 1,499,999.96$ 1,999,999.96$ 2,499,999.96$ 2,999,999.96$ Due Diligence, Valuation and Advisory $100,000 $200,000 $300,000 $400,000 $500,000Due Diligence, Valuation and Advisory Work Fee Split 50% 50% 50% 50% 50%Less Due Diligence, Valuation and Advisory Work Fee Referral 25% 25% 25% 25% 25%Combined Less Due Diligence, Valuation & Advisory Work Fee Split and Referral $75,000 $150,000 $225,000 $300,000 $375,000Profile of Book Buyers $100,000 $200,000 $300,000 $400,000 $500,000Profile of Book Buyers Referral Fee 50% 50% 50% 50% 50%Less Profile of Book Buyers Commission Fee $50,000 $100,000 $150,000 $200,000 $250,000

Total Revenue 2,689,999.96$ 5,687,499.96$ 9,492,499.96$ 14,104,999.96$ 19,524,999.96$

Expenses

Interest Expense 800,000.00$ 2,000,000.00$ 3,600,000.00$ 5,600,000.00$ 8,000,000.00$ Non Variable Administration 60,000.00$ 60,000.00$ 60,000.00$ 60,000.00$ 60,000.00$ Administration % of Total Capital 1.0% 1.0% 1.0% 1.0% 1.0%Administration 100,000.00$ 250,000.00$ 450,000.00$ 700,000.00$ 1,000,000.00$ Non Variable Marketing 60,000.00$ 60,000.00$ 60,000.00$ 60,000.00$ 60,000.00$ Marketing % of New Capital Raised 1.0% 1.0% 1.0% 1.0% 1.0%Marketing 100,000.00$ 150,000.00$ 200,000.00$ 250,000.00$ 300,000.00$ Offering and Trustee Costs 70,000.00$ 20,000.00$ 20,000.00$ 20,000.00$ 20,000.00$ Operation Legal % of New Capital Raised 0.3% 0.25% 0.25% 0.25% 0.25%Operation Legal 25,000.00$ 37,500.00$ 50,000.00$ 62,500.00$ 75,000.00$ Non Variable Legal 20,000.00$ Investor Relations Expense 10,000.00$ 20,000.00$ 30,000.00$ 40,000.00$ 50,000.00$ Bridge Loan Financing and Issue Costs 37,500.00$ Commission and Corporate Finance Rate 7.5% 7.5% 7.5% 7.5% 7.5%Commission Expense 750,000.00$ 1,125,000.00$ 1,500,000.00$ 1,875,000.00$ 2,250,000.00$

Income Before Tax 657,499.96$ 1,964,999.96$ 3,522,499.96$ 5,437,499.96$ 7,709,999.96$ Income Tax Rate 25% 25% 25% 25% 25%Income Tax Payable 164,374.99$ 491,249.99$ 880,624.99$ 1,359,374.99$ 1,927,499.99$ Net Income 493,124.97$ 1,473,749.97$ 2,641,874.97$ 4,078,124.97$ 5,782,499.97$

Expected Shareholder Dividend 246,562.49$ 736,874.99$ 1,320,937.49$ 2,039,062.49$ 2,891,249.99$

Allocation 1 Year Notes 6% 20% 1.20%Allocation 2 Year Notes 7% 20% 1.40%Allocation 3 Year Notes 8% 20% 1.60%Allocation 4 Year Notes 9% 20% 1.80%Allocation 5 Year Notes 10% 20% 2.00%Allocation to Bank Financing 0% 0.00%Cost of Capital 8%

Commission and Dealer Fee 1 Year Notes 2.5% 0.50%Commission and Dealer Fee 2 Year Notes 5.0% 1.00%Commission and Dealer Fee 3 Year Notes 7.5% 1.50%Commission and Dealer Fee 4 Year Notes 10.0% 2.00%Commission and Dealer Fee 5 Year Notes 12.5% 2.50%Average Commission 7.50%

Revenue Lower Variable 100%Expense Increase Variable 100%

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Key Risks

1. This is a private equity offering of a new company. Many private equity companies even with the best management fail. It is important for an investor to consider if they can afford to lose their principal.

