Olympia Financial Group Inc. Annual Report 2018

FY2018 Annual Report · Olympia Financial Group Inc.

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financial group inc.

2 01 8 A N NUAL REPORT

financial group inc.

financial highlightS

Results from continuing operations for
the year ended 2018, when compared to
continuing operations for the year ended
December 31, 2017:

• Earnings before income tax

increased 40% to $13.59 million
from $9.73 million.

• Total revenue increased 20% to

$50.03 million from $41.54 million
due to an increase in both interest
revenue and trust income, and service
revenue earned.

• Service revenue increased 17% to
$38.60 million from $32.97 million
mainly due to increases in the Foreign
Exchange division and the Registered
Plans division. The increase in the
Foreign Exchange division is due to
an increase in spot trade volume and
transaction sizes, while the increase
in the Registered Plans division is
mainly due to one time fees charged in
connection with the restructuring of an
exempt market issuer.

• Olympia’s interest revenue and trust

income is subject to fluctuations
depending on account balances and
changes in the Canadian prime rate.
Interest revenue and trust income

increased 33% to $11.43 million from
$8.58 million as a result of increases in
the Canadian prime rate.

• Direct and administrative expenses

(excluding depreciation and
amortization) increased 10% to
$34.26 million from $31.02 million
mainly due to an increase in salaries
and bonuses, computer maintenance,
enhanced cyber security measures
and startup costs for the Corporate and
Shareholder Services division.

• Other (losses)/gains, net, increased
more than 100% to ($1.43) million
from $0.02 million, mainly due to
Olympia Trust’s FX division recording a
$1.38 million unrealized forward foreign
exchange contract loss resulting from
a reduction in the number of forward
exchange contracts. This compares to a
$0.03 million forward foreign exchange
contract gain in the prior year.

• On June 5, 2018, Olympia announced
the sale of substantially all the assets
of its wholly owned subsidiary, Olympia
ATM Inc. Olympia ATM Inc. entered
into an agreement with Tarman ATM
Inc., a corporation owned and controlled
by Olympia’s president and Chief
Executive Officer. The sale closed on
August 3, 2018, with an effective date
of July 1, 2018.

OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT | Table of contents

PRESIDENT’S REPORT

MANAGEMENT’S DISCUSSION
AND ANALYSIS

MANAGEMENT’S RESPONSIBILITY
FOR CONSOLIDATED
FINANCIAL STATEMENTS

INDEPENDENT AUDITOR’S REPORT

CONSOLIDATED
FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS

CORPORATE INFORMATION

109

| OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORTpresident’s report

It was a pleasure to write last year’s Annual Report
and let shareholders know that our pre-tax earnings
increased 20% when compared to 2016. It gives me
even greater pleasure to inform shareholders that
our pre-tax earnings for the past year increased an
additional 40% when compared to 2017. Shareholders
were also rewarded with a 22% increase in share price
during the calendar year along with a 18% increase
in the monthly dividend to 20 cents from 17 cents
(effective June 30, 2018).

Olympia has significantly benefited from higher
interest rates but has also seen significant gains in our
established business units. Olympia did exit the ATM
business mid-year, which helped second-half earnings
by eliminating related losses.

RICK SKAUGE
Chief Executive Officer & President

In December, Olympia re-entered the corporate and shareholder services business; a business which
longer-term shareholders may recall we previously sold on December 13, 2013 for $43 million.

The one common thread that has historically bound our divisions together is that we all operate under
the mantra “with us, it’s personal”. We now seem to have adopted a second common thread in that all
our divisions are morphing into Fintech operations. Through independently built and operated “apps”
and web portals, Olympia customers can now make a health claim, check their RRSP or TFSA account
information or buy 83 foreign currencies on their phone or personal computer.

2018 saw Olympia’s Registered Plans division undertake many behind the scenes projects with the
goal to improve the end user experience and create operational efficiencies. Highlights of these
changes included the digitization of the division’s records management system which ultimately saw
the division vacate approximately 4,000 SF of office space needed for physical storage. To modernize
and improve the sharing of information for both end users with accounts and advisors that refer
clients, the division created the first version of their mobile “app”. Available now on both Apple and
Android operating systems, this app will be strategically marketed to clients throughout 2019. While
Version 1 of the app focused on providing clients real time account information, RSP is developing
additional versions in 2019 which will ultimately allow clients to transact online, further reducing
administration done by staff and improving the customer experience for those who prefer to interact
digitally.

Olympia’s Foreign Exchange Division rebounded from a challenging 2017 to record excellent
profitability for 2018. During the year the division released its PayFX Cash Delivery System, which
allows Canadians to purchase 83 currencies online and pay via e-transfer. The system is flexible and
allows customers to have physical foreign currency delivered to their home or office the day after
purchase. The division also successfully utilized blockchain technology this past year, empowering
Olympia to send payments worldwide in minutes instead of days. Olympia’s FXATM finally became
profitable as they added a key partner in the travel industry to their network.

OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT | Olympia Benefits Inc. is our oldest division. It had a remarkable 2018 with net income increasing by
30% and for the first time exceeding $2,000,000 in profits. During 2018 the division added over
7,000 new health plan members. Over 50% of claims are now made online and the division is about to
release a new product called Telemedicine (doctor in your pocket) to assist our customers in getting
important medical information when they need it most. The division is a good example of Olympia
going digital as most of the division’s sales, claims and administration are online events. Look for more
positive growth in this division this coming year.

Exempt Edge Inc., Olympia’s second newest division, gained significant traction in the marketplace
in 2018. One of the greatest challenges faced by the division is the onboarding of the many clients
wishing to license the division’s various platforms. With the regulatory landscape continuing to evolve,
including the regulatory requirement of many Mortgage Investment Entities in British Columbia
needing to become licensed as Exempt Market Dealers in 2019, demand for the division’s product line
should continue to grow.

Exempt Edge Inc. spent significant resources in 2018 developing and testing a state-of-the-art
data exchange system for the exempt market. 2019 will see it fully brought to market which should
revolutionize the way in which many exempt market stakeholders interact and accordingly bring
further market participants into the Exempt Edge ecosystem and line of products.

Olympia ATM Inc. commenced operations in 2015 and lost money since inception. The Board of
Directors were very supportive of management, but ultimately had to call an end to this money
losing business. The President agreed to purchase the business at fair market value and continue its
operations privately.

When times are tough, the tough get going. That could be said about Olympia Charitable Foundation.
2018 saw the Charity raise $225,000 in the employee and employer matched contributions campaign
and our Olympia Charitable Golf Tournament raised an additional $64,000. We are proud of all our
employees, clients, and service providers for their generosity in support of our Charity.

Olympia Financial Group Inc. has significant growth possibilities in all its divisions. We will continue
to provide custom services to the Canadian Exempt Market and we will continue to develop software
that will enhance our customers experience in all our divisions. Shareholders have lots of reasons to
be optimistic about Olympia’s future.

| OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORTmanagement’s discussion and analysis

This Management’s Discussion and Analysis (“MD&A”) is provided to enable a reader to assess
the financial position and results of operations of Olympia Financial Group Inc. (“Olympia”) for
the year ended December 31, 2018.

This MD&A should be read in conjunction with Olympia’s audited consolidated financial
statements for the year ended December 31, 2018 (“consolidated financial statements”), as well
as the MD&A found in Olympia’s 2017 Annual Report, together with the audited consolidated
financial statements and accompanying notes found therein. Olympia’s audited consolidated
financial statements have been prepared in accordance with International Financial Reporting
Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

Amounts are presented in Canadian dollars, Olympia’s functional currency. All references to
$ are to Canadian dollars and references to US$ are to United States dollars.

This report, and the information provided herein, is dated as at February 28, 2019. Additional
information about Olympia, including quarterly and annual reports, is available on Olympia’s
website at www.olympiafinancial.com and on SEDAR at www.sedar.com.

Cautionary note regarding forward-looking statements

Certain statements contained in this MD&A may constitute forward-looking statements. These
statements relate to future events or Olympia’s future performance. All statements, other than
statements of historical fact, may be forward-looking statements. Forward-looking statements
are often, but not always, identified by the use of words such as “seek,” “anticipate,” “plan,”
“continue,” “estimate,” “expect,” “may,” “will,” “project,” “predict,” “propose,” “potential,”
“targeting,” “intend,” “could,” “might,” “should,” “believe” and similar expressions. These
statements involve known and unknown risks, uncertainties and other factors that may cause
actual results or events to differ materially from those anticipated in such forward-looking
statements. Olympia believes that the expectations reflected in those forward-looking
statements are reasonable, but no assurance can be given that these expectations will prove to
be correct. Any forward-looking statements included in this MD&A should not be unduly relied
upon by investors, as actual results may vary. These statements speak only as of the date of this
MD&A and are expressly qualified, in their entirety, by this cautionary statement.

With respect to forward-looking statements contained herein, Olympia has made assumptions
regarding, among other things:

• general business and economic conditions in Canada;

• fluctuations in interest rates and currency values;

• changes in monetary policy;

• changes in economic and political conditions;

• legislative and regulatory developments;

management’s discussion and analysisOLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT | • results from legal proceedings and disputes;

• the level of competition in Olympia’s markets;

• the occurrence of weather related and other natural catastrophes;

• changes in accounting standards and policies;

• the accuracy and completeness of information Olympia receives about customers

and counterparties;

• the ability to attract and retain key personnel;

• changes in tax laws;

• technological developments;

• cyber security risks;

• costs related to operations remaining consistent with historical experiences; and

• management’s ability to anticipate and manage risks associated with these factors.

Olympia’s actual results could differ materially from those anticipated in the forward-looking
statements contained herein as a result of the risk factors set forth herein.

Although Olympia’s management has attempted to identify important factors that could
cause actual results to differ materially from those contained in forward-looking statements,
there may be other factors that cause results to not be as anticipated, estimated or intended.
Forward-looking statements contained herein are made as of the date of this MD&A and
Olympia disclaims any obligation to update any forward-looking statements if circumstances
or management’s beliefs, expectations or opinions should change, whether as a result of new
information, future events or otherwise, unless required by applicable securities laws.

Olympia’s business

Olympia was formed under the Business Corporations Act (Alberta) and is headquartered in
Calgary, Alberta. Olympia is a reporting issuer in British Columbia, Alberta and Ontario and its
common shares are listed on the Toronto Stock Exchange (“TSX”). The majority of Olympia’s
business is conducted through its wholly owned subsidiary Olympia Trust Company (“Olympia
Trust”), a non-deposit taking trust corporation.

Olympia Trust received its letters patent on September 6, 1995, authorizing the formation
of a trust corporation to be registered under the Loan and Trust Corporations Act (Alberta).
Olympia Trust is licensed to conduct trust activities in Alberta, British Columbia, Saskatchewan,
Manitoba, Quebec, Newfoundland and Labrador, Prince Edward Island, New Brunswick and
Nova Scotia. The Registered Plans division, Foreign Exchange division and Corporate and
Shareholder Services division conduct business under Olympia Trust.

| OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORTThe Private Health Services Plan division conducts business under Olympia Benefits Inc. (“OBI”),
a wholly owned subsidiary of Olympia. OBI was incorporated on May 4, 2006, under the Business
Corporations Act (Alberta).

The ATM division conducted business under Olympia ATM Inc. (“ATM” or “Olympia ATM”), a
wholly owned subsidiary of Olympia. ATM was incorporated on November 17, 2014, under the
Business Corporations Act (Alberta). During the year ended December 31, 2018, management
sold substantially all the assets of ATM to Tarman ATM Inc. (“Tarman”), a corporation owned
and controlled by Olympia’s president and CEO. Following the sale of the assets, ATM was
amalgamated with OBI on August 10, 2018.

The Exempt Edge division conducts business under Exempt Edge Inc. (“EEI”). EEI was
incorporated under the Business Corporations Act (Alberta) on November 28, 2016, as a
subsidiary of Olympia. EEI focuses on the provision of information technology services to exempt
market dealers, registrants and issuers.

Olympia holds an 80% controlling interesting in EEI and a third party holds a non-controlling
interest of 20%. The non-controlling interest is presented separately in the consolidated
statements of net earnings and comprehensive income and within equity in the consolidated
balances sheets, but separately from Olympia’s equity.

Summary of financial results

Overview and financial highlights of the year ended December 31, 2018

As a result of the sale of the ATM division, Olympia has presented the ATM division as
“discontinued operations,” with the remaining operations as “continuing operations,” and
the total of discontinued operations and continuing operations as “combined operations.”
Note that, in accordance with the requirements of IFRS 5 Non-current Assets Held for Sale and
Discontinued Operations, income, expenses, other gains/losses and cash flows associated with
the ATM division have been classified as discontinued operations in the consolidated statements
of net earnings and comprehensive income, as well as in the consolidated statements of cash
flows. Unless otherwise indicated, net earnings and comprehensive income, and other financial
information reflect the results of our continuing operations for all years presented.

OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT | Results from continuing operations

• Total net earnings and comprehensive income increased 40% to $9.90 million from

$7.06 million when compared to the year ended December 31, 2017.

• Total revenue increased 20% to $50.03 million from $41.54 million when compared to the year
ended December 31, 2017, due to an increase in both interest revenue and trust income, and
service revenue.

• Service revenue increased 17% to $38.60 million from $32.97 million when compared to the
year ended December 31, 2017, mainly due to increases in the Foreign Exchange division and
the Registered Plans division. The increase in the Foreign Exchange division is due to an
increase in spot trade volume and transaction sizes, while the increase in the Registered
Plans division is mainly due to one time fees charged in connection with the restructuring of an
exempt market issuer.

• Olympia’s interest revenue is subject to fluctuations depending on account balances and
changes in the Canadian prime rate. Interest revenue and trust income increased 33% to
$11.43 million from $8.58 million when compared to the year ended December 31, 2017, due to
increases in the Canadian prime rate. The Canadian prime rate was 3.95% on December 31,
2018, and 3.20% on December 31, 2017.

• Earnings before income tax increased 40% to $13.59 million from $9.73 million when compared

to the year ended December 31, 2017.

• Direct and administrative expenses (excluding depreciation and amortization) increased 10%
to $34.26 million from $31.02 million when compared to the year ended December 31, 2017,
mainly due to an increase in salaries and bonuses, computer maintenance, enhanced cyber
security measures and startup costs in the Corporate and Shareholder Services division.

• Other (losses)/gains, net, increased more than 100% to ($1.43) million from $0.02 million,

mainly due to Olympia Trust’s FX division recording a $1.38 million unrealized forward foreign
exchange contract loss resulting from a reduction in the number of forward exchange contracts.
This compares to a $0.03 million forward foreign exchange contract gain in the prior year.

• Income tax expense is recognized based on the estimated average annual income tax

rate for the full financial year. The rate used as at December 31, 2018, was 27%
(December 31, 2017 – 27%).

• Basic and diluted earnings per share for continuing operations attributable to shareholders of
Olympia increased 40% to $4.14 per share from $2.95 per share when compared to the year
ended December 31, 2017.

Results from discontinued operations

• Net loss and comprehensive loss from discontinued operations decreased 62% to

($0.39) million from ($1.03) million when compared to the year ended December 31, 2017.

| OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORTSummary of quarterly results

The following table sets forth a summary of Olympia’s quarterly results for each of the last
eight quarters. The quarterly results have been derived from financial information prepared in
accordance with IFRS.

($ thousands)

Service revenue

Expenses

Other (losses)/gains, net

QUARTERLY SUMMARY

Dec. 31
2018

Sep. 30
2018

Jun. 30
2018

Mar. 31
2018

Dec. 31
2017

Sep. 30
2017

Jun. 30
2017

Mar. 31
2017

9,738 9,452 10,308 9,099 8,838 7,767 8,278 8,083
1,870
(8,831 ) (8,584 ) (9,268 ) (8,327 ) (8,261 ) (7,558 ) (8,223 ) (7,791 )
(33 )

1,984

(809 )

(225 )

(310 )

(189 )

(122 )

275

Interest revenue and trust income 2,966 2,963 2,874 2,630 2,515 2,206

Earnings before income taxes

3,563 3,022 3,725 3,280 2,867 2,423 2,314 2,129

Earnings from continuing
operations

Earnings/(loss) from
discontinued operations

2,591 2,200 2,725 2,386 2,087

1,707

1,721

1,549

(199 )

(244 )

(289 )

(264 )

(259 )

(214 )

Net earnings

2,621 2,225 2,526 2,142

1,798

1,443

1,462

1,335

Per share attributable to
shareholders of Olympia from
continuing operations - basic
and diluted ($)

Per share attributable to
discontinuing operations - basic
and diluted ($)

1.09 0.92

1.14 0.99 0.88

0.71 0.72 0.64

0.01

0.01 (0.08 ) (0.09 )

(0.11 )

(0.11 ) (0.09 )

Dividends per share ($)

0.60 0.60 0.54

0.51

Quarterly results in 2018

Olympia’s quarterly revenue for 2018 was, on average, 21% higher than Olympia’s quarterly
revenue for 2017. This increase is largely due to an increase in both service revenue and interest
revenue and trust income earned. Service revenue had the largest year over year increases in the
second and third quarter of 2018 when compared to 2017. This was mainly due to an increase
in spot trade volume and transaction size in the Foreign Exchange division and fees charged
by the Registered Plans division in connection with the restructuring of an exempt market
issuer. Quarterly interest earned and trust income increases are attributable to increases in the
Canadian prime rate throughout the year, whereby the prime rate increased from 3.20% as at
December 31, 2017, to 3.95% as at December 31, 2018.

Quarterly direct and administrative expenses (including depreciation and amortization)
increased by an average of 8%, mainly due to an increase in commission and bonus expenses.

OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT |

Fourth quarter results

Service revenue in the fourth quarter was $9.74 million, up from $8.84 million in the fourth
quarter of 2017, mainly due to an increase in spot trade volume and transaction sizes in the
Foreign Exchange division as well as an accounting policy change in the Registered Plans
divisions, whereby administrative revenue from new accounts opened during the year is
recognized on a straight-line basis over the calendar year, rather than immediately. Interest
revenue and trust income was $2.97 million, up from $2.52 million in the fourth quarter of 2017,
due to increased interest rates.

Total revenue in the fourth quarter for the Private Health Services Plan division increased 3%
to $2.21 million from $2.14 million when compared to the fourth quarter of 2017. Total expenses
and depreciation decreased to $1.39 million from $1.54 million when compared to the fourth
quarter of 2017. The decrease is due mainly to a decrease in salaries, computer maintenance and
depreciation arising from the continued digitization of the Private Health Services division.

Total revenue for the Registered Plans division increased 14% to $7.87 million from $6.90 million
when compared to the fourth quarter of 2017. Total expenses and depreciation increased 6% to
$5.06 million from $4.77 million when compared to the fourth quarter of 2017. The increase in
expenses is primarily due to an increase in bonus expense as a result of higher revenue.

The Foreign Exchange division’s total revenue increased by 15% to $2.46 million from
$2.13 million when compared to the fourth quarter of 2017. Expenses, commissions, depreciation
and amortization increased by 3% to $1.78 million from $1.72 million when compared to the
fourth quarter of 2017, due to an increase in commission expense and bonus expense as a result
of higher revenue.

The Exempt Edge division’s total revenue increased by 88% to $0.15 million from $0.08 million
when compared to the fourth quarter of 2017. Total expenses, including depreciation, increased
to $0.30 million from $0.17 million when compared to the fourth quarter of 2017, due to an
increase in computer maintenance as the Exempt Edge division continues development of its
software services.

Objectives for 2019

Management has set the following major objectives for 2019:
• Grow the Corporate and Shareholder Services (“CSS”) division;
• Continue to invest in Olympia’s online presence;
• Introduction of mobile application for PayFX.com platform;
• Continue to grow our Health Spending Account (“HSA”) business;
• Continue to grow the Exempt Edge division; and
• Introduction and further development of mobile application for the Registered Plans

division “App.”

| OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORTGrow the Corporate and Shareholder Services division

In 2019, the Corporate and Shareholder Services division will focus on establishing and growing
its client base for transfer agent and corporate trustee services and will explore complementary
services where opportunities arise. In addition, Corporate and Shareholder Services will be
expanding into Vancouver in the first quarter of 2019.

Continue to invest in Olympia’s online presence

Olympia continues to enhance its online platforms to better serve its customers with
performance and usability improvements. Olympia has devoted specialized resources to
application development for the purpose of enhancing its online presence. Olympia continues to
invest in its cyber security initiatives to ensure the safety and security of client information and
prevention of malicious activity.

Introduction of our mobile application for PayFX.com platform

In 2018, the Foreign Exchange division implemented a new product on PayFX.com that caters
to individual consumers on our platform. This new product allows Canadians to purchase
from more than 83 currencies on PayFX.com and pay through e-transfer. The FX cash is sent
via Purolator for next day delivery to the individual’s home or office. In Q1, 2019, the Foreign
Exchange division will release a new mobile application that will allow users to access all our
foreign exchange products in one convenient app on their phone or tablet.

Grow our Health Spending Account (“HSA”) business

Olympia’s Private Health Services Plan division will continue to expand its leadership in small
business benefits by further developing its innovative suite of digital products. In 2019, the
Private Health Services Plan division will introduce a wellness plan and a telemedicine service.
A mobile application is currently being tested.

Entry into the wellness plan space will satisfy a growing need for small businesses to offer
comprehensive benefits, will improve margins for the group product and improve stickiness.

A strategic partnership with a telemedicine provider will allow the division to offer exclusive
telemedicine service pricing to family business clients. This innovative “doctor in your
pocket” further reinforces the value proposition that healthcare costs can be reduced by
using digital alternatives.

OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT | The first version of the mobile application will allow customers to remotely file health spending
account and wellness claims with Olympia using their smart phone or tablet. It is anticipated
that the application will improve the customer experience, strengthen relationships and
increase visibility.

The family and group HSA products remain the engine of the division. The new initiatives will
augment the core offering and position the division to maintain standing as market leader.

