2009 Investment Loan Program. Reference Guide. value choice ADVISOR INFORMATION ONLY

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1 2009 Investment Loan Program Reference Guide value choice ease ADVISOR INFORMATION ONLY

2 Table of Contents Identifying the opportunities 2 How we can help 3 Lending programs 4 Application guidelines 4 Qualifying criteria 5 Calculating loan payments 6 Understanding margin loans 8 About collateral 9 The application process 10 Sales & marketing support 12 advisor information Only 1 OF 13

3 Identifying the opportunities Choosing the right lender is the first step, but knowing what s appropriate for your clients is key. We re committed to your success At B2B Trust, we re committed to working with advisors to make investment lending a cornerstone of their growing business. And as a leader in the investment lending marketplace, we believe it s important to offer the utmost in value, choice, and ease. Value we offer competitive rates that can help make borrowing to invest affordable. Choice with a range of products, you can select from a variety of lending solutions. Ease it s both fast and easy to apply for - and receive - investment loan funding. About B2B Trust The leading Canadian supplier of third-party investment and RRSP loans. Providing lending solutions to over 13,000 financial professionals. Over 20 years of investment lending experience with a loan portfolio in the billions. Our lending philosophy is grounded in professionalism and integrity two values that we believe are critical to maintaining long-term relationships. You re dedicated to your clients needs As a financial advisor, you understand that people have different investment goals and a different timeframe for achieving them. And because individuals have varying comfort levels with borrowing to invest, it s important to know your clients needs. That way, you can design effective strategies to help them achieve their financial goals. An in-depth understanding of your clients complete financial picture is key in determining whether an investment loan is suitable for their particular circumstances. Determine if your client may qualify for an investment loan by asking yourself questions such as: Do they have good credit and positive net worth? This demonstrates that individuals can manage their finances and have other means (beyond their purchased assets) to repay their debt. Do they have steady income and are their debts under control? This is important because loan payments are due regardless of the performance of the investments. These pre-screening questions will help you get a better understanding of your clients credit viability. 2 OF 13 advisor information only

4 How we can help Once you ve determined that borrowing to invest is the right strategy for your client, it s time to choose a lending provider you can count on. At B2B Trust, we have built a solid reputation as an industry leader in investment lending. We offer four distinct loan types all of which are competitively priced and available with or without a margin call option. Client s Borrowed Amount Loan Types Portion Amount Invested 100% Loan: B2B Trust finances 100% of the investment. $0 $150,000 $150,000 3 For 1 Loan: B2B Trust lends up to three times the dollar amount pledged. $37,500 $112,500 $150,000 2 For 1 Loan: B2B Trust lends up to two times the dollar amount pledged. $50,000 $100,000 $150,000 1 For 1 Loan: B2B Trust matches the dollar amount pledged. $75,000 $75,000 $150,000 Value Choice Ease Loan amounts up to $250,000 Consolidate all of your clients loans with a single lending provider. Highly competitive rates Reduce the cost of borrowing with low interest rates, which make it more affordable for investors. Uniform pricing Offer clients the same great rate whether they apply online or on paper. Meet each client s needs Multiple loan types and options fit a variety of client needs. Apply quickly and easily Mail or fax an application or apply online the choice is yours. Invest as you wish A majority of Canadian investment industry assets qualify as collateral. Get a quick decision Apply online using pre-populated forms and get a status in seconds. Then track your application all the way to funding using online status updates. Reduce paperwork The 100% and 3 For 1 Loans require less paperwork for loan amounts up to $100,000.* *Additional documents may be requested at the discretion of B2B Trust. ADVISOR INFORMATION ONLY 3 OF 13

5 Lending programs B2B Trust is pleased to offer distribution alliance programs to mutual fund and insurance manufacturers. Distribution Alliance Loan Program Investments must remain within the family of funds offered by CI Investments Inc. Loans are offered at a 0.50% discount over B2B Trust s Standard Loan Program. Loans with margin call, deduct 0.25%. For current investment lending interest rates, please visit the I Need section of b2btrust.com. Application guidelines Applicants who apply for our investment loan program must meet the following criteria. Basic application rules The applicant must be an individual applications and pledges of collateral in company names are not permitted. Loans can be registered individually or jointly (power of attorney forms are not accepted). Applicants must be at least 18 years of age. Applicants must be Canadian residents and have a Canadian personal chequing account for pre-authorized loan payments. 4 OF 13 advisor information Only