2. Not finding enough IFA books for sale. This is a key risk that is partly offset by the wide marketing effort Book Exchange is going to use. Not convincing book buyers to pay the base case finder’s and interest fees. With the high amount of buyers that wish to purchase books, this risk is partly offset. But it is possible that TBX marketing will not be sufficient to find buyers that wish to purchase IFA books that are for sale.

3. Not raising enough capital. Even though the majority of expenses are variable, a few initial expenses are fixed. If sufficient capital is not raised, then it is possible that TBX will not be profitable.

4. Lower overall revenue or expenses higher than expected. There is a number of revenue and expense variables. It is possible that revenue has been overestimated in the models. Expenses are unlikely to be higher than as the board has approved the below expense and does not expect to increase them.

5. Future competition Currently, TBX only has one competitor in Canada. It is possible that a new competitor could emerge in the Canadian landscape and reduce TBX’s ability to create revenue.

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Appendix #1: Stress Tests In the stress tests, the revenue, capital raised, and cash drag is decreased in each period by 5%. In the first scenario, the variables are 95% of the base scenario followed by 90%, 85%, and 80%. Lowering all of these variables at the same time and by a total of 20% is considered a worst case scenario. It is noticed that even in the worst case scenario, the company is profitable in the second year. The directors believe that the base model is already conservative and the subsequent stress test models are unlikely scenarios.

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Stress Test #1 – 5% reduction in capital raise, cash drag, and revenue

Year 1 2 3 4 5


Revenue


Total Revenue 2,358,410.59$ 4,957,901.52$ 8,249,722.77$ 12,233,874.34$ 16,910,356.21$

Expenses

Interest Expense 760,000.00$ 1,900,000.00$ 3,420,000.00$ 5,320,000.00$ 7,600,000.00$ Non Variable Administration 60,000.00$ 60,000.00$ 60,000.00$ 60,000.00$ 60,000.00$ Administration % of Total Capital 1.0% 1.0% 1.0% 1.0% 1.0%Administration 95,000.00$ 237,500.00$ 427,500.00$ 665,000.00$ 950,000.00$ Non Variable Marketing 60,000.00$ 60,000.00$ 60,000.00$ 60,000.00$ 60,000.00$ Marketing % of New Capital Raised 1.0% 1.0% 1.0% 1.0% 1.0%Marketing 95,000.00$ 142,500.00$ 190,000.00$ 237,500.00$ 285,000.00$ Offering and Trustee Costs 70,000.00$ 20,000.00$ 20,000.00$ 20,000.00$ 20,000.00$ Operation Legal % of New Capital Raised 0.3% 0.25% 0.25% 0.25% 0.25%Operation Legal 23,750.00$ 35,625.00$ 47,500.00$ 59,375.00$ 71,250.00$ Non Variable Legal 20,000.00$ Investor Relations Expense 10,000.00$ 20,000.00$ 30,000.00$ 40,000.00$ 50,000.00$ Bridge Loan Financing and Issue Costs 37,500.00$ Commission and Corporate Finance Rate 7.5% 7.5% 7.5% 7.5% 7.5%Commission Expense 712,500.00$ 1,068,750.00$ 1,425,000.00$ 1,781,250.00$ 2,137,500.00$

Income Before Tax 414,660.59$ 1,413,526.52$ 2,569,722.77$ 3,990,749.34$ 5,676,606.21$ Income Tax Rate 25% 25% 25% 25% 25%Income Tax Payable 103,665.15$ 353,381.63$ 642,430.69$ 997,687.33$ 1,419,151.55$ Net Income 310,995.44$ 1,060,144.89$ 1,927,292.08$ 2,993,062.00$ 4,257,454.66$

Expected Shareholder Dividend 155,497.72$ 530,072.45$ 963,646.04$ 1,496,531.00$ 2,128,727.33$



