Proposal to launch an an asset management

business

George ParkanyiAsset Management Company (AMCo)

(placeholder name)

Imagine A compound annual rate of return of

over 15-20 years, consistently, without leverage.

25%

from?

the global financial markets

Then imagine … The wealth management business

you could build with

25%

Consider that … Equities (STOCK MARKET) over the past

century have grown in the order of 8-10% per year total-return from economic growth, inflation, and re-invested dividends

The majority of asset managers over the long term UNDERPERFORM the market – because of fees, trading, mandate restrictions, and short-term performance pressure

The implication … In the asset management business

is a huge COMPETITIVE ADVANTAGE

25%

Over 20 years …

$1,000,000 @ 10% grows to $6,727,500

$1,000,000 @ 25% grows to $86,736,200

So who can do 25%? You, I, and a committed team of

owners at

using

REAPTM

Asset Management Company

REAPTM?

Relational - portfolio structure

Equity - securities holdings

Allocation - decision process

Program- the overall system TM - our proprietary edge

Skeptical? …

Why would WE be able to separate 25% from the markets when most trained money

managers can only dream of doing that?

Research … Randomized simulation

REAPTM algorithm “manufactures” a specific compounding effect

Hundreds of test runs paint a clear statistical picture of expected returns

Rates of return can be forecast based on one proprietary easy-to-measure metric

Testing with historical stock price data Confirms simulations

Test results Randomized simulation (20 year)

lowest return was 13% annual compound rate of return (ARR)

highest was 35% ARR the predominant mid-range was 22%-28%

ARR Historical back-testing (20 years)

Confirms simulated ARR’s Model portfolio since Nov 2004

$1M invested in 60 stocks 1 Nov Up 50% to date vs 23% (S&P500)

Taxes All comparisons are before taxes Compounding

Is unimpaired in non-taxable accounts Is unimpaired in tax-deferred accounts Is unimpaired in a low-tax jurisdiction

(offshore) Can be mostly preserved with modest

application of margin in taxable environment

OK, so then how does it work?

The specifics are proprietary but it involves a unique portfolio structure that

drives the compounding reduces risk is highly scalable without compromising performance reduces operating costs

a unique trading algorithm that provides specific buy, sell and trade size instructions is easy to administer lends itself to automation

Passive-aggressive investing …

Random market energy

$

REAPTM - portfolio setup (researched)- buy/sell decisions (systematic)- trade size decisions (systematic)- timing (systematic)

=

25% (ish) long-termcompounding

Sell

Buy

Actual trading – 2 years Kids’ education savings plan account

Since 1 Nov 2004 Cash account - no leverage Up 56% vs 23% (S&P500) as of 1 Nov 2006

– total increase, not compounded After

currency loss of 15% (securities are all U.S.) Extra currency conversion losses on trades

because registered account has to be in CAD About 4% dividend income included In USD terms, performance more like 72%

The business edge 1 – The REAPTM algorithm

Superior compounding beats the indices and most competition

2 – The portfolio structure Accommodates very large portfolios ($100M’s

through $ billions)

a key for large institutional clients directly addresses the liquidity problems large

portfolios normally face size does not impair performance!

For asset-allocation and balanced portfolios can combine equities, debt instruments, convertibles,

currencies, precious metals, and commodities More defensive than indices in bear markets

important risk management feature multiple diversification features

The catch - time By definition, all business models

based on compounding take time Warren Buffett is not a multi-

billionaire because of “quits hits”, short-term thinking, or a desire for short-term results

The Business Asset Management Company (AMCo) How it makes money

Earns fees on assets under management Growth of client assets (that 25%) grows the

fees Capital gains and fees from the proprietary

houseaccount

End objective – AMCo IPO in 7 years

The means Earn trust

track record performance-based fee structure Solid governance

Spread the word Referrals

High Net-worth Individuals (HNI’s) Institutional contacts

Sales program - institutions Low-risk entry

Offer try-and-buy vehicles

The key to success Obtaining clients to increase

assets under management Growing the assets with the model

Track record 3 Vehicles

AMCo House account = actual/model portfolio AMCo shareholders Investment Club (CLUB) Institutional TAB account (client try and buy)

Each vehicle Track monthly Net Asset Value (NAV) CLUB and TAB participants can withdraw at

any time at the prevailing NAV price(AMCo house funds are vested in the corporation and part of the corporate assets)

Performance criteria for fees Clients only pay AFTER

they are ahead in absolute terms 10% annually compounded, AND

the S&P500 annually compounded Benchmark is the greater of these two

values

Fee structure

Performance Fee

X+1% .5%

X+2% 1.0%

X+3% 1.5%

X+4% 2.0%

>X+4% Paid up for year

Fees are charged from the total absolute % increase of REAPTM less the total absolute % increase of the benchmark + prior fees

Where the benchmark total % increase is x …

Example

Year S&P500

10%/yr REAPTM Fee

1 8.0% 10.0% 11.0% .5%

2 16.0% 21.0% 15% .0%

3 0% 33.1% 16% .0%

4 15% 46.4% 52% 2.0%

5 72% 61.0% 85% 4.0%*

* Recovered retro-actively – max 2% per year

Try and Buy Two separate accounts for

prospective institutional clients (US & Canada)

Institutions place a small trial investment in the respective TAB account Very low risk Experience what their clients would

Target market … Other asset management firms

Banks, brokerages, mutual funds, ETFs Pension funds Foundations, trusts, endowment funds Insurance reserves Government funds

Social safety-nets; entitlement programs Individuals

High-net-worth per current rules (e.g. $250K and higher)

NOT the general public for regulatory reasons Avoids expensive retail cost structure

First Client Me AMCo will manage my family RSP

and RESP accounts, as a client Why?