6 Qualifying criteria Net worth Net worth measures an applicant s overall financial resources. It s calculated by subtracting total outstanding liabilities (debt obligations) from total verifiable assets. To protect the interests of all parties, B2B Trust follows industry-standard procedures to minimize the risk of loan default. This section outlines some of our criteria. NET WORTH = Assets Liabilities Assets include: A home Registered plans Non-registered investments Stocks Liabilities include: Mortgages Personal loans Credit card debt Line of credit balances Leases Net worth minimums: 1 x loan amount if < $100K 1.5 x loan amount if $100K 2 x loan amount if > $250K Total debt service ratio (TDsR) TDSR measures an applicant s capacity to repay debt. Regularly recurring monthly debt payments should be less than 40% of gross monthly income. TIP Monthly debt (including new loan payment) Gross monthly income = TDsR Income consists of: Salary Commissions Net self-employed earnings Note: TDSR and net worth requirements are only applicable to 100% and 3 For 1 Loans, or to any loan greater than $250,000. Credit history Credit history shows how an applicant has managed credit in the past. At B2B Trust, we require that all applicant obligations are up-to-date and paid as agreed no bankruptcies, collections or judgments. For a thorough understanding of the credit evaluation process including the 5Cs of Credit, download our Credit Evaluation brochure at b2btrust.com. The following questions may help you determine if a client is likely to qualify for an investment loan: 1. Have they been approved for another loan before? 2. Do they make monthly bill and credit card payments on time? 3. Do they usually have money left over after meeting their monthly expenses and debt obligations? ADVISOR INFORMATION ONLY 5 OF 13

7 Calculating loan payments Prior to applying for a loan, you may want to calculate your client s potential monthly payment to determine if they qualify based on TDSR and if they can afford this extra payment. Interest only payments The loan amount times the interest rate (Prime Rate + applicable percentage) divided by 12 will give you the monthly payment amount. Here s a sample calculation for a $25, % Loan at an interest rate of 6.25%. > Principal and interest payments Monthly payments can be amortized for up to 20 years and are determined by multiplying the loan amount by the applicable interest rate factor. Here s a sample calculation for a $25, % Loan at an interest rate of 6.25% and a 20-year amortization period. > Loan amount ($25,000) x interest rate (6.25%) 12 = Monthly payment ($130.21) Monthly payment amounts may be adjusted at least annually to reflect changes in the outstanding principal of the loan and the Prime Rate. Any adjusted payments are effective in January and usually remain fixed for the entire calendar year. 1 Loan amount ($25,000) x interest rate factor ( ) = Monthly payment ($182.75) Note: the Prime Rate means the annual interest rate announced by B2B Trust from time to time as being its reference rate in effect (the Prime Rate ). The examples presented are for illustration purposes. The payment amount will vary based on loan amount, interest rate, deferral period and loan type selected. TIP The easiest way to calculate a monthly payment is to use our Investment Loan Calculator at b2btrust.com. Reminders 1. With changes in the Prime Rate, the actual amount of interest charged may vary from month to month. When monthly payments exceed the actual interest costs, the difference will be used to reduce the principal. When the actual interest cost exceeds the monthly payment, the difference will be added to the principal. 2. Borrowers may select a monthly pre-authorized payment date that s convenient for them, from the 1st to the 28th of the month. Flexible payment dates can help your clients manage their monthly cash flow. 3. Remember to include the estimated monthly loan payment when calculating your client s TDSR. 6 OF 13 ADVISOR INFORMATION ONLY

8 Calculating loan payments Use the following interest rate factors to calculate your client s monthly principal and interest loan payment. Or, use our Investment Loan Calculator at b2btrust.com. Rate Amortization Period % 1 YR 2 yrs 3 yrs 4 yrs 5 yrs 10 yrs 15 Yrs 20 Yrs advisor information Only 7 OF 13

