<PAGE> 1
================================================================================
BLC FINANCIAL SERVICES, INC.
[BLC LOGO]
MERGER FAIRNESS REVIEW
October 31, 2000
================================================================================
[RYAN, BECK LOGO]
<PAGE> 2
Ryan, Beck & Co.
PRIVATE AND CONFIDENTIAL
The attached materials have been compiled and prepared by Ryan, Beck & Co., Inc.
solely for the use and information of the Board of Directors and management of
BLC Financial Services, Inc. Such materials are not intended for viewing by any
other person or party for any purpose, and no such review should be undertaken
without the prior written consent of Ryan, Beck & Co., Inc. through one or more
of its authorized officers.
Portions of the information contained herein are not publicly available and are
not intended for public dissemination. The public disclosure or personal use of
such information may be actionable under applicable federal and/or state
securities laws.
<PAGE> 3
Ryan, Beck & Co.
================================================================================
TABLE OF CONTENTS [BLC LOGO]
--------------------------------------------------------------------------------
1) TERM SHEET AND STRUCTURE
2) ALLIED CAPITAL CORPORATION
A) Description
B) Selected Historical Financial Data
C) Price / Volume Graphs
3) BLC FINANCIAL SERVICES, INC.
A) Financial Comparison vs. Peer Group
B) Price / Volume Graphs
4) VALUATION OF BLC FINANCIAL SERVICES, INC.
A) Discounted Dividend Analysis
B) Imputed Value Analysis
C) Pro Forma Financial Statement Impact
D) Break Even Analysis
5) ADVANTAGE OF THE TRANSACTION TO BLC STOCKHOLDERS
6) RELATIONSHIP OF RYAN, BECK & CO., INC. WITH BLC, ALLIED AND
FUTURONICS
================================================================================
[RYAN, BECK LOGO]
<PAGE> 4
Ryan, Beck & Co.
================================================================================
[BLC LOGO]
--------------------------------------------------------------------------------
TERM SHEET AND STRUCTURE
================================================================================
[RYAN, BECK LOGO]
<PAGE> 5
Ryan, Beck & Co.
================================================================================
TERM SHEET [BLC LOGO]
--------------------------------------------------------------------------------
BACKGROUND: BLC Financial Services, Inc. ("BLC") will be acquired by
Allied Capital Corporation ("Allied") for premium to its current market
price. Allied will purchase for cash the shares of Futuronics Corporation,
holder of 2,595,224 shares of BLC. BLC will be combined with Allied
Capital Express and will become a portfolio company of Allied Capital
Corporation ("Allied"). Allied will own 94.9% of the portfolio company
("the Surviving Corporation") and the remaining 5.1% will be owned by
officers and directors of BLC.
CONSIDERATION TYPE: 0.180 shares of Allied common stock will be exchanged
for each share of BLC common stock.
TREATMENT OF VESTED OPTIONS AND WARRANTS: Holders will exercise prior to
the acquisition and loans will be provided to the holders to enable them
to finance the exercise.
TREATMENT OF UNVESTED OPTIONS: The Surviving Corporation shall establish a
non-qualified deferred compensation plan covering employees of the
Surviving Corporation who remain an employee and who held options which
had not vested.
TREATMENT OF CONVERTIBLE DEBENTURES: BLC shall use its reasonable efforts
to redeem all outstanding BLC Convertible Debentures prior to the
Effective Time.
MANAGEMENT CONTRACTS: Employment contracts are effective as of the closing
for Robert Tannenhauser and Jennifer Goldstein.
MANAGEMENT OF BLC: BLC's management will be retained and will serve as the
senior management team of the acquirer's portfolio company.
================================================================================
[RYAN, BECK LOGO]
<PAGE> 6
Ryan, Beck & Co.
================================================================================
TERM SHEET [BLC LOGO]
--------------------------------------------------------------------------------
OFFICERS: The Officers of BLC immediately prior to the Effective Time will
be the initial officers of the Surviving Corporation, until such officers
are duly elected and qualified.
VOTING: The Agreement and all transactions contemplated by the Agreement
require the approval of 51% of the outstanding shares of Common Stock and
Class B Common Stock together as a single class.
COVENANTS: BLC is restricted from engaging in certain material activities
and activities outside the ordinary course of business between the time of
the signing of and the Effective Time.
NON-SURVIVAL: The representations, warranties, covenants and agreements
made by the parties shall not survive the closing of the Merger, with the
exception of certain limited covenants.
INDEMNIFICATION: Allied agrees not to adversely amend the Directors and
Officers D & O Insurance for a period of six years following the Effective
Time.
NO SOLICITATION: Solicitation from a third person or entity is prohibited.
CLOSING: Consummation of the Merger is subject to the fulfillment or
waiver of mutual closing conditions. The conditions are as followed:
- Approval and adoption of the Agreement by the
Shareholders.
- Approval of the Merger from the SBA.
- Allied's issued common stock resulting from the merger
is approved for listing on the NASDAQ National Market.
- Registration Statement filed with the SEC by Allied.
- No more than $250,000 in aggregated principal amount of
Convertible Debt be outstanding.
================================================================================
[RYAN, BECK LOGO]
<PAGE> 7
Ryan, Beck & Co.
================================================================================
TERM SHEET [BLC LOGO]
--------------------------------------------------------------------------------
TERMINATION FEE: BLC shall pay to Allied a termination fee of $2,750,000
in the event that the Board terminated the Agreement upon accepting a
Superior Proposal (as defined in the Merger Agreement).
TERMINATION: The Agreement may be terminated:
- Merger shall not have been consummated on or before April 30,
2001.
- If shareholders who voted on the Merger breach any of their
respective obligations under Article VI of the Merger
Agreement and such breach continues for a period of ten days
after receipt of notice of the breach.
- If Allied has not met or had waived conditions specified in
Article VII or IX of the Merger Agreement.
- If Allied, BLC or Futuronics has breached any of their
respective obligations under Article VI of the Merger
Agreement.
- If BLC accepts an Acquisition Proposal in accordance with
section 6.9 of the Merger Agreement.
- If by mutual written consent of Allied, BLC and Futuronics.
VOTING AGREEMENT: Robert Tannenhauser, Carol Tannenhauser, David
Tannenhauser, Emily Tannenhauser, Peter Blanck, Jennifer Goldstein, Diane
Rosenfeld, R. Matthew McGee and Futuronics will agree to vote all shares
in favor of the Merger.
LOCK-UP LETTER: A number of shareholders will be restricted for ninety
days after the Effective Time to sell their shares.
================================================================================
[RYAN, BECK LOGO]
<PAGE> 8
Ryan, Beck & Co.
[DIAGRAM OF TRANSACTION]
[1] ALLC contributes ACE assets to SBLC. SBLC establishes separate BOD, Mgt, &
Op Systems.
[2] ALLC exchanges cash for F stock in merger of F with FACQ.
[3] BLC recapitalizes & establishes class A & B stock with identical rights
Class A (shares to exchange with ALLC)
Class B (5.1% + F's BLC shares)
[4] ALLC merges with BLC into portfolio company / BLC is survivor
[5] BLC recapitalizes again
Class B exchange for Class A common
[6] SBLC merges with BLC on 1/1/01 / BLC is survivor
NOTE: STEPS 3, 4 AND 5 ARE SIMULTANEOUS.
<PAGE> 9
Ryan, Beck & Co.
================================================================================
[BLC LOGO]
--------------------------------------------------------------------------------
ALLIED CAPITAL CORPORATION
================================================================================
[RYAN, BECK LOGO]
<PAGE> 10
Ryan, Beck & Co.
================================================================================
[BLC LOGO]
--------------------------------------------------------------------------------
ALLIED CAPITAL CORPORATION
Description
================================================================================
[RYAN, BECK LOGO]
<PAGE> 11
Ryan, Beck & Co.
================================================================================
COMPANY OVERVIEW [BLC LOGO]
--------------------------------------------------------------------------------
Allied Capital Corporation provides private investment capital to private
companies and undervalued public companies in a variety of different
industries and in diverse geographic locations throughout the United
States. The Company has been investing in growing businesses for over 41
years and has financed thousands of private companies nationwide. The
Company is a publicly traded business development company ("BDC") as
defined in the Investment Company Act of 1940 ("the 1940 Act"). The
Company is the largest BDC in the nation. Allied is a Regulated Investment
Company for tax purposes and as such must distribute 90% of its
"investment taxable income" to shareholders.
The Company's principal lines of business include private finance and
small business finance, operating under the name "Allied Capital Express".
The Company is also an investor in commercial mortgage-backed securities.
At September 30, 2000, the investment portfolio totaled $1.6 billion. The
Company's portfolio by line of business at September 30, 2000 was 59%
private finance, 37% real estate finance, and 4% small business finance.
Allied Capital is a full-service investor that sources, originates and
services its investments. The Company sources investments through various
industry contacts such as investment banks, private equity firms, private
mezzanine lenders and other financial intermediaries. Allied Capital's
credit approval and servicing functions are centralized in its Washington,
DC headquarters. The Company maintains regional offices in Chicago, San
Francisco and New York. In addition, Allied Capital Express has eight
regional offices. Allied Capital is led by a highly talented and
experienced management team.
Allied Capital's eight senior managers possess over 150 years of combined
experience in the investment industry, while principal investment
professionals have an average of 14 years of industry experience. At
September 30, 2000, Allied Capital had total assets and book equity of
$1.7 billion and $933.3 million, respectively. Allied Capital is a
publicly traded company, with its common shares trading on NASDAQ under
the symbol "ALLC." At October 27, 2000, the Company had a market
capitalization of approximately $1.6 billion. The Company's management has
been able to maintain strong asset quality, as evidenced by average annual
realized investment losses of less than 1% of its total assets over the
last 20 years.
================================================================================
[RYAN, BECK LOGO]
<PAGE> 12
Ryan, Beck & Co.
================================================================================
COMPANY OVERVIEW [BLC LOGO]
--------------------------------------------------------------------------------
The Company is conservatively capitalized, and as a BDC is required by law
to maintain an asset coverage ratio (broadly defined to be assets to
indebtedness) of at least 200% of its indebtedness. Historically,
management has managed the Company's leverage ratio on an even more
conservative basis, and at June 30, 2000, the Company's asset coverage
ratio was 225% (which approximates a debt to equity ratio of 0.9 to 1.0).
The Company has no public debt outstanding.
The Company has successfully accessed the private long-term debt markets
on three separate occasions, raising $180 million in April 1998, $137
million in May 1999, and $102 million in November 1999. Each of the note
issues were designated "NAIC-2" by the Securities Valuation Office of the
National Association of Insurance Commissioners ("NAIC"). The November
1999 Notes also received a "BBB" rating from Fitch IBCA, Inc.
The Company has historically been successful in growing its operating
income through its investing and lending activities as illustrated in the
chart below.
PRIVATE FINANCE
Allied Capital is a leading provider of private long-term investment
capital to growing private and undervalued public companies nationwide.
Its private finance activities focus on mezzanine financing that provides
long-term debt capital with an equity participation. The Company's debt is
typically junior in priority to the senior debt financing provided by
traditional lenders, such as banks, commercial finance companies and
insurance companies, but is senior in priority to the equity capital
provided by private equity investors.
================================================================================
[RYAN, BECK LOGO]
<PAGE> 13
Ryan, Beck & Co.
================================================================================
COMPANY OVERVIEW [BLC LOGO]
--------------------------------------------------------------------------------
The Company has maintained its successful track record as a private
finance lender by following a well-established set of underwriting
criteria in originating these loans. In addition to maintaining portfolio
diversity with respect to investment size, industry and geographic
location, the Company typically seeks companies with sufficient critical
mass and sustainable cash flow margins to assure repayment of the debt
financing. The Company seeks companies that are in non-cyclical industries
and have excellent management teams with proven track records. Portfolio
companies have generally been in business in excess of 10 years.
In general, Allied Capital's mezzanine investments range in size from $5
million to $30 million, with an average size of $13.9 million for new
investments originated during the first six months of 2000. These
investments bear current interest at fixed rates ranging between 12% and
18%. In many transactions, Allied Capital receives warrants to purchase
equity of the growing business at a nominal cost. When equity is later
sold, the resulting gain adds to Allied Capital's investment return.
SMALL BUSINESS FINANCE - ALLIED CAPITAL EXPRESS
Through Allied Capital Express, the Company's small business lending
program, Allied Capital originates small business and small commercial
real estate loans up to $3 million for sale. Once originated, these loans
are sold to banks and other institutional investors. The Company is
licensed by the Small Business Administration ("SBA") as a non-bank lender
to participate in the SBA Section 7(a) Guaranteed Loan Program, and is one
of the oldest non-bank lenders in the country. Under the 7(a) Guaranteed
Loan Program, loans of up to $1 million have a 75% "full faith and credit"
government guarantee. As a result, the majority of the Allied Capital
Express loans are readily saleable at significant premiums to face value.
Premiums, net of origination costs, generally range between 4.0% to 7.5%
of the loan balance sold.
Allied Capital Express provides a steady stream of premium income of the
Company, yet uses minimal investment capital. As a result, Allied
Capital Express enhances the Company's overall return on assets and equity
capital.
================================================================================
[RYAN, BECK LOGO]
<PAGE> 14
Ryan, Beck & Co.
================================================================================
COMPANY OVERVIEW [BLC LOGO]
--------------------------------------------------------------------------------
COMMERCIAL REAL ESTATE FINANCE
Allied Capital has been a commercial real estate lender throughout its
history. The Company's management has always recognized that commercial
real estate finance is a cyclical sector of the capital markets, and that
a commercial real estate lender must follow the markets closely and react
quickly to changes in the market to seize opportunities as they arise.
During the early 1990s, Allied Capital was an active purchaser of
performing commercial mortgage loans that were being sold in pools by the
RTC, FDIC and various financial institutions. Allied Capital was uniquely
positioned to re-underwrite these pools, understand their value and bid
for the loans. The majority of the loans purchased were purchased at
significant discounts, and Allied Capital realized investment returns in
the mid-teens, with negligible losses. In the mid 1990s, the Company took
advantage of a shortage of real estate capital for middle-market
businesses, and began originating commercial mortgages, again at very
attractive investment yields generally of 10% to 12%. In early 1998,
management believed that the market was beginning to under price real
estate loans, and the Company curtailed its mortgage loan origination
business. Management's foresight enabled the Company to be unaffected by
the turmoil that resulted in the real estate capital markets in the fall
of 1998. Instead, Allied Capital was able to use its ample liquidity to
seize an investment opportunity in the new issuance CMBS market. Allied
Capital was able to use its loan underwriting and loan purchasing skills
to become a purchaser of non-investment grade CMBS ("Purchased CMBS") with
very attractive risk / return dynamics. As of September 30, 2000, the
commercial real estate portfolio aggregated $600 million.
================================================================================
[RYAN, BECK LOGO]
<PAGE> 15
Ryan, Beck & Co.
================================================================================
ALLIED CAPITAL CORPORATION - MARKET STATISTICS
--------------------------------------------------------------------------------
MARKET STATISTICS
<TABLE>
<S> <C> <S> <C>
Recent Price (10/27/00) $19.88 Market Capitalization $1.6 Billion
52-Week High $21.88 Shares Outstanding 80.754 Million
52-Week Low $15.50 Shares Outstanding Date 9/30/2000
YTD High $21.13 Institutional Ownership 33.80%
YTD Low $16.06 Top 5 Institutional Owners (as of
6/30/00)
YTD Change 12.83% 1. Goldman Sachs Asset Management 2.5mm 3.3%
Volume (6-Month Average) 434,330 2. Wallace R. Weitz & Co. 2.4mm 3.2%
Price to Earnings* 10.2x 3. Franklin Advisors, Inc. 1.8mm 2.4%
Dividend Yield 9.13% 4. T. Rowe Price associates, Inc. 1.8mm 2.4%
5. Fenimore Asset Management, Inc. 1.2mm 1.6%
</TABLE>
*Source: Bloomberg - 2000E EPS $1.95
================================================================================
[RYAN, BECK LOGO]
<PAGE> 16
Ryan, Beck & Co.
================================================================================
ANALYST COVERAGE [BLC LOGO]
--------------------------------------------------------------------------------
ANALYST COVERAGE*
<TABLE>
<CAPTION>
COMPANY RATING EPS 2000 EPS 2001
<S> <C> <C> <C>
A.G. Edwards & Sons, Inc. Buy $1.95 $2.25
BB&T Capital Markets Strong Buy $1.93 $2.25
Bluestone Capital Partners, LP Outperform $1.89 $2.12
B of A Montgomery Buy $1.94 $2.26
Davenport & Company,LLC Accumulate $1.95 $2.20
Ferris, Baker Watts, Inc. Outperform $1.94 $2.24
First Union Securities, Inc. Strong Buy $1.96 $2.30
Friedman, Billings, Ramsey
& Co. Accumulate $1.95 $2.25
Hilliard Lyons, Inc. Buy $1.90 $2.10
Jolson Merchant Partners Strong Buy N/A N/A
Merrill Lynch & Co. Near Term Buy N/A N/A
U.S. Bancorp Piper Jaffray Strong Buy $1.94 $2.25
First Security Van Kasper Strong Buy $1.94 N/A
William Blair & Co. Long-term Buy $1.95 $2.28
CONSENSUS $1.94 $2.23
</TABLE>
* Source: Bloomberg
================================================================================
[RYAN, BECK LOGO]
<PAGE> 17
Ryan, Beck & Co.
================================================================================
[BLC LOGO]
--------------------------------------------------------------------------------
ALLIED CAPITAL CORPORATION
Selected Historical Financial Data
================================================================================
[RYAN, BECK LOGO]
<PAGE> 18
ALLIED CAPITAL CORPORATION
SELECTED HISTORICAL FINANCIAL DATA
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
9 Months Ended
September 30, As of and for the Years Ended December 31,
------------------------ --------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA
Total interest and related portfolio income $ 149,854 $ 98,862 $ 141,140 $ 106,738 $ 97,405 $ 84,937 $ 68,817
Total operating expenses excluding merger
expenses $ 67,065 $ 43,952 $ 63,346 $ 44,444 $ 46,180 $ 37,361 $ 27,274
Portfolio income before realized and
unrealized gains $ 77,992 $ 49,772 $ 71,041 $ 55,245 $ 46,066 $ 47,576 $ 41,543
Net realized gains $ 23,085 $ 16,448 $ 25,391 $ 22,541 $ 10,704 $ 19,155 $ 12,000
Net unrealized gains (losses) $ (267) $ 1,475 $ 2,138 $ 1,079 $ 7,209 $ (7,412) $ 9,266
Net Increase in net assets resulting from
operations $ 100,820 $ 67,645 $ 98,570 $ 78,078 $ 61,304 $ 54,947 $ 60,479
Diluted earnings per common share $1.42 $1.14 $1.64 $1.50 $1.24 $1.17 $1.37
Dividends per common share(1) $1.36 $1.20 $1.60 $1.43 $1.20 $1.23 $1.09
Weighted average common shares outstanding
- diluted 70,777 59,239 60,044 51,974 49,251 46,733 44,010
BALANCE SHEET DATA
Portfolio at value $1,638,207 $1,228,497 $1,228,497 $ 807,119 $703,331 $612,411 $532,311
Portfolio at cost -- $1,098,111 $1,222,901 $ 803,479 $697,030 $618,319 $530,807
Total assets $1,731,773 $1,290,038 $1,290,038 $ 856,079 $807,775 $713,360 $605,434
Total debt outstanding $ 762,150 $ 592,850 $ 592,850 $ 334,350 $347,663 $274,997 $200,339
Shareholders' equity $ 933,329 $ 667,513 $ 667,513 $ 491,358 $420,060 $402,134 $367,192
Shareholders' equity per common share (NAV) $ 11.56 $ 10.20 $ 10.20 $ 8.79 $ 8.07 $ 8.34 $ 8.26
Common shares outstanding at the end of the
period 80,754 65,414 65,414 55,919 52,047 48,238 44,479
OTHER DATA
New portfolio investments -- -- $ 751,871 $ 524,530 $364,942 $283,295 $216,175
Loan repayments -- -- $ 145,706 $ 138,081 $233,005 $179,292 $111,731
Loan sales(2) -- -- $ 198,368 $ 81,013 $ 53,912 $ 27,715 $ 29,726
Total assets managed at period end -- -- $1,577,296 $1,143,548 $935,720 $822,450 $702,567
Realized gains -- -- $ 31,536 $ 25,757 $ 15,804 $ 30,417 $ 16,679
Realized losses -- -- $ (6,145) $ (3,216) $ (5,100) $(11,262) $ (4,679)
</TABLE>
(1) Dividends for 1997 exclude certain Merger-related dividends. Allied 1
distributed $0.34 per common share representing the 844,914 shares of
Allied Lending distributed in conjunction with the Merger. This
distribution resulted in a partial return of capital. Also in conjunction
with the Merger, the company distributed $0.17 per share representing the
undistributed earnings of the merged companies at December 31, 1997.
(2) Loan sales for 1998 exclude loans sold through securitization in January
1998.
<PAGE> 19
Ryan, Beck & Co.
================================================================================
[BLC LOGO]
--------------------------------------------------------------------------------
ALLIED CAPITAL CORPORATION
Price / Volume Graphs
================================================================================
[RYAN, BECK LOGO]
<PAGE> 20
Ryan, Beck & Co.
ALLIED CAPITAL CORP.
WEEKLY PRICE-VOLUME GRAPH
[LINE/BAR GRAPH]
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
DATE VOLUME PRICE
-------------------------------------------------------------------------------
<S> <C> <C>
1/1/1999 471,600 17.31
1/8/1999 874,600 18.06
1/15/1999 825,200 17.53
1/22/1999 1,040,100 18.00
1/29/1999 930,500 18.00
2/5/1999 805,600 17.06
2/12/1999 431,100 17.00
2/19/1999 504,700 17.00
2/26/1999 2,068,100 17.63
3/5/1999 1,318,200 19.69
3/12/1999 1,149,100 18.97
3/19/1999 2,077,100 18.00
3/26/1999 1,335,900 18.56
4/2/1999 802,600 18.69
4/9/1999 734,000 17.03
4/16/1999 1,075,300 18.06
4/23/1999 630,400 18.06
4/30/1999 1,113,600 18.00
5/7/1999 813,300 17.56
5/14/1999 1,944,800 18.88
5/21/1999 829,800 19.13
5/28/1999 1,108,100 18.63
6/4/1999 273,200 18.94
6/11/1999 408,100 18.81
6/18/1999 960,700 20.38
6/25/1999 1,037,000 20.63
7/2/1999 2,477,600 22.50
7/9/1999 1,392,400 22.25
7/16/1999 1,468,900 22.50
7/23/1999 641,300 21.94
7/30/1999 908,800 22.50
8/6/1999 716,200 20.63
8/13/1999 1,372,900 23.25
8/20/1999 1,323,700 21.88
8/27/1999 549,500 22.00
9/3/1999 876,700 22.06
9/10/1999 648,300 21.63
9/17/1999 842,300 20.94
9/24/1999 646,000 21.19
10/1/1999 1,081,700 22.50
10/8/1999 994,300 21.88
10/15/1999 975,500 20.25
10/22/1999 1,631,200 19.88
10/29/1999 1,854,800 20.06
11/5/1999 1,807,700 20.81
11/12/1999 961,900 20.88
11/19/1999 886,300 20.50
11/26/1999 433,400 19.94
12/3/1999 873,100 20.13
12/10/1999 2,430,800 19.50
12/17/1999 2,249,200 18.13
12/24/1999 1,503,100 17.63
12/31/1999 1,595,200 18.31
1/7/2000 2,698,900 16.44
1/14/2000 3,133,000 17.13
1/21/2000 1,772,900 17.13
1/28/2000 1,600,200 17.88
2/4/2000 2,179,900 19.63
2/11/2000 2,417,800 17.69
2/18/2000 1,959,600 18.19
2/25/2000 1,119,600 17.88
3/3/2000 1,513,800 17.63
3/10/2000 3,164,600 16.81
3/17/2000 2,094,000 17.94
3/24/2000 1,296,100 17.88
3/31/2000 1,380,500 17.44
4/7/2000 2,340,400 17.56
4/14/2000 1,903,100 16.56
4/21/2000 1,327,300 17.44
4/28/2000 1,672,500 18.69
5/5/2000 1,746,600 18.50
5/12/2000 1,987,200 17.63
5/19/2000 1,968,800 17.31
5/26/2000 2,178,100 16.81
6/2/2000 1,873,200 17.63
6/9/2000 4,247,600 17.00
6/16/2000 2,688,300 17.31
6/23/2000 1,727,300 17.13
6/30/2000 1,891,800 17.00
7/7/2000 1,288,600 17.63
7/14/2000 1,418,400 17.56
7/21/2000 1,348,600 17.63
7/28/2000 1,795,000 18.19
8/4/2000 2,422,400 19.63
8/11/2000 1,470,100 20.00
8/18/2000 1,391,200 19.50
8/25/2000 1,438,700 20.00
9/1/2000 1,183,000 20.06
9/8/2000 878,000 20.38
9/15/2000 1,905,100 20.50
9/22/2000 4,653,300 20.13
9/29/2000 3,100,800 20.75
10/6/2000 4,849,600 19.69
10/13/2000 2,608,100 19.44
10/20/2000 1,651,900 19.50
10/27/00 1,624,600 19.88
</TABLE>
<PAGE> 21
Ryan, Beck & Co.
ALLIED CAPITAL CORP.
INDEX GRAPH
[LINE GRAPHS]
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
DATE S&P 500 INDEX NASDAQ FINANCIAL INDEX ALLC
=================================================================================
<S> <C> <C> <C>
1/1/1999 1.00 1.00 1.00
1/8/1999 1.04 1.01 1.04
1/15/1999 1.01 0.99 1.01
1/22/1999 1.00 0.96 1.04
1/29/1999 1.04 0.99 1.04
2/5/1999 1.01 0.95 0.99
2/12/1999 1.00 0.95 0.98
2/19/1999 1.01 0.95 0.98
2/26/1999 1.01 0.96 1.02
3/5/1999 1.04 0.99 1.14
3/12/1999 1.05 1.01 1.10
3/19/1999 1.06 1.01 1.04
3/26/1999 1.04 0.98 1.07
4/2/1999 1.05 0.96 1.08
4/9/1999 1.10 1.01 0.98
4/16/1999 1.07 1.04 1.04
4/23/1999 1.10 1.06 1.04
4/30/1999 1.09 1.09 1.04
5/7/1999 1.09 1.09 1.01
5/14/1999 1.09 1.08 1.09
5/21/1999 1.08 1.07 1.10
5/28/1999 1.06 1.04 1.08
6/4/1999 1.08 1.03 1.09
6/11/1999 1.05 1.00 1.09
6/18/1999 1.09 1.01 1.18
6/25/1999 1.07 1.01 1.19
7/2/1999 1.13 1.05 1.30
7/9/1999 1.14 1.04 1.29
7/16/1999 1.15 1.03 1.30
7/23/1999 1.10 1.01 1.27
7/30/1999 1.08 0.98 1.30
8/6/1999 1.06 0.93 1.19
8/13/1999 1.08 0.95 1.34
8/20/1999 1.09 0.95 1.26
8/27/1999 1.10 0.94 1.27
9/3/1999 1.10 0.93 1.27
9/10/1999 1.10 0.91 1.25
9/17/1999 1.09 0.88 1.21
9/24/1999 1.04 0.87 1.22
10/1/1999 1.04 0.87 1.30
10/8/1999 1.09 0.92 1.26
10/15/1999 1.01 0.86 1.17
10/22/1999 1.06 0.90 1.15
10/29/1999 1.11 0.95 1.16
11/5/1999 1.11 0.98 1.20
11/12/1999 1.14 0.99 1.21
11/19/1999 1.16 0.99 1.18
11/26/1999 1.15 0.95 1.15
12/3/1999 1.17 0.96 1.16
12/10/1999 1.15 0.93 1.13
12/17/1999 1.16 0.89 1.05
12/24/1999 1.19 0.91 1.02
12/31/1999 1.20 0.91 1.06
1/7/2000 1.17 0.87 0.95
1/14/2000 1.19 0.87 0.99
1/21/2000 1.17 0.82 0.99
1/28/2000 1.11 0.81 1.03
2/4/2000 1.16 0.83 1.13
2/11/2000 1.13 0.80 1.02
2/18/2000 1.10 0.77 1.05
2/25/2000 1.08 0.76 1.03
3/3/2000 1.15 0.76 1.02
3/10/2000 1.13 0.73 0.97
3/17/2000 1.19 0.82 1.04
3/24/2000 1.24 0.85 1.03
3/31/2000 1.22 0.86 1.01
4/7/2000 1.23 0.84 1.01
4/14/2000 1.10 0.77 0.96
4/21/2000 1.17 0.81 1.01
4/28/2000 1.18 0.81 1.08
5/5/2000 1.17 0.78 1.07
5/12/2000 1.16 0.80 1.02
5/19/2000 1.14 0.80 1.00
5/26/2000 1.12 0.81 0.97
6/2/2000 1.20 0.87 1.02
6/9/2000 1.19 0.83 0.98
6/16/2000 1.19 0.79 1.00
6/23/2000 1.17 0.79 0.99
6/30/2000 1.18 0.78 0.98
7/7/2000 1.20 0.83 1.02
7/14/2000 1.23 0.85 1.01
7/21/2000 1.20 0.83 1.02
7/28/2000 1.16 0.81 1.05
8/4/2000 1.19 0.86 1.13
8/11/2000 1.20 0.87 1.16
8/18/2000 1.21 0.86 1.13
8/25/2000 1.23 0.87 1.16
9/1/2000 1.24 0.89 1.16
9/8/2000 1.22 0.93 1.18
9/15/2000 1.19 0.93 1.18
9/22/2000 1.18 0.92 1.16
9/29/2000 1.17 0.95 1.20
10/6/2000 1.15 0.92 1.14
10/13/2000 1.12 0.88 1.12
10/20/2000 1.14 0.89 1.13
10/27/00 1.12 0.91 1.15
</TABLE>
<PAGE> 22
Ryan, Beck & Co.
================================================================================
[BLC LOGO]
--------------------------------------------------------------------------------
BLC FINANCIAL SERVICES, INC.
================================================================================
[RYAN, BECK LOGO]
<PAGE> 23
Ryan, Beck & Co.
================================================================================
[BLC LOGO]
--------------------------------------------------------------------------------
BLC FINANCIAL SERVICES, INC.
Financial Comparison vs. Peer Group
================================================================================
[RYAN, BECK LOGO]
<PAGE> 24
Ryan, Beck & Co.
SELECTED COMMERCIAL FINANCE COMPANIES
WITH MARKET CAPITALIZATION BETWEEN $20 MILLION AND $200 MILLION
<TABLE>
<CAPTION>
NO. OF MARKET PRICE 52 WEEK
COMPANY SYMB. LISTED SHARES CAP. 10/27/2000 RANGE DIVIDEND YIELD
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Airlease Ltd. FLY NYSE 4,625,000 $ 55,210,000 $11.88 $10.63 - $13.00 $1.80 15.15%
American Business Fin'l ABFI NASDAQ 3,323,674 23,680,000 6.84 5.13 - 24.50 0.32 4.68%
Amplicon, Inc. AMPI NASDAQ 11,617,000 127,787,000 11.00 8.88 - 14.50 0.16 1.45%
Capital Trust CT NYSE 22,927,000 90,270,000 4.37 3.25 - 5.00 0.00 0.00%
ePlus Inc. PLUS NASDAQ 9,673,358 145,680,000 14.50 8.75 - 68.56 0.00 0.00%
Equivest Finance EQUI NASDAQ 28,089,722 59,690,000 1.75 1.75 - 6.25 0.00 0.00%
First International Bancorp, Inc. FNCE NASDAQ 8,264,318 57,870,000 8.00 6.50 - 9.13 0.12 1.50%
HPSC Inc. HDR AMEX 4,184,630 27,130,000 6.50 6.41 - 11.00 0.00 0.00%
MicroFinancial Inc. MFI NYSE 12,542,756 125,460,000 9.88 8.63 - 12.19 0.18 1.82%
PLM International, Inc. PLM AMEX 7,395,510 48,160,000 6.61 4.94 - 7.44 0.00 0.00%
PMC Capital, Inc. PMC AMEX 11,846,116 110,287,340 9.31 7.81 - 10.25 1.00 10.74%
Resource America Inc. REXI NASDAQ 21,305,734 190,420,000 7.82 6.50 - 9.13 0.13 1.70%
SierraCities.com Inc. BTOB NASDAQ 19,048,640 81,550,000 4.50 1.97 - 24.00 0.00 0.00%
Willis Lease Finance Corp. WLFC NASDAQ 7,401,866 40,710,000 5.37 4.13 - 8.81 0.00 0.00%
AVERAGE: 84,564,596 0.27 2.65%
MEDIAN: 70,620,000 0.06 0.73%
BLC Financial Services, Inc. BLC AMEX 20,467,875 43,070,000 2.13 1.50 - 3.13 0.00 0.00%
<CAPTION>
MARKET/
P/E BOOK BOOK EPS FULLY DILUTED (BEFORE EXTRAORDINARY)
COMPANY (X) (X) VALUE LTM 1999 1998 1997
<S> <C> <C> <C> <C> <C> <C> <C>
Airlease Ltd. 12.38 1.04 $11.41 $0.96 $1.01 $1.04 $1.17
American Business Fin'l 3.74 0.37 18.69 1.83 3.72 2.98 1.95
Amplicon, Inc. 6.59 0.75 14.63 1.67 1.60 1.55 1.31
Capital Trust 10.40 0.67 6.50 0.42 0.55 0.44 N/A
ePlus Inc. 13.81 1.63 8.88 1.05 0.98 0.98 0.66
Equivest Finance 5.30 0.61 2.86 0.33 0.31 0.20 0.15
First International Bancorp, Inc. 11.11 1.09 7.34 0.72 0.72 0.86 0.67
HPSC Inc. 9.70 0.65 10.06 0.67 0.61 0.47 0.26
MicroFinancial Inc. 9.78 1.44 6.88 1.01 0.83 0.77 0.52
PLM International, Inc. 18.36 1.03 6.44 0.36 0.29 0.20 0.50
PMC Capital, Inc. 8.46 1.52 6.14 1.10 1.11 1.16 1.35
Resource America Inc. 12.22 0.62 12.54 0.64 1.17 1.75 0.84
SierraCities.com Inc. N/M 0.54 8.37 -0.28 0.13 -0.43 1.03
Willis Lease Finance Corp. 33.56 0.54 9.88 0.16 0.44 1.27 0.94
11.96 0.89 9.33 0.76 0.96 0.95 0.87
10.40 0.71 8.63 0.70 0.78 0.92 0.84
BLC Financial Services, Inc. 9.68 1.73 1.23 0.22 0.14 0.15 0.10
<CAPTION>
TOTAL ROAA TOTAL ROAE
ASSETS (BEF. EXTRA) EQUITY (BEF. EXTRA)
COMPANY ($000'S) (%) ($000'S) (%)
<S> <C> <C> <C> <C>
Airlease Ltd. $ 63,453 6.59 $ 53,305 7.92
American Business Fin'l 592,668 N/M 62,115 N/M
Amplicon, Inc. 409,857 4.88 167,184 11.97
Capital Trust 718,232 0.63 166,140 2.84
ePlus Inc. 345,937 2.88 85,917 13.90
Equivest Finance 436,246 2.29 80,496 12.45
First International Bancorp, Inc. 335,049 2.80 58,682 15.05
HPSC Inc. 412,169 0.78 42,118 7.64
MicroFinancial Inc. 335,195 6.47 91,080 23.91
PLM International, Inc. 150,944 1.65 47,628 5.12
PMC Capital, Inc. 157,464 8.30 72,727 17.92
Resource America Inc. 482,583 0.55 267,186 0.99
SierraCities.com Inc. 1,044,802 N/M 159,344 N/M
Willis Lease Finance Corp. 430,876 1.75 73,097 10.28
422,534 3.30 101,930 10.83
411,013 2.55 76,797 11.13
BLC Financial Services, Inc. 85,896 6.86 25,091 23.88
</TABLE>
(Source: SNL Securities and Bloombergs)
Footnote: All earnings data from 06/30/00 except for
MicroFinancial Inc. (09/30/00)
<PAGE> 25
Ryan, Beck & Co.
Summary of Operations:
<TABLE>
<CAPTION>
Year Ended June 30,
2000 1999 1998 1997 1996
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Total revenues 26,366,000 $19,422,000 $15,729,000 $ 7,168,000 $ 4,997,000
Income before
extraordinary items 5,282,000 3,103,000 3,226,000 1,702,000 553,000
Extraordinary item 245,000 91,000
Net Income 5,282,000 $ 3,103,000 $ 3,226,000 $ 1,947,000 $ 644,000
Income per share (basic)
before extraordinary item .26 .16 .18 .10 .04
Income per share
from extraordinary item -- -- -- .01 .01
Net income per
share (basic) .26 .16 .18 .11 .05
Net income per share
(diluted) .22 .14 .15 .11 .04
As of June 30:
Total assets $85,896,000 $68,037,000 $53,281,000 $20,086,000 $10,983,000
Total liabilities $60,805,000 $48,890,000 $39,012,000 $12,896,000 $ 5,657,000
Shareholders' equity $25,091,000 $19,147,000 $14,269,000 $ 7,190,000 $ 4,601,000
Shareholders' equity
per share 1.23 .94 .72 .41 .27
</TABLE>
<PAGE> 26
Ryan, Beck & Co.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30,
2000 1999
<S> <C> <C>
ASSETS
Loans receivable - net $22,291,000 $ 21,936,000
Loans held for sale 7,494,000 8,922,000
Cash 9,609,000 4,229,000
Restricted cash 1,860,000 1,728,000
Accounts receivable - loans sold 15,121,000 8,982,000
Accounts and other receivables 1,803,000 2,681,000
Prepaid expenses and security deposits 592,000 595,000
Leasehold improvements, furniture and equipment, net of accumulated
depreciation of $882,000 in 2000; $571,000 in 1999 1,288,000 1,207,000
Servicing assets 7,189,000 4,761,000
Residual interests 16,794,000 10,877,000
Deferred tax asset 0 1,000,000
Deferred financing costs, net of accumulated amortization of $1,344,000 in
2000; $774,000 in 1999 1,132,000 669,000
Other assets 723,000 450,000
----------- ------------
$85,896,000 $ 68,037,000
=========== ============
LIABILITIES
Advances under credit facilities $45,840,000 $ 39,488,000
Accounts payable and accrued expenses 2,073,000 643,000
Due to participants 2,466,000 1,640,000
Allowance for estimated future losses on loans sold 10,000 77,000
Notes payable 0 120,000
Convertible debentures 6,486,000 4,725,000
Customer deposits 2,443,000 2,197,000
Deferred tax liability 1,487,000 0
----------- ------------
Total liabilities 60,805,000 48,890,000
----------- ------------
Commitments and contingencies (Note 8)
SHAREHOLDERS' EQUITY:
Preferred stock, $.10 par value:
Authorized - 2,000,000 shares, issued and outstanding - none
Common stock, $.01 par value:
Authorized - 35,000,000 shares, issued and outstanding
20,467,875 in 2000 and 20,288,875 in 1999 205,000 202,000
Additional paid-in capital 12,923,000 12,659,000
Retained earnings 11,147,000 5,865,000
Accumulated other comprehensive income - unrealized gain on residual interests
(net of income taxes of $533,000 in 2000; $305,000 in 1999) 816,000 421,000
----------- ------------
Total shareholders' equity 25,091,000 19,147,000
----------- ------------
$85,896,000 $ 68,037,000
=========== ============
</TABLE>
<PAGE> 27
Ryan, Beck & Co.
================================================================================
BLC FINANCIAL SERVICES - MARKET STATISTICS
--------------------------------------------------------------------------------
MARKET STATISTICS
<TABLE>
<S> <C> <C> <C>
Recent Price (10/27/00) $2.13 Market Capitalization $45.9 Million
52-Week High $3.25 Shares Outstanding 21.54 Million
52-Week Low $1.50 Shares Outstanding Date 9/11/2000
YTD High $3.13 Significant Owners
YTD Low $1.50 1. Futuronics 2.595mm
YTD Change 21.45% 2. Officers and Directors 7.428mm
Volume (6-Month Average) 9,833 3. Diane Rosenfeld 1.095mm
Price to Earnings* 9.68x 4. Muus & Co. 1.019mm
Dividend Yield 0.00%
</TABLE>
================================================================================
[RYAN, BECK LOGO]
<PAGE> 28
Ryan, Beck & Co.
================================================================================
[BLC LOGO]
--------------------------------------------------------------------------------
BLC FINANCIAL SERVICES, INC.
Price / Volume Graphs
================================================================================
[RYAN, BECK LOGO]
<PAGE> 29
Ryan, Beck & Co.
BLC FINANCIAL SERVICES, INC.
WEEKLY PRICE-VOLUME GRAPH
[LINE/BAR GRAPH]
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
DATE VOLUME PRICE
-------------------------------------------------------------------------------
<S> <C> <C>
1/1/1999 83,300 2.25
1/8/1999 32,300 2.38
1/15/1999 137,100 2.88
1/22/1999 75,600 2.81
1/29/1999 85,900 2.50
2/5/1999 34,100 2.38
2/12/1999 104,800 2.19
2/19/1999 91,500 2.38
2/26/1999 51,800 2.19
3/5/1999 70,700 2.31
3/12/1999 41,000 2.25
3/19/1999 37,900 2.25
3/26/1999 32,800 2.13
4/2/1999 38,000 2.19
4/9/1999 68,600 2.06
4/16/1999 78,200 2.06
4/23/1999 56,100 1.94
4/30/1999 35,600 2.19
5/7/1999 22,100 2.19
5/14/1999 28,800 2.13
5/21/1999 72,200 2.00
5/28/1999 114,800 2.13
6/4/1999 33,300 2.00
6/11/1999 16,700 2.00
6/18/1999 17,900 1.88
6/25/1999 37,000 1.88
7/2/1999 38,500 1.81
7/9/1999 52,000 1.88
7/16/1999 125,200 2.44
7/23/1999 125,700 2.44
7/30/1999 58,000 2.19
8/6/1999 90,500 2.06
8/13/1999 35,100 2.06
8/20/1999 27,800 1.94
8/27/1999 41,600 2.00
9/3/1999 26,200 2.25
9/10/1999 33,600 2.44
9/17/1999 18,300 2.25
9/24/1999 27,000 2.19
10/1/1999 36,500 2.06
10/8/1999 131,300 1.75
10/15/1999 41,000 1.94
10/22/1999 190,200 1.88
10/29/1999 201,200 1.75
11/5/1999 15,200 1.69
11/12/1999 238,500 1.81
11/19/1999 168,800 1.63
11/26/1999 69,600 1.75
12/3/1999 86,600 1.63
12/10/1999 80,800 1.63
12/17/1999 61,800 1.56
12/24/1999 368,800 1.63
12/31/1999 117,200 1.75
1/7/2000 44,400 1.75
1/14/2000 113,600 1.69
1/21/2000 74,600 1.81
1/28/2000 100,300 1.75
2/4/2000 84,700 2.00
2/11/2000 188,000 2.38
2/18/2000 109,500 2.13
2/25/2000 186,100 2.38
3/3/2000 78,100 2.38
3/10/2000 673,900 3.06
3/17/2000 258,800 2.69
3/24/2000 65,200 2.44
3/31/2000 105,700 2.19
4/7/2000 103,000 2.19
4/14/2000 167,200 1.69
4/21/2000 110,200 2.00
4/28/2000 94,700 1.94
5/5/2000 90,100 1.94
5/12/2000 27,100 1.81
5/19/2000 16,700 1.75
5/26/2000 72,000 1.88
6/2/2000 30,400 1.81
6/9/2000 30,100 1.88
6/16/2000 22,700 1.75
6/23/2000 94,100 1.81
6/30/2000 59,400 1.88
7/7/2000 13,900 1.94
7/14/2000 51,000 1.94
7/21/2000 36,300 2.00
7/28/2000 20,700 2.13
8/4/2000 33,300 1.94
8/11/2000 27,400 1.94
8/18/2000 56,900 2.00
8/25/2000 26,900 1.94
9/1/2000 88,200 1.88
9/8/2000 23,900 1.63
9/15/2000 21,400 1.69
9/22/2000 13,500 1.69
9/29/2000 19,400 1.88
10/6/2000 37,300 1.88
10/13/2000 13,800 1.75
10/20/2000 93,100 1.88
10/27/2000 209,400 2.13
</TABLE>
<PAGE> 30
Ryan, Beck & Co.
BLC FINANCIAL SERVICES, INC.
INDEX GRAPH
[LINE GRAPHS]
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
DATE S&P 500 INDEX NASDAQ FINANCIAL INDEX BLC
=========================================================================
<S> <C> <C> <C>
1/1/1999 1.00 1.00 1.00
1/8/1999 1.04 1.01 1.06
1/15/1999 1.01 0.99 1.28
1/22/1999 1.00 0.96 1.25
1/29/1999 1.04 0.99 1.11
2/5/1999 1.01 0.95 1.06
2/12/1999 1.00 0.95 0.97
2/19/1999 1.01 0.95 1.06
2/26/1999 1.01 0.96 0.97
3/5/1999 1.04 0.99 1.03
3/12/1999 1.05 1.01 1.00
3/19/1999 1.06 1.01 1.00
3/26/1999 1.04 0.98 0.94
4/2/1999 1.05 0.96 0.97
4/9/1999 1.10 1.01 0.92
4/16/1999 1.07 1.04 0.92
4/23/1999 1.10 1.06 0.86
4/30/1999 1.09 1.09 0.97
5/7/1999 1.09 1.09 0.97
5/14/1999 1.09 1.08 0.94
5/21/1999 1.08 1.07 0.89
5/28/1999 1.06 1.04 0.94
6/4/1999 1.08 1.03 0.89
6/11/1999 1.05 1.00 0.89
6/18/1999 1.09 1.01 0.83
6/25/1999 1.07 1.01 0.83
7/2/1999 1.13 1.05 0.81
7/9/1999 1.14 1.04 0.83
7/16/1999 1.15 1.03 1.08
7/23/1999 1.10 1.01 1.08
7/30/1999 1.08 0.98 0.97
8/6/1999 1.06 0.93 0.92
8/13/1999 1.08 0.95 0.92
8/20/1999 1.09 0.95 0.86
8/27/1999 1.10 0.94 0.89
9/3/1999 1.10 0.93 1.00
9/10/1999 1.10 0.91 1.08
9/17/1999 1.09 0.88 1.00
9/24/1999 1.04 0.87 0.97
10/1/1999 1.04 0.87 0.92
10/8/1999 1.09 0.92 0.78
10/15/1999 1.01 0.86 0.86
10/22/1999 1.06 0.90 0.83
10/29/1999 1.11 0.95 0.78
11/5/1999 1.11 0.98 0.75
11/12/1999 1.14 0.99 0.81
11/19/1999 1.16 0.99 0.72
11/26/1999 1.15 0.95 0.78
12/3/1999 1.17 0.96 0.72
12/10/1999 1.15 0.93 0.72
12/17/1999 1.16 0.89 0.69
12/24/1999 1.19 0.91 0.72
12/31/1999 1.20 0.91 0.78
1/7/2000 1.17 0.87 0.78
1/14/2000 1.19 0.87 0.75
1/21/2000 1.17 0.82 0.81
1/28/2000 1.11 0.81 0.78
2/4/2000 1.16 0.83 0.89
2/11/2000 1.13 0.80 1.06
2/18/2000 1.10 0.77 0.94
2/25/2000 1.08 0.76 1.06
3/3/2000 1.15 0.76 1.06
3/10/2000 1.13 0.73 1.36
3/17/2000 1.19 0.82 1.19
3/24/2000 1.24 0.85 1.08
3/31/2000 1.22 0.86 0.97
4/7/2000 1.23 0.84 0.97
4/14/2000 1.10 0.77 0.75
4/21/2000 1.17 0.81 0.89
4/28/2000 1.18 0.81 0.86
5/5/2000 1.17 0.78 0.86
5/12/2000 1.16 0.80 0.81
5/19/2000 1.14 0.80 0.78
5/26/2000 1.12 0.81 0.83
6/2/2000 1.20 0.87 0.81
6/9/2000 1.19 0.83 0.83
6/16/2000 1.19 0.79 0.78
6/23/2000 1.17 0.79 0.81
6/30/2000 1.18 0.78 0.83
7/7/2000 1.20 0.83 0.86
7/14/2000 1.23 0.85 0.86
7/21/2000 1.20 0.83 0.89
7/28/2000 1.16 0.81 0.94
8/4/2000 1.19 0.86 0.86
8/11/2000 1.20 0.87 0.86
8/18/2000 1.21 0.86 0.89
8/25/2000 1.23 0.87 0.86
9/1/2000 1.24 0.89 0.83
9/8/2000 1.22 0.93 0.72
9/15/2000 1.19 0.93 0.75
9/22/2000 1.18 0.92 0.75
9/29/2000 1.17 0.95 0.83
10/6/2000 1.15 0.92 0.83
10/13/2000 1.12 0.88 0.78
10/20/2000 1.14 0.89 0.83
10/27/2000 1.12 0.91 0.94
</TABLE>
<PAGE> 31
Ryan, Beck & Co.
================================================================================
[BLC LOGO]
--------------------------------------------------------------------------------
VALUATION BLC FINANCIAL SERVICES, INC.
================================================================================
[RYAN, BECK LOGO]
<PAGE> 32
Ryan, Beck & Co.
================================================================================
[BLC LOGO]
--------------------------------------------------------------------------------
BLC FINANCIAL SERVICES, INC.
Discounted Dividend Analysis
================================================================================
[RYAN, BECK LOGO]
<PAGE> 33
Ryan, Beck & Co.
DISCOUNTED DIVIDEND ANALYSIS
ANSWERS THE QUESTION:
"At what price would an acquisition of Target bring economic value to an
acquiror?"
METHODOLOGY:
Values the cash that can be dividended from the company given its financial
performance and capital requirements.
INPUT ASSUMPTIONS:
- Projected Earnings
- Annual Growth in Earnings and Assets
- Merger Savings/Synergies
- Earnings Multiple in Assumed Terminal Year
- Discount Rate
- Restructuring Charges
- Capital Required
<PAGE> 34
Ryan, Beck & Co.
DISCOUNTED DIVIDEND ANALYSIS FOR BLC FINANCIAL SERVICES, INC.
(Dollars in thousands, except per share data)
--------------------------------------------------------------------------------
NO SYNERGIES
0.00% SYNERGIES IN YEAR 2
MAINTAIN TANGIBLE EQUITY RATIO OF 30.00%.
BLC FINANCIAL SERVICES, INC. EARNINGS AS ESTIMATES
YEAR 1 AFTER TAX RESTRUCTURING CHARGE OF $2,711
INITIAL DIVIDEND ADJUSTMENT TO ACQUIROR OF $352
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Five Year Projections
--------------------------------------------------------------------------
2001 2002 2003 2004 2005
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Beginning Equity(a) $ 26,059 $ 36,778 $ 44,133 $ 50,753 $ 58,366
Unadjusted Net Income(a,b) 6,999 8,398 9,658 11,107 12,773
After Tax Income Impact(c) (16) 273 214 68 (91)
Synergies/Restructuring Charge(d) (2,711) 0 0 0 0
---------- ---------- ---------- ---------- ----------
Adjusted Net Income(e) $ 4,272 $ 8,671 $ 9,872 $ 11,175 $ 12,682
Dividends(f) 6,446 (1,316) (3,252) (3,562) (3,927)
Ending Equity 36,778 44,133 50,753 58,366 67,121
Intangibles(g) 0 0 0 0 0
---------- ---------- ---------- ---------- ----------
Ending Tangible Equity $ 36,778 $ 44,133 $ 50,753 $ 58,366 $ 67,121
Net Change in Equity(h) 6,446 (1,316) (3,252) (3,562) (3,927)
Cumulative Change in Equity 6,094 4,778 1,526 (2,036) (5,963)
Total Assets(a,b) $122,593 $147,111 $169,178 $194,555 $223,738
Asset Growth Rate 42.72% 20.00% 15.00% 15.00% 15.00%
Net Income Growth Rate(i) NM 102.98% 13.85% 13.20% 13.48%
Return on Average Assets 5.71% 6.23% 6.11% 6.11% 6.11%
Adjusted ROAA 3.48% 6.43% 6.24% 6.14% 6.06%
Adjusted ROAE 13.60% 21.43% 20.81% 20.48% 20.21%
Equity/Assets 30.00% 30.00% 30.00% 30.00% 30.00%
Tangible Equity/Tangible Assets 30.00% 30.00% 30.00% 30.00% 30.00%
</TABLE>
--------------------------------------------------------------------------------
Aggregate Net Present Value
---------------------------
<TABLE>
<CAPTION>
Discount Rate: 12.00% 14.00% 16.00%
--------------
<S> <C> <C> <C> <C>
Terminal Year 12.00 $ 86,217 $78,349 $71,296
Multiple of Earnings 13.00 $ 93,203 $84,713 $77,102
Adj. for Goodwill Amortization 14.00 $100,189 $91,076 $82,908
</TABLE>
Aggregate Net Present Value - Per Share(j)
-------------------------------------------
<TABLE>
<CAPTION>
Discount Rate: 12.00% 14.00% 16.00%
--------------
<S> <C> <C> <C> <C>
Terminal Year 12.00 $3.29 $3.02 $2.77
Multiple of Earnings 13.00 $3.54 $3.24 $2.97
Adj. for Goodwill Amortization(k) 14.00 $3.78 $3.46 $3.18
</TABLE>
<PAGE> 35
Ryan, Beck & Co.
FOOTNOTES
--------------------------------------------------------------------------------
Methodology: The Discounted Dividend Analysis produces values given earnings
estimates and projections of achievable synergies, over a range of discount
rates and terminal year earnings multiples. An initial dividend for tangible
capital in excess of a specified target is assumed; earnings in subsequent
years are adjusted to reflect the opportunity cost of this distribution.
Earnings in excess of those required to maintain BLC Financial Services,
Inc.'s tangible equity ratio at the specified targets are dividendable. It
should be noted that "Synergies" is defined as cost savings and revenue
enhancements which are assumed to approximate 0.00% of BLC Financial
Services, Inc.'s non-interest expenses in 2002.
* Present value = NPV of dividend stream plus terminal year multiple applied
to net income less intangible amortization.
(a) Beginning equity for BLC Financial Services, Inc. represents total equity
for the period ended 06/30/00, after an initial dividend to reduce BLC
Financial Services, Inc.'s tangible equity to assets to specified target
tangible capital levels.
(b) Earnings assumption based on BLC Financial Services, Inc. projections for
2001 and certain assumed growth rates for subsequent years.
(c) Assumes a pre-tax rate of 7.00% is earned/(lost) on any capital
retained/(dividend) in excess of assumed regular dividend payout. Assumes a
tax rate of 36.00%.
(d) No synergies/revenue enhancements are assumed.
(e) Adjusted for income impact of paying dividends in excess of assumed regular
dividend payout ratio.
(f) Assumed to pay the maximum dividend possible while maintaining a tangible
equity/asset ratio of 30.00%.
(g) Intangibles assumed to be amortized at a rate of $000 per year.
(h) Represents dividends paid in excess of estimated payout ratio of 0.00%.
(i) Includes income impact of cumulative increase (decrease) in equity.
(j) Per share data is based on 26,153,578 diluted shares outstanding, assuming
options are cashed out at $3.24 per share.
(k) The terminal year multiple, when applied to terminal year adjusted earnings
produces a value which approximates the net present value of the earnings in
perpetuity, given certain assumptions regarding growth rates and discount
rates.
<PAGE> 36
Company Name BLC Financial Services, Inc. Ryan, Beck & Co.
Ticker BLC
Date 06/30/00
First Year of Earnings Forecast 2001
<TABLE>
<S> <C> <C> <C>
Beginning Assets............................................. $85,896
Beginning Equity............................................. $25,091
Beginning Intangibles........................................ $0
2001 Tangible Equity/Tangible Asset Ratio.................... 30.0%
2002 Tangible Equity/Tangible Asset Ratio.................... 30.0%
2003 Tangible Equity/Tangible Asset Ratio.................... 30.0%
2004 Tangible Equity/Tangible Asset Ratio.................... 30.0%
2005 Tangible Equity/Tangible Asset Ratio.................... 30.0%
Basic Shares Outstanding (w/SOP 93-6)........................ 20,467,875
Options Outstanding.......................................... 5,270,974
Options Strike Price......................................... $1.47
Options Cash Out Price....................................... $3.24
Current Stock Price.......................................... $2.13
Common Stock Equivalents (treasury method of options)........ 1,624,700
Convertible Shares........................................... 2,806,893
Diluted Shares Outstanding................................... 24,899,468
Unallocated ESOP Shares (due to SOP 93-6).................... 0
Merger Shares (includes all ESOP shares)..................... 26,153,578
Net Income Current Year...................................... 5,282
Quarters of Income to Close.................................. 1
Retained Earnings to Close................................... $1,321
2001 Earnings per Share...................................... 0.27
2002 Earnings per Share...................................... 0.36
Net Income Growth Rate....................................... 32.50%
Net Income Growth Rate - Year 2.............................. 20.00%
Net Income Growth Rate - Years 3-5........................... 15.00%
Company (C), RBCO (R), ZACHS (Z) or IBES (I)................. C Company
Are The Earnings Estimates Basic or Diluted (B or D)......... D Estimates
Asset Growth Rate............................................ 32.50%
Asset Growth Rate..-Year 2................................... 20.00%
Asset Growth Rate..-Years 3-5................................ 15.00%
Dividend Payout Ratio........................................ 0.00% 2001 6,999
LTM Operating Expenses (Excluding Goodwill Amortization)..... 14,363 2002 8,398
Synergies (Y or N)........................................... N 2003 9,658
2001 Synergies estimate...................................... 0.0000% 2004 11,107
2002 Synergies estimate...................................... 0.0000% 2005 12,773
2003 Synergies estimate...................................... 0.0000%
Synergies Growth Rate........................................ 0.00%
Credit for synergies......................................... 0.00%
Bad Debt Recapture? (Y or N)................................. n
Bad Debt Recapture ($)....................................... 0
2001 Restructuring Charge (after tax)........................ 2,711
Initial Dividend (Y or N).................................... Y
Intangible Amortization...................................... $0
Tax Rate..................................................... 36.00%
Pre-Tax Earnings Yield....................................... 7.00%
After Tax Earnings Yield..................................... 4.48%
How many extra months discounted do you want?................ 3
</TABLE>
<PAGE> 37
Ryan, Beck & Co.
================================================================================
[BLC LOGO]
--------------------------------------------------------------------------------
BLC FINANCIAL SERVICES, INC.
IMPUTED VALUE ANALYSIS
================================================================================
[RYAN, BECK LOGO]
<PAGE> 38
Ryan, Beck & Co.
IMPUTED VALUE ANALYSIS
ANSWERS THE QUESTION:
"What would Target's value be if it was sold at a price comparable to recent
similar transactions?"
METHODOLOGY:
Values the acquisition based on comparable transactions.
In a rational market, buyers and sellers will be similarly influenced by
comparable factors.
VALUATION CONSIDERATIONS:
- Industry
- Capital Levels
- Earnings Growth
- Asset Mix (ie., loans vs. securities)
- Region
- Asset Quality
<PAGE> 39
Ryan, Beck & Co.
BLC FINANCIAL SERVICES, INC.
IMPUTED VALUATION SUMMARY
<TABLE>
<CAPTION>
PRICE/ PRICE/ PRICE/ PRICE/
EARNINGS BOOK REVENUE ASSETS MEAN
-------- ---- ------- ------ ----
<S> <C> <C> <C> <C> <C> <C>
HIGH 26.97 274.34 6.46 279
LOW 5.39 77.41 0.73 16.78
SPECIALITY LENDER ACQUISITION
PEER GROUP
MEAN 15.38 186.45 2.50 83.34
MEDIAN 14.59 193.74 1.41 62.28
HIGH $ 5.93 $ 3.37 $ 8.32 $ 11.71 $ 7.33
LOW $ 1.19 $ 0.95 $ 0.94 $ 0.70 $ 0.95
BLC'S VALUATION
USING ABOVE BENCHMARKS
MEAN $ 3.38 $ 2.29 $ 3.22 $ 3.50 $ 3.10
MEDIAN $ 3.21 $ 2.38 $ 1.82 $ 2.61 $ 2.51
</TABLE>
<PAGE> 40
Ryan, Beck & Co.
SELECTED TRANSACTIONS ANNOUNCED SINCE 01/01/98
WITH DEAL VALUES BETWEEN $50 MILLION $250 MILLION,
WHERE SELLER IS A SPECIALTY LENDER LOCATED IN THE UNITED STATES
DESCRIPTION OF TRANSACTION
<TABLE>
DESCRIPTION OF TRANSACTION
_____________________________________________________________________
BUYER BUYER
BUYER NAME STATE TICKER TARGET NAME
<S> <C> <C> <C>
AMRESCO, Inc. TX AMMB Independence Funding Co.
AMRESCO, Inc. TX AMMB Mortgage Investors Corp.
Associates First Capital Corporation TX AFS Arcadia Financial Ltd.
Bank of America Corporation NC BAC Fleetwood Credit Corp.
Capital One Financial Corporation VA COF Summit Acceptance Corp.
E-LOAN, Inc. CA EELN CarFinance.com
FINOVA Group Inc. AZ FNV Fremont Financial Corp.
First Investors Financial Services Group, Inc. TX FIFS Auto Lenders Acceptance Corp.
GS Capital Partners II LP NY -- Media Communications Group
Household International, Inc. IL HI Decision One Mortgage Co.
Lahaina Acquisitions Inc. FL LAHA Accent Group Inc.
Norwest Corporation MN NOB Century Business Credit Corp.
Prudential Insurance Company of America NJ -- WMF Group Ltd.
Republic Security Financial Corporation FL RSFC First New England Financial
Royal Bank of Canada -- RY Prism Financial Corp.
SLM Holding Corporation VA SLM Student Loan Funding Resources Inc.
Textron Inc. RI TXT Litchfield Financial Corp.
Transamerica Corporation CA TA SBA lending division-4 entities
</TABLE>
<TABLE>
DESCRIPTION OF TRANSACTION
___________________________________________________________________________
SELLER ANNOUNCE DEAL
BUYER NAME SELLER NAME TICKER DATE STATUS
<S> <C> <C> <C>
Independence Funding Company 06/02/1998 Completed
AMRESCO, Inc. Mortgage Investors Corp. 07/14/1998 Completed
AMRESCO, Inc. Arcadia Financial Ltd. AAC 11/12/1999 Completed
Associates First Capital Corporation Associates First Capital Corporation AFS 01/28/1999 Completed
Bank of America Corporation Summit Acceptance Corporation 07/16/1998 Completed
Capital One Financial Corporation Bank of America Corporation BAC 08/23/1999 Completed
E-LOAN, Inc. Fremont General Corporation FMT 12/07/1999 Completed
FINOVA Group Inc. Fortis, Inc. 09/09/1998 Completed
First Investors Financial Services Group, Inc. First Union Corporation FTU 06/25/1998 Completed
GS Capital Partners II LP Decision One Mortgage Co., LLC 07/23/1999 Completed
Household International, Inc. Accent Group Incorporated 07/21/1999 Completed
Lahaina Acquisitions Inc. Century Business Credit Corporation 10/28/1998 Completed
Norwest Corporation WMF Group, Ltd. WMFG 05/10/2000 Completed
Prudential Insurance Company of America Deere & Company DE 07/14/1999 Completed
Republic Security Financial Corporation Prism Financial Corporation PRFN 03/10/2000 Completed
Royal Bank of Canada Thomas L. Conlan Education Foundation 05/25/2000 Completed
SLM Holding Corporation Litchfield Financial Corporation LTCH 09/22/1999 Completed
Textron Inc. HomeGold Financial, Inc. HGFN 10/02/1998 Completed
Transamerica Corporation
</TABLE>
<TABLE>
DESCRIPTION OF TRANSACTION
_______________________________________________
DEAL VALUE CONSIDERATION ACCOUNTING
BUYER NAME ($M) TYPE METHOD
<S> <C> <C> <C>
62.9 Mixed Purchase
AMRESCO, Inc. 167.4 Mixed Purchase
AMRESCO, Inc. 217.5 Mixed Purchase
Associates First Capital Corporation 227.0 Cash Purchase
Bank of America Corporation 55.0 Common Stock Purchase
Capital One Financial Corporation 64.1 Common Stock Purchase
E-LOAN, Inc. 130.4 Cash Purchase
FINOVA Group Inc. 74.8 Cash Purchase
First Investors Financial Services Group, Inc. 220.0 -- --
GS Capital Partners II LP 62.2 Mixed Purchase
Household International, Inc. 66.3 Mixed --
Lahaina Acquisitions Inc. 213.0 Cash Purchase
Norwest Corporation 106.9 Cash Purchase
Prudential Insurance Company of America 108.8 Cash Purchase
Republic Security Financial Corporation 109.7 Cash Purchase
Royal Bank of Canada 117.3 Cash Purchase
SLM Holding Corporation 182.7 Cash Purchase
Textron Inc. 96.0 Cash Purchase
Transamerica Corporation
</TABLE>
<PAGE> 41
Ryan, Beck & Co.
SELECTED TRANSACTIONS ANNOUNCED SINCE 01/01/98
WITH DEAL VALUES BETWEEN $50 MILLION $250 MILLION,
WHERE SELLER IS A SPECIALITY LENDER LOCATED IN THE UNITED STATES
<TABLE>
<CAPTION>
FINANCIALS
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
TARGET NAME TA:ASSETS TA:GROSS LOANS TA:EQUITY TA:MANAGED RECEIVABLES TA:REVENUE TA:NET INCOME
($000) ($000) ($000) ($000) ($000) ($000)
Independence Funding Co. 104,277 50,398 NA NA NA NA
Mortgage Investors Corp. 60,386 NA NA 0 NA NA
Arcadia Financial Ltd. 855,376 NA 249,591 5,260,794 214,641 36,009
Fleetwood Credit Corp. NA NA NA 2,000,000 NA NA
Summit Acceptance Corp. NA NA NA 263,000 NA NA
CarFinance.com 6,278 NA NA NA NA NA
Fremont Financial Corp. 777,986 755,284 110,000 NA NA NA
Auto Lenders Acceptance Corp. 96,247 59,559 37,394 150,000 NA NA
Media Communications Group NA NA NA NA NA NA
Decision One Mortgage Co. 58,000 NA NA NA NA NA
Accent Group Inc. 3,790 NA N/M NA NA NA
Century Business Credit Corp. 342,000 NA NA NA NA NA
WMF Group Ltd. 153,426 NA 38,982 13,937,812 59,265 3,597
First New England Financial NA NA NA NA NA NA
Prism Financial Corp. 332,910 NA 42,035 198,294 150,658 8,853
Student Loan Funding Resources Inc. NA NA NA 3,000,000 NA NA
Litchfield Financial Corp. 340,589 NA 91,288 529,198 28,302 10,381
SBA lending division-4 entities 73,000 NA NA NA NA NA
MAX 855,376 755,284 249,591 13,937,812 214,641 36,009
MIN 3,790 50,398 37,394 0 28,302 3,597
MEAN 246,482 288,414 94,882 2,815,455 113,217 14,710
MEDIAN 104,277 59,559 66,662 529,198 104,962 9,617
85,896 31,486 25,091 376,007 26,366 5,282
</TABLE>
<TABLE>
<CAPTION>
FINANCIALS VALUATION
---------------------------------------------------- -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
TA:TOTAL PRICE/LTM PRICE/ PRICE/ PRICE/
ORIGINATIONS EARNINGS BOOK REVENUE ASSETS
($000) (x) (%) (x) (%)
Independence Funding Co. NA NA NA NA 60.48
Mortgage Investors Corp. 1,250,000 NA NA NA 279
Arcadia Financial Ltd. 2,273,533 5.39 77.41 1.01 25.43
Fleetwood Credit Corp. NA NA NA NA NA
Summit Acceptance Corp. NA NA NA NA NA
CarFinance.com NA NA NA NA NM
Fremont Financial Corp. NA NA 118.54 NA 16.78
Auto Lenders Acceptance Corp. NA NA 200.03 NA 77.72
Media Communications Group NA NA NA NA NA
Decision One Mortgage Co. NA NA NA NA 107.24
Accent Group Inc. NA NA NM NA NM
Century Business Credit Corp. NA NA NA NA 62.28
WMF Group Ltd. 2,351,317 26.97 274.34 1.80 69.70
First New England Financial NA NA NA NA NA
Prism Financial Corp. 7,669,000 12.39 260.95 0.73 32.95
Student Loan Funding Resources Inc. NA NA NA NA NA
Litchfield Financial Corp. 429,179 16.78 187.45 6.46 53.64
SBA lending division-4 entities NA NA NA NA 131.51
MAX 7,669,000 26.97 274.34 6.46 279.00
MIN 429,179 5.39 77.41 0.73 16.78
MEAN 2,794,606 15.38 186.45 2.50 83.34
MEDIAN 2,273,533 14.59 193.74 1.41 62.28
163,568 15.91(1) 284.55(1) 3.47(1) 106.57(1)
</TABLE>
(1) Based on $3.50 a share
<PAGE> 42
Ryan, Beck & Co.
================================================================================
[BLC LOGO]
--------------------------------------------------------------------------------
PRO FORMA FINANCIAL STATEMENT IMPACT
Allied Capital Corporation Acquisition of BLC Financial
Services, Inc.
================================================================================
[RYAN, BECK LOGO]
<PAGE> 43
Ryan, Beck & Co.
FINANCIAL STATEMENT IMPACT ANALYSIS
ANSWERS THE QUESTION:
"Can Acquiror afford to par a price in the range determined in the Discounted
Dividend and Imputed Value Analyses?"
METHODOLOGY:
Analyze impact on key financial variables such as earnings per share and book
value per share, among others.
DETERMINATION CONSIDERATIONS:
- Acquiror's Earnings and Book Value Dilution
- Capital Capacity
- Cost Savings Opportunities
- Regulatory Environment
<PAGE> 44
Ryan, Beck & Co.
================================================================================
PRO FORMA FINANCIAL STATEMENT IMPACT [BLC LOGO]
--------------------------------------------------------------------------------
- We reviewed the analysis (see the following pages) by Allied Capital
Corporation and their financial advisor, Jolson Merchant Partners
("JMP"), which provides an estimate of the pro forma impact of the
transaction to Allied's balance sheet, income statement, shares
outstanding, earnings per share, and book value per share.
- We also discussed with JMP certain assumptions used in their
analysis.
- Based on our review, the transaction is estimated to be neutral to
Allied's earnings per share and accretive to book value.
- The transaction also permits Allied to achieve certain financial
objectives by re-positioning its SBA program and related lending
activities as a portfolio company investment.
- We analyzed the impact of the merger on BLC's values per Allied
share based on the exchange ratio of 0.180 shares of Allied common
stock for each share of BLC's common stock using pro forma projected
2001 and 2002 earnings per share. That analysis found that, based on
such exchange ratio, BLC's equivalent projected 2001 earnings per
share would increase by approximately 48% and projected 2002
earnings per share would increase by approximately 36%.
================================================================================
[RYAN, BECK LOGO]
<PAGE> 45
Ryan, Beck & Co.
BALANCE SHEET
( $ in 000's)
<TABLE>
<CAPTION>
2001 ADJUSTMENTS
----------------------------------------------------------
MOVE LOWER
ALLC CONSOLIDATED ACE OFF ACE BLC ALLC
2001E 2002E BALANCE RECAPIT- ACQUI- EQUITY
STATUS QUO STATUS QUO SHEET ALIZATION SITION ISSUANCE
---------- ---------- ----- --------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
PRIVATE FINANCE:
Loans $ 1,365,120 $ 1,749,245 -- $ 90,430 -- --
Preferred Stock 96,326 96,326 27,580 -- -- --
Equity Securities 94,530 110,405 -- -- 91,715 --
REAL ESTATE:
Loans 70,226 64,932 (18,904) -- -- --
Interest in CMBS 463,251 463,251 -- -- -- --
Interest in Allied Capital CMBS 73,207 73,207 -- -- -- --
IO Strip (REIT) 292 292 -- -- -- --
Real estate owned 5,005 5,005 -- -- -- --
EXPRESS:
Loans (7a) 25,722 29,860 (25,722) -- -- --
Retained Interest 19,222 32,688 (19,222) -- -- --
I/O Strip 23,961 31,496 (23,961) -- -- --
OTHER:
Other Assets 78,633 78,633 (17,626) -- -- --
Cash 634 634 -- -- -- --
Total Assets $ 2,316,127 $ 2,735,972 ($ 77,855) $ 90,430 $ 91,715 --
LIABILITIES:
Debt Other Than SBIC or SBLC 1,037,613 1,210,216 (49,988) 90,430 -- 61,256
Debt, SBIC and SBLC 86,450 86,450 (9,000) -- -- --
Other Liabilities 27,092 27,092 (3,501) -- -- --
PREFERRED STOCK 7,000 7,000 -- -- -- --
EQUITY:
Common Equity and Paid In Capital 1,160,824 1,387,064 -- -- 91,715 (61,256)
Officer Loans (25,926) (25,926) -- -- -- --
Treasury Stock (1,404) (1,404) -- -- -- --
Unrealized Appreciation 4,250 4,250 -- -- -- --
Retained Earnings 20,229 41,230 (15,366) -- -- --
Total Equity 1,157,973 1,405,214 (15,366) -- 91,715 (61,256)
Total Debt & Equity $ 2,316,127 $ 2,735,972 ($ 77,855) $ 90,430 $ 91,715 --
</TABLE>
<TABLE>
<CAPTION>
2002 ADJUSTMENTS
----------------------------------------------
MOVE LOWER
ACE OFF ACE BLC ALLC ALLC CONSOLIDATED
BALANCE RECAPIT- ACQUI- EQUITY 2001E 2002E
SHEET ALIZATION SITION ISSUANCE PRO FORMA PRO FORMA
----- --------- ------ -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
PRIVATE FINANCE:
Loans -- $118,930 -- -- $ 1,455,550 $ 1,868,175
Preferred Stock 30,338 -- -- -- 123,905 126,663
Equity Securities -- -- 91,715 -- 186,245 202,120
REAL ESTATE:
Loans (21,026) -- -- -- 51,322 43,906
Interest in CMBS -- -- -- -- 463,251 463,251
Interest in Allied Capital CMBS -- -- -- -- 73,207 73,207
IO Strip (REIT) -- -- -- -- 292 292
Real estate owned -- -- -- -- 5,005 5,005
EXPRESS:
Loans (7a) (29,860) -- -- -- -- --
Retained Interest (32,688) -- -- -- -- --
I/O Strip (31,496) -- -- -- -- --
OTHER:
Other Assets (26,126) -- -- -- 61,007 52,507
Cash -- -- -- -- 634 634
Total Assets ($110,857) $118,930 $91,715 -- $ 2,420,418 $ 2,835,760
LIABILITIES:
Debt Other Than SBIC or SBLC (61,990) 118,930 -- 11,256 1,139,311 1,278,413
Debt, SBIC and SBLC (9,000) -- -- -- 77,450 77,450
Other Liabilities (3,501) -- -- -- 23,591 23,591
PREFERRED STOCK -- -- -- -- 7,000 7,000
EQUITY:
Common Equity and Paid In Capital -- -- 91,715 (11,256) 1,191,283 1,467,523
Officer Loans -- -- -- -- (25,926) (25,926)
Treasury Stock -- -- -- -- (1,404) (1,404)
Unrealized Appreciation -- -- -- -- 4,250 4,250
Retained Earnings (36,367) -- -- -- 4,863 4,863
Total Equity (36,367) -- 91,715 (11,256) 1,173,066 1,449,306
Total Debt & Equity ($110,857) $118,930 $91,715 -- $ 2,420,418 $ 2,835,760
</TABLE>
<PAGE> 46
Ryan, Beck & Co.
INCOME STATEMENT
($ in 000's)
<TABLE>
<CAPTION>
2001 ADJUSTMENTS
--------------------------------------------------
MOVE LOWER
ALLC CONSOLIDATED ACE OFF ACE BLC ALLC
2001E 2002E BALANCE RECAPIT- ACQUI- EQUITY
STATUS QUO STATUS QUO SHEET ALIZATION SITION ISSUANCE
---------- ---------- ----- --------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Investment Income:
Interest Income $246,495 $323,513 ($8,360) $21,725 --
Premium Income 25,938 34,092 (21,938) -- --
Dividends 3,915 4,450 -- 2,758 --
Other Income 211 200 (11) -- --
Total Investment Income 276,558 362,255 (30,308) 24,483 --
Other Income:
Advisory Fees 2,500 2,500 -- -- 7,000
Syndication Fees 1,000 2,000 -- -- --
Other Income 5,907 7,618 -- -- --
Officer Note Income 1,607 1,607 -- -- --
Total Income 287,572 375,980 (30,308) 24,483 7,000
Expenses:
Interest Expense 77,759 100,390 -- 5,931 --
Employee Costs 35,214 41,104 (7,068) -- --
Other Operating 16,851 19,557 (2,594) -- --
Cut-Off Award 202 202 -- -- --
Formula Award -- -- -- -- --
Total Expenses 130,025 161,253 (9,661) 5,931 --
Net Investment Income 157,547 214,727 (20,647) 18,552 7,000
Realized/Unrealized Gains/Losses:
Net Investment Gains 29,000 36,000 -- -- --
Net Unrealized Gains/Losses 5,000 10,000 -- -- --
Total Realized/Unrealized Gains/Losses 34,000 46,000 -- -- --
Income Tax Expense -- -- -- -- --
NET INCOME $191,547 $260,727 ($20,647) $18,552 $7,000
Basic Earnings per share $2.24 $2.72
Diluted Earnings per share $2.24 $2.70
Weighted Avg. Shares Outstanding 85,447 95,757 4,140 (2,018)
Diluted Weighted Avg. Shares Outstanding 85,550 96,499
</TABLE>
<TABLE>
<CAPTION>
2002 ADJUSTMENTS
-------------------------------------------------
MOVE LOWER
ACE OFF ACE BLC ALLC ALLC CONSOLIDATED
BALANCE RECAPIT- ACQUI- EQUITY 2001E 2002E
SHEET ALIZATION SITION ISSUANCE PRO FORMA PRO FORMA
----- ---------- ------ -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Investment Income:
Interest Income ($ 9,988) $28,850 -- $259,860 $342,375
Premium Income (33,092) -- -- 4,000 1,000
Dividends -- 3,034 -- 6,673 7,484
Other Income -- -- -- 200 200
Total Investment Income (43,080) 31,884 -- 270,733 351,058
Other Income:
Advisory Fees -- -- 9,500 9,500 12,000
Syndication Fees -- -- -- 1,000 2,000
Other Income -- -- -- 5,907 7,618
Officer Note Income -- -- -- 1,607 1,607
Total Income (43,080) 31,884 9,500 288,747 374,284
Expenses:
Interest Expense -- 4,769 -- 83,689 105,159
Employee Costs (9,129) -- -- 28,146 31,975
Other Operating (2,776) -- -- 14,257 16,781
Cut-Off Award -- -- -- 202 202
Formula Award -- -- -- -- --
Total Expenses (11,905) 4,769 -- 126,295 154,117
Net Investment Income (31,175) 27,115 9,500 162,453 220,167
Realized/Unrealized Gains/Losses:
Net Investment Gains -- -- -- 29,000 36,000
Net Unrealized Gains/Losses -- -- -- 5,000 10,000
Total Realized/Unrealized Gains/Losses -- -- -- 34,000 46,000
Income Tax Expense -- -- -- -- --
NET INCOME ($31,175) $27,115 $9,500 $196,453 $266,167
Basic Earnings per share $2.24 $2.72
Diluted Earnings per share $2.24 $2.70
Weighted Avg. Shares Outstanding 4,140 (1,960) 87,568 97,937
Diluted Weighted Avg. Shares Outstanding 87,671 98,679
</TABLE>
<PAGE> 47
Ryan, Beck & Co.
================================================================================
[BLC LOGO]
--------------------------------------------------------------------------------
BLC FINANCIAL SERVICES, INC.
BREAK EVEN ANALYSIS
================================================================================
[RYAN, BECK LOGO]
<PAGE> 48
Ryan, Beck & Co.
BREAK-EVEN ANALYSIS
ANSWERS THE QUESTION:
"At what rate would the Company's earnings have to grow such that the future
stock price would equal today's acquisition price?"
METHODOLOGY:
Determines the earnings growth rate necessary to meet a certain price target
while maintaining the Company's current price / earnings ratio.
INPUT ASSUMPTIONS:
- Projected Earnings
- Annual Growth in Assets
- Price / Earnings Multiple
- Discount Rate
- Dividend Payout Ratio
<PAGE> 49
Ryan, Beck & Co.
BLC FINANCIAL SERVICES, INC.
ANALYSIS OF BREAKEVEN RETURNS
REQUIRED FIVE YEAR COMPOUND ANNUAL GROWTH RATE OVER 2001 ESTIMATED EARNINGS
OFFER VALUE OF $3.50 PER SHARE
65% PREMIUM TO MARKET
285% TANGIBLE BOOK VALUE
13.0X 2001E EPS
<TABLE>
<CAPTION>
TERMINAL YEAR DISCOUNT RATE
MULTIPLE OF ---------------------------------------------
EARNINGS 14.0% 15.0% 16.0% 17.0%
<S> <C> <C> <C> <C> <C>
10.0x 25.5% 26.9% 28.7% 30.0%
MARKET
MULTIPLES
12.0x 20.0% 21.6% 22.6% 24.1%
14.0x 15.5% 16.7% 18.4% 19.5%
ACQUISITION
MULTIPLES
</TABLE>
16.0x 11.7% 13.0% 14.2% 15.5%
<PAGE> 50
BLC FINANCIAL SERVICES, INC. Ryan, Beck & Co.
ANALYSIS OF BREAKEVEN RETURNS
ASSUMPTIONS:
<TABLE>
<CAPTION>
DIVIDEND PAYOUT RATIO:
<S> <C> <C> <C> <C> <C>
2001E EPS: $0.27[1] YEAR 1 0.00% YEAR 6 0.00%
DISCOUNT RATE: 15% YEAR 2 0.00% YEAR 7 0.00%
ASSET GROWTH: 20%[2] YEAR 3 0.00% YEAR 8 0.00%
P/E: 11.0x YEAR 4 0.00% YEAR 9 0.00%
STOCK PRICE: $2.13 10/30/00 YEAR 5 0.00% YEAR 10 0.00%
</TABLE>
OFFER VALUE = $3.25
53% PREMIUM TO MARKET
264% TANGIBLE BOOK VALUE(3)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
REQUIRED
YEAR MARKET NECESSARY
ENDED SHARES TOTAL VALUE/ IMPLIED IMPLIED EARNINGS
06/30 OWNED[4] ASSETS[2,3] SHARE[5] LTM EPS[6] ROA GROWTH[7]
----- -------- ----------- -------- ---------- ------- ---------
2001 1.00 85.9 2.13 $0.27 6.77% N/A
2002 1.00 103.1 4.30 0.43 8.98% 59.26%
2003 1.00 123.7 4.94 0.49 8.53% 34.72%
2004 1.00 148.4 5.68 0.57 8.27% 28.28%
2005 1.00 178.1 6.54 0.65 7.86% 24.56%
2006 1.00 213.7 7.52 0.75 7.56% 22.67%
2007 1.00 256.5 8.65 0.86 7.22% 21.30%
2008 1.00 307.8 9.94 0.99 6.93% 20.40%
2009 1.00 369.4 11.43 1.14 6.65% 19.73%
2010 1.00 443.2 13.15 1.31 6.37% 19.18%
2011 1.00 531.9 15.12 1.51 6.11% 18.78%
2012 1.00 638.2 17.39 1.74 5.87% 18.46%
</TABLE>
OFFER VALUE = $3.5
65% PREMIUM TO MARKET
285% TANGIBLE BOOK VALUE(3)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
REQUIRED
YEAR MARKET NECESSARY
ENDED SHARES TOTAL VALUE/ IMPLIED IMPLIED EARNINGS
06/30 OWNED[4] ASSETS[2,3] SHARE[5] LTM EPS[6] ROA GROWTH[7]
----- -------- ----------- -------- ---------- ------- ---------
2001 1.00 85.9 2.13 $0.27 6.77% N/A
2002 1.00 103.1 4.63 0.46 9.61% 70.37%
2003 1.00 123.7 5.32 0.53 9.23% 40.11%
2004 1.00 148.4 6.12 0.61 8.85% 31.22%
2005 1.00 178.1 7.04 0.70 8.46% 26.89%
2006 1.00 213.7 8.10 0.81 8.16% 24.57%
2007 1.00 256.5 9.31 0.93 7.81% 22.89%
2008 1.00 307.8 10.71 1.07 7.49% 21.74%
2009 1.00 369.4 12.31 1.23 7.17% 20.87%
2010 1.00 443.2 14.16 1.42 6.90% 20.25%
2011 1.00 531.9 16.28 1.63 6.60% 19.70%
2012 1.00 638.2 18.73 1.87 6.31% 19.24%
</TABLE>
OFFER VALUE = $3.75
76% PREMIUM TO MARKET
305% TANGIBLE BOOK VALUE(3)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
REQUIRED
YEAR MARKET NECESSARY
ENDED SHARES TOTAL VALUE/ IMPLIED IMPLIED EARNINGS
06/30 OWNED[4] ASSETS[2,3] SHARE[5] LTM EPS[6] ROA GROWTH[7]
----- -------- ----------- -------- ---------- ------- ---------
2001 1.00 85.9 2.13 $0.27 6.77% N/A
2002 1.00 103.1 4.96 0.50 10.45% 85.19%
2003 1.00 123.7 5.70 0.57 9.92% 45.30%
2004 1.00 148.4 6.56 0.66 9.58% 34.71%
2005 1.00 178.1 7.54 0.75 9.07% 29.10%
2006 1.00 213.7 8.67 0.87 8.77% 26.37%
2007 1.00 256.5 9.98 1.00 8.40% 24.39%
2008 1.00 307.8 11.47 1.15 8.05% 23.00%
2009 1.00 369.4 13.19 1.32 7.70% 21.94%
2010 1.00 443.2 15.17 1.52 7.39% 21.17%
2011 1.00 531.9 17.45 1.74 7.05% 20.48%
2012 1.00 638.2 20.06 2.01 6.78% 20.02%
</TABLE>
Notes:
-------------------
(1) 2001 EPS reflects an earnings estimate of $0.27 per share as provided by the
Company.
(2) Assets assumed to grow at 20% per year.
(3) Initially as reported in the Company's financial statements dated June 30,
2000.
(4) Assumes dividends are reinvested in common shares at the end of the
previous period market price.
(5) Equates to required market value divided by shares owned. Required market
value equates to initial offer value compounded annually at the discount
rate.
(6) Equates to required market value divided by P/E.
(7) Compound annual growth rate of earnings necessary to provide the same
increase in value to shareholders as the initial offer value, assuming a
15.0% discount rate, a 10.0x P/E ratio and the specified dividend payout
ratio.
<PAGE> 51
Ryan, Beck & Co.
<TABLE>
<S> <C>
Inputs for Calculations:
Company Name BLC Financial Services, Inc.
Current Market Price 2.13
Offer Price Case 1 3.25
Case 2 3.50
Case 3 3.75
Shares O/S 21.535514 MM
Assets 86 MM
Tang. Book Value per share 1.23
Inputs For Assumptions Box:
Dividend Payout Ratio - Year 1 0.00%
Dividend Payout Ratio - Year 2 0.00%
Dividend Payout Ratio - Year 3 0.00%
Dividend Payout Ratio - Year 4 0.00%
Dividend Payout Ratio - Years 5-11 0.00%
EPS Estimate $0.27
Year for Earnings Estimate 2001
Discount Rate 15%
Asset Growth Rate 20%
Price/Earnings Ratio 10.0x
Inputs For Footnotes
Financial Statement Date 06/30/2000
Fiscal Year End 06/30
Earnings Estimate C
(Z=Zachs, R=RBCO, C=Company, I=I/B/E/S)
Inputs For Summary
Specify Market Multiples:
10.0 x
12.0 x
Specify Acquisition Multiples:
14.0 x
16.0 x
Specify Discount Rates:
14.0%
15.0%
16.0%
17.0%
</TABLE>
<PAGE> 52
Ryan, Beck & Co.
================================================================================
[BLC LOGO]
--------------------------------------------------------------------------------
ADVANTAGE OF THE TRANSACTION TO BLC
STOCKHOLDERS
================================================================================
[RYAN, BECK LOGO]
<PAGE> 53
Ryan, Beck & Co.
================================================================================
ADVANTAGES OF THE TRANSACTION TO BLC SHAREHOLDERS
--------------------------------------------------------------------------------
- The price of approximately $3.50 per share represents a 65% premium to the
market price of $2.125 as of October 27, 2000. The price also represents a
88% premium to the 30-day trailing average price of $1.86. During 2000
BLC Financial Services, Inc. stock has traded between $1.50 - $3.13. The
price represents a 2.85x BLC's book value per share of $1.23 as of June
30, 2000.
- The transaction is structured as a tax-free exchange.
- BLC shareholders will receive a stock that has historically paid a high
dividend (vs. no dividends for BLC common stock). As a RIC, Allied is
required to pay out approximately 90% of its net income to shareholders.
Dividends paid in 1999 totaled $1.60 and dividends paid during the first
three quarters of 2000 totaled $1.36. The most recent $0.46 dividend
declared in the third quarter represents an annualized dividend of $1.84.
- Shareholders will receive a stock with greater liquidity. Allied has
approximately 80 million shares outstanding vs. 21 million shares for BLC.
Average daily trading volumes are 434,330 shares ($8,108,941) for Allied
and 9,833 shares ($18,309) for BLC.
================================================================================
[RYAN, BECK LOGO]
<PAGE> 54
Ryan, Beck & Co.
================================================================================
ADVANTAGES OF THE TRANSACTION TO BLC SHAREHOLDERS
--------------------------------------------------------------------------------
- BLC common stockholders will receive 0.180 shares of Allied for each BLC
share they own. BLC's 21,535,514 common shares as of September 11, 2000
would be exchanged for approximately 3.9 million shares of Allied, or 4.8%
of the existing 80.75 million shares outstanding prior to the transaction.
Additional shares would be issued to BLC warrant, option and debenture
holders who converted.
================================================================================
[RYAN, BECK LOGO]
<PAGE> 55
Ryan, Beck & Co.
================================================================================
[BLC LOGO]
--------------------------------------------------------------------------------
RELATIONSHIP WITH RYAN, BECK & CO., INC.
================================================================================
[RYAN, BECK LOGO]
<PAGE> 56
Ryan, Beck & Co.
================================================================================
HISTORY OF RELATIONSHIP WITH BLC, ALLIED AND FUTURONICS
--------------------------------------------------------------------------------
- Ryan, Beck was retained on February 16, 2000 by BLC Financial Services,
Inc. to pursue a private placement of debt securities. Due to market
conditions, a transaction was not completed within the engagement period
and Ryan, Beck did not receive any compensation. Ryan, Beck's research
department does not provide published investment analysis on BLC Financial
Services, Inc.
- Ryan, Beck has not had a prior investment banking relationship with Allied
Capital Corporation. Ryan, Beck's research department does not provide
published investment analysis on Allied Capital Corporation. Ryan, Beck is
not a market maker in Allied Capital Corporation's Common Stock.
- Futuronics Corporation, a holder of 12% of BLC's common stock, has
retained Ryan, Beck as its financial advisor. Ryan, Beck has not had a
prior investment banking relationship with Futuronics.
================================================================================
[RYAN, BECK LOGO]