I use the model now anyway Company has at least one client on

the books to start Walk the talk

AMCo Capital Structure One class of voting common shares 5 Managing Shareholders

5 x 1100 shares @ USD $10 = USD $55,000 Up to 45 Founding shareholders

4500 shares @ USD $10 = USD $45,000 Minimum 100 shares; maximum 1000 shares each

Total capitalization 10,000 shares @ USD $10 = USD $100,000

Use of funds USD $30,000 – expenses (otherwise interest-bearing)

UDS $70,000 – house account invested with the model

Cost structure Low cost-structure culture for maximum

return to shareholders No salaries, fees, bonuses, options etc. Shareholders provide “sweat equity” – no

one has to give up “day-job” until a major client is landed

$30,000 expense account for Professional fees Sales costs Other directly related cost as may be applicable

Additional future expenses to be funded from fee income within an approved budget

How AMCo shareholders make money Capital growth of AMCo + any dividends or

distributions Opus Investment Club capital growth, income, and

distributions only open to AMCo shareholders encouraged but optional participation

AMCo can optionally manage a portion of shareholders’ own personal assets (like me)

Client referral fees 30% of total fees AMCo earns from referred clients

AMCo IPO at a significant multiple to net asset value – THE BIG PAY-OFF if everything goes according to plan

Why the Investment Club? A vehicle for shareholders to do the 25% program

directly with their own personal assets Cannot market to the public, but CLUB OK CLUB emulates an AMCo client, (and will become one

at the $250,000 threshold) Provides a needed track record for marketing to the big

clients - therefore MUST FOLLOW THE MODEL to the tee!

Separate CLUB accounts for Canada and for US if there is a significant mix of residency among AMCo shareholders

Monthly Net Asset Value calculations will allow new money (lump sum or monthly) to go into the account (and out) at the correct pro-rata NAV value

Obtaining clients Referrals, referrals, referrals

Keep costs low Based on trust / relationships

Managing shareholders expected to meet with potential HNI / institutional clients as opportunities present (e.g if visiting a city anyway)

Founding shareholders introduce such clients to management, who will close the sale

All AMCo shareholders can earn a commission against client fees for clients they bring in

Shareholder incentive 30% of all fee revenue earned by

AMCo for clients brought in by the shareholder Must personally introduce the prospect

to the management team Acceptance of client subject to approval

by management to ensure compliance with laws (e.g. money laundering etc…)

For as long as AMCo has the client

Risk management Keep personal investments modest

until the operating model – both investments AND relationships – prove to work smoothly

The model calls for staying fully invested – the account WILL go down with the rest of the market for a period of time (but is designed – and tests – to outperform the general market with inherent defensive properties)

Don’t use money that may be imminently needed for other purposes – AMCo works long-term.

CLUB funds are not vested or locked belong to the member, and can be withdrawn at any time

Shareholder/member protection I will run the model, have trading authority, provide

accounting, and calculate NAV’s (with a non-related managing shareholder as a backup)

All accounts will be with a bank-sponsored discount broker

Two other shareholders (managing treasurer + any other non-related shareholder) will co-sign all cheques and authorize shareholder funds withdrawals

All members will be able to log into accounts in which they have an interest, with viewing (but not trading) authority

NAV’s will be based on account values less approved expenses incurred outside the account – as agreed and applicable.

Client protection Clients will hold accounts with a

third party AMCo will simply manage the

trading according to the model, and invoice the client for fees

AMCo will not have deposit or withdrawal access to client assets – only trading authority

My background BSC Physics (that was some bizarre math) Rocket scientist (developed satellite control system software

at Telesat Canada – also sales and sales management) 30 years in the financial markets

Stockbroker for a time 1980-82 at Bache Have traded, stocks, options, and commodities

extensively (the latter two are tough) since 1976 It’s a passion “Numbers guy” and I’ve done the math

Many years consulting – proposals and telecom technology Entrepreneur previously – ran a small manufacturing and

export business from 1997 through 2001 - $4M revenues in peak year – closed profitably and gracefully for lack of future prospects

AMCo is the next business …

What I’d like you to do …

Provide a non-binding letter of interest indicating Interest in managing or founding subscription

(managing is designed to maximize client acquisition potential and maintain integrity of the business and the model – active managing participation is expected)

How many shares of AMCo you wish to subscribe (lots of 100, maximum 1000 – 1100 min/max if managing)

Investment club participation interest – lump sum (minimum $1000) and/or monthly (minimum $100 /mo)

Contact Information George Parkanyi

gparkanyi@hotmail.com

Remember …

25%