9 Understanding margin loans Some borrowers prefer to know that their loan is always in line with loan-to-value (LTV) requirements and so choose a margin call loan. Others would rather pay a slightly higher interest rate for not having to monitor LTV requirements and as such, select a no margin call loan. Essentially, it comes down to an investor s comfort level with potential market volatility. The role of the LTV ratio Margin call loans are tied to loan-to-value (LTV) ratios. Over time, the value of the loan collateral will fluctuate with the market. If the value of the collateral depreciates, the LTV will increase. Depending on the severity of the depreciation, the result may be a margin warning or a margin call. If the value of the collateral appreciates, the LTV will decrease. Significant degrees of collateral appreciation could result in excess collateral. Margin Warnings / Margin Calls Margin warnings or margin calls are triggered when the LTV reaches certain percentages. Here s an illustration: Loan Type Amount Collateral LTV Ratios 100% Loan $20,000 $20, % at approval $20,000 $18, % margin warning $20,000 $16, % margin call 3 For 1 Loan $20,000 $26, % at approval $20,000 $23,529 85% margin warning $20,000 $21,053 95% margin call 2 For 1 Loan $20,000 $30, % at approval $20,000 $26,667 75% margin warning $20,000 $23,529 85% margin call 1 For 1 Loan $20,000 $40, % at approval $20,000 $26,667 75% margin warning $20,000 $23,529 85% margin call Conversion of No Margin Call, Interest Only Loans 2 No Margin Call, Interest Only loans will convert to Principal & Interest payments when the LTV ratios are equal to or exceed minimum thresholds. For more information see our Investment Loan Overview at b2btrust.com. Did you know that excess collateral can be released to the client? Find out how see our Investment Loan Admin Tips at b2btrust.com. Margin warning Margin warning letters may be sent to borrowers when their LTV ratios reach the applicable percentage; we also send you a report of any clients with accounts in warning positions. This allows you to discuss what action should be taken in the event of a margin call. Please note that it is your responsibility to monitor the ratios of your clients investment loan accounts to ensure that they remain at acceptable LTV levels. Margin call In the event that the LTV ratio reaches the applicable percentage, a margin call may be made and you may be notified. In this case, the borrower will be required to invest an additional sum into non-registered eligible funds or provide cash to pay down the loan. Note that margin calls are triggered on gross market value ( before any fees that may be associated with fund redemptions ). 8 OF 13 ADVISOR INFORMATION ONLY

10 Understanding margin loans TIP 100% Loans Margin warning amount = Borrowed amount 1.10 Margin call amount = Borrowed amount For 1 Loan Use these formulas to calculate margin warning and margin call amounts. Borrowed amount Margin warning amount = 0.85 Borrowed amount Margin call amount = For 1 & 1 For 1 Loans Margin warning amount = Margin call amount = Borrowed amount 0.75 Borrowed amount 0.85 About collateral As a lender and loan account administrator, B2B Trust does not provide investment advice to individuals or advisors. We do, however, hold pledged funds as collateral for loans. Broad fund eligibility A majority of industry assets qualify as eligible collateral for all loan types, giving investors a broad range of investment options. 4 To qualify, funds must trade electronically in Canadian dollars and be valued at least weekly. The following categories are not eligible as collateral for any B2B Trust loan product: Retail Venture Capital, Alternative Strategies and Miscellaneous (e.g., hedge fund products, principal-protected notes). Flexible dividend/distribution options Dividends or fund distributions can be managed in one of the following ways for 2 For 1 and 1 For 1 Loans as well as 100% and 3 For 1 Loans with Principal & Interest payments: Reinvested in the same fund Deposited to the client s bank account Used to pay down the loan balance For 100% and 3 For 1 Loans with Interest Only payments, dividends or fund distributions can only be reinvested in the same fund or used to pay down the loan balance. Note: Because systematic withdrawal plans (SWPs) systematically reduce the value of a fund holding, they are not permitted on any asset pledged as collateral against an investment loan. advisor information Only 9 OF 13