Revenue Lower Variable 95%

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Year 1 2 3 4 5


Revenue


Total Revenue 2,054,834.96$ 4,293,337.46$ 7,120,507.46$ 10,536,344.96$ 14,540,849.96$

Expenses

Interest Expense 720,000.00$ 1,800,000.00$ 3,240,000.00$ 5,040,000.00$ 7,200,000.00$ Non Variable Administration 60,000.00$ 60,000.00$ 60,000.00$ 60,000.00$ 60,000.00$ Administration % of Total Capital 1.0% 1.0% 1.0% 1.0% 1.0%Administration 90,000.00$ 225,000.00$ 405,000.00$ 630,000.00$ 900,000.00$ Non Variable Marketing 60,000.00$ 60,000.00$ 60,000.00$ 60,000.00$ 60,000.00$ Marketing % of New Capital Raised 1.0% 1.0% 1.0% 1.0% 1.0%Marketing 90,000.00$ 135,000.00$ 180,000.00$ 225,000.00$ 270,000.00$ Offering and Trustee Costs 70,000.00$ 20,000.00$ 20,000.00$ 20,000.00$ 20,000.00$ Operation Legal % of New Capital Raised 0.3% 0.25% 0.25% 0.25% 0.25%Operation Legal 22,500.00$ 33,750.00$ 45,000.00$ 56,250.00$ 67,500.00$ Non Variable Legal 20,000.00$ Investor Relations Expense 10,000.00$ 20,000.00$ 30,000.00$ 40,000.00$ 50,000.00$ Bridge Loan Financing and Issue Costs 37,500.00$ Commission and Corporate Finance Rate 7.5% 7.5% 7.5% 7.5% 7.5%Commission Expense 675,000.00$ 1,012,500.00$ 1,350,000.00$ 1,687,500.00$ 2,025,000.00$

Income Before Tax 199,834.96$ 927,087.46$ 1,730,507.46$ 2,717,594.96$ 3,888,349.96$ Income Tax Rate 25% 25% 25% 25% 25%Income Tax Payable 49,958.74$ 231,771.87$ 432,626.87$ 679,398.74$ 972,087.49$ Net Income 149,876.22$ 695,315.60$ 1,297,880.60$ 2,038,196.22$ 2,916,262.47$

Expected Shareholder Dividend 74,938.11$ 347,657.80$ 648,940.30$ 1,019,098.11$ 1,458,131.24$




23


Year 1 2 3 4 5


Revenue

Interest Income Average Yield 14.5% 14.5% 14.5% 14.5% 14.5%Less Cash Drag 80.8% 80.8% 80.8% 80.8% 80.8%Net Interest Income 991,811.88$ 2,479,529.69$ 4,463,153.44$ 6,942,683.13$ 9,918,118.75$ Net Placement/Lending Revenue % of Capital Raised 8.5% 8.5% 8.5% 8.5% 8.5%Less Referral Fee on Net Placement Seller 3% 3% 3% 3% 3%Less Referral Fee on Net Placement Buyer 1% 1% 1% 1% 1%Net Placement/Lending Revenue 722,499.96$ 1,083,749.96$ 1,444,999.96$ 1,806,249.96$ 2,167,499.96$ Due Diligence, Valuation and Advisory $85,000 $170,000 $255,000 $340,000 $425,000Due Diligence, Valuation and Advisory Work Fee Split 50% 50% 50% 50% 50%Less Due Diligence, Valuation and Advisory Work Fee Referral 25% 25% 25% 25% 25%Combined Less Due Diligence, Valuation & Advisory Work Fee Split and Referral $63,750 $127,500 $191,250 $255,000 $318,750Profile of Book Buyers $85,000 $170,000 $255,000 $340,000 $425,000Profile of Book Buyers Referral Fee 50% 50% 50% 50% 50%Less Profile of Book Buyers Commission Fee $42,500 $85,000 $127,500 $170,000 $212,500

Total Revenue 1,778,061.84$ 3,690,779.65$ 6,099,403.40$ 9,003,933.09$ 12,404,368.71$

