Asset Mngmnt Coy

8/7/2019 Asset Mngmnt Coy

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Proposal to launch an an asset management business

George Parkanyi

Asset 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 longterm UNDERPERFORM the market becauseof fees, trading, mandate restrictions, andshort-term performance pressure



The implication In the asset management business

is a huge

COMPETITIVE AD V ANT AGE

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 ARRs

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 taxableenvironment



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 becauseregistered 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 ($100Ms through$ 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-billionairebecause of quits hits, short-termthinking, 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 (HNIs)

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 T AB account (client try and buy)

Each vehicle Track monthly Net Asset Value (NA V)

CLUB and T AB participants can withdraw at anytime at the prevailing NA V price( AMCo house funds are vested in the corporationand 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 trialinvestment in the respective T ABaccount

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 thebooks 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 feeincome 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 - thereforeMUST FOLLOW THE MODEL to the tee!

Separate CLUB accounts for Canada and for US if there isa 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 (andout) at the correct pro-rata NA V value



Obtaining clients Referrals, referrals, referrals

Keep costs low

Based on trust / relationships

Managing shareholders expected to meet withpotential HNI / institutional clients as opportunitiespresent (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 tothe management team

Acceptance of client subject to approval by

management to ensure compliance withlaws (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 ANDrelationships prove to work smoothly

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

Dont use money that may be imminently needed forother 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 NA Vs (with a non-relatedmanaging 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 allcheques and authorize shareholder funds withdrawals

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

NA Vs will be based on account values less approvedexpenses incurred outside the account as agreedand applicable.



Client protection Clients will hold accounts with a third

party

AMCo will simply manage the tradingaccording to the model, and invoice theclient for fees

AMCo will not have deposit orwithdrawal 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 Its a passion Numbers guy and Ive 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 Id like you to do

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

(managing is designed to maximize client acquisitionpotential and maintain integrity of the business and themodel active managing participation is expected)

How many shares of AMCo you wish to subscribe (lotsof 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

[email protected]



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25%

Asset Mngmnt Coy

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