11 The application process For your convenience, B2B Trust accepts applications in a few ways: on paper by fax or mail, or online through our Electronic Application Submission Entry (EASE). Applying online The online loan application allows you to enter, print, and submit loan applications. Credit decisions are fast normally in seconds so you can provide an immediate answer to your clients. 1. Go to ci.com (advisoronline) and log in to EASE. Contact CI Investments Inc. for specific instructions on how to access the EASE application. 2. Complete all tabs of the application. Print, review for accuracy, and have your client sign it. Make sure the information is accurate before you submit it for credit review. Changes cannot be made to the application after it has been submitted. 3. Submit the application for credit review. This is the final step that sends the application electronically to B2B Trust. 4. You will receive an notification within seconds confirming the status of the application. If the status is: - under review by dealer, contact your dealer head office. 5 - credit approved, see step 5. - under credit review, you will be contacted by or by fax. - declined, you will be contacted with an explanation or with alternative options. 5. If approved, forward the printed and signed application, signature and supporting documents to: 5 B2B Trust, Investment Lending 130 Adelaide Street West, Suite 200 Toronto, Ontario M5H 3P5 We will fund the loan and purchase the investments within one business day upon receipt of the original loan documentation Required documents: Void cheque from a personal account All supporting documents automatically generated to loan specs Original Life Insurance Application Include the following for all 100% and 3 For 1 Loans of $100,000 and greater: Proof of assets (e.g., statements/assessments) Proof of income - Salaried income: Notice of Assessment and pay stub showing YTD earnings - Commissioned income: last 2 years Notice of Assessment - Self-employed income: last 2 years Notice of Assessment and financial statements Note: additional documentation may be requested at the discretion of B2B Trust. Original documentation must be submitted to our office within 10 business days OF 13 ADVISOR INFORMATION ONLY

12 The application process Applying by fax or mail For those who prefer to submit an application by fax or mail, the following information outlines all the necessary steps. 1. Obtain an investment loan application. Go to ci.com (advisoronline) for a fillable pdf of the Investment Loan Application. Contact CI Investments Inc. for specific instructions on how to access the application. 2. Complete the application and required supporting documentation with your client. 3. Forward all documentation to B2B Trust. 5 Documentation bearing your client s original signature must follow faxed applications within 10 business days B2B Trust reviews the application and provides a credit decision within one business day if received prior to 3:00 p.m. (ET). Required documents: Void cheque from a personal account Letter of Direction required only if paying out a loan at another financial institution Original Life Insurance Application Notice of Investments 7 and/or cheque payable to B2B Trust required in addition to a Letter of Direction if paying out a loan at another financial institution OR if your client is pledging collateral on a 3 For 1, 2 For 1 or 1 For 1 Loan Original Assignment, Hypothecation, Acknowledgement and Direction Movable Hypothec (Quebec only) Include the following for all 100% and 3 For 1 Loans of $100,000 and greater: Proof of assets (e.g., statements/assessments) Proof of income - Salaried income: Notice of Assessment and pay stub showing YTD earnings - Commissioned income: last 2 years Notice of Assessment - Self-employed income: last 2 years Notice of Assessment and financial statements Note: additional documentation may be requested at the discretion of B2B Trust. Fax to B2B Trust at Originals should be sent to: B2B Trust, Investment Lending 130 Adelaide Street West, Suite 200 Toronto, Ontario M5H 3P5 If approved: you will be contacted and the loan will be funded within one business day. If declined: you will be contacted with an explanation or with alternative options. ADVISOR INFORMATION ONLY 11 OF 13

13 Sales & marketing support Marketing support Build your business with B2B Trust s user-friendly marketing support materials. Here s a snapshot of what you ll find in the I Need section of b2btrust.com: B2B Trust offers you full support before, during and after the sale. Sample Applications Frequently Asked Questions Evaluating Credit Marketing Materials Admin Tips See what a correctly completed investment loan application looks like Answers to the most common questions regarding investment lending Learn about the 5Cs of credit and what we look for when assessing your clients creditworthiness Access information on B2B Trust s products and services Post sale how-to instructions for typical transactions such as: Calculating and withdrawing excess collateral Changing dividend/distribution payments Pledging additional collateral Business Development support From coast-to-coast, B2B Trust s Business Development managers are ready and eager to assist you. For product training, sales presentations or to discuss business opportunities, please visit b2btrust.com and go to Contact Us where you ll find an interactive map listing the Business Development representative in your area. You may also call us at Western Canada Prairies Quebec Atlantic Canada Ontario Client services support For general inquiries or service support, call one of B2B Trust s Client Service representatives at from Monday to Friday, 8:00 a.m. to 8:00 p.m. (ET). 12 OF 13 ADVISOR INFORMATION ONLY

14 value choice ease 1 B2B Trust reserves the right to adjust the payment amount at any time to maintain it at a level sufficient to cover the accruing interest. 2 Will occur once the LTV ratio is equal to or greater than 125% for 100% Loans or 100% for 3 For 1, 2 For 1 or 1 For 1 Loans. If after 3 months, the LTV ratios fall below 125% for 100% Loan and 100% for 3 For 1, 2 For 1 and 1 For 1 Loans, the borrower may request in writing to resume the Interest Only payments. 3 The collateral value is comprised of the initial deposit plus the loan amount. 4 B2B Trust s inclusion of certain funds as eligible loan collateral should not be construed as an endorsement of the fund or an indication of the fund s appropriateness as investment loan collateral for an individual investor. Other investment products may be eligible on a case-by-case basis. Mutual funds are not guaranteed, unit values change frequently and past performance may not be repeated. Borrowed monies are due and payable regardless of the performance of the investments purchased. 5 Some dealers may request an initial review of all documentation. 6 If original documents are not received within 10 days, units may be redeemed and fund proceeds used to repay the loan. 7 Pledged funds must be unencumbered and in the name of the borrower(s) only. B2B Trust is not affiliated with CI Investments Inc., Sun Life Financial or Sun Life Assurance Company of Canada or any of their affiliates and does not endorse or promote the investment products offered by these companies. B2B Trust is a wholly-owned subsidiary of Laurentian Bank of Canada. B2B Trust does not provide investment advice to individuals or advisors. The dealer and advisor, not B2B Trust, are responsible for determining the suitability of investments for their clients and for informing them of the risks associated with borrowing to invest. B2B Trust acts solely in the capacity of lender and loan account administrator. Any loan approval from B2B Trust should not be construed as an endorsement of any investment choice, program or strategy. All loans are subject to credit approval and borrowed monies are due and payable regardless of the performance of the investments purchased. B2B Trust reserves the right to request additional information or documentation at its sole discretion. The B2B Trust Loan Program is available exclusively through licensed financial advisors. This document is for advisor information only. Special Note to Segregated Fund Investors: At the time the investment loan is originated, a charge of $60 is required from the borrower to cover the cost of registering the individual variable insurance contract under applicable personal property security legislation. B2B Trust will take an assignment on the individual variable insurance contract, which will be held as collateral. Advisors should be aware that a segregated fund policy or any other investment product with a principal guarantee feature or other guaranteed benefits could be surrendered by B2B Trust to repay the loan. Investors cannot depend on any principal repayment guarantees or other guaranteed benefits until such time as all conditions for the payment of guarantees or benefits are satisfied. Any surrenders made by B2B Trust to repay the loan may affect guarantees or benefits, may result in a loss of original invested capital and/or other guaranteed benefits, including but not limited to guaranteed minimum withdrawal benefits, and may have tax consequences. Sun Life Assurance Company of Canada, a member of the Sun Life Financial group of companies, is the sole issuer of the individual variable annuity contract providing for investment in SunWise Elite segregated funds. A description of the key features of the applicable individual variable annuity contract is contained in the Information Folder. SunWise is a registered trademark of Sun Life Assurance Company of Canada. CI Investments, the CI Investments design and Select Portfolios Series are trademarks of CI Investments Inc. SunWise Elite ( ) E advisor information Only 13 OF 13