Expenses

Interest Expense 680,000.00$ 1,700,000.00$ 3,060,000.00$ 4,760,000.00$ 6,800,000.00$ Non Variable Administration 60,000.00$ 60,000.00$ 60,000.00$ 60,000.00$ 60,000.00$ Administration % of Total Capital 1.0% 1.0% 1.0% 1.0% 1.0%Administration 85,000.00$ 212,500.00$ 382,500.00$ 595,000.00$ 850,000.00$ Non Variable Marketing 60,000.00$ 60,000.00$ 60,000.00$ 60,000.00$ 60,000.00$ Marketing % of New Capital Raised 1.0% 1.0% 1.0% 1.0% 1.0%Marketing 85,000.00$ 127,500.00$ 170,000.00$ 212,500.00$ 255,000.00$ Offering and Trustee Costs 70,000.00$ 20,000.00$ 20,000.00$ 20,000.00$ 20,000.00$ Operation Legal % of New Capital Raised 0.3% 0.25% 0.25% 0.25% 0.25%Operation Legal 21,250.00$ 31,875.00$ 42,500.00$ 53,125.00$ 63,750.00$ Non Variable Legal 20,000.00$ Investor Relations Expense 10,000.00$ 20,000.00$ 30,000.00$ 40,000.00$ 50,000.00$ Bridge Loan Financing and Issue Costs 37,500.00$ Commission and Corporate Finance Rate 7.5% 7.5% 7.5% 7.5% 7.5%Commission Expense 637,500.00$ 956,250.00$ 1,275,000.00$ 1,593,750.00$ 1,912,500.00$

Income Before Tax 11,811.84$ 502,654.65$ 999,403.40$ 1,609,558.09$ 2,333,118.71$ Income Tax Rate 25% 25% 25% 25% 25%Income Tax Payable 2,952.96$ 125,663.66$ 249,850.85$ 402,389.52$ 583,279.68$ Net Income 8,858.88$ 376,990.99$ 749,552.55$ 1,207,168.56$ 1,749,839.03$

Expected Shareholder Dividend 4,429.44$ 188,495.49$ 374,776.27$ 603,584.28$ 874,919.52$




24


Year 1 2 3 4 5


Revenue

Interest Income Average Yield 13.6% 13.6% 13.6% 13.6% 13.6%Less Cash Drag 76.0% 76.0% 76.0% 76.0% 76.0%Net Interest Income 826,880.00$ 2,067,200.00$ 3,720,960.00$ 5,788,160.00$ 8,268,800.00$ Net Placement/Lending Revenue % of Capital Raised 8.0% 8.0% 8.0% 8.0% 8.0%Less Referral Fee on Net Placement Seller 3% 3% 3% 3% 3%Less Referral Fee on Net Placement Buyer 1% 1% 1% 1% 1%Net Placement/Lending Revenue 639,999.96$ 959,999.96$ 1,279,999.96$ 1,599,999.96$ 1,919,999.96$ Due Diligence, Valuation and Advisory $80,000 $160,000 $240,000 $320,000 $400,000Due Diligence, Valuation and Advisory Work Fee Split 50% 50% 50% 50% 50%Less Due Diligence, Valuation and Advisory Work Fee Referral 25% 25% 25% 25% 25%Combined Less Due Diligence, Valuation & Advisory Work Fee Split and Referral $60,000 $120,000 $180,000 $240,000 $300,000Profile of Book Buyers $80,000 $160,000 $240,000 $320,000 $400,000Profile of Book Buyers Referral Fee 50% 50% 50% 50% 50%Less Profile of Book Buyers Commission Fee $40,000 $80,000 $120,000 $160,000 $200,000

Total Revenue 1,526,879.96$ 3,147,199.96$ 5,180,959.96$ 7,628,159.96$ 10,488,799.96$