Continue to grow the Exempt Edge division

In 2018, EEI’s rapid growth and corresponding challenges proved that there is significant demand
for software built specifically for the Canadian private capital market. Carrying this growth and
momentum into 2019, Exempt Edge’s two main areas of focus will be the further investment in
its own development team and the launch of its third product, EdgeLink, in early 2019. EdgeLink
is intended to create the first ever digital ecosystem for the Canadian private capital market
and its participants. Exempt Edge will continue to ensure its software is built using industry best
practices, with a view towards long-term sustainability and scalability.

Introduction and Further Development of Registered Plans Division “App”

The Registered Plans division will be deploying and marketing version 1 of its “app” in the
first quarter of 2019 with version 2 being launched towards the end of the second quarter.
Management believes this product will enhance the customer experience for those who prefer
online banking while simultaneously reducing the manual administration required by staff.

Outlook for 2019

Olympia is confident that its current operations will be able to generate sufficient amounts of
cash and cash equivalents in the short and long term to maintain and meet Olympia’s planned
growth and development activities. Olympia is well diversified, with its Registered Plans,
Private Health Services Plan, Foreign Exchange, Exempt Edge, and Corporate and Shareholder
Services divisions.

| OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORTFinancial analysis

CONSOLIDATED BALANCE SHEETS AS AT

($)
ASSETS
Current assets

Cash & cash equivalents
Restricted cash in circulation
Trade & other receivables
Inventory
Prepaid expenses
Derivative financial instruments

Total current assets
Non-current assets

Restricted cash & investments
Equipment & other
Intangible assets
Financial asset at fair value through other
comprehensive income
Promissory note receivable
Derivative financial instruments
Deferred tax assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities

Trade & other payables
Deferred revenue
Other liabilities & charges
Cash in circulation due to bank
Revolving credit facility
Derivative financial instruments
Current tax liability
Total current liabilities
Other liabilities
Derivative financial instruments

Total liabilities
EQUITY

Share capital
Contributed surplus
Retained earnings

Equity attributable to owners of Olympia

Non-controlling interests

Total equity
Total equity & liabilities

December 31, 2018

December 31, 2017

$ 12,834,906
-
2,272,037
49,127
783,370
406,082
16,345,522

707,000
1,239,533
2,508,262

43,714

1,428,539
-
1,243,256
7,170,304
$ 23,515,826

1,341,892
399,820
1,528,078
-
4,207,347
160,480
5,637
7,643,254
791,705
-
$ 8,434,959

$ 7,886,989
86,373
7,214,540
15,187,902
(107,035 )
15,080,867
$ 23,515,826

10,140,523
3,823,110
1,413,359
223,114
732,914
9,236,934
25,569,954

500,000
2,232,396
1,849,693

48,932

-
729,459
1,435,531
6,796,011
$ 32,365,965

1,278,144
313,256
1,648,081
3,823,110
4,812,347
7,796,036
102,212
19,773,186
1,068,776
543,073
$ 21,385,035

7,886,989
86,373
3,048,996
11,022,358
(41,428 )
10,980,930
$ 32,365,965

OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT |

Cash, cash equivalents and restricted cash and investments

Olympia continues to generate cash from its core businesses, except for the Exempt Edge and
Corporate and Shareholder Services divisions. As at December 31, 2018, cash reserves increased
by 27% to $12.83 million (December 31, 2017 - $10.14 million). This increase results mainly from
Olympia’s higher revenues for the year and reduced funding requirements following the sale of
substantially all of ATM's assets in August of 2018.

Restricted cash and investments as at December 31, 2018, of $0.71 million (December 31, 2017
- $0.50 million), comprises of Treasury bonds provided as collateral to a financial institution
securing Olympia Trust’s foreign exchange trading platform. The Treasury bonds have a term
of one year from issuance and earn interest at an average rate of 1.45% (December 31, 2017 –
0.59%). Restricted cash and investments are not readily accessible for use in operations and are
reported separately from cash and cash equivalents on the balance sheet.

Olympia’s cash is placed with a Canadian financial institution where it generates interest. Cash
and cash equivalents comprise 79% of the total current assets of Olympia at December 31, 2018,
compared to 40% at December 31, 2017.

Restricted cash in circulation

With the sale of substantially all the assets of ATM, the restricted cash in circulation was
returned, resulting in a $nil balance at December 31, 2018, (December 31, 2017 - $3.82 million)
and ATM’s cash bailment agreement was terminated.

ATM had entered into a bailment agreement with a financial institution to provide the ATM
division with cash that could only be used in ATMs. ATM paid a fee for using the cash based on
the total amount of cash outstanding at any given time, and paid fees related to the bundling and
preparation of such cash prior to it being loaded in the ATMs. ATM had access and rights to the
cash and bore the risk in the case of loss. ATM had obtained the required insurance coverage in
the event of loss of cash while in circulation.

ATM’s cash bailment agreement was for a term of five years, through to November 2020, and
bore interest at the Canadian prime rate. The available bailment cash limit was $20.00 million.

Trade and other receivables

Trade and other receivables are comprised largely of receivables from the Registered Plans
division’s clients (87%). The increase in trade receivables is mainly due to fees charged in
connection with the restructuring of an exempt market issuer.

Included in trade and other receivables at December 31, 2017, was a $0.12 million demand loan to
Tarman, a company controlled by the president and chief executive officer (“CEO”) of Olympia.
The loan was fully repaid in the first quarter of 2018.

| OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORTOlympia has made allowances for doubtful accounts of $0.57 million, compared to $0.61 million
as at December 31, 2017. Management is committed to a policy of closely monitoring risk
and exposure in this area and is actively pursuing past due accounts through its internal
collection process.

Promissory note receivable

On June 5, 2018, Olympia announced the sale of substantially all the assets of its wholly owned
subsidiary, Olympia ATM. Olympia ATM entered into an agreement with Tarman, a company
owned and controlled by Olympia’s president and CEO. The sale closed on August 3, 2018, with
an effective date of July 1, 2018.

The purchase price paid by Tarman is equal to the aggregate net book value of the assets used by
the ATM division. The assets’ book value at June 5, 2018, was estimated to be $1.40 million. The
purchase price was paid by the delivery of a secured demand promissory note (the “promissory
note”) for $1.40 million by Tarman. The outstanding principal amount of the promissory note
bears interest at prime plus 0.25%. All interest accrued under the promissory note shall be paid
on an annual basis on or before the 30th day of June of each calendar year. Subject to Canadian
Western Bank’s consent (as discussed below), commencing June 30, 2020, Tarman is required
to repay the outstanding principal amount of the promissory note in annual installments of
$140,000 on or before the 30th day of June of each calendar year, with the outstanding balance
of the principal amount to be repaid in full on or before June 30, 2023.

In connection with the financing of the vault cash used by Tarman, Olympia agreed to postpone
to Canadian Western Bank (“CWB”) the receipt of all amounts owed to it by Tarman and is
required to obtain CWB’s consent prior to accepting any amounts from Tarman. Olympia also
agreed to subordinate to CWB all security interests granted to Olympia by Tarman.

Olympia has assessed the expected credit loss as it relates to the promissory note and has
determined it to be nominal.

Refer to Note 5 of the financial statements for assets sold in the transaction.

For the year ended December 31, 2018, interest of $28,539 has accrued.

Forward foreign exchange contracts

Olympia purchases forward exchange contracts when its Foreign Exchange division enters into
a transaction to buy or sell foreign currency in the future. These contracts are both short term
and long term in nature, are in the normal course of business and are used to manage foreign
exchange exposures. Forward foreign exchange contracts are not designated as hedges and they
are recorded using the mark-to-market method of accounting.

OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT | Forward foreign exchange contracts are recorded on Olympia’s balance sheet as either an asset
or liability, with changes in fair value included in net earnings. This accounting treatment resulted
in the disclosure of a forward foreign exchange contract asset of $0.41 million on the balance
sheet at December 31, 2018, compared to $9.97 million as at December 31, 2017, and a forward
foreign exchange contract liability of $0.16 million at December 31, 2018, compared to
$8.34 million as at December 31, 2017. The movement in the derivative financial instruments
asset and liability on the balance sheet is due mainly to the fluctuation of the Canadian and
United States dollar exchange rates, as the vast majority of the Foreign Exchange division’s
trades are in Canadian and United States dollars. The number and size of outstanding forward
foreign exchange contracts also impacts the movement in the derivative financial instrument
assets and liabilities on the balance sheet.

Intangible assets

The capital additions of $1.08 million relates mainly to the continued development and
enhancement of cloud based online systems in the Exempt Edge division and the development of
a mobile application for use by the Registered Plans division.

Current liabilities

The breakdown of Olympia’s trade and other payables consists of trade payables and other
payables (54%), government taxes (23%), amounts due to agents, clients and commission
payable (15%) and amounts due to related parties (8%).

The balance in other liabilities and charges consists of bonus accruals, general accruals,
professional fees payable, straight-line rent, employee benefits payable, onerous contract
obligation and leasehold inducements.

Deferred revenue

At December 31, 2018, deferred revenue totaled $0.40 million compared to $0.31 million as at
December 31, 2017. This consists mainly of the Private Health Services Plan division’s annual fees
for maintaining customer health saving accounts. The unearned portion of these annual fees is
recognized as deferred revenue at the time of billing and revenue is recognized on a straight-line
basis in relation to Olympia rendering these services.

Employee Share Ownership Plan (ESOP)

Olympia has established an Employee Share Ownership Plan (“ESOP”). Under this plan,
Olympia contributes $1 for each $1 contributed by an employee up to a maximum that is based
on the employee’s earnings and years of service. The employee and Olympia’s contributions

| OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORTare used to purchase common shares of Olympia through the facilities of the TSX. Olympia’s
contribution is included as an administrative expense in the statements of net earnings and
comprehensive income and amounted to $0.24 million for the year ended December 31, 2018
(December 31, 2017 - $0.21 million).

Contingencies

Olympia is not a money lender, nor does it guarantee or participate in loans or mortgages of any
type, except in its capacity as trustee of mortgages held on behalf of its clients.

Olympia is a defendant and plaintiff in a number of legal actions that arise in the normal course
of business, the losses or gains from which, if any, are not anticipated to have a material effect on
the consolidated financial statements.

Subsequent event

On February 2, 2019, Olympia was subject to a ransomware cyber attack on its information
technology systems. The malware used to perform the attack encrypted Olympia’s network
services so it could not be used. While operations were affected, Olympia’s dedicated staff
managed to maintain many basic operations throughout, with funding of both RSP investment
transactions and foreign exchange trades. On February 11, 2019, Olympia announced that it
had resumed all business operations and restored nearly all information technology systems
impacted by the ransomware cyber attack.

Investigations into the attack are ongoing, but there is still no evidence that customers’ personal
information was compromised as a result of the attack.

Olympia remains committed to utilizing all available means to protect its business operations
and customers’ personal information. Olympia will continue to invest in its information
technology systems and security to detect and minimize the risk of unauthorized activity in this
age of ever growing highly sophisticated information security threats.

Olympia is in the process of quantifying the financial impact of the ransomware attack and its
impact on the Q1, 2019, condensed consolidated financial statements. Olympia has initiated a
claim with its insurance broker.

Related party transactions

Olympia’s president and CEO owns and controls 29.26% of Olympia’s shares. During the year,
Olympia entered into transactions with the following related parties:

• Companies and businesses controlled by the president and CEO of Olympia;

• Companies and businesses associated with the directors of Olympia;

OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT | • Companies and businesses controlled by management of Olympia;

• Family members of the president, management and directors; and

• Key management and directors.

The following transactions with related parties were measured at the exchange amount, which is
the amount of consideration agreed to by the parties:

Service revenue

Companies and businesses controlled by the president
and CEO

December 31, 2018 December 31, 2017

11,639

20,736

Revenue from associated entities totaled $11,639 for the year ended December 31, 2018
(December 31, 2017 - $20,736). This consisted mainly of revenue from legal services provided by
Olympia’s in-house general counsel to Tarman, a company controlled by the president and CEO.

Interest revenue

Companies and businesses controlled by the president
and CEO

December 31, 2018 December 31, 2017

37,335

5,276

Interest revenue from associated entities totaled $37,335 for the year ended December 31, 2018,
(December 31, 2017 - $5,276) and consists of interest earned from outstanding receivables and
the promissory note receivable.

Administrative expenses

Companies and businesses controlled by the president
and CEO

Olympia Charitable Foundation

December 31, 2018 December 31, 2017

3,594,972

98,432

3,693,404

2,617,874

58,899

2,676,773

Administrative expenses paid to associated entities totaled $3.69 million for the year ended
December 31, 2018 (December 31, 2017 - $2.68 million), and consisted of the following:

• The Olympia Charitable Foundation is funded by Olympia and the employees of

Olympia. Olympia donated a total of $98,432 for the year ended December 31, 2018
(December 31, 2017 - $58,899).

| OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT

ALY BANDALI AND CRAIG SKAUGE
Olympia’s Charitable Foundation donating to Operation Eyesight

• Management fees are paid to Tarman based on a percentage of pre-tax profits of Olympia’s
divisions, except for the Private Health Services Plan division, where the management fee is
based on a percentage of health claims administered. These fees are for services provided as
president and CEO of Olympia. For the year ended December 31, 2018, this amounted to
$3.59 million (December 31, 2017 - $2.62 million).

Trade and other receivables include amounts receivable from related parties

Companies and businesses controlled by the president
and CEO (current)

Companies and businesses controlled by the president
and CEO (non-current)

December 31, 2018 December 31, 2017

57,522

365,028

1,428,539

1,486,061

365,028

Receivables from associated entities totaled $1.49 million for the year ended December 31, 2018
(December 31, 2017 - $365,028), and consisted mainly of the following:

• A receivable in the amount of $nil (December 31, 2017 - $7,388) from Target Capital Inc.,
(“Target”) a company previously controlled by the president and CEO of Olympia, which

OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT |

reflected an arrangement whereby Olympia paid a portion of the remuneration for Target’s
personnel who delivered services to both Olympia and Target.

• A receivable in the amount of $57,488 (December 31, 2017 - $236,503) from Tarman, a

company controlled by Olympia’s president and CEO, reflects the legal services and other
expense recoveries provided to Tarman.

• A receivable in the amount of $34 (December 31, 2017 - $716) from Namena Island, Toy Box
II and Camera 2 Canvas Inc., companies controlled by the president and CEO of Olympia, for
expense recoveries.

• On November 29, 2017, Olympia obtained approval from the Board of Directors for a

$120,000 demand loan to Tarman, a company controlled by the president and CEO of Olympia.
The secured demand loan was fully repaid during the year ended December 31, 2018, including
accrued interest at 4.00% per annum.

• On June 5, 2018, Olympia announced the sale of substantially all the assets of its wholly owned
subsidiary, Olympia ATM. Olympia ATM entered into an agreement with Tarman, a company
owned and controlled by Olympia’s president and CEO. The sale closed on August 3, 2018.

• The purchase price paid by Tarman is equal to the aggregate net book value of the assets

used in the ATM business. The assets’ book value at June 5, 2018, was estimated to be $1.40
million. The purchase price was paid by the delivery of a secured demand promissory note
(the “promissory note”) for $1.40 million by Tarman. The outstanding principal amount of the
promissory note bears interest at prime plus 0.25%. All interest accrued under the promissory
note shall be paid on an annual basis on or before the 30th day of June of each calendar year.
Subject to Canadian Western Bank’s consent, commencing June 30, 2020, Tarman is required
to repay the outstanding principal amount of the promissory note in annual installments of
$140,000 on or before the 30th day of June of each calendar year, with the outstanding balance
of the principal amount to be repaid in full on or before June 30, 2023.

• Olympia has assessed the expected credit loss as it relates to the promissory note and has

determined it to be nominal.

• For the year ended December 31, 2018, interest of $28,539 has been accrued.

Trade and other payables and provision for other liabilities and charges include amounts
payable to related parties

Companies and businesses controlled by the president
and CEO

Directors' fees

December 31, 2018 December 31, 2017

153,502

69,776

223,278

160,298

45,377

205,675

| OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT

• Payables to associated entities totaled $223,278 for the year ended December 31, 2018

(December 31, 2017 - $205,675), and consisted mainly of the following:

• A payable in the amount of $37,070 (December 31, 2017 - $36,473) to Tarman, a company

controlled by the president and CEO of Olympia, for commissions related to the sale of health
plans offered by OBI.

• A payable in the amount of $693 (December 31, 2017 - $1,538) to Target, Tarman and Camera

2 Canvas Inc., companies controlled by the president and CEO of Olympia, for expense
recoveries.

• A management fee payable in the amount of $115,739 (December 31, 2017 - $122,287) to

Tarman, a company controlled by the president and CEO of Olympia, based on a percentage of
pre-tax profits of Olympia’s divisions.

• A payable for directors’ fees of $69,776 (December 31, 2017 - $45,377).

These payables are all current.

Key management compensation

Compensation paid to key management is included in Notes 23 and 33 of the consolidated
financial statements. Key management includes the Board of Directors, and executive teams of
OBI, Olympia Trust, EEI, and Olympia. Olympia uses management or employment contracts as
a means to incent certain executives to maximize the profitability of their applicable business
units and the profitability of Olympia as a whole. The compensation paid or payable to key
management is shown in the following table:

Salaries, bonuses and profit sharing

4,583,106

3,734,006

December 31, 2018 December 31, 2017

Management fees

Directors’ fees

Short-term employee benefits

3,594,972

262,163

233,604

2,617,874

193,526

210,495

8,673,845

6,755,901

The increase in salaries, bonuses and profit sharing and management fees in the current
year is attributable to an increase in earnings, resulting in higher management profit sharing
entitlements to executive management.

OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT |

Shareholders’ equity

As at December 31, 2018, and December 31, 2017, Olympia had 2,406,352 outstanding shares,
with a carrying value of $7.89 million.

Income taxes

Deferred income tax assets are recognized for loss carry-forward and other deductible
temporary differences to the extent that the realization of the related tax benefit is probable
through future taxable profits or other tax planning opportunities. The average corporate rate
used for the year ended December 31, 2018, was 27% (December 31, 2017 - 27%).

| OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORTAnalysis of results by division

Registered Plans Division

SUMMARY OF DIVISIONAL RESULTS FOR THE YEAR ENDED DECEMBER 31

($ thousands)

Service revenue

Interest revenue and trust income

Direct expenses

Administrative expenses

Depreciation and amortization

Other losses, net

Earnings before income tax

Income taxes

Net earnings

Self-Directed Plans
(thousands)

2008 2009 2010

2011 2012

2013 2014

2015

2016 2017

2018

20,004

10,694

(36 )

30,662

(19,951 )

(514 )

(54 )

10,143

(2,695 )

7,448

2017

18,233

8,024

(103 )

26,154

(18,185 )

(516 )

(1 )

7,452

(1,980 )

5,472

Variation

10%

33%

-65%

17%

10%

>100%

36%

The Registered Plans division (“RRSP”)
specializes in the administration of registered
plan accounts, including RRSPs, RRIFs, LIRAs,
LIFs and TFSAs. In contrast to traditional
registered plan account administrators,
Olympia’s focus is on exempt market
securities, including arms-length mortgages.
The holder of a registered plan account with
Olympia will typically hold multiple exempt
market securities or mortgages in their
Olympia registered plan account.

RRSP service revenue increased 10% to
$20.00 million from $18.23 million when
compared to the year ended December 31,
2017. The increase is mainly attributable to
one time fees charged in connection with the
restructuring of an exempt market issuer.

OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT |

ENJOYING OLYMPIA’S CHRISTMAS PARTY IN BANFF

Interest revenue and trust income increased 33% to $10.69 million from $8.02 million when
compared to the year ended December 31, 2017, reflecting increases in the Canadian prime
interest rate to 3.95% as at December 31, 2018, from 3.20% at December 31, 2017.

Direct, administrative, depreciation and amortization expenses increased 9% to $20.50 million
from $18.80 million when compared to the year ended December 31, 2017. This increase is
largely due to an increase in operating expenses, such as salaries and bonuses, computer
maintenance and enhanced cyber security measures.

Earnings before income tax increased 36% to $10.14 million from $7.45 million when compared
to the year ended December 31, 2017.

RRSP net earnings increased 36% to $7.45 million from $5.47 million when compared to the year
ended December 31, 2017.

RRSP is responsible for 60% of Olympia’s total revenue (including interest), a decrease from
63% when compared to the year ended December 31, 2017.

| OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORTPrivate Health Services Plan Division

SUMMARY OF DIVISIONAL RESULTS FOR THE YEAR ENDED DECEMBER 31

($ thousands)

Service revenue

Interest revenue and trust income

Direct expenses

Administrative expenses

Depreciation and amortization

Other losses, net

Earnings before income tax

Income taxes

Net earnings

Private Health Plan Services Claims
(millions of dollars)

2008 2009 2010 2011 2012 2013

2014

2015

2016

2017

2018

7,959

234

(1,801 )

6,392

(3,745 )

(75 )

(2 )

2,570

(658 )

1,912

2017

7,675

158

(1,857 )

5,976

(3,921 )

(121 )

1,934

(499 )

1,435

Variation

48%

-3%

-4%

-38%

100%

33%

32%

33%

The Private Health Services Plan division
(“Health”) markets, sells and administers
health and dental benefits to business owners
through OBI, a wholly owned subsidiary of
Olympia. Health’s primary focus remains on
health and dental plans for small businesses.
Health’s launch of MY Online Claim in late
2012 marked a significant step in digitizing
Health’s services. This digital overhaul
of Health assisted with the launch of the
Health Spending Account (“HSA”) product
in January 2014. The HSA product has
gained momentum and continues to receive
a positive response from the market. The
company has now completed the digitization
of all its products with the recent release of
Group HSA Online. The product’s innovative
interfaces, pricing models and digital nature
provide a competitive advantage for Health
as it continues to expand into the Ontario and
Eastern Canadian markets.

OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT |

AARON TAKEDA AND ERI ELIOPOULOS
Enjoying a night out with Olympia at Zoolights

Health’s service revenue increased by 4% to $7.96 million from $7.68 million when compared to
the year ended December 31, 2017. The increase in the Private Health Services Plan division is
mainly due to an increase in the number of health claims submitted by customers.

Direct, administrative, depreciation and amortization expenses decreased 5% to $5.62 million
from $5.90 million when compared to the year ended December 31, 2017. This decrease results
from a decrease in operating expenses such as salaries and computer maintenance as the Health
division continues its digitization.

Earnings before income tax increased 33% to $2.57 million from $1.93 million when compared to
the year ended December 31, 2017.

Health’s net earnings increased 33% to $1.91 million from $1.44 million when compared to the
year ended December 31, 2017.

Health is responsible for 17% of Olympia’s total revenue (including interest), a decrease from
19% when compared to the year ended December 31, 2017.

| OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORTForeign Exchange Division

SUMMARY OF DIVISIONAL RESULTS FOR THE YEAR ENDED DECEMBER 31

($ thousands)

Service revenue

Interest revenue and trust income

Direct expenses

Administrative expenses

Depreciation and amortization

Other (losses)/gains, net

Earnings before income tax

Income taxes

Net earnings

Foreign Exchange Revenue
(millions of dollars)

2008 2009 2010

2011 2012

2013 2014

2015

2016 2017

2018

9,922

207

(1,109 )

9,020

(6,177 )

(80 )

(1,384 )

1,379

(366 )

1,013

2017

6,840

117

(863 )

6,094

(5,457 )

(133 )

530

(141 )

389

Variation

45%

77%

29%

48%

13%

-40%

>-100%

>100%

The FX division allows corporations and
private clients to buy and sell foreign
currencies at competitive rates. The division
offers its clients same-day transactions as
well as long-term forward contracts. With
offices in Vancouver, Surrey, Calgary and
Winnipeg, the FX division is well situated to
service Western Canada.

FX’s service revenue increased 45% to
$9.92 million compared to $6.84 million
when compared to the year ended December
31, 2017. The increase is due to an increase in
spot trade volume and transaction sizes.

Direct, administrative, depreciation and
amortization expenses increased 14%
to $7.37 million from $6.45 million when
compared to the year ended December 31,
2017. The increase is mainly due to higher
employee commissions and bonuses.

OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT |

PEGGY CHU AND DERICK KACHUIK
Celebrating 10 years of dedicated service

Other (losses)/gains, net, increased more than 100% to ($1.38) million from $0.03 million. This
decrease is due to a reduction in the number of forward exchange contracts.

Earnings before income tax increased more than 100% to $1.38 million from $0.53 million when
compared to the year ended December 31, 2017.

FX’s net earnings increased more than 100% to $1.01 million from $0.39 million when compared
to the year ended December 31, 2017.

FX is responsible for 20% of Olympia’s total revenue (including interest), an increase from 17%
when compared to the year ended December 31, 2017.

| OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORTExempt Edge Division

SUMMARY OF DIVISIONAL RESULTS FOR THE YEAR ENDED DECEMBER 31

($ thousands)

Service revenue

Interest revenue and trust income

Direct expenses

Administrative expenses

Depreciation and amortization

Loss before income tax

Income taxes recovery

Non-controlling interest

2018

518

(166 )

353

(743 )

(75 )

(465 )

136

(66 )

Net loss attributable to shareholders of Olympia

(263 )

2017

210

(142 )

(315 )

(45 )

(292 )

(41 )

(168 )

Variation

>100%

100%

17%

>100%

67%

59%

64%

61%

57%

Exempt Edge focuses on the provision of information technology services to exempt market
dealers, registrants and issuers.

Service revenue for the year ended December 31, 2018, relates mainly to fees for onboarding
clients onto the Exempt Edge platform.

Direct, administrative, depreciation and amortization expenses increased 96% to $0.98 million
from $0.50 million when compared to the year ended December 31, 2017. These relate mainly to
employee salaries, computer maintenance, consulting fees and depreciation and amortization.

Loss before income tax for the year ended December 31, 2018 increased 62% to ($0.47) million
from ($0.29) million compared to the year ended December 31, 2017.

EEI’s net loss attributable to shareholders of Olympia increased 53% to ($0.26) million from
($0.17) million when compared to the year ended December 31, 2017.

OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT |

Corporate and Shareholder Services Division

SUMMARY OF DIVISIONAL RESULTS FOR THE YEAR ENDED DECEMBER 31

($ thousands)

Service revenue

Interest revenue and trust income

Direct expenses

Administrative expenses

Depreciation and amortization

Loss before income tax

Income taxes recovery

Net loss

2018

(257 )

(1 )

(258 )

(189 )

On December 17, 2018, Olympia announced that its wholly owned subsidiary Olympia Trust
had commenced business as a transfer agent and corporate trustee. Olympia’s Corporate
and Shareholder Services (“CSS”) division provides transfer agent and registrar services to
public and private issuers across Canada. CSS is positioned as an alternative to the large trust
companies that are principally focused on eastern Canada. The services provided by CSS include
administering dividend reinvestment and employee share purchase plans, acting as depository
and disbursing agent for corporate reorganizations, assisting with shareholder solicitations and
scrutineering shareholder meetings. The CSS management team comprises highly respected and
experienced individuals with a track record of success in the provision of transfer agency and
corporate trust services.

For the year ended December 31, 2018, administrative costs comprised of startup cost.

| OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT

Corporate Division

SUMMARY OF DIVISIONAL RESULTS FOR THE YEAR ENDED DECEMBER 31

2018

194

296

490

(278 )

(2 )

220

(173 )

2017

276

284

(174 )

(5 )

105

(131 )

(26 )

Variation

>100%

73%

60%

-60%

100%

>100%

32%

81%

($ thousands)

Service revenue

Interest revenue and trust income

Administrative expenses

Depreciation and amortization

Other gains, net

Earnings before income tax

Income taxes expense

Net earnings/(loss)

The Corporate division carries out
support functions in the areas of
accounting, information technology,
legal services, human resources, payroll
and internal audit. Support function
remuneration is allocated, based on usage,
to the various divisions.

Total revenue earned is incidental to
Olympia’s activities. During the year
ended December 31, 2018, the Corporate
division received indemnification
payments from customers involved in the
previously reported Canadian Revenue
Agency dispute.

Administrative, depreciation and
amortization expenses for the year ended
December 31, 2018, have increased 56%
to $0.28 million from $0.18 million when
compared to the year ended December
31, 2017. The increase relates mainly to
corporate costs arising from the sale of the
assets of ATM and ATM’s subsequent amalgamation with OBI.

CRAIG AND KENDRICK SKAUGE
Enjoying an Olympia evening skating at The Calgary Zoo’s Zoolights.

The Corporate division’s net earnings increased 67% to $0.05 million from
($0.03) million when compared to the year ended December 31, 2017.

OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT |

Off-balance sheet arrangements

During the normal course of operations, Olympia administers client assets that are not reported
on its balance sheet. The cash component of the off-balance sheet arrangements represents the
cash and cash equivalents held in trust.

OFF-BALANCE SHEET ARRANGEMENTS UNDER ADMINISTRATION

December 31, 2018

December 31, 2017

Cash & public
securities at
estimated
fair value

Private
securities,
mortgages and
mutual funds
at cost

Cash & public
securities at
estimated
fair value

Private
securities,
mortgages and
mutual funds
at cost

($ thousands)

Registered Plans

$ 530,238

$ 4,139,064

$ 535,348

$ 4,090,555

Private Health Services Plan

Foreign Exchange

11,018

6,281

10,124

18,900

547,537

$ 4,139,064

$ 564,372

$ 4,090,555

RRSP division

At December 31, 2018, RRSP administered self-directed registered plans consisting of private
company securities and mortgages with a cost value of $4.14 billion (December 31, 2017 –
$4.09 billion) plus cash, public securities, term deposits and outstanding cheques with an
estimated fair value of $530.24 million (December 31, 2017 – $535.35 million). These assets are
the property of the account holders and Olympia Trust does not maintain effective control over
the assets. Therefore, the assets are not reflected in the consolidated financial statements.

Olympia earned trust income from funds held in trust of $10.28 million for the year ended
December 31, 2018 (December 31, 2017 - $7.81 million).

Health division

At December 31, 2018, Health held funds in trust of $11.02 million (December 31, 2017 - $10.12
million) on behalf of its self-insured private health clients. These assets are the property of the
plan holders and OBI does not maintain effective control over the assets. Therefore, the assets
are not reflected in the consolidated financial statements.

| OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT

FX division

At December 31, 2018, FX held funds in trust of $1.22 million (December 31, 2017 – $5.31 million)
for clients who have paid margin requirements on forward foreign exchange contracts and
$5.06 million (December 31, 2017 - $13.59 million) of outstanding payments. These assets are
the property of the contract holders and Olympia Trust does not maintain effective control over
the assets. Therefore, the assets are not reflected in the consolidated financial statements.

Management of capital resources

Olympia includes shareholders’ equity, which comprises share capital, contributed surplus and
retained earnings, in the definition of capital. Olympia’s main objectives when managing its
capital structure are to:

• Maintain sufficient cash and cash equivalents over the short and medium term in order to

finance its growth and development, including capital expenditures;

• Maintain investor and creditor confidence to sustain future development of the business;

• Maintain regulatory capital for Olympia Trust as required by the Loan and Trust Corporations
Act (Alberta) ($2 million). Similar regulatory capital is required by legislation in Nova Scotia
($5 million). Regulatory capital is defined as share capital and retained earnings. Olympia
Trust has maintained these minimum capital requirements throughout the year ended
December 31, 2018; and

• Maintain compliance with financial covenants. The financial covenants are reviewed, and

controls are in place to maintain compliance with the covenants. Olympia complied with its
financial covenants for the year ended December 31, 2018.

In managing capital, Olympia estimates its future dividend payments and capital expenditures,
which are compared to planned business growth for purposes of sustainability. The capital
structure of Olympia is managed and adjusted to reflect changes in economic conditions. In
order to maintain or adjust the capital structure, adjustments may be made to the amount of
dividends (if any) to shareholders, in addition to the number of new common shares issued
or common shares repurchased. Management reviews the financial position of Olympia on a
monthly and cumulative basis.

Financing decisions are set based on the timing and extent of expected operating and capital
cash outlays. Factors considered when determining capital and the amount of operational cash
required are weighed against the costs associated with excess cash, its terms and availability,
whether to issue equity and the creation of value for the shareholders. Olympia works towards
managing its capital objectives to the extent possible while facing the challenges of market
conditions and the public’s assessment of Olympia’s risk profile.

Olympia maintains a strong capital base to maintain investor and creditor confidence and to
sustain future development of the business.

OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT | Olympia has committed capital resources to its 2019 Objectives (set out previously) and has
sufficient capital through internally generated cash flows and its credit facility to meet these
spending objectives.

Completing and fulfilling its 2019 Objectives will help Olympia meet its growth and
development activities. No other significant expenditure is required to maintain growth and
development activities.

Olympia’s Foreign Exchange division maintains various foreign currency bank accounts of which
Canadian dollar and United States dollar bank accounts are the most significant. It is Olympia
Trust’s policy to limit the amount of foreign currencies on hand to $1.25 million to reduce
exposure to foreign currency risk.

Olympia’s capital management objectives have remained substantially unchanged over the
years presented.

Liquidity

Liquidity risk is the risk that Olympia will encounter difficulties in meeting its financial
obligations. Olympia manages its liquidity risk by keeping surplus cash with a highly rated
financial institution. This allows Olympia to earn interest on surplus cash while having access to
it within a short time. Olympia seeks to ensure the security and liquidity of these investments.

Olympia has a healthy current ratio (current assets: current liabilities) of 2.14:1 as at
December 31, 2018, compared to 1.29:1 as at December 31, 2017. The ratio indicates that
Olympia should not have difficulty in meeting working capital requirements.

There are no legal or practical restrictions on the ability of subsidiaries to transfer cash
to Olympia.

Cash flows

• Operating activities from continuing operations

The movement in cash flow from operating activities from continuing operations for the year
ended December 31, 2018, is attributable to higher net earnings.

• Investing activities from continuing operations

The movement in cash (used)/from investing activities from continuing operations during the
year ended December 31, 2018, is mainly attributable to capital asset expenditure in the RRSP
and EEI divisions.

| OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT• Financing activities from continuing operations

Cash used in financing activities from continuing operations during the year ended
December 31, 2018, decreased, mainly due to the movement in amounts provided to
Olympia ATM.

Cash

Cash is placed with a Canadian financial institution where it generates interest. Cash and cash
equivalents comprise 79% of the total current assets of Olympia, compared to 40% as at
December 31, 2017.

One factor that affects Olympia’s profitability is effective interest rates. Although Olympia Trust
is a non-deposit taking trust corporation, it does earn trust income on cash held in trust. Cash
held in trust generated trust income of $10.28 million, a 32% increase from $7.81 million when
compared to the year ended December 31, 2017, due to increases in the Canadian prime rate. The
Canadian prime rate was 3.95% on December 31, 2018, and 3.20% on December 31, 2017.

Olympia, through its operational cash flow and line of credit, has sufficient funds to meet its
Objectives for 2019.

Liquidity risks associated with financial instruments are addressed in the notes to the
accompanying consolidated financial statements. Management understands that currency
markets are volatile and therefore subject to higher risk. Olympia’s FX division mitigates currency
risk through its policy of limiting the amount of foreign currencies on hand to $1.25 million.

Commitments

Olympia leases various offices under operating lease agreements. The initial lease terms are
between twelve months and fifty months and the majority of lease agreements are renewable at
market rates when the lease period ends.

Future aggregate minimum lease payments under operating leases are listed in the table below:

2019

2020

2021

2022

December 31, 2018

1,024,581

1,009,885

923,397

147,932

3,105,795

OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT |

Olympia’s Earnings from Operations
Before Income Taxes
(millions of dollars)

Olympia’s Total Revenue
(millions of dollars)

2008 2009 2010

2011 2012

2013 2014

2015

2016 2017

2018

2008 2009 2010

2011 2012

2013 2014

2015

2016 2017

2018

Credit facility

As at December 31, 2018, Olympia had drawn $4.21 million on its credit facility, compared
to $4.81 million as at December 31, 2017. Amounts drawn in the current year have been used
primarily to finance expansion of the EEI division and startup of the CSS division. Amounts drawn
in previous years were used for capital expenditures related to the ATM division and Olympia’s
Normal Course Issuer Bid (“NCIB”). The credit facility provides a maximum of $8.50 million and
bears interest at the Canadian prime rate plus 0.25%. The Canadian prime rate at December
31, 2018, was 3.95% (December 31, 2017 – 3.20%). The credit facility is subject to review at
any time, and in any event will be reviewed annually based on Olympia’s audited consolidated
financial statements for the year ended December 31, 2018.

The credit facility contains a number of affirmative covenants, including maintaining specific
security and maintenance of a specific financial ratio. The financial ratio is an annual cash flow
coverage ratio of not less than 1.50:1. At December 31, 2018, Olympia’s cash flow coverage ratio
under the terms of the credit facility was calculated to be 3.23:1 (December 31, 2017 – 2.13:1).

This calculation is based on Olympia’s twelve month revolving Earnings Before Interest and Tax
after Depreciation and Amortization (“EBITDA”) less cash taxes paid (“revolving EBITDA”).
This revolving EBITDA for the year ended December 31, 2018, has been calculated at $10.79
million (December 31, 2017 - $7.00 million) after adjusting for finance expenses of $0.15 million
(December 31, 2017 - $0.14 million). The coverage required is based on an annualized average
of the scheduled facility principal of $8.50 million and interest payments calculated at 5.99%
(December 31, 2017 – 5.29%) over a period of 36 months. As at December 31, 2018, this was

| OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORTcalculated to be $3.34 million (December 31, 2017 -$3.28 million). Should the covenants and
other limitations be breached, it could cause a default, which might result in a requirement for
immediate repayment of all amounts outstanding.

Security for the credit facility includes a general security agreement providing a first security
charge over all present and after acquired property.

On May 16, 2016, Olympia Trust entered into a contingent credit facility to be used only by the
FX division. The contingent credit facility has a maximum of $5.00 million, which can only be
used to enter into spot, forward or foreign exchange transactions with the issuing financial
institution. The contingent credit facility bears interest at the Canadian prime rate. The
contingent credit facility is currently undrawn.

Credit facility

Available balance at January 1

Drawn

Available at the end of the year

Risk framework

December 31, 2018 December 31, 2017

8,500,000

(4,207,347 )

4,292,653

8,500,000

(4,812,347 )

3,687,653

Olympia is exposed to various types of risks owing to the nature of the commercial activities it
pursues. Management has identified the following risks:

Liquidity risk

Liquidity risk is the risk that Olympia will encounter difficulties in meeting its financial liability
obligations. Olympia manages its liquidity risk by keeping surplus cash with a highly rated
financial institution. This allows Olympia to earn interest on surplus cash while having access to
it within a very short time.

The timing of cash outflows is outlined in the following tables:

At December 31, 2018

Current

31 to 60 days 61 to 90 days Over 90 days

Total

Trade and other payables

$ 1,341,291

Other liabilities and charges

1,259,435

Total

$ 2,600,726 $

601 $ 1,341,892

1,259,435

601 $2,601,327

At December 31, 2017

Current

31 to 60 days 61 to 90 days Over 90 days

Total

Trade and other payables

$ 1,251,312

16,033

10,799

- $ 1,278,144

Other liabilities and charges

1,356,208

Cash in circulation due to bank 3,823,110

1,356,208

3,823,110

Total

$ 6,430,630 $

16,033

10,799

- $ 6,457,462

OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT |

At December 31, 2018, trade and other payables totaled $1.34 million (December 31, 2017 -
$1.28 million). Olympia continues to meet all of the obligations associated with its financial
liabilities. Other liabilities and charges with a cash outflow are identified in Note 20 of the
consolidated financial statements, except for leasehold inducements, straight-line rent and
onerous contract obligation.

The liquidity risk relating to derivative financial instruments payable is outlined in the
table below:

Current

31 to 60 days

61 to 90 days

Over 90 days

Non-current (1-3 years)

December 31, 2018 December 31, 2017

15,210

19,473

16,849

108,948

160,480

501,075

539,665

565,106

6,190,190

7,796,036

543,073

The previous table presents the expected maturity dates of the foreign exchange contracts.

Liquidity risk is associated with Olympia’s credit facility. The credit facility is available to finance
day-to-day operations to a maximum principal amount of $8.50 million (December 31, 2017 -
$8.50 million) and bears interest at the Canadian prime rate plus 0.25%. For the year ended
December 31, 2018, a balance of $4.21 million remains outstanding (December 31, 2017 -
$4.81 million). Olympia has determined the principal and interest to be current.

Security for the credit facility includes a general security agreement providing a first security
interest in all present and after acquired property.

Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will
fluctuate because of changes in market prices, following variations in the parameters underlying
their evaluation, such as interest rates, exchange rates or quoted stock market prices, and is
comprised of foreign currency exchange risk, interest rate risk, management’s assessment and
operational risks.

Foreign currency exchange risk

Olympia is exposed to changes in foreign exchange rates when, and if, revenues or financial
instruments fluctuate because of changing rates. Transactions in the applicable financial market
are executed consistent with established risk management policies. Olympia purchases forward
contracts whenever it enters into a transaction to buy or sell foreign currency in the future. These
contracts are both short term and long term in nature and are in the normal course of business.

| OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT

Management understands that the currency markets are volatile and therefore subject to higher
risk. Olympia Trust applies the following policy to mitigate the currency risk.

• For forward contracts, a margin of 5% is payable on signature of the contract.

• Olympia Trust sets up a corresponding position with its currency supplier.

• If market rates vary by 4% or more, the client is required to adjust their margin to match the

variance by the end of the next trading day.

Olympia’s FX division maintains various foreign currency bank accounts, of which Canadian
dollar and United States dollar bank accounts are the most significant. It is Olympia’s
FX division’s policy to limit the amount of foreign currencies on hand to $1.25 million to reduce
exposure to foreign currency risk.

If the United States dollar to Canadian dollar exchange rate at December 31, 2018, were to
have increased by $0.10, it is estimated that Olympia’s after-tax earnings for the year ended
December 31, 2018, would have decreased by approximately $91,464 (December 31, 2017
-$118,792). A $0.10 decrease in the United States dollar to Canadian dollar exchange rate
would have had an equal but opposite effect. The vast majority of Olympia’s Foreign Exchange
division’s trades are Canadian dollars traded for United States dollars and vice versa, although
it trades in various other currencies. This sensitivity analysis assumes that all other variables
remain constant.

Interest rate risk

Interest rate risk is the risk that the value of a financial instrument will fluctuate because of
changes in market interest rates. Olympia is exposed to interest rate risk as the cash flows
generated from interest bearing instruments fluctuate in response to changes in market interest
rates. The primary exposure is related to cash balances and fixed term deposits.

If the interest rates were to have increased by 1%, it is estimated that Olympia’s after-tax
earnings for the year ended December 31, 2018, would have increased by approximately
$3.76 million (December 31, 2017 - $3.94 million). A 1% decrease in interest rates would have
had an equal but opposite effect. This sensitivity analysis assumes that all other variables
remain constant.

Credit risk

Credit risk is the risk that the counterparty to a financial asset will default, resulting in Olympia
incurring a financial loss. Before transactions begin with a new customer or counterparty,
the counterparty’s creditworthiness is assessed by the FX division. The assessment practice
considers both quantitative and qualitative factors. Olympia constantly monitors the exposure
to any single customer or counterparty along with the financial position of the customer or
counterparty. If it is deemed that a customer or counterparty has become materially weaker,
Olympia will work to reduce the credit exposure and lower the credit limit allocated. Olympia

OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT | is exposed to credit risk on its cash and cash equivalents, restricted cash and investments,
restricted cash in circulation, trade and other receivables and derivative financial instruments
receivable. The maximum exposure to credit risk of Olympia at the end of the year is the
carrying value of cash and cash equivalents, restricted cash and investments, restricted cash in
circulation, trade and other receivables and derivative financial instruments receivable.

• Cash and cash equivalents

Olympia mitigates its exposure to credit risk by maintaining its bank accounts with a highly rated
financial institution.

• Restricted cash and investments and restricted cash in circulation

Olympia limits its counterparty credit risk on these assets by dealing with reputable
counterparties and assessing their credit ratings utilizing the services of an independent ratings
agency. The Treasury bonds are “AAA” rated.

• Trade and other receivables

Olympia has policies and procedures in place to govern the credit risk it will assume. Trade
receivables over 90 days are considered past due. As of December 31, 2018, net trade
receivables of $2.04 million (December 31, 2017 - $0.62 million) were past due but deemed not
impaired. The increase in trade receivables is mainly due to one time fees charged in connection
with the restructuring of an exempt market issuer.

Included in trade and other receivables at December 31, 2017 was a $0.12 million demand loan
to Tarman, a company controlled by the president and CEO of Olympia, which was fully repaid
during the year, with interest accruing at 4% per annum.

Olympia has made allowances for doubtful accounts of $0.57 million, compared to $0.61 million
as at December 31, 2017. The allowance is based on Olympia’s provision matrix.

The balance relates to a number of independent clients which Olympia is actively pursuing
through its internal collection process.

The aging of trade and other receivables is as follows:

Current

31 to 60 days

61 to 90 days

Over 90 days

Allowance for doubtful accounts

December 31, 2018 December 31, 2017

196,911

12,657

24,234

2,609,598

(571,363 )

753,939

15,579

28,407

1,229,256

(613,822 )

2,272,037

1,413,359

The allowance for doubtful accounts is based on an account portfolio analysis.

| OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT

Movements on Olympia’s provision for impairment of trade receivables are as follows:

At January 1

Increase in provision

Receivables written off

Allowance for doubtful accounts

December 31, 2018 December 31, 2017

613,822

269,437

(311,896 )

244,154

616,733

(247,065 )

571,363

613,822

The provision for impaired receivables has been included in administrative expenses in the
consolidated statements of net earnings and comprehensive income. Amounts charged to the
allowance account are generally written off when there is no expectation of recovering
additional cash.

• Derivative financial instruments receivable

The expected maturity relating to derivative financial instruments receivable and foreign
exchange contracts is outlined in the table below:

Current

31 to 60 days

61 to 90 days

Over 90 days

Non-current (1-3 years)

Capital risk management

December 31, 2018 December 31, 2017

17,926

30,960

45,029

312,167

406,082

572,398

648,240

636,671

7,379,625

9,236,934

729,459

Olympia’s objectives when managing capital are to safeguard Olympia’s ability to continue
as a going concern in order to provide returns and benefits to shareholders and to maintain
an optimal capital structure to reduce the cost of capital and to meet regulatory capital
requirements. In order to maintain or adjust the capital structure, Olympia may adjust the
amount of dividends paid to shareholders, return capital to shareholders, issue new shares,
repurchase shares, sell assets or make further use of its credit facility. Refer to Note 14 in the
accompanying consolidated financial statements for a detailed discussion on the revolving
credit facility.

Olympia includes shareholders’ equity (December 31, 2018 - $15.19 million: December 31, 2017
-$11.02 million) in the definition of capital. Shareholders’ equity comprises share capital,
contributed surplus and retained earnings.

OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT |

Olympia’s main objectives when managing its capital structure are to:

• Maintain sufficient cash and cash equivalents over the short and medium term in order to

finance its growth and development, including capital expenditures;

• Maintain investor and creditor confidence to sustain future development of the business.
Olympia does not use financial ratios to manage its capital structure. Olympia’s objective
when managing capital is to maintain adequate financial flexibility to preserve its ability
to meet financial obligations. In managing capital, Olympia estimates its future dividend
payments and capital expenditures, which is compared to planned business growth for
purposes of sustainability;

• Maintain regulatory capital for Olympia Trust as required by the Loan and Trust Corporations
Act (Alberta) ($2.00 million). Similar regulatory capital is required by legislation in Nova
Scotia ($5.00 million). Regulatory capital is defined as share capital and retained earnings.
Olympia Trust has maintained these minimum capital requirements throughout the year ended
December 31, 2018; and

• Maintain compliance with financial covenants. The financial covenants are reviewed, and
controls are in place to maintain compliance with the covenants. Olympia complied with
financial covenants for the year ended December 31, 2018.

The capital structure of Olympia is managed and adjusted to reflect changes in economic
conditions. Capital structure adjustments could include adjusting the level of dividends and/or
issuance or repurchase of common shares. In support thereof, management reviews the financial
position of Olympia on a monthly and cumulative basis. Financing decisions are set based on
the timing and extent of expected operating and capital cash outlays. Factors considered when
determining capital and the amount of operational cash required are weighed against the costs
associated with excess cash, its terms and availability and whether to issue equity. Olympia
works towards managing its capital objectives to the extent possible while facing the challenges
of market conditions and the public’s assessment of Olympia’s risk profile. Olympia’s capital
management objectives have remained substantively unchanged over the periods presented.

Operational risks

Management has identified the following major operational risks which could negatively affect
Olympia’s future strategies and objectives:

• The risk of fluctuations in interest rates and currency values negatively affecting

Olympia’s business;

• Legal developments and changes in tax laws;

• The occurrence of weather related and other natural catastrophes;

• The risk that the regulatory environment in which Olympia carries out commercial activities

may change;

| OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT• The level of competition in Olympia’s markets;

• The risk that new markets may fail to produce estimated revenues;

• The risk of changes in accounting standards and policies;

• The risk that negative stakeholder impressions about Olympia’s business practices, actions or
inaction, whether true or not, could cause deterioration in Olympia’s value, brand, liquidity, or
customer base;

• The risk that general economic conditions could deteriorate and any significant downturn in

capital markets or the general economy could negatively affect financial results;

• The cybersecurity risk that failure of computer hardware, data processing systems, network

access and software could interrupt operations or materially impact Olympia’s ability to deliver
its services;

• The accuracy and completeness of information Olympia receives about customers

and counterparties; and

• Olympia’s corporate insurance program further mitigates certain operational risk exposures.

Olympia looks to industry benchmarks as well as legal, regulatory and contractual
requirements when deciding on types of coverage and limits. Coverage is placed at limits
considered appropriate for Olympia’s size, structure and type of operations. Olympia reviews
the insurance program annually to ensure it remains well suited and compliant with regulations
and requirements.

Accounting policies

The financial information contained in the accompanying consolidated financial statements and
this MD&A is prepared in accordance with IFRS as issued by the IASB. The accounting polices
adopted are consistent with those in the prior years except as noted below. In addition, some
accounting policies, due to their nature, require further explanation.

A number of new amended standards became applicable on January 1, 2018. Olympia had to
change its accounting policies and/or make retrospective adjustments as a result of adopting the
following standards:

• IFRS 9 “Financial Instruments”

• IFRS 15 “Revenue from Contracts with Customers”

OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT | Policies prior to January 1, 2018

Financial instruments

Olympia’s financial instruments, included in the consolidated balance sheets are comprised of
cash and cash equivalents, restricted cash and investments, restricted cash in circulation, cash
in circulation due to bank, trade and other receivables, derivative financial instruments, available
for sale investments, trade and other payables, revolving credit facility and other liabilities and
charges. A derivative is a financial instrument whose value changes in response to a specified
variable, requires little or no net investment and is settled at a future date. An embedded
derivative is a derivative that is a part of a non-derivative contract and not directly related to
that contract. Under this standard, embedded derivatives must be accounted for as a separate
financial instrument. A non-financial derivative is a contract that can be settled net in cash or by
other financial instruments. Olympia does not apply hedge accounting to the derivative financial
instruments. Non-derivative financial instruments include cash and cash equivalents, restricted
cash and investments, restricted cash in circulation, trade and other receivables, available for
sale investments, revolving credit facility, trade and other payables and other liabilities and
charges. Non-derivative financial instruments are recognized initially at fair value, plus any
directly attributable transaction costs, except for financial assets at fair value through profit or
loss, whereby any directly attributable transaction costs are expensed as incurred. Subsequent
to initial recognition, non-derivative financial instruments are designated into one of the
following categories and measured as described below:

(i) Financial assets and liabilities at fair value through profit or loss

Financial assets and liabilities at fair value through profit or loss are financial assets or
financial liabilities held for trading. A financial asset is classified in this category if acquired
principally for the purpose of selling in the short term. A financial liability is classified in this
category if acquired principally for the purpose of repurchasing in the short term. Olympia’s
derivative financial instruments are designated as financial assets and liabilities at fair value
through profit and loss as they are not designated as hedges for accounting purposes.

(ii)

Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market and which are not classified as available
for sale. Loans and receivables are initially recognized at fair value, including direct and
incremental transaction costs. They are subsequently valued at amortized cost, using
the effective interest method where applicable, less allowances and write-downs for
impairment. Assets in this category include restricted cash and investments, restricted
cash in circulation and trade and other receivables, the fair value of which approximates its
carrying amount due to its short-term maturity.

| OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT

(iii) Held-to-maturity

Held-to-maturity investments are non-derivative financial assets with fixed or determinable
payments that Olympia’s management has the intention and ability to hold to maturity.
They are initially recognized at fair value, including direct and incremental transaction costs.
They are subsequently valued at amortized cost, using the effective interest method where
applicable. Olympia has no held-to-maturity investments.

(iv) Available for sale financial assets

Available for sale assets are non-derivative financial assets that are designated as available
for sale and are not categorized into any of the other categories described above. They are
initially recognized at fair value, including direct and incremental transaction costs. They
are subsequently recognized at fair value. Gains and losses arising from changes in fair
value are included as a separate component of equity until sale, when the cumulative gain
or loss is transferred to the statement of net earnings and comprehensive income. Interest
is determined using the effective interest method, and impairment losses and translation
differences on monetary items are recognized in the statement of net earnings and
comprehensive income. Available for sale investment represents Olympia’s investment in
securities of a private issuer.

(v) Other financial liabilities

Items classified as other financial liabilities on Olympia’s consolidated financial statements
are accounted for at amortized cost using the effective interest method. Any gains or
losses in the realization of other financial liabilities are included in earnings. Olympia’s
trade and other payables, other liabilities and charges, restricted cash in circulation due
to bank and revolving credit facility are designated as other financial liabilities. The fair
value and charges approximate their carrying values, due to the short-term nature of these
instruments.

Cash and cash equivalents

Cash and cash equivalents are comprised of cash on hand, non-restricted cash in circulation,
interest on term deposits held with banks and other short-term highly liquid investments with
original maturities of three months or less. Non-restricted cash in circulation refers to the
aggregate amount of non-restricted vault cash (cash in ATM cassettes) plus cash inventory
(cash in transit from armoured car carriers). Cash and cash equivalents are measured at
amortized cost, which approximates fair value. Cash and cash equivalents are reported
separately from restricted cash and investments, and restricted cash in circulation.

Recognition and measurement

OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT |

Financial assets carried at fair value through profit or loss are initially recognized at fair value
and transaction costs are expensed in the statement of net earnings and comprehensive income.
Financial assets are derecognized when the rights to receive cash flows from the investments
have expired or have been transferred and Olympia has substantially transferred all risks and
rewards of ownership. Available for sale financial assets and financial assets at fair value through
profit or loss are subsequently carried at fair value. Loans and receivables are subsequently
carried at amortized cost using the effective interest method. Gains or losses arising from
changes in the fair value of the financial assets at fair value through profit or loss are presented
in the statement of net earnings and comprehensive income within the period in which they
arise. When securities classified as available for sale are sold or impaired, the accumulated
fair value adjustments recognized in equity are included in the statement of net earnings and
comprehensive income as gains and losses.

The impact of the adoption of these standards and the new accounting policies are
disclosed below.

IFRS 9 “Financial instruments” - impact of adoption

Trade receivables
Olympia applies the IFRS 9 simplified approach to measuring Expected Credit Losses (“ECL”),
which uses a lifetime expected loss allowance for all trade and other receivables. Olympia holds
trade receivables that do not have a significant financing component. To determine the amount
of the ECL to be recognized, Olympia has set up a provision matrix based on its historically
observed default rates. Olympia adjusts the matrix for forward-looking estimates and has
established that the expected credit loss should be calculated as follows:

• less than 90 days: nominal;

• more than 90 days but less than two years past due: 20% of carrying value;

• more than two years but less than three years past due: 65% of carrying value; and

• three or more years past due: 100% of carrying value.

Trade receivables are written off when there is no reasonable expectation of recovery. Indicators
that there is no reasonable expectation of recovery include, among others, the failure of a
customer to make contractual payments for a period greater than 365 days past due, and the
value of a customer’s asset being assessed to be nominal.

The loss allowance for trade receivables as at December 31, 2017, remains consistent with the
reported consolidated financial statements for the year ended December 31, 2017.

| OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORTClassification
As of January 1, 2018, Olympia classifies its financial assets in the following measurement
categories:

• those to be measured subsequently at fair value (either through Other Comprehensive

Income [“OCI”] or through profit or loss); and

• those to be measured at amortized cost.

The classification depends on Olympia’s business model for managing the financial assets and
the contractual terms of the cash flows.

For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI.
For investments in equity instruments that are not held for trading, this will depend on whether
Olympia has made an irrevocable election at the time of initial recognition to account for the
equity investment at Fair Value Through Other Comprehensive Income (“FVOCI”).

Olympia has elected to recognize its investment in a private issuer at FVOCI. The investment in
the private issuer was previously recognized as available for sale in accordance with IAS 39.

Measurement
At initial recognition, Olympia measures a financial asset at its fair value plus, in the case of
a financial asset not at Fair Value Through Profit or Loss (“FVPL”), transaction costs that are
directly attributable to the acquisition of the financial asset. Transaction costs of financial assets
carried at FVPL are expensed in profit or loss.

Financial assets with embedded derivatives are considered in their entirety when determining
whether their cash flows are solely payment of principal and interest.

IFRS 9 did not have any impact on Olympia’s measurement of financial instruments and did not
require retrospective adjustments.

IFRS 15 “Revenue from Contracts with Customers”

Effective January 1, 2018, Olympia adopted IFRS 15, “Revenue From Contracts With Customers”
(“IFRS 15”) replacing IAS 11, “Construction Contracts,” IAS 18, “Revenue” and several revenue-
related interpretations. Olympia adopted IFRS 15 using the modified retrospective with
cumulative effect approach, and applied the following practical expedients:

• Electing to apply the standard retrospectively only to contracts that were not completed

contracts on January 1, 2018; and

• For modified contracts, evaluating the original contract together with any contract

modifications at the date of initial application.

IFRS 15 did not have any impact on Olympia’s accounting policies and did not require
retrospective adjustments.

OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT | Critical accounting estimates

However, actual results could differ from these estimates. By their very nature, these estimates
are subject to measurement uncertainty, and the effect on the financial statements of future
periods could be material. Estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognized in the period in which the estimates are
revised and in any future periods affected.

In the process of applying Olympia’s accounting policies, management has made the following
judgments, estimates and assumptions which have the most significant effect on the amounts
recognized in the consolidated financial statements.

(i) Discontinued operations (Note 5)

Olympia presents discontinued operations on a separate line in the consolidated statements
of net earnings and comprehensive income if a major line of business has been disposed of
or is classified as held for sale.

Net loss from discontinued operations includes the net total of operating profit and loss
before tax from operations, including net gain or loss on sale before tax or measurement
to fair value less costs to sell and discontinued operations tax expense. A major line
of business comprises operations and cash flows that can be clearly distinguished,
operationally and for financial reporting purposes, from the rest of Olympia’s operations
and cashflows. If a major line of business is classified as a discontinued operation, Olympia
restates prior periods in the consolidated statements of net earnings. Non-current assets
classified as held for sale are measured at the lower of carrying amount and fair value
less costs to sell. These measurement provisions do not apply to deferred tax assets and
liabilities, and financial assets. Non-current assets are classified as held for sale if their
carrying amount will be recovered through a sale transaction rather than through continuing
use. This condition is regarded as met only when the sale is highly probable and the asset
is available for immediate sale in its present condition, subject to terms that are usual and
customary for sales of such assets. Management must be committed to the sale and must
actively market the business for sale at a price that is reasonable in relation to the current
fair value. The sale should be expected to qualify for recognition as a completed sale within
one year from the date of classification.

(ii) Allowance for doubtful accounts (Note 7)

| OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT

provision regularly to determine if any of the accounts provided for should be written off.
Those accounts which are deemed uncollectable could materially change as a result of
changes in a customer’s financial situation. This includes risks associated with the
gross receivable position on foreign exchange forward contracts, all assessed regularly
for impairment.

(iii) Depreciation and amortization methods (Notes 16 and 17)

Olympia estimates the useful lives of property, plant and equipment and intangible assets,
based on the period over which the assets are expected to be available for use.

The estimated useful lives are reviewed periodically and are updated if expectations
differ from previous estimates due to physical wear and tear, technical or commercial
obsolescence and legal or other limits on the use of the relevant assets. In addition, the
estimation of the useful lives is based on internal technical evaluation, current facts and
past experience with similar assets, and takes into consideration the anticipated expected
life of the asset, existing long-term agreements and contracts, current and forecasted
demand and the potential for technological obsolescence. It is possible, however, that future
results of operations could be materially affected by changes in the estimates brought about
by changes in factors mentioned above. The amounts and timing of recorded expenses for
any period would be affected by changes in these factors and circumstances.

(iv) Impairments (Note 17)

Olympia performs impairment tests of assets when indications of impairment exist.
Application of judgment is required in determining whether an impairment test is
warranted. Impairment exists when the carrying value of an asset or Cash-Generating
Unit (“CGU”) exceeds its recoverable amount, which is the higher of (a) its fair value less
costs of disposal and (b) its value in use. The fair value less costs of disposal calculation
is estimated using valuation techniques such as a discounted cash flow model adjusted to
reflect the considerations of any prospective third-party buyer. The value in use calculation
is based on the present value of expected cash flows. The cash flows are derived from
internal budgets and do not include restructuring activities that Olympia is not yet
committed to or significant future investments that will enhance the asset’s performance
of the CGU being tested. The recoverable amount is most sensitive to the discount rate
used for the present value of expected cash flows, as well as expected transaction volumes,
future operating costs, tax rates, margins and the growth rate used for extrapolation
purposes. There is a certain amount of subjectivity and judgment in the determination of
the recoverable amount calculation. Judgments and assumptions, described in notes 7, 16
and 17, are subject to measurement uncertainty, and the impact of differences between
actual and estimated amounts on the consolidated financial statements of future periods
could be material.

When indicators support that the asset is no longer impaired, Olympia will reverse
impairment losses. Similar to the impairment, application of judgment is required to
determine whether a reversal should be considered.

OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT |

(v) Income taxes (Note 22)

Olympia calculates an income tax provision in each of the jurisdictions in which it operates.
Estimation of income taxes includes evaluating the recoverability of deferred tax assets
based on an assessment of the ability to use the underlying future tax deductions against
future taxable income before the deductions expire. The assessment is based on existing tax
laws and estimates of future taxable income. Further, there are transactions and calculations
for which the ultimate tax determination is uncertain during the ordinary course of business.
Provisions are made using the best estimate of the amount expected to be paid based on
a qualitative assessment of all relevant factors. Olympia reviews the adequacy of these
provisions at each reporting period. However, it is possible that at some future date an
additional liability could result from audits by taxation authorities. Where the final outcome
of these tax-related matters is different from the amounts that were initially recorded, such
differences will affect the tax provisions in the period in which such determination is made.

(vi) Revenue

Olympia applies judgment to determine whether fee revenue should be recognized on a
gross basis or net of fees paid to the merchant or insurer for providing, processing, and
maintaining the service to a customer. Pursuant to the guidance in IFRS 15, Olympia has
assessed whether to record such payments as a reduction of associated service revenues
or as a direct expense. Olympia determines whether the nature of its promise to customers
is a performance obligation to provide the service itself or to arrange for that service to be
provided by another party. Specific factors considered are, whether Olympia acts as the
principal and is the primary obligor in performance obligations, provides the processing
for the performance obligations, has significant influence over pricing and has the risks
and rewards of ownership, including a variable earnings component and the risk of loss
for collection. Olympia has full discretion over the price of the services and therefore has
no unfulfilled obligations that could affect the clients acceptance of the service. Olympia
recognizes insurance fees on a net basis. As a result, for agreements under which Olympia
acts as the principal, Olympia records the total amounts earned from the underlying
performance obligations as service revenues and records the related merchant expense as
a direct expense of operating revenues. However, for those agreements in which Olympia
does not meet the criteria to qualify as the principal in a performance obligation, Olympia
does not record the related fee revenue, as the rights associated with this revenue stream
are attributable to the benefit of the merchant. Olympia records fee revenue under these
arrangements on a net basis.

Whether Olympia is considered to be the principal or an agent in a performance obligation
depends on analysis by management of both the legal form and substance of the agreement
between Olympia and the merchant. Such judgments impact the amount of reported
revenue and expenses, but do not impact reported assets, liabilities or cash flows.

| OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT

Future accounting pronouncements

A number of new standards and amendments to standards and interpretations are effective for
annual periods beginning after January 1, 2019, and have not been applied in preparing these
consolidated financial statements.

On January 13, 2016, the IASB published IFRS 16, “Leases” (“IFRS 16”) replacing IAS 17, “Leases.”
IFRS 16 now requires lessees to recognize a lease liability reflecting future lease payments and a
“right-of-use asset” for virtually all lease contracts. The IASB has included an optional exemption
for certain short-term leases and leases of low-value assets; however, this exemption can only
be applied by lessees. For lessors, the IASB has updated the guidance on the definition of a lease
(as well as the guidance on the combination and separation of contracts). The new standard will
affect both the balance sheet and related ratios, such as debt/equity ratio, and may result in a
significant increase in debt on the balance sheet. IFRS 16 is effective for annual reporting periods
beginning on or after January 1, 2019. Earlier application is permitted, but only in conjunction
with IFRS 15, “Revenue from Contracts with Customers.” On adoption of IFRS 16, Olympia will
recognise a lease liability and a right of use asset primarily as it relates to its office space. The
financial impact on the consolidated financial statements is still being evaluated.

Evaluation of disclosure controls and procedures and internal control over
financial reporting

The President and Chief Executive Officer (“CEO”) and Vice President, Finance and Chief
Financial Officer (“CFO”) of Olympia are responsible for establishing and maintaining
Disclosure Controls and Procedures (“DC&P”) and Internal Control over Financial Reporting
(“ICFR”) for Olympia.

DC&P are designed to provide reasonable assurance that material information relating to
Olympia is made known to the CEO and CFO by others, particularly in the period in which the
annual filings are being prepared, and that information required to be disclosed in documents
filed with securities regulatory authorities is recorded, processed, summarized and reported
within the time periods specified in securities legislation, and include controls and procedures
designed to ensure that such information is accumulated and communicated to Olympia’s
management, including the CEO and CFO, as appropriate, to allow timely decisions regarding
required disclosure. ICFR is designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in
accordance with IFRS.

In accordance with the requirements of National Instrument 52-109 “Certification of Disclosures
in Issuer’s Annual and Interim Filings,” an evaluation of the effectiveness of DC&P and ICFR
was carried out under the supervision of the CEO and CFO at December 31, 2018. Based on this
evaluation, the CEO and CFO have concluded that, subject to certain inherent limitations noted
below, Olympia’s DC&P and ICFR are effectively designed and operating as intended.

OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT | Olympia’s management, including the CEO and CFO, does not expect that Olympia’s DC&P and
ICFR will prevent or detect all misstatements or instances of fraud. The inherent limitations in all
control systems are such that they can provide only reasonable, not absolute, assurance that all
control issues, misstatements or instances of fraud, if any, within Olympia have been detected.

There was no change to Olympia’s ICFR during the most recent annual period that has materially
affected, or is reasonably likely to materially affect, Olympia’s ICFR.

Outstanding share data

As at February 28, 2019, Olympia has an aggregate of 2,406,352 common shares issued
and outstanding.

Additional information

Further information regarding Olympia can be accessed under Olympia’s public filings found
at www.sedar.com.

Shareholders seeking to contact Olympia’s independent directors may do so by calling
Rick Skauge, Olympia’s president and CEO, at 403-261-7501 or by email at
ricks@olympiafinancial.com.

| OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORTManagement’s responsibility for consolidated
financial statements

For the years ended December 31, 2018, and December 31, 2017

The accompanying consolidated financial statements and all of the data included in this
annual report have been prepared by and are the responsibility of the Board of Directors and
management of Olympia Financial Group Inc. (“Olympia”).

The consolidated financial statements have been prepared in accordance with International
Financial Reporting Standards as set out in the Handbook of the Chartered Professional
Accountants of Canada and reflect management’s best estimates and judgments based on
currently available information. In the opinion of management, the consolidated financial
statements have been prepared within acceptable limits of materiality and are in accordance
with International Financial Reporting Standards appropriate in the circumstances. The financial
information elsewhere in the Annual Report has been reviewed to ensure consistency with that in
the consolidated financial statements.

The Board of Directors has reviewed and approved the accompanying consolidated financial
statements for the years ended December 31, 2018, and December 31, 2017.

The Audit Committee, comprised of non-management directors, acts on behalf of the Board
of Directors to ensure that management fulfills its financial reporting and internal control
responsibilities. Management maintains appropriate systems of internal control. Policies and
procedures are designed to give reasonable assurance that transactions are properly authorized,
assets are safeguarded and financial records properly maintained to provide reliable information
for the preparation of the consolidated financial statements.

Internal controls are further supported by an internal audit function which conducts periodic
audits of Olympia’s financial reporting and internal controls. The internal audit function reports
to the Audit Committee. In performing its duties, the Audit Committee acts only in an oversight
capacity and necessarily relies on the work and assurances of Olympia’s management.

Olympia’s independent auditor, PricewaterhouseCoopers LLP, has performed an audit on
these consolidated financial statements in accordance with the standards established by
the Chartered Professional Accountants of Canada. Their report outlines the scope of their
examination and opinion.

Signed Rick Skauge

Rick Skauge
PRESIDENT & CHIEF EXECUTIVE OFFICER

Calgary, Canada, February 28, 2019

Signed Gerhard Barnard

Gerhard Barnard, CPA, CMA
CHIEF FINANCIAL OFFICER

OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT | Independent Auditor’s Report

Independent auditor’s report

To the Shareholders of Olympia Financial Group Inc.

Our opinion

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects,
the financial position of Olympia Financial Group Inc. and its subsidiaries (together, the Group) as at
December 31, 2018 and 2017, and its financial performance and its cash flows for the years then ended in
accordance with International Financial Reporting Standards (IFRS).

What we have audited
The Group’s consolidated financial statements comprise:

●

the consolidated balance sheets as at December 31, 2018 and 2017;

the consolidated statements of net earnings and comprehensive income for the years then ended;

the consolidated statements of changes in equity for the years then ended;

the consolidated statement of cash flows for the years then ended; and

the notes to the consolidated financial statements, which include a summary of significant
accounting policies.

Basis for opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit
of the consolidated financial statements section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.

Independence
We are independent of the Group in accordance with the ethical requirements that are relevant to our
audit of the consolidated financial statements in Canada. We have fulfilled our other ethical
responsibilities in accordance with these requirements.

Other information

Management is responsible for the other information. The other information comprises the Annual
Report.

Our opinion on the consolidated financial statements does not cover the other information and we do not
express any form of assurance conclusion thereon.

PricewaterhouseCoopers LLP
111-5th Avenue S.W., Suite 3100, Calgary, Alberta, Canada T2P 5L3
T: +1 403 509 7500, F: +1 403 781 1825

“PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.

| OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORTIndependent Auditor’s Report

In connection with our audit of the consolidated financial statements, our responsibility is to read the
other information identified above and, in doing so, consider whether the other information is materially
inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of management and those charged with governance for the
consolidated financial statements

Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with IFRS, and for such internal control as management determines is necessary
to enable the preparation of consolidated financial statements that are free from material misstatement,
whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Group's
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless management either intends to liquidate the Group or to cease
operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group’s financial reporting process.

Auditor’s responsibilities for the audit of the consolidated financial statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with Canadian generally accepted auditing standards will always
detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:

●

Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk
of not detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.

Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s internal control.

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.

OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT | Independent Auditor’s Report

●

Conclude on the appropriateness of management’s use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s
report to the related disclosures in the consolidated financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to
the date of our auditor’s report. However, future events or conditions may cause the Group to cease
to continue as a going concern.

Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the
underlying transactions and events in a manner that achieves fair presentation.

Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the consolidated financial statements.
We are responsible for the direction, supervision and performance of the group audit. We remain
solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal
control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.

The engagement partner on the audit resulting in this independent auditor’s report is Peter Harris.

Chartered Professional Accountants

Calgary, Alberta
February 28, 2019

| OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORTCONSOLIDATED BALANCE SHEETs

ASSETS
Current assets

Cash & cash equivalents (note 11)
Restricted cash in circulation (notes 12 and 30)
Trade & other receivables (note 7)
Inventory (note 13)
Prepaid expenses
Derivative financial instruments (notes 7 and 15)

Total current assets
Non-current assets

Restricted cash & investments (note 10)
Equipment & other (note 16)
Intangible assets (note 17)
Financial asset at fair value through other
comprehensive income (note 8)
Promissory note receivable (note 5)
Derivative financial instruments (notes 7 and 15)
Deferred tax assets (note 22)

Total non-current assets
Total assets
LIABILITIES
Current liabilities

Trade & other payables (notes 7 and 18)
Deferred revenue (note 19)
Other liabilities & charges (note 20)
Cash in circulation due to bank (note 12)
Revolving credit facility (notes 14 and 30)
Derivative financial instruments (notes 7 and 15)
Current tax liability
Total current liabilities

Other liabilities (note 20)
Derivative financial instruments (notes 7 and 15)

Total liabilities
EQUITY

Share capital (note 21)
Contributed surplus (note 21)
Retained earnings

Equity attributable to owners of Olympia
Non-controlling interests
Total equity
Total equity & liabilities
Contingencies (note 32)
Subsequent event (note 34)
Approved on behalf of the Board of Directors

Signed Rick Skauge

Rick Skauge
DIRECTOR

February 28, 2019
See accompanying notes to the consolidated financial statements

December 31, 2018

December 31, 2017

$ 12,834,906
-
2,272,037
49,127
783,370
406,082
16,345,522

707,000
1,239,533
2,508,262

43,714

1,428,539
-
1,243,256
7,170,304
$ 23,515,826

1,341,892
399,820
1,528,078
-
4,207,347
160,480
5,637
7,643,254
791,705
-
$ 8,434,959

7,886,989
86,373
7,214,540
15,187,902
(107,035 )
15,080,867
$ 23,515,826

Signed Brian Newman

Brian Newman, CPA, CA
DIRECTOR

10,140,523
3,823,110
1,413,359
223,114
732,914
9,236,934
25,569,954

500,000
2,232,396
1,849,693

48,932

-
729,459
1,435,531
6,796,011
$ 32,365,965

1,278,144
313,256
1,648,081
3,823,110
4,812,347
7,796,036
102,212
19,773,186
1,068,776
543,073
$ 21,385,035

7,886,989
86,373
3,048,996
11,022,358
(41,428 )
10,980,930
$ 32,365,965

OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT |

CONSOLIDATED STATEMENTs OF NET EARNINGS AND
COMPREHENSIVE INCOME

YEARS ENDED DECEMBER 31
Revenue

Service revenue (note 9)
Trust income
Interest

Expenses

Direct expenses (notes 9 and 24)
Administrative expenses (notes 9 and 23)
Depreciation and amortization (note 9)
Other losses/(gains), net (notes 9 and 26)

Earnings before income tax
Income tax expense (notes 9 and 22)

Current
Deferred tax expense/(recovery)

Total income tax expense
Net earnings and comprehensive income from
continuing operations attributable to:

Shareholders of Olympia
Non-controlling interests

Net loss and comprehensive loss from discontinued
operations (note 5)

Net earnings and comprehensive income from
combined operations for the year

Earnings per share attributable to shareholders of
Olympia - continuing operations

Basic and diluted (note 27)

$
$

2018

2017(1)

38,597,248
10,276,949
1,155,384
50,029,581

3,112,075
31,150,889
746,967
1,430,616
36,440,547
13,589,034

3,353,276
333,544
3,686,820

32,966,443
7,805,637
769,637
41,541,717

2,963,756
28,051,595
818,546
(24,907 )
31,808,990
9,732,727

2,746,447
(77,546 )
2,668,901

9,967,821

$
(65,607 ) $

7,105,454
(41,628 )

(388,022 ) $

(1,025,612 )

9,514,192

6,038,214

4.14

2.95

Loss per share attributable to shareholders of Olympia
- discontinued operations

Basic and diluted (note 27)

(0.16 ) $

(0.42 )

Earnings per share attributable to shareholders of Olympia -
combined operations

Basic and diluted (note 27)

3.98

2.53

(1) 2017 balances have been restated due to the classification of the ATM division as a discontinued operation. Refer to Note 5 in the

consolidated financial statements.

See accompanying notes to the consolidated financial statements

| OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Attributable to owners of Olympia

Share
Capital

Contributed
Surplus

Retained
Earnings

Non-
Controlling
Interest

Total
Equity

$ 7,886,989

86,373 $ 2,672,169 $

- $ 10,645,531

200

6,079,842

(41,628 )

6,038,214

(5,703,015 )

$ 7,886,989

86,373 $ 3,048,996 $

(41,428 ) $ 10,980,930

$ 7,886,989

86,373

$ 3,048,996

(41,428 ) $ 10,980,930

9,579,799

(65,607 )

9,514,192

(5,414,255 )

$ 7,886,989

86,373

7,214,540

(107,035 ) $ 15,080,867

Balance at
January 1, 2017

Share issuance

Net earnings and
comprehensive
income from
combined
operations

Dividends
(note 28)

Balance as at
December 31, 2017

Balance as at
January 1, 2018

Net earnings and
comprehensive
income from
combined
operations

Dividends
(note 28)

Balance as at
December 31, 2018

See accompanying notes to the consolidated financial statements

OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT |

CONSOLIDATED STATEMENTS OF CASH FLOWs

YEARS ENDED DECEMBER 31
Cash flows from operating activities
Net earnings from continuing operations
Items not affecting cash

Depreciation of equipment & other
Amortization of intangible assets
Other
Loss/(gain) on disposal of assets
Fair value change in investments
Impairment of intangible asset
Deferred income taxes recovery (note 22)
Foreign exchange loss/(gain) (note 26)

Changes in non-cash working capital balances (note 29a)
Cash flows from operating activities from continuing
operations
Cash flows used in operating activities from
discontinued operations (note 5)
Net cash from operating activities
Cash flows from investing activities

Purchase of equipment & other (note 16)
Purchase of intangible assets (note 17)
(Purchase)/ release of restricted investment for
collateral, net
Cash flows (used)/from investing activities from
continuing operations
Cash flow used in investing activities from
discontinued operation (note 5)
Net cash from investing activities
Cash flows from financing activities

(Repayment)/borrowing on revolving credit facility
Loan repaid/(provided) to Olympia ATM (note 5)
Sale of assets for issuance of promissory note
Dividends (note 28)
Cash flow used in financing activities from
continuing operations
Cash flow (used)/from financing activities from
discontinued operations (note 5)
Net cash used in financing activities
Net change in cash position
Cash, beginning of year
Cash, end of year
Cash is represented by:

Cash & cash equivalents (note 11)
Restricted cash & restricted cash in circulation (note 12 )

Other information for continuing operations

Trust income earned and received
Interest received
Income taxes paid
Non-cash financing and investing activities (note 29b)

See accompanying notes to the consolidated financial statements

2018

2017

9,902,214

7,063,826

410,240
336,726
(27,998 )
59,948
-
-
333,544
1,381,682
(1,147,657 )

511,730
306,817
-
(53,715 )
53,000
150,417
(77,546 )
(25,768 )
1,361,977

11,248,699

9,290,738

(637,292 )

10,611,407

(573,029 )
(1,080,139 )

(207,000 )

(1,860,168 )

(605,000 )
325,000
(37,601 )
(5,414,255 )

(5,731,856 )

(4,148,110 )

(9,879,966 )
(1,128,727 )
13,963,633
$ 12,834,906

$ 12,834,906
-
$ 12,834,906

$
7,421,105
$
1,021,666
$ 3,348,000

(628,781 )

8,661,957

(507,589 )
(248,347 )

1,930,000

1,174,064

(219,939 )

954,125

877,302
(2,172,243 )
-
(5,703,015 )

(6,997,956 )

875,433

(6,122,523 )
3,493,559
10,470,074
13,963,633

10,140,523
3,823,110
13,963,633

6,717,922
708,530
2,691,000

$
$
$

| OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT

1. NATURE OF BUSINESS

Olympia Financial Group Inc. (“Olympia”) is governed by the Business Corporations Act (Alberta).
Olympia is a reporting issuer in British Columbia, Alberta and Ontario, and its common shares are listed
on the Toronto Stock Exchange (“TSX”). Olympia’s registered and head office is 2300, 125 - 9th Avenue
SE, Calgary, Alberta T2G 0P6.

The majority of Olympia’s business is conducted through its wholly owned subsidiary Olympia Trust
Company (“Olympia Trust”), a non-deposit taking trust corporation.

Olympia Trust received its letters patent on September 6, 1995, authorizing the formation of a trust
corporation to be registered under the Loan and Trust Corporations Act (Alberta). Olympia Trust acts
as a trustee for self-directed registered plans and provides foreign currency exchange services as well
as corporate and shareholder services. Olympia Trust is licensed to conduct trust activities in Alberta,
British Columbia, Saskatchewan, Manitoba, Quebec, Newfoundland and Labrador, Prince Edward
Island, New Brunswick and Nova Scotia. The Private Health Services Plan division conducts its business
through Olympia Benefits Inc. (“OBI”), a wholly owned subsidiary of Olympia. Olympia ATM Inc. (“ATM”
or “Olympia ATM”) was incorporated under the Business Corporations Act (Alberta) as a wholly owned
subsidiary of Olympia, and was focused on building an automated teller machine distribution network
and on growing its portfolio. During the year ended December 31, 2018, substantially all the assets of
ATM were sold to Tarman ATM Inc., a corporation owned and controlled by Olympia’s president and
CEO. Following the sale of the assets, ATM was amalgamated with OBI on August 10, 2018. Exempt
Edge Inc. (“EEI”) was incorporated under the Business Corporations Act (Alberta) on November 28, 2016,
as a subsidiary of Olympia. EEI focuses on the provision of information technology services to exempt
market dealers, registrants and issuers.

2. BASIS OF PREPARATION

These consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”)
applicable to the preparation of the consolidated financial statements. The accounting policies adopted
are consistent with those of the previous year except as identified in Note 3.

These consolidated financial statements have been approved and authorized for issuance by the Board
of Directors as of February 28, 2019. The policies applied in these consolidated financial statements are
based on IFRS, issued, effective and outstanding as of December 31, 2018.

Olympia’s consolidated financial statements are presented in Canadian dollars, Olympia’s primary
operating currency. All references to $ are in Canadian dollars and references to US$ are in United
States dollars.

The preparation of the consolidated financial statements requires management to make judgments,
estimates and assumptions that affect the application of accounting policies and the reported amounts
of assets and liabilities, income and expenses. Actual results may differ from these estimates.

Certain of the prior year comparative figures have been reclassified to conform to the presentation
adopted for the current year.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSOLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT |

3. SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies used in the preparation of these consolidated financial statements
are described below.

Basis of measurement

The consolidated financial statements have been prepared under the historical cost convention, except
for the revaluation of certain financial assets and financial liabilities to fair value, including derivative
instruments and financial assets at fair value through Other Comprehensive Income.

Critical accounting estimates

The preparation of financial statements requires management to make judgments, estimates and
assumptions based on currently available information that affects the application of accounting
policies and the reported amounts of assets, liabilities, income and expenses. Estimates and judgments
are evaluated and are based on management’s experience and other factors, including expectations
of future events that are believed to be reasonable under the circumstances. However, actual results
could differ from these estimates. By their very nature, these estimates are subject to measurement
uncertainty, and the effect on the financial statements of future periods could be material. Estimates
and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognized in the period in which the estimates are revised and in any future periods affected.

In the process of applying Olympia’s accounting policies, management has made the following judgments,
estimates and assumptions which have the most significant effect on the amounts recognized in the
consolidated financial statements.

(i) Discontinued operations (Note 5)

Olympia presents discontinued operations on a separate line in the consolidated statements of net
earnings and comprehensive income if a major line of business has been disposed of or is classified
as held for sale.

Net loss from discontinued operations includes the net total of operating profit and loss before tax
from operations, including net gain or loss on sale before tax or measurement to fair value less costs
to sell and discontinued operations tax expense. A major line of business comprises operations and
cash flows that can be clearly distinguished, operationally and for financial reporting purposes,
from the rest of Olympia’s operations and cashflows. If a major line of business is classified as
a discontinued operation, Olympia restates prior periods in the consolidated statements of net
earnings. Non-current assets classified as held for sale are measured at the lower of carrying
amount and fair value less costs to sell. These measurement provisions do not apply to deferred tax
assets and liabilities, and financial assets. Non-current assets are classified as held for sale if their
carrying amount will be recovered through a sale transaction rather than through continuing use.
This condition is regarded as met only when the sale is highly probable and the asset is available
for immediate sale in its present condition, subject to terms that are usual and customary for sales
of such assets. Management must be committed to the sale and must actively market the business
for sale at a price that is reasonable in relation to the current fair value. The sale should be expected
to qualify for recognition as a completed sale within one year from the date of classification.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS| OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT

(ii) Allowance for doubtful accounts (Note 7)

Olympia regularly performs a review of outstanding accounts receivable balances to determine
eventual collectability. A provision for bad debt is recorded based on historical information or if
an account is deemed uncollectable. Olympia applies the IFRS 9 simplified approach to measuring
Expected Credit Losses (“ECL”), which uses a lifetime expected loss allowance for all trade
and other receivables. Olympia holds trade receivables that do not have a significant financing
component. To determine the amount of the ECL to be recognized in the financial statements,
Olympia has set up a provision matrix based on its historically observed default rates. Olympia
adjusts the matrix for forward-looking estimates and has established that the expected credit loss
should be calculated as follows:

• less than 90 days: nominal;

• more than 90 days but less than two years past due: 20% of carrying value;

• more than two years but less than three years past due: 65% of carrying value; and

• three or more years past due: 100% of carrying value.

Those accounts which are deemed uncollectable could materially change as a result of changes in
a customer’s financial situation. This includes risks associated with the gross receivable position
on foreign exchange forward contracts, all assessed regularly for impairment.

(iii) Depreciation and amortization methods (Notes 16 and 17)

Olympia estimates the useful lives of property, plant and equipment and intangible assets, based
on the period over which the assets are expected to be available for use.

The estimated useful lives are reviewed periodically and are updated if expectations differ from
previous estimates due to physical wear and tear, technical or commercial obsolescence and legal
or other limits on the use of the relevant assets. In addition, the estimation of the useful lives is
based on internal technical evaluation, current facts and past experience with similar assets, and
takes into consideration the anticipated expected life of the asset, existing long-term agreements
and contracts, current and forecasted demand and the potential for technological obsolescence.
It is possible, however, that future results of operations could be materially affected by changes in
the estimates brought about by changes in factors mentioned above. The amounts and timing of
recorded expenses for any period would be affected by changes in these factors and circumstances.

(iv) Impairments (Note 17)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSOLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT |

rate used for the present value of expected cash flows, as well as expected transaction volumes,
future operating costs, tax rates, margins and the growth rate used for extrapolation purposes.
There is a certain amount of subjectivity and judgment in the determination of the recoverable
amount calculation. Judgments and assumptions, described in notes 7, 16 and 17, are subject to
measurement uncertainty and the impact of differences between actual and estimated amounts
on the consolidated financial statements of future periods could be material.

When indicators support that the asset is no longer impaired, Olympia will reverse impairment
losses. Similar to the impairment, application of judgment is required to determine whether a
reversal should be considered.

(v) Income taxes (Note 22)

Olympia calculates an income tax provision in each of the jurisdictions in which it operates.
Estimation of income taxes includes evaluating the recoverability of deferred tax assets based on a
more likely than not assessment to use the underlying future tax deductions against future taxable
income before the deductions expire. The assessment is based on existing tax laws and estimates
of future taxable income. Further, there are transactions and calculations for which the ultimate tax
determination is uncertain during the ordinary course of business. Provisions are made using the
best estimate of the amount expected to be paid based on a qualitative assessment of all relevant
factors. Olympia reviews the adequacy of these provisions at each reporting period. However, it
is possible that at some future date an additional liability could result from audits by taxation
authorities. Where the final outcome of these tax-related matters is different from the amounts
that were initially recorded, such differences will affect the tax provisions in the period in which
such determination is made.

(vi) Revenue

Olympia applies judgment to determine whether fee revenue should be recognized on a gross basis
or net of fees paid to the merchant or insurer for providing, processing, and maintaining the service
to a customer. Pursuant to the guidance in IFRS 15, Olympia has assessed whether to record such
payments as a reduction of associated service revenues or as a direct expense. Olympia determines
whether the nature of its promise to customers is a performance obligation to provide the service
itself or to arrange for that service to be provided by another party. Specific factors considered
were, whether Olympia acts as the principal and is the primary obligor in performance obligations,
provides the processing for the performance obligations, has significant influence over pricing
and has the risks and rewards of ownership, including a variable earnings component and the
risk of loss for collection. Olympia has full discretion over the price of the services and therefore
has no unfulfilled obligations that could affect the clients acceptance of the service. Olympia
recognizes insurance fees on a net basis. As a result, for agreements under which Olympia acts
as the principal, Olympia records the total amounts earned from the underlying performance
obligations as service revenues and records the related merchant expense as a direct expense of
operating revenues. However, for those agreements in which Olympia does not meet the criteria
to qualify as the principal in a performance obligation, Olympia does not record the related fee
revenue, as the rights associated with this revenue stream are attributable to the benefit of the
merchant. Olympia records fee revenue under these arrangements on a net basis.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS| OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT

Whether Olympia is considered to be the principal or an agent in a performance obligation depends
on analysis by management of both the legal form and substance of the agreement between
Olympia and the merchant. Such judgments impact the amount of reported revenue and expenses,
but do not impact reported assets, liabilities or cash flows.

Functional and presentation currency

These consolidated financial statements are presented in Canadian dollars, which is the functional
currency of Olympia and its subsidiaries. Transactions denominated in foreign currencies are translated
into Canadian dollars using the exchange rates prevailing at the dates of the transactions. Under this
method, monetary assets and liabilities denominated in foreign currencies are translated into Canadian
dollars at the rates in effect at the consolidated balance sheet dates. Revenues and expenses are
translated at the rates prevailing at the respective transaction dates.

Basis of consolidation

The consolidated financial statements include the accounts of Olympia and its subsidiaries. All
inter-company balances and unrealized income and expenses arising from inter-company transactions
have been eliminated.

The subsidiaries consist of Olympia Trust, OBI and EEI.

Olympia holds an 80% controlling interest in EEI and a third party holds a non-controlling interest of
20%. The non-controlling interest is presented separately in the consolidated statement of net earnings
and comprehensive income and within equity in the consolidated balance sheets, but separately
from Olympia’s equity. Losses applicable to the non-controlling interest in excess of their interest in
the subsidiary’s equity is allocated against the non-controlling interest, even if that results in a
deficit balance.

Segment reporting

Management has determined Olympia’s operating segments based on reports reviewed by the president
and other executive management to make strategic decisions. An operating segment is a component
of Olympia that engages in business activities from which it may earn revenues and incur expenses,
including revenues and expenses that relate to transactions with any of Olympia’s other components.
Operating results are regularly reviewed by the president and other executive management to make
decisions about resources to be allocated to the segment and to assess its performance. Discrete
financial information is available for each operating segment. Segment results that are reported to the
president and other executive management include items directly attributable to a segment, as well as
those that can be allocated on a reasonable basis.

Considering the business from a product and service perspective, Olympia has identified six operating
segments. The Private Health Services Plan division, operated through OBI, markets, sells and
administers health and dental benefits to business owners. The Registered Plans division, operated
through Olympia Trust, specializes in self-directed registered plans administration. Exempt market
securities and arm’s- length mortgages continue to be the main focus of many of the Registered Plans
division’s clients. The Foreign Exchange division, operated through Olympia Trust, provides corporations

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSOLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT |

and private clients a personalized service for buying and selling foreign currencies. The Corporate and
Shareholder Services division, operated through Olympia Trust, provides transfer agency and corporate
trust services to public and private issuers across Canada. The Exempt Edge division, operated through
EEI, focuses on the provision of information technology to exempt market dealers, registrants and
issuers. The Corporate division is a cost centre and earns incidental revenue.

Equipment and other

Equipment and other is measured and accounted for at cost less accumulated depreciation. Additions
and subsequent expenditures are capitalized only in the event that they enhance the future economic
benefits to be derived from the assets.

Depreciation is provided on the depreciable amount of equipment and other on a straight-line basis
over the estimated useful economic life of each asset. The depreciable amount is the gross carrying
amount less the estimated residual value at the end of its useful economic life.

The annual depreciation rates and methods are as follows:

• Furniture and fixtures

Straight-line over 5 years

• Leasehold improvements

Straight-line over the lease term

• Computer equipment

Straight-line over 3 years

• ATM equipment

Straight-line over 5 years

Depreciation rates, methods and residual values used to calculate depreciation of items of equipment
and other are kept under review for any change in circumstances. The principal factors Olympia takes
into account when deciding on rates and methods of depreciation are the pattern of usage for each asset,
the lease term, the expected rate of developments in technology and expected market requirements.

When reviewing residual values, Olympia estimates the amount that it would currently obtain for the
disposal of the asset after deducting the estimated cost of disposal if the asset were already of the age
and condition expected at the end of its useful economic life.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and
are recognized in the statements of net earnings and comprehensive income. Assets are derecognized
on disposal or when no future economic benefits are expected from their use.

Intangible assets

Intangible assets consist primarily of internally developed software, purchased computer software, and
trademark agreements.

Internally developed software is stated at cost, less accumulated amortization and impairment, if
any. The identifiable and directly associated external and internal costs of acquiring and developing
software are capitalized where the software is controlled by Olympia and where it is probable that
future economic benefits will flow from its use over more than one year.

The cost of purchase of computer software that is separable from an item of related hardware is
capitalized separately.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS| OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT

Trademark agreements are recognized at fair value at the acquisition date. These agreements have a
finite useful life and are carried at cost less accumulated amortization. Amortization is calculated using
the straight-line method over the expected term of the agreement.

Impairments are recorded if the carrying amount of an asset exceeds the recoverable amount.

The annual amortization rates and methods are as follows:

• Purchased computer software

Straight-line over 3 to 5 years

• Internally developed software

Straight-line over 3 to 7 years

• Trademarks

Straight-line over the term of the agreements

Research costs and costs associated with maintaining software are recognized as an expense when
incurred. Development costs are capitalized under intangible assets if they can be identified as an
intangible asset that is expected to generate probable future economic benefit and if the costs of this
asset can be reliably calculated. Development costs include those costs directly attributable to the
development of the asset.

Impairment of non-financial assets

Non-financial assets are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the
amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount
is the higher of an asset’s fair value less costs of disposal or value in use. For the purpose of assessing
impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows.
Non-financial assets that suffered impairment are reviewed for possible reversal of the impairment at
each reporting date.

Olympia assesses all non-financial assets on an ongoing basis for indications of impairment and
to determine whether a previously recognized impairment loss should be reversed. If such indicators
are found to exist, then detailed impairment testing is carried out. Impairments and the reversal
of previously recognized impairments are recognized in the statement of net earnings and
comprehensive income.

Inventory

Inventory consists primarily of ATMs not in service. Inventory is measured at the lower of cost and net
realizable value. The cost of inventory is based on the first-in first-out valuation method and includes
expenditures incurred in acquiring the inventory, as well as other costs incurred in bringing them to
their existing location and condition. Net realizable value is the estimated selling price in the ordinary
course of business, less the estimated costs of completion and selling expenses.

Business combinations

Business combinations are accounted for using the acquisition method of accounting, in which the
identifiable assets acquired, liabilities assumed and any non-controlling interest are recognized and
measured at their fair value at the date of acquisition. Any excess of the purchase price, plus any non-
controlling interest over the fair value of the net assets acquired is recognized as goodwill. When the

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSOLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT |

excess is negative, a bargain purchase gain is recognized immediately in the statement of earnings and
comprehensive income/(loss). At acquisition, goodwill is allocated to each of the CGUs to which it
relates. Subsequent measurement of goodwill is at cost less any accumulated impairment losses.

Transaction costs that Olympia incurs in connection with a business combination are expensed
as incurred.

Financial instruments

Olympia’s financial instruments included in the consolidated balance sheets are comprised of cash
and cash equivalents, restricted cash and investments, restricted cash in circulation, cash in circulation
due to bank, trade and other receivables, promissory note receivable, derivative financial instruments,
financial assets at fair value through other comprehensive income, trade and other payables, revolving
credit facility and other liabilities and charges.

A derivative is a financial instrument whose value changes in response to a specified variable, requires
little or no net investment and is settled at a future date. An embedded derivative is a derivative that
is a part of a non-derivative contract and not directly related to that contract. Under this standard,
embedded derivatives must be accounted for as a separate financial instrument. A non-financial
derivative is a contract that can be settled net in cash or by other financial instruments. Olympia does
not apply hedge accounting to the derivative financial instruments.

Non-derivative financial instruments include cash and cash equivalents, restricted cash and investments,
restricted cash in circulation, trade and other receivables, promissory note receivable, financial assets
at fair value through other comprehensive income, revolving credit facility, trade and other payables
and other liabilities and charges. Non-derivative financial instruments are recognized initially at fair
value, plus any directly attributable transaction costs, except for financial assets at fair value through
profit or loss, whereby any directly attributable transaction costs are expensed as incurred.

Subsequent to initial recognition, non-derivative financial instruments are designated into one of the
following categories and measured as described below:

(i) Financial assets and liabilities at fair value through profit or loss

Financial assets and liabilities at fair value through profit or loss are financial assets or financial liabilities
held for trading. A financial asset is classified in this category if acquired principally for the purpose of
selling in the short term. A financial liability is classified in this category if acquired principally for the
purpose of repurchasing in the short term. Olympia’s derivative financial instruments are designated as
financial assets and liabilities at fair value through profit and loss as they are not designated as hedges
for accounting purposes.

(ii) Financial assets measured at amortized cost

Financial assets measured at amortized cost are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. Financial assets measured at
amortized cost are initially recognized at fair value, including direct and incremental transaction costs.
They are subsequently valued at amortized cost, using the effective interest method where applicable,
less allowances and write-downs for impairment. Assets in this category include restricted cash and

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS| OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT

investments, restricted cash in circulation, trade and other receivables and promissory note receivable.

(iii) Financial assets at fair value through Other Comprehensive Income (“OCI”)

Financial assets at fair value through OCI are non-derivative financial assets that are not categorized
into any of the category described previously. The classification depends on Olympia’s business model
for managing the financial assets and the contractual terms of the cash flows.

Financial assets at fair value through other comprehensive income are initially recognized at fair value,
including direct and incremental transaction costs. They are subsequently recognized at fair value.
Gains and losses arising from changes in fair value are recorded in profit or loss or OCI. For investments
in equity instruments that are not held for trading, this will depend on whether Olympia has made an
irrevocable election at the time of initial recognition to account for the equity investment at Fair Value
Through Other Comprehensive Income (“FVOCI”).

Olympia has elected to recognize its investment in a private issuer at FVOCI.

(iv) Other financial liabilities

Items classified as other financial liabilities on Olympia’s consolidated financial statements are
accounted for at amortized cost using the effective interest method. Any gains or losses in the
realization of other financial liabilities are included in earnings. Olympia’s trade and other payables,
other liabilities and charges, restricted cash in circulation due to bank and revolving credit facility are
designated as other financial liabilities. The fair value and charges approximate their carrying values,
due to the short-term nature of these instruments.

Cash and cash equivalents

Cash and cash equivalents are comprised of cash on hand, non-restricted cash in circulation, interest on
term deposits held with banks and other short-term highly liquid investments with original maturities of
three months or less. Non-restricted cash in circulation refers to the aggregate amount of non-restricted
vault cash (cash in ATM cassettes) plus cash inventory (cash in transit from armoured car carriers).
Cash and cash equivalents are measured at amortized cost, which approximates fair value. Cash and
cash equivalents are reported separately from restricted cash and investments and restricted cash
in circulation.

Recognition and measurement

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSOLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT |

Gains or losses arising from changes in the fair value of the financial assets at fair value through
profit or loss are presented in the statement of net earnings and comprehensive income within the
period in which they arise. When securities classified as Financial Assets at Fair Value through Other
Comprehensive Income are sold or impaired, the accumulated fair value adjustments recognized in
equity are included in the statement of net earnings and comprehensive income as gains and losses.

Impairment of financial assets

Assets carried at amortized cost

At each balance sheet date, Olympia assesses whether there is objective evidence that a financial asset
or group of financial assets is impaired. A financial asset or group of financial assets is impaired and
impairment losses are incurred if, and only if, there is objective evidence of impairment as a result of
one or more events that occurred after the initial recognition of the asset (a loss event), and that loss
event (or events) has an impact on the estimated future cash flows of the financial asset or group of
financial assets that can be reliably estimated.

If a financial asset measured at fair value through OCI or through profit or loss or at amortized cost has
a variable interest rate, the discount rate for measuring any impairment loss is the current effective
interest rate determined under the contract. For practical reasons, Olympia may measure impairment
of an instrument’s fair value using an observable market price. Calculation of the present value of
estimated future cash flows of a collateralized financial asset reflects the cash flows that may result
from foreclosure, less cost for obtaining and selling the collateral, whether or not foreclosure is probable.

Trade receivables are written off when there is no reasonable expectation of recovery. Indicators that
there is no reasonable expectation of recovery include, among others, the failure of a customer to make
contractual payments for a period of greater than 365 days past due, and the value of a customer’s
asset being assessed as close to nil.

Evidence of impairment

The amount of the loss is measured as the difference between the asset’s carrying amount and the
present value of estimated future cash flows (excluding future credit losses) discounted at the financial
asset’s original effective interest rate. The asset’s carrying amount is reduced and the amount of the
loss is recognized in the statement of net earnings and comprehensive income. If a loan or investment
has a variable interest rate, the discount rate for measuring any impairment loss is the current effective
interest rate determined under the contract. For practical reasons, Olympia may measure impairment
on the basis of an instrument’s fair value, using an observable market price.

Offsetting financial instrument

Financial assets and liabilities are offset and the net amount reported in the balance sheet where there
is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net
basis, or realize the asset and settle the liability simultaneously.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS| OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT

Foreign currency exchange forward contracts

Olympia Trust purchases forward contracts when it enters into a transaction to buy or sell foreign
currency in the future. These contracts are in the normal course of business and are used to manage
foreign exchange exposures. Foreign exchange forward contracts are not designated as hedges for
accounting purposes. They are initially recorded at fair value based on Bank of Canada published
rates and subsequently measured at fair value based on published foreign currency curves. They are
recorded in Olympia’s balance sheet as either an asset or liability, with changes in fair value recorded
to net earnings. The estimated fair value of all derivative instruments is based on quoted market prices,
or, in their absence, third-party indications and forecasts. Foreign exchange translation gains and losses
on these instruments are recognized as revenue when the contract is signed.

Revenue recognition

Olympia has six operating segments, of which five are business segments. Revenue is recognized
through these five business segments. The revenue of each business segment is distinctly unique to that
segment. Each business segment in return has revenue streams that originate from different product
and service offerings. Olympia earns interest income and trust income from funds held with financial
institutions and from term deposits and balances held in trust. Interest income and trust income is
recorded on an accrual basis.

(A) Self-Directed Registered Plans division

(i) Account set-up fees

Client set-up fees are recognized upon creation of a client account in Olympia Trust’s records.

(ii) Annual administration fees

Annual fees for maintaining registered plan services are billed once a year. The annual fees are
recognized as deferred revenue and recognized as revenue on a straight-line basis in relation
to Olympia Trust’s expenditure for rendering these services. Where contractual services are
terminated by the customer, the unearned deferred revenue is recognized as revenue.

(iii) Transactional fees

Certain services are provided and billed on an ongoing basis. Such fees are recognized when
services are rendered.

(B) Private Health Services Plan division

(i) Travel medical benefit insurance brokerage fees

Commissions earned on the selling of short-term medical insurance are recognized in full, on the
basis that no underwriting risks remain with OBI.

(ii) Monthly fees

Certain services are provided and billed on an ongoing monthly basis. Such fees are recognized
monthly at the time of billing, subsequent to the completion of services.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSOLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT |

(iii) Life insurance brokerage fees

Commissions earned on the selling of long-term insurance related products are recognized in full,
on the basis that no underwriting risks remain with OBI.

(iv) Annual health spending account fees (“HSA fees”)

Fees for maintaining health spending accounts are billed annually. The annual fees are recognized
as deferred revenue and recognized as revenue on a straight-line basis in relation to OBI rendering
these services. Where contractual services are terminated by the customer, the unearned deferred
revenue is recognized as revenue.

(i) Trading profits and losses

Trading profits and losses from spot trading are recognized at the time the trade transaction settles.
Transaction fees and trading profits for foreign currency exchange services and transactions are
recognized at the time the transaction is entered into.

(ii) Unrealized profits and losses

Unrealized profits and losses in foreign exchange forward contracts are recognized on a net basis
at each period end, are measured at fair value and are recorded in the consolidated statement of
net earnings and comprehensive income as other gains, net.

(D) Exempt Edge division

(i) Onboarding fees

Client set-up fees are recognized upon creation of a client account in EEI’s records.

(ii) Non-contractual service maintenance fee

Certain services are provided and billed on an ongoing basis. Such fees are recognized at the time
services are rendered.

(E) Corporate and Shareholder Services division

(i) Annual administrative fees

Certain services are invoiced on an annual basis. Such fees are levied once a year on the contract
anniversary date. The annual fees are recognized as deferred revenue and recognized as revenue
on a straight-line basis in relation to service terms performed by Olympia Trust. Where contractual
services are terminated, the unearned deferred revenue is recognized as revenue.

(ii) Monthly program fees

Certain services are invoiced on a monthly basis over a one-year period. These fees are
recognized monthly.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS| OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT

(iii) Monthly basic fees

Certain services are provided and billed on an ongoing monthly basis. Such fees are recognized
monthly at the time of billing.

Finance costs

Finance costs comprise interest expense on borrowings from credit facilities, accrual of differences
between amounts advanced and the principal repayable (i.e. discounted obligations) and impairment
losses recognized on financial assets. Borrowing costs that are not directly attributable to the
acquisition, construction or production of a qualifying asset are recognized in profit or loss using the
effective interest method.

Common shares

Common shares are classified as equity. Incremental costs directly attributable to the issue of common
shares and share options are recognized as a deduction from equity, net of any tax effects. When
Olympia repurchases its own common shares, share capital is reduced by the average carrying value of
the shares purchased. The excess of the purchase price over the average carrying value is recognised
as a deduction from retained earnings. Shares are cancelled upon repurchase.

Restricted cash and investments

Restricted cash and investments are not readily accessible for use in operations and are reported
separately from cash and cash equivalents on the balance sheet. Restricted cash and investments
consist of a restricted bond investment, which is held as collateral securing Olympia Trust’s foreign
exchange trading platform.

Restricted cash in circulation

Restricted cash in circulation was not readily available for use except for use in Olympia’s ATMs.
Olympia paid a fee for using this cash based on the total amount of cash outstanding at any given
time, as well as a fee related to the bundling and preparation of such cash prior to it being loaded in the
ATMs. Beneficial risk and rewards of ownership of the cash was retained by Olympia, as Olympia had
access and rights to the cash and bore the risk in the case of loss. The cash in circulation and the related
obligation due to the bank, are presented separately.

Provisions and contingencies

Provisions are recognized for present obligations arising as a consequence of past events where it is more
likely than not that a transfer of economic benefit will be necessary to settle the obligation and it can be
reliably estimated. Provisions are determined by discounting the expected future cash flows at a pre-tax
rate that reflects current market assessment of the time value of money and the risks specific to the
liability. The unwinding of the discount is recognized as a finance cost. Contingent liabilities are possible
obligations whose existence will be confirmed only by uncertain future events or present obligations
where the transfer of economic benefit is uncertain or cannot be reliably measured. Contingent liabilities
are not recognized, but are disclosed unless they are remote.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSOLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT |

Employee benefits

(i) Short-term employee benefits

Wages, salaries, employment insurance premiums, Canada Pension Plan contributions, paid
annual leave and sick leave, bonuses, profit sharing and non-monetary benefits are accrued
for pursuant to contractual arrangements and in accordance with the nature of the constructive
benefits Olympia provides in addition to remuneration upon an employee joining or in the year
in which the associated services are rendered by employees of Olympia. The accruals of such
constructive benefits are derecognized pursuant to the contractual arrangements and in
accordance with the nature of constructive benefits when employee services terminate or as
provided for in employee contracts.

(ii) Other long-term employee benefits

All employees are entitled to long-term service monetary awards based on the number of years of
service with Olympia. Olympia recognizes long service award obligations on a straight-line basis in
accordance with the number of completed years of service and in accordance with the qualifying
criteria attached to having earned these awards. The award expense is therefore accrued and
recognized in profit or loss based on completed years of services.

Taxation

(i) Taxation and deferred taxation

Taxes, including deferred taxes, are income tax payable on taxable profits (tax reporting), and
are recognized as an expense in the period in which the profits arise. Deferred income tax on tax
allowable losses is recognized as an asset only to the extent that it is regarded as probable that
taxable profit or tax planning opportunities will be available in the future against which the unused
tax losses can be utilized before they expire. Deferred income tax is provided in full, using the
liability method, on temporary differences arising from the differences between the tax basis of
assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred
income tax is determined using tax rates and legislation enacted or substantively enacted by the
balance sheet date that is expected to apply when the deferred tax asset is realized or the deferred
tax liability is settled. Deferred and current tax assets and liabilities are only offset when they arise
in the same tax reporting group and where there is both the legal right and the intention to settle
on a net basis or to realize the asset and settle the liability simultaneously.

(ii) Investment tax credits

Certain expenditures qualify for Investment Tax Credits (“ITCs”) pursuant to the Scientific Research
and Experimental Development program, which is a federal tax incentive program to encourage
Canadian businesses of all sizes and in all sectors to conduct research and development in Canada
that will lead to new, improved, or technologically advanced products or processes. Based on
this, Olympia could be entitled to ITCs on certain research and experimental development costs
incurred, which currently consist of internally generated software.

Refundable cash credits stemming from the ITCs is in respect of credits recognized in prior years
when there is reasonable assurance of their recovery using the cost reduction method. ITCs are

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS| OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT

subject to assessment and approval by the CRA. Adjustments required, if any, are reflected in the
year when such assessments are received. Investment tax credits and other cost recoveries related
to computer and equipment and intangible assets are credited against the book value of such
assets and the credit is released to income on a straight-line basis as a reduction of depreciation
or amortization expense over the previously mentioned estimated useful economic lives of the
relevant assets.

Leases

Agreements under which payments are made to owners in return for the right to use an asset for a
period are accounted for as leases. A lease is classified as a finance lease if it transfers substantially all
the risks and rewards incidental to ownership. A lease is classified as an operating lease if it does not
transfer substantially all the risks and rewards incidental to ownership. At the commencement of the
lease term, finance leases are recognized as assets and liabilities at amounts equal to the fair value of
the leased property or, if lower, the present value of the minimum lease payments, each determined
at the inception of the lease. The discount rate to be used in calculating the present value of the
minimum lease payments is the interest rate implicit in the lease, if this is practicable to determine;
if not, the incremental borrowing rate is used. Failing that, the cost-of-equity rate is used. Any initial
direct costs attached to the lease are added to the amount recognized as an asset. Lease payments
under an operating lease are recognized as an expense on a straight-line basis over the lease term
unless another systematic basis is more representative of the time pattern of the lease benefit. Lease
incentives received are recognized as an integral part of the total lease expense over the term of the
lease. Contingent rents, in respect of operating leases, are charged as expenses to profit and loss in the
periods in which they are incurred.

Related parties

Olympia enters into transactions with related parties, including key management compensation, in
the normal course of business, except as otherwise noted in Note 33. Related party transactions are
recognized at the exchange amount. Olympia considers the following as related parties:

• Directors, president, vice presidents and key management personnel (and post-employment benefit

plans where applicable);

• Associated entities;

• An entity controlled, jointly controlled or significantly being influenced by any of the aforementioned;

and

• Children, spouses or dependents related to any of the aforementioned persons or entities.

Earnings per share (“EPS”)

The calculation of basic earnings per share is based on net earnings attributable to shareholders of
Olympia divided by the weighted average number of common shares outstanding during the period.
For the calculation of diluted EPS, the weighted average number of common shares is the same as for
basic EPS, with the addition of the weighted average number of common shares that would be issued on
conversion of all the dilutive potential common shares. Dilutive potential common shares are deemed
to have been converted at the start of the period or at the date of their issue, if later. The number of

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSOLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT |

common shares that would be issued on conversion of dilutive potential common shares is determined
from their terms of conversion. Where the terms could vary, it is deemed that they would be exercised
at the rate or exercise price that would be most advantageous to the holder of such potentially dilutive
common shares.

Dividends

Dividends on common shares are recognized in equity in the period in which they are declared or
approved by Olympia’s Board of Directors.

Changes in accounting policies

A number of new amended standards became applicable on January 1, 2018, and Olympia had to
change its accounting policies and/or make retrospective adjustments as a result of adopting the
following standards:

• IFRS 9 “Financial Instruments”

• IFRS 15 “Revenue from Contracts with Customers”

Policies prior to January 1, 2018

Financial instruments

Olympia’s financial instruments, included in the consolidated balance sheets are comprised of cash and
cash equivalents, restricted cash and investments, restricted cash in circulation, cash in circulation due
to bank, trade and other receivables, derivative financial instruments, available for sale investments,
trade and other payables, revolving credit facility and other liabilities and charges. A derivative is a
financial instrument whose value changes in response to a specified variable, requires little or no net
investment and is settled at a future date. An embedded derivative is a derivative that is a part of a non-
derivative contract and not directly related to that contract. Under this standard, embedded derivatives
must be accounted for as a separate financial instrument. A non-financial derivative is a contract that
can be settled net in cash or by other financial instruments. Olympia does not apply hedge accounting
to the derivative financial instruments. Non-derivative financial instruments include cash and cash
equivalents, restricted cash and investments, restricted cash in circulation, trade and other receivables,
available for sale investments, revolving credit facility, trade and other payables, and other liabilities
and charges. Non-derivative financial instruments are recognized initially at fair value, plus any directly
attributable transaction costs, except for financial assets at fair value through profit or loss, whereby
any directly attributable transaction costs are expensed as incurred. Subsequent to initial recognition,
non-derivative financial instruments are designated into one of the following categories and measured
as described below:

(i)

Financial assets and liabilities

Financial assets and liabilities at fair value through profit or loss are financial assets or financial
liabilities held for trading. A financial asset is classified in this category if acquired principally for
the purpose of selling in the short term. A financial liability is classified in this category if acquired
principally for the purpose of repurchasing in the short term. Olympia’s derivative financial
instruments are designated as financial assets and liabilities at fair value through profit and loss as
they are not designated as hedges for accounting purposes.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS| OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT

(ii) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments
that are not quoted in an active market and which are not classified as available for sale. Loans
and receivables are initially recognized at fair value, including direct and incremental transaction
costs. They are subsequently valued at amortized cost, using the effective interest method where
applicable, less allowances and write-downs for impairment. Assets in this category include
restricted cash and investments, restricted cash in circulation and trade and other receivables, the
fair value of which approximates its carrying amount due to its short-term maturity.

(iii) Held-to-maturity

Held-to-maturity investments are non-derivative financial assets with fixed or determinable
payments that Olympia’s management has the intention and ability to hold to maturity. They
are initially recognized at fair value, including direct and incremental transaction costs. They are
subsequently valued at amortized cost, using the effective interest method where applicable.
Olympia has no held-to-maturity investments.

(iv) Available for sale financial assets

Available for sale assets are non-derivative financial assets that are designated as available for
sale and are not categorized into any of the other categories previously described. They are initially
recognized at fair value, including direct and incremental transaction costs. They are subsequently
recognized at fair value. Gains and losses arising from changes in fair value are included as a
separate component of equity until sale, when the cumulative gain or loss is transferred to the
statement of net earnings and comprehensive income. Interest is determined using the effective
interest method, and impairment losses and translation differences on monetary items are
recognized in the statement of net earnings and comprehensive income. Available for sale
investment represents Olympia’s investment in securities of a private issuer.

(v)

Other financial liabilities

Items classified as other financial liabilities on Olympia’s consolidated financial statements are
accounted for at amortized cost using the effective interest method. Any gains or losses in the
realization of other financial liabilities are included in earnings. Olympia’s trade and other payables,
other liabilities and charges, restricted cash in circulation due to bank and revolving credit facility
are designated as other financial liabilities. The fair value and charges approximate their carrying
values, due to the short-term nature of these instruments.

Cash and cash equivalents

Cash and cash equivalents are comprised of cash on hand, non-restricted cash in circulation, term
deposits held with banks and other short-term highly liquid investments with original maturities of
three months or less. Non-restricted cash in circulation refers to the aggregate amount of non-restricted
vault cash (cash in ATM cassettes) plus cash inventory (cash in transit from armoured car carriers).
Cash and cash equivalents are measured at amortized cost, which approximates fair value. Cash and
cash equivalents are reported separately from restricted cash and investments and restricted cash
in circulation.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSOLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT |

Recognition and measurement

Regular purchases and sales of financial assets are recognized on the trade date on which Olympia
commits to purchase or sell the asset. Investments are initially recognized at fair value plus transaction
costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair
value through profit or loss are initially recognized at fair value and transaction costs are expensed in
the statement of net earnings and comprehensive income. Financial assets are derecognized when the
rights to receive cash flows from the investments have expired or have been transferred and Olympia
has substantially transferred all risks and rewards of ownership. Available for sale financial assets and
financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and
receivables are subsequently carried at amortized cost using the effective interest method. Gains or
losses arising from changes in the fair value of the financial assets at fair value through profit or loss are
presented in the statement of net earnings and comprehensive income within the period in which they
arise. When securities classified as available for sale are sold or impaired, the accumulated fair value
adjustments recognized in equity are included in the statement of net earnings and comprehensive
income as gains and losses.

The impact of the adoption of these standards and the new accounting policies are disclosed below.

IFRS 9 “Financial instruments” - impact of adoption

Trade receivables

Olympia applies the IFRS 9 simplified approach to measuring Expected Credit Losses (“ECL”), which
uses a lifetime expected loss allowance for all trade and other receivables. Olympia holds trade
receivables that do not have a significant financing component. To determine the amount of the ECL to
be recognized in the financial statements, Olympia has set up a provision matrix based on its historically
observed default rates. Olympia adjusts the matrix for forward-looking estimates and has established
that the expected credit loss should be calculated as follows:

• less than 90 days: nominal;

• more than 90 days but less than two years past due: 20% of carrying value;

• more than two years but less than three years past due: 65% of carrying value; and

• three or more years past due: 100% of carrying value.

Trade receivables are written off when there is no reasonable expectation of recovery. Indicators that
there is no reasonable expectation of recovery include, among others, the failure of a customer to make
contractual payments for a period of greater than 365 days past due, and the value of a customer’s
asset being assessed as nominal.

The loss allowances for trade receivables as at December 31, 2017, remain consistent with the reported
consolidated financial statements for the year ended December 31, 2017.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS| OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT

Classification

As of January 1, 2018, Olympia classifies its financial assets in the following measurement categories:

• those to be measured subsequently at fair value (either through Other Comprehensive Income [“OCI”]

or through profit or loss); and

• those to be measured at amortised cost.

The classification depends on Olympia’s business model for managing the financial assets and the
contractual terms of the cash flows.

For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI. For
investments in equity instruments that are not held for trading, this will depend on whether Olympia
has made an irrevocable election at the time of initial recognition to account for the equity investment
at Fair Value Through Other Comprehensive Income (“FVOCI”).

Olympia has elected to recognize its investment in a private issuer at FVOCI. The investment in the
private issuer was previously recognized as available for sale in accordance with IAS 39.

Measurement

At initial recognition, Olympia measures a financial asset at its fair value plus, in the case of a financial
asset not at Fair Value Through Profit or Loss (“FVPL”), transaction costs that are directly attributable to
the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed
in profit or loss.

Financial assets with embedded derivatives are considered in their entirety when determining whether
their cash flows are solely payment of principal and interest.

IFRS 9 did not have any impact on Olympia’s measurement of financial instruments and did not require
retrospective adjustments.

IFRS 15 “Revenue from Contracts with Customers”

Effective January 1, 2018, Olympia adopted IFRS 15, “Revenue From Contracts With Customers”
(“IFRS 15”) replacing IAS 11, “Construction Contracts,” IAS 18, “Revenue” and several revenue-related
interpretations. Olympia adopted IFRS 15 using the modified retrospective with cumulative effect
approach, and applied the following practical expedients:

• Electing to apply the standard retrospectively only to contracts that were not completed contracts on

January 1, 2018; and

• For modified contracts, evaluating the original contract together with any contract modifications at

the date of initial application.

IFRS 15 did not have any impact on Olympia’s accounting policies and did not require retrospective
adjustments.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSOLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT |

4. FUTURE ACCOUNTING PRONOUNCEMENTS

A number of new standards and amendments to standards and interpretations are effective for annual
periods beginning after January 1, 2019, and have not been applied in preparing these consolidated
financial statements.

On January 13, 2016, the IASB published IFRS 16, “Leases” (“IFRS 16”) replacing IAS 17, “Leases.” IFRS 16
now requires lessees to recognize a lease liability reflecting future lease payments and a “right-of-use
asset” for virtually all lease contracts. The IASB has included an optional exemption for certain short-
term leases and leases of low-value assets; however, this exemption can only be applied by lessees.
For lessors, the IASB has updated the guidance on the definition of a lease (as well as the guidance
on the combination and separation of contracts). The new standard will affect both the balance sheet
and related ratios, such as debt/equity ratio, and may result in a significant increase in debt on the
balance sheet. IFRS 16 is effective for annual reporting periods beginning on or after January 1, 2019.
Earlier application is permitted, but only in conjunction with IFRS 15, “Revenue from Contracts with
Customers.” On adoption of IFRS 16, Olympia will recognise a lease liability and a right of use asset
primarily as it relates to its office space. The financial impact on the consolidated financial statements
is still being evaluated.

5. DISCONTINUED OPERATIONS

On June 5, 2018, Olympia announced the sale of substantially all the assets of its wholly owned
subsidiary, Olympia ATM. Olympia ATM entered into an agreement with Tarman ATM Inc. (“Tarman”),
a company owned and controlled by Olympia’s president and Chief Executive Officer (“CEO”). The sale
closed on August 3, 2018, with an effective date of July 1, 2018.

The purchase price paid by Tarman was equal to the aggregate net book value of the assets used by the
ATM division. The assets’ book value at June 5, 2018, was estimated to be $1.40 million. The purchase
price was paid by the delivery of a secured demand promissory note (the “promissory note”) for
$1.40 million by Tarman. The outstanding principal amount of the promissory note bears interest at
prime plus 0.25%. All interest accrued under the promissory note shall be paid on an annual basis
on or before the 30th day of June of each calendar year. Subject to Canadian Western Bank’s consent
(as discussed below), commencing June 30, 2020, Tarman is required to repay the outstanding principal
amount of the promissory note in annual installments of $140,000 on or before the 30th day of June
of each calendar year, with the outstanding balance of the principal amount to be repaid in full on or
before June 30, 2023.

In connection with the financing of the vault cash used by Tarman, Olympia agreed to postpone to
Canadian Western Bank (“CWB”) the receipt of all amounts owed to it by Tarman and is required to
obtain CWB’s consent prior to accepting any amount from Tarman. Olympia also agreed to subordinate
to CWB all security interests granted to Olympia by Tarman.

Olympia has assessed the expected credit loss as it relates to the promissory note and has determined
it to be nominal.

For the year ended December 31, 2018, interest of $28,539 has accrued.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS| OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT

Assets sold consist of the following:

Assets

Equipment and other

Intangible assets

Accounts receivable

Prepaid expenses

Inventory

Results from discontinued operations:

Results from discontinued operations

Revenue

Service revenue

Interest

Expenses

Direct expenses

Administrative expenses

Depreciation and amortization

Other losses, net

Loss before income tax

Deferred tax recovery

Total income tax recovery

Net loss and comprehensive loss from
discontinued operations

August 3, 2018

915,645

76,027

200,999

32,273

137,455

1,362,399

YEAR ENDED

December 31,
2018

December 31,
2017

$ 1,520,597

$ 3,073,901

36,633

16,637

1,557,230

3,090,538

990,432

2,355,093

907,213

187,076

1,800

1,666,829

407,964

60,500

2,086,521

4,490,386

(529,291 )

(1,399,848 )

141,269

374,236

$ (388,022 )

$ (1,025,612 )

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSOLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT |

Cash flows from discontinued operations included in the consolidated statements of cash flows are as
follows:

YEAR ENDED DECEMBER 31

Cash flows from operating activities

Net loss

Items not affecting cash

Depreciation of equipment & other

Amortization of intangible assets

Loss on disposal of assets

Other

Deferred income taxes recovery

Changes in non-cash working capital balances

Net cash used in operating activities

Cash flows from investing activities

Purchase of equipment & other

Proceeds from sale of equipment & other

Net cash used in investing activities

Cash flows from financing activities

Cash in circulation due to bank

Loan (repaid)/from Olympia Financial Group Inc.

Net cash (used)/from financing activities

Net change in cash position

Cash, beginning of year

Cash, end of year

Cash is represented by:

Cash & cash equivalents

Restricted cash & restricted cash in circulation (note 12)

2018

2017

$ (388,022 )

$ (1,025,612 )

171,718

15,358

1,800

4,677

(141,269 )

(301,554 )

(637,292 )

326,046

81,917

60,500

(374,236 )

302,604

(628,781 )

(296,293 )

76,354

(219,939 )

(3,823,110 )

(1,296,810 )

(325,000 )

2,172,243

(4,148,110 )

(4,785,402 )

875,433

26,713

4,874,226

5,660,600

88,824

$ 5,687,313

88,824

$ 1,864,203

3,823,110

88,824

$ 5,687,313

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS| OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT

6. FUNDS IN TRUST

Self-Directed Registered Plans division (“RRSP”)

At December 31, 2018, RRSP administered self-directed registered plans consisting of private company
securities and mortgages with a cost value of $4.14 billion (December 31, 2017 – $4.09 billion)
plus cash, public securities, term deposits and outstanding cheques with an estimated fair value of
$530.24 million (December 31, 2017 – $535.35 million). These assets are the property of the account
holders and Olympia Trust does not maintain effective control over the assets. Therefore, the assets are
not reflected in these consolidated financial statements. Olympia earned trust income from funds held
in trust of $10.28 million for the year ended December 31, 2018 (December 31, 2017 - $7.81 million).

Private Health Services Plan division (“Health”)

At December 31, 2018, Health held funds in trust of $11.02 million (December 31, 2017 - $10.12 million)
on behalf of its self-insured private health clients. These assets are the property of the plan holders and
OBI does not maintain effective control over the assets. Therefore, the assets are not reflected in these
consolidated financial statements.

Foreign Exchange division (“FX”)

At December 31, 2018, FX held funds in trust of $1.22 million (December 31, 2017 – $5.31 million) for
clients who have paid margin requirements on forward foreign exchange contracts and $5.06 million
(December 31, 2017 - $13.59 million) of outstanding payments. These assets are the property of the
contract holders and Olympia Trust does not maintain effective control over the assets. Therefore, the
assets are not reflected in these consolidated financial statements.

7. FINANCIAL INSTRUMENTS AND FINANCIAL RISK FACTORS

Fair value of financial instruments

The fair value of cash and cash equivalents, restricted cash and investments, restricted cash in circulation
and cash in circulation due to the bank, trade and other receivables, promissory note receivable, trade
and other payables, revolving credit facility and other liabilities and charges approximate their carrying
amounts. Derivative financial instruments are measured at fair value through profit or loss. The fair
value of all forward foreign exchange contracts is based on current bid prices for their respective terms
to maturity in an active market.

Risks associated with financial instruments

Olympia is exposed to financial risks arising from normal course business operations and its financial
assets and liabilities. The financial risks include liquidity risk and market risk relating to foreign currency
exchange rates, interest rates and credit risk.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSOLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT |

(i) Liquidity risk

Liquidity risk is the risk that Olympia will encounter difficulties in meeting its financial obligations.
Olympia manages its liquidity risk by keeping surplus cash in liquid investments with a highly rated
financial institution. This allows Olympia to earn interest on surplus cash while having access to it
within a very short time.

The timing of cash outflows is outlined in the following tables:

At December 31, 2018

Current 31 to 60 days

61 to 90 days Over 90 days

Total

Trade and other payables

1,341,291

Other liabilities and charges(1)

1,259,435

Total

$ 2,600,726

- $

601

1,341,892

1,259,435

- $

601

$ 2,601,327

At December 31, 2017

Current 31 to 60 days

61 to 90 days Over 90 days

Total

Trade and other payables

1,251,312

16,033

10,799

- $

1,278,144

Other liabilities and charges(1)

Cash in circulation due to bank

1,356,208

3,823,110

1,356,208

3,823,110

Total

$ 6,430,630

16,033

10,799

- $ 6,457,462

At December 31, 2018, trade and other payables totaled $1.34 million (December 31, 2017 - $1.28
million). Olympia continues to meet all of the obligations associated with its financial liabilities.

The liquidity risk relating to derivative financial instruments payable is outlined in the table below:

Current

31 to 60 days

61 to 90 days

Over 90 days

Non-current (1-3 years)

December 31,
2018

December 31,
2017

15,210

501,075

19,473

16,849

539,665

565,106

108,948

6,190,190

160,480

$ 7,796,036

- $

543,073

The previous table presents the expected maturity dates of the foreign exchange contracts.

Liquidity risk is associated with Olympia’s credit facility. The credit facility is available to finance
day-to-day operations to a maximum principal amount of $8.50 million (December 31, 2017 -
$8.50 million) and bears interest at the Canadian prime rate plus 0.25%. For the year ended
December 31, 2018, a balance of $4.21 million is outstanding (December 31, 2017 - $4.81 million).
Olympia has determined the principal and interest to be current.

Security for the credit facility includes a general security agreement providing a first security
interest in all present and after acquired property.

(1) Other liabilities and charges excludes leasehold inducement, straight-line rent and onerous

contract obligation.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS| OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT

(ii) Market risk

Market risk is the risk that the fair value of future cash flows of financial instruments will fluctuate
because of changes in market prices and is composed of the following:

Foreign currency exchange risk

Olympia is exposed to changes in foreign exchange rates when, and if, revenues or financial
instruments fluctuate because of changing rates. Transactions in the applicable financial market
are executed consistent with established risk management policies. Olympia purchases forward
contracts whenever it enters into a transaction to buy or sell foreign currency in the future.
These contracts are both short term and long term in nature and are in the normal course of
business. Management understands that the currency markets are volatile and therefore subject
to higher risk.

Olympia applies the following policy to mitigate the currency risk:

• For forward contracts, a margin of 5% is payable on signature of the contract;

• Olympia sets up a corresponding position with its currency supplier; and

• If market rates vary by 4% or more, the client is required to adjust their margin to match the

variance by the end of the trading day.

Olympia’s FX division maintains various foreign currency bank accounts of which Canadian
dollar and United States dollar bank accounts are the most significant. It is Olympia Trust’s policy
to limit the amount of foreign currencies on hand to $1.25 million to reduce exposure to foreign
currency risk.

If the United States dollar to Canadian dollar exchange rate at December 31, 2018, were to have
increased by $0.10, it is estimated that Olympia’s after-tax earnings for the year ended December
31, 2018, would have decreased by approximately $91,464 (December 31, 2017 - $118,792).
A $0.10 decrease in the United States dollar to Canadian dollar exchange rate would have had an
equal but opposite effect. The vast majority of Olympia’s Foreign Exchange division’s trades are
Canadian dollars traded for United States dollars and vice versa, although it trades in various other
currencies. This sensitivity analysis assumes that all other variables remain constant.

Interest rate risk

Interest rate risk is the risk that the value of a financial instrument will fluctuate because of changes
in market interest rates. Olympia is exposed to interest rate risk as the cash flows generated
from interest bearing instruments fluctuate in response to changes in market interest rates. The
primary exposure is related to cash balances and fixed term deposits.

If the interest rates were to have increased by 1%, it is estimated that Olympia’s after-tax earnings
for the year ended December 31, 2018, would have increased by approximately $3.76 million
(December 31, 2017 - $3.94 million). A 1% decrease in interest rates would have had an equal but
opposite effect. This sensitivity analysis assumes that all other variables remain constant.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSOLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT |

Credit risk

Credit risk is the risk that the counterparty to a financial asset will default, resulting in Olympia
incurring a financial loss. Before material transactions begin with a new counterparty, the
counterparty’s creditworthiness is assessed by the FX division. The assessment practice considers
both quantitative and qualitative factors. Olympia constantly monitors the exposure to any single
customer or counterparty along with the financial position of the customer or counterparty. If it
is deemed that a customer or counterparty has become materially weaker, Olympia will work to
reduce the credit exposure and lower the credit limit allocated. Olympia is exposed to credit risk on
its cash and cash equivalents, restricted cash and investments, restricted cash in circulation, trade
and other receivables, promissory note receivable and derivative financial instruments receivable.
The maximum exposure to credit risk of Olympia at the end of the year is the carrying value of cash
and cash equivalents, restricted cash and investments, restricted cash in circulation, trade and
other receivables, promissory note receivable and derivative financial instruments receivable.

• Cash and cash equivalents

Olympia mitigates its exposure to credit risk by maintaining its bank accounts with a highly rated
financial institution.

• Restricted cash and investments and restricted cash in circulation

Olympia limits its counterparty credit risk on these assets by dealing with reputable counterparties
and assessing their credit ratings via the services of an independent ratings agency. The Treasury
bond held for collateral is “AAA” rated.

• Trade and other receivables

Olympia has policies and procedures in place to govern the credit risk it will assume. Trade
receivables over 90 days are considered past due. As of December 31, 2018, net trade receivables
of $2.04 million (December 31, 2017 - $0.62 million) were past due but deemed not impaired.
The increase in trade receivables is mainly due to one time fees charged in connection with the
restructuring of an exempt market issuer.

Included in trade and other receivables at December 31, 2017, was a $0.12 million demand loan to
Tarman, a company controlled by the president and CEO of Olympia. The loan was fully repaid in
the first quarter of 2018.

The balance relates to a number of independent clients which Olympia is actively pursuing through
its internal collection process. As a result, management considers the outstanding amounts to
be recoverable.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS| OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT

The aging of these receivables is as follows:

Current

31 to 60 days

61 to 90 days

Over 90 days

Allowance for doubtful accounts

December 31,
2018

December 31,
2017

196,911

753,939

12,657

24,234

15,579

28,407

2,609,598

1,229,256

(571,363 )

(613,822 )

$ 2,272,037

1,413,359

The allowance for doubtful accounts is based on an account portfolio analysis.

Movements on Olympia’s provision for impairment of trade receivables are as follows:

At January 1

Increase in provision

Receivables written off

Allowance for doubtful accounts

December 31,
2018

December 31,
2017

613,822

244,154

269,437

(311,896 )

616,733

(247,065 )

571,363

613,822

The provision for impaired receivables has been included in administrative expenses in
the consolidated statements of net earnings and comprehensive income. Amounts charged to
the allowance account are generally written off when there is no expectation of recovering
additional cash.

Olympia has set up a provision matrix based on its historically observed default rates. Olympia
adjusts the matrix for forward-looking estimates. The allowance has been calculated based on the
provision matrix. The expected credit loss is as follows:

• less than 90 days: nil;

• more than 90 days but less than two years past due: $191,484 ;

• more than two years but less than three years past due: $189,692; and

• three or more years past due: $34,734.

Derivative financial instruments receivable

The expected maturity relating to derivative financial instruments receivable and foreign exchange
contracts is outlined in the table below. The receivables can all be offset with one counterparty:

Current

31 to 60 days

61 to 90 days

Over 90 days

Non-current (1-3 years)

December 31,
2018

December 31,
2017

17,926

572,398

30,960

45,029

312,167

648,240

636,671

7,379,625

$ 406,082

$ 9,236,934

- $

729,459

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSOLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT |

(iii) Capital risk management

Olympia’s objectives when managing capital are to safeguard Olympia’s ability to continue
as a going concern in order to provide returns and benefits to shareholders and to maintain an
optimal capital structure to reduce the cost of capital and to meet minimum regulatory capital
requirements. In order to maintain or adjust the capital structure, Olympia may adjust the amount
of dividends paid to shareholders, return capital to shareholders, issue new shares, repurchase
shares, sell assets or make further use of its credit facility.

Olympia includes shareholders’ equity of $15.19 million (December 31, 2017 - $11.02 million) in
the definition of capital. Shareholders’ equity comprises share capital, contributed surplus and
retained earnings.

Olympia’s main objectives when managing its capital structure are to:
• Maintain sufficient cash and cash equivalents over the short and medium term in order to finance

its growth and development, including capital expenditures;

• Maintain investor and creditor confidence to sustain future development of the business.
Olympia’s objective when managing capital is to maintain adequate financial flexibility to
preserve its ability to meet financial obligations. In managing capital, Olympia estimates its
future dividend payments and capital expenditures, which is compared to planned business
growth for purposes of sustainability;

• Maintain regulatory capital for Olympia Trust as required by the Loan and Trust Corporations Act
(Alberta) ($2.00 million). Similar regulatory capital is required by legislation in Nova Scotia
($5.00 million). Regulatory capital is defined as share capital and retained earnings. Olympia
Trust has maintained these minimum capital requirements throughout the year ended December
31, 2018; and

• Maintain compliance with financial covenants. The financial covenants are reviewed regularly,
and controls are in place to maintain compliance with the covenants. Olympia complied with its
financial covenants for the year ended December 31, 2018.

The capital structure of Olympia is managed and adjusted to reflect changes in economic
conditions. Capital structure adjustments could include adjusting the level of dividends and/or
issuance or repurchase of common shares. In support thereof, management reviews the financial
position of Olympia on a monthly and cumulative basis. Financing decisions are set based on
the timing and extent of expected operating and capital cash outlays. Factors considered when
determining capital and the amount of operational cash requirements are weighed against the
costs associated with excess cash, its terms and availability and whether to issue equity. Olympia
works towards managing its capital objectives to the extent possible while facing the challenges
of market conditions and the public’s assessment of Olympia’s risk profile. Olympia’s capital
management objectives have remained substantively unchanged over the periods presented.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS| OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT

8. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME

Investment in private issuer

December 31,
2018

December 31,
2017

43,714

48,932

The financial assets at fair value through other comprehensive income investments represents
Olympia’s investment in securities of a private issuer.

The investment in the private issuer is recorded at the estimated fair value and is categorized as
Level 3 of the fair value hierarchy.

The three levels of fair value hierarchy are:

Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities

Level 2 – Inputs other than quoted prices that are observable for assets or liabilities,

either directly or indirectly

Level 3 – Inputs that are not based on observable market data

For the year ended December 31, 2018, there were no transfers between Level 2 and Level 3 fair value.

The following table presents Olympia’s financial assets at fair value through other comprehensive
income measured at fair value and categorized by level according to the significance of the inputs used
in making these measurements:

Recurring measurements

Investment in private issuer

Recurring measurements

Investment in private issuer

December 31,
2018

Level 1

Level 2

Level 3

43,714

- $

43,714

December 31,
2017

Level 1

Level 2

Level 3

48,932

- $

48,932

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSOLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT |

9. OPERATING SEGMENTS

Olympia has six operating segments, of which five are business segments and offer different products
and services and are managed separately because they require different technology and marketing
strategies. The ATM division is classified as a discontinued operation and its results from operation are
shown in Note 5. The Corporate division is a cost centre and earns incidental revenue. For each of the
divisions, Olympia’s president, chief financial officer and other executive management review internal
management reports on a monthly basis.

Segment profit/(loss) is used to measure performance. Olympia’s president and other executive
management believe that such information is the most relevant in evaluating the results of certain
segments relative to other entities that operate within these industries. Inter-segmental transactions
consist mainly of cost recoveries, which are recognized at cost. In addition, reportable segments
are managed on a functional basis through regular reporting to the president and other executive
management.

Olympia does not disclose a measure of segment assets, because the president and other executive
management do not use this information to assess performance and allocate resources. Olympia
reports net earnings/(loss) information for all operating segments to the president and other executive
management. All other assets and liabilities are reported on a consolidated basis. Costs are allocated
to segments based on usage.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS| OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT

Net operations 2018

Health

RRSP

EEI

CSS

Corporate

Total

Service revenue

$ 7,958,937

$ 20,004,171

$ 9,921,513

518,257

194,370

$ 38,597,248

Interest revenue
and trust income

234,441

10,694,190

207,096

767

Direct expenses

(1,801,294 )

(36,085 )

(1,108,870 )

(165,826 )

6,392,084

30,662,276

9,019,739

353,198

295,839

11,432,333

(3,112,075 )

490,209

46,917,506

Administrative
expenses

Depreciation and
amortization

Other (losses)/
gains, net (note 26)

Earnings/(loss)
before income
taxes
Income taxes
(expense)/recovery(1)

(3,745,167 )

(19,951,246)

(6,176,542 )

(742,736 )

(257,476 )

(277,722 )

(31,150,889 )

(75,218 )

(514,300 )

(80,151 )

(74,709 )

(780 )

(1,809 )

(746,967 )

(2,064 )

(54,440 )

(1,384,262 )

10,150

(1,430,616 )

2,569,635

10,142,290

1,378,784

(464,247)

(258,256 )

220,828

13,589,034

(657,930 )

(2,694,538 )

(366,306 )

136,212

68,612

(172,870 )

(3,686,820 )

Net earnings/(loss)

1,911,705

$ 7,447,752

$ 1,012,478

$ (328,035 )

$ (189,644 )

47,958

$ 9,902,214

Service revenue per segment 2018

Account set-up fees
and onboarding
fees
Annual
administration fee
and Annual Health
spending account
fees
Monthly and
transaction fees

Trading profits
and losses
Travel and life
insurance
brokerage fees
Other

Health

RRSP

EEI

CSS

Corporate

Total

$ 469,700

207,683

677,383

1,186,941

13,006,275

6,153,989

6,430,874

122,542

310,109

555,137

9,782,629

14,193,216

13,017,514

9,782,629

555,137

62,870

97,322

16,342

465

194,370

371,369

Service revenue

$ 7,958,937

$ 20,004,171

$ 9,921,513

518,257

194,370

$ 38,597,248

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSOLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT |

Net operations 2017

Service revenue

$ 7,674,791

$ 18,233,291

$ 6,840,407

209,754

8,200

$ 32,966,443

Health

RRSP

EEI

Corporate

Total

Interest revenue
and trust income

157,871

8,023,713

116,890

769

276,031

8,575,274

Direct expenses

(1,856,755 )

(102,785 )

(862,683 )

(141,533 )

(2,963,756 )

5,975,907

26,154,219

6,094,614

68,990

284,231

38,577,961

Administrative
expenses

Depreciation and
amortization

Other gains &
(losses), net
(note 26)

Earnings/(loss)
before income
taxes
Income taxes
(expense) /recovery(1)

(3,920,714 )

(18,185,412 )

(5,457,031 )

(314,829 )

(173,609 )

(28,051,595 )

(120,728 )

(515,583 )

(132,588 )

(44,868 )

(4,779 )

(818,546 )

(874 )

25,781

24,907

1,934,465

7,452,350

530,776

(290,707 )

105,843

9,732,727

(499,068 )

(1,980,478 )

(141,055 )

82,568

(130,868 )

(2,668,901 )

Net earnings/(loss)

$ 1,435,397

$ 5,471,872

389,721

(208,139 )

(25,025 )

$ 7,063,826

Service revenue per segment 2017

Account set-up
fees and
onboarding fees
Annual
administration fee
and Annual Health
spending account
fees
Monthly and
transaction fees

Trading profits
and losses
Travel and life
insurance
brokerage fees
Other

Health

RRSP

EEI

Corporate

Total

$ 534,300

182,457

716,757

849,952

12,674,055

13,524,007

6,325,206

5,023,788

36,776

19,187

491,511

6,759,631

11,404,957

6,759,631

491,511

8,122

1,148

44,000

8,110

8,200

69,580

Service revenue

$ 7,674,791

$ 18,233,291

$ 6,840,407

209,754

8,200

$ 32,966,443

Revenue earned from one customer in the FX division represents approximately 13% of the FX division’s
total revenue earned for the year ended December 31, 2018. No one client contributed more than 10% of
any of Olympia’s Divisions’ revenue for the year ended December 31, 2017.

(1) No income tax adjustment has been made regarding the elimination of intercompany transactions.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS| OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT

10. RESTRICTED CASH AND INVESTMENTS

Foreign exchange trading investments collateral provided

December 31,
2018

December 31,
2017

707,000

500,000

Restricted cash and investments comprises Treasury bonds provided as collateral to a financial
institution securing Olympia Trust’s foreign exchange trading platform. The Treasury bonds have a
term of one year from issuance and earn interest at a rate of 1.45% (December 31, 2017 – 0.59%).
Restricted cash and investments are not readily accessible for use in operations and are therefore
reported separately from cash and cash equivalents.

11. CASH AND CASH EQUIVALENTS

Cash at bank and on hand

Non-restricted cash in circulation

December 31,
2018

December 31,
2017

$ 11,827,579

9,167,957

1,007,327

972,566

$ 12,834,906

$ 10,140,523

Cash at bank and on hand is readily convertible to known amounts of cash, which are subject to an
insignificant risk of changes in value.

Non-restricted cash in circulation refers to Olympia’s foreign exchange cash in ATM cassettes and cash
in transit.

12. RESTRICTED CASH IN CIRCULATION

With the sale of substantially all the assets of ATM, the restricted cash in circulation was returned,
resulting in a $nil balance at December 31, 2018 (December 31, 2017 - $3.82 million).

ATM had entered into a bailment agreement with a financial institution to provide the ATM division
with cash that could only be used in ATMs. ATM paid a fee for using the cash based on the total amount
of cash outstanding at any given time, as well as paid fees related to the bundling and preparation of
such cash prior to it being loaded in the ATMs. ATM had access and rights to the cash and bore the risk
in the case of loss. ATM had obtained the required insurance coverage in the event of loss of cash while
in circulation.

ATM’s cash bailment agreement was for a term of five years, through to November 2020, and bore
interest at the Canadian prime rate. The available bailment cash limit was $20.00 million.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSOLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT |

13. INVENTORY

ATMs not in service

ATM parts and accessories

December 31,
2018

December 31,
2017

49,127

144,400

78,714

49,127

223,114

Inventory consists primarily of ATMs not in service and related spare parts and accessories measured
at the lower of cost and net realizable value.

14. REVOLVING CREDIT FACILITY

As at December 31, 2018, Olympia has drawn $4.21 million (December 31, 2017 - $4.81 million) on its
established credit facility. The credit facility in place has a maximum amount of $8.50 million (December
31, 2017 - $8.50 million) which can be drawn, and bears interest at the Canadian prime rate plus 0.25%.
The credit facility is subject to review at any time, and in any event will be reviewed annually based on
these financial statements.

The credit facility is subject to certain covenants and other limitations that, if breached, could cause
a default, which might result in a requirement for immediate repayment of all amounts outstanding.
Olympia considers that it has one significant covenant that is monitored on an ongoing basis, being the
cash flow coverage ratio. As at and for the year ended December 31, 2018, Olympia was in compliance with
all covenants.

Security for the credit facility includes a general security agreement providing a first security charge
over all present and after acquired property.

Credit facility

Available balance at January 1

Drawn

Available at the end of the year

December 31,
2018

December 31,
2017

$ 8,500,000

(4,207,347 )

(4,812,347 )

$ 4,292,653

$ 3,687,653

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS| OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT

15. DERIVATIVE FINANCIAL INSTRUMENTS

Fair value as at
December 31,
2018

Notional
amount as at
December 31,
2018

Fair value as at
December 31,
2017

Notional
amount as at
December 31,
2017

Current assets

Non-current assets (1-3 years)

Current liabilities

Non-current liabilities (1-3 years)

$ 406,082

$ 25,894,166

$ 9,236,934

$ 112,034,573

- $

729,459

$ 8,810,123

160,480

$ 5,796,292

$ 7,796,036

$ 107,958,340

543,073

$ 8,400,009

Olympia Trust has entered into foreign exchange contracts with its customers and currency suppliers.
The expiry dates of the above derivatives vary between January 1, 2019, and November 29, 2019. As a
result, no portion of the foreign exchange contracts is classified as non-current.

Forward foreign exchange contracts are measured at fair value through profit or loss based on contractual
maturities and are presented at their fair value on the balance sheet. Changes in fair values of forward
foreign exchange contracts at fair value through profit or loss are recorded in “other (losses)/gains,
net” in the consolidated statement of net earnings and comprehensive income. The fair value of all
forward foreign exchange contracts is based on current bid prices for their respective remaining terms
to maturity in an active market. As at December 31, 2018, Olympia has margins held in Canadian dollars
of $1.22 million (December 31, 2017 - $5.31 million).

For the year ended December 31, 2018, there were no transfers between Level 1 and Level 2 fair value
measurements and no transfers into or out of Level 3 fair value measurements.

The following table presents Olympia’s derivative financial assets and liabilities measured at fair value
and categorized by level according to the significance of the inputs used in making these measurements:

December 31,
2018

Level 1

Level 2

Level 3

Recurring measurements

Financial assets - derivative financial instruments

$ 406,082

Financial liabilities - derivative financial instruments

(160,480 )

245,602

December 31,
2017

406,082

(160,480 )

245,602

Level 1

Level 2

Level 3

Recurring measurements

Financial assets - derivative financial instruments

$ 9,966,393

Financial liabilities - derivative financial instruments

(8,339,109 )

1,627,284

$ 9,966,393

(8,339,109 )

1,627,284

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSOLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT |

16. EQUIPMENT AND OTHER

December 31, 2018

Cost

Furniture &
fixtures

Leasehold
improvements

Computers &
equipment

ATM
equipment

Total

At beginning of year

1,499,304

$ 3,307,502

$ 2,497,727

1,467,560

$ 8,772,093

Additions

Reclassification

Disposals

At end of year

Accumulated depreciation

At beginning of year

Disposals

70,638

1,560

143,859

(1,677 )

178,249

180,283

573,029

(843 )

960

(460,985 )

(223,441 )

(2,031,998 )

(1,354,354 )

(4,070,778 )

1,110,517

$ 3,226,243

643,135

294,449

$ 5,274,344

1,247,936

$ 2,579,050

$ 2,244,883

467,828

$ 6,539,697

(421,097 )

(211,205 )

(1,923,476 )

(531,090 )

(3,086,868 )

Depreciation charge for the year

120,538

199,640

At end of year

Closing net book value

947,377

$ 2,567,485

163,140

658,758

113,580

434,987

208,148

148,224

581,982

84,962

$ 4,034,811

209,487

$ 1,239,533

December 31, 2017

Cost

At beginning of year

1,378,869

$ 3,070,994

$ 2,375,129

1,253,666

$ 8,078,658

Additions

Disposals

At end of year

121,035

(600 )

236,508

124,436

321,903

(1,838 )

(108,009 )

803,882

(110,447 )

1,499,304

$ 3,307,502

$ 2,497,727

1,467,560

$ 8,772,093

Accumulated depreciation

At beginning of year

Disposals

Depreciation charge for the year

At end of year

Closing net book value

1,090,982

$ 2,359,557

$ 2,065,665

219,810

$ 5,736,014

(140 )

157,094

219,493

(419 )

179,637

(33,534 )

281,552

(34,093 )

837,776

1,247,936

$ 2,579,050

$ 2,244,883

251,368

728,452

252,844

467,828

$ 6,539,697

999,732

$ 2,232,396

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS| OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT

17. INTANGIBLE ASSETS

December 31, 2018

Cost

Internally
generated
software

Computer
software

ATM
processing
contracts

Other

Total

At beginning of year

1,850,960

1,210,020

1,082,968

41,032

$ 4,184,980

Additions

Disposals

At end of year

461,642

616,192

2,305

1,080,139

(202,283 )

(178,689 )

(139,000 )

(16,032 )

(536,004)

$ 2,110,319

$ 1,647,523

943,968

27,305

$ 4,729,115

Accumulated depreciation

At