Expenses

Interest Expense 640,000.00$ 1,600,000.00$ 2,880,000.00$ 4,480,000.00$ 6,400,000.00$ Non Variable Administration 60,000.00$ 60,000.00$ 60,000.00$ 60,000.00$ 60,000.00$ Administration % of Total Capital 1.0% 1.0% 1.0% 1.0% 1.0%Administration 80,000.00$ 200,000.00$ 360,000.00$ 560,000.00$ 800,000.00$ Non Variable Marketing 60,000.00$ 60,000.00$ 60,000.00$ 60,000.00$ 60,000.00$ Marketing % of New Capital Raised 1.0% 1.0% 1.0% 1.0% 1.0%Marketing 80,000.00$ 120,000.00$ 160,000.00$ 200,000.00$ 240,000.00$ Offering and Trustee Costs 70,000.00$ 20,000.00$ 20,000.00$ 20,000.00$ 20,000.00$ Operation Legal % of New Capital Raised 0.3% 0.25% 0.25% 0.25% 0.25%Operation Legal 20,000.00$ 30,000.00$ 40,000.00$ 50,000.00$ 60,000.00$ Non Variable Legal 20,000.00$ Investor Relations Expense 10,000.00$ 20,000.00$ 30,000.00$ 40,000.00$ 50,000.00$ Bridge Loan Financing and Issue Costs 37,500.00$ Commission and Corporate Finance Rate 7.5% 7.5% 7.5% 7.5% 7.5%Commission Expense 600,000.00$ 900,000.00$ 1,200,000.00$ 1,500,000.00$ 1,800,000.00$

Income Before Tax (150,620.04)$ 137,199.96$ 370,959.96$ 658,159.96$ 998,799.96$ Income Tax Rate 25% 25% 25% 25% 25%Income Tax Payable 89,139.99$ 164,539.99$ 249,699.99$ Net Income (150,620.04)$ 137,199.96$ 281,819.97$ 493,619.97$ 749,099.97$

Expected Shareholder Dividend -$ 68,599.98$ 140,909.99$ 246,809.99$ 374,549.99$




25

Appendix #2: Media Reports References http://www.advisor.ca/news/industry-news/multiples-not-enough-when-selling-book-53078/3 http://www.investmentexecutive.com/-/external-succession-planning-heats-up?redirect=%2Fsearch https://m.investmentexecutive.com/home/succession-seller-beware/ http://www.investmentexecutive.com/-/selling-your-book-work-with-an-expert http://www.investmentexecutive.com/-/how-to-shop-for-a-book-of-business?redirect=http%3A%2F%2Fwww.investmentexecutive.com%2Fspecial-feature%3Bjsessionid%3DpDaetvsrEXNf19QeX8xV%2BTEo%3Fp_p_id%3D175_INSTANCE_TS7iffNVLHa9%26p_p_lifecycle%3D0%26p_p_state%3Dnormal%26p_p_mode%3Dview%26p_p_col_id%3Dcolumn-1%26p_p_col_pos%3D1%26p_p_col_count%3D2 http://www.pressreader.com/canada/investment-executive/20160201/281887297327892

http://www.advisor.ca/news/industry-news/multiples-not-enough-when-selling-book-53078/3

http://www.investmentexecutive.com/-/external-succession-planning-heats-up?redirect=%2Fsearch

http://www.investmentexecutive.com/-/external-succession-planning-heats-up?redirect=%2Fsearch

https://m.investmentexecutive.com/home/succession-seller-beware/

http://www.investmentexecutive.com/-/selling-your-book-work-with-an-expert

http://www.investmentexecutive.com/-/how-to-shop-for-a-book-of-business?redirect=http%3A%2F%2Fwww.investmentexecutive.com%2Fspecial-feature%3Bjsessionid%3DpDaetvsrEXNf19QeX8xV%2BTEo%3Fp_p_id%3D175_INSTANCE_TS7iffNVLHa9%26p_p_lifecycle%3D0%26p_p_state%3Dnormal%26p_p_mode%3Dview%26p_p_col_id%3Dcolumn-1%26p_p_col_pos%3D1%26p_p_col_count%3D2





http://www.pressreader.com/canada/investment-executive/20160201/281887297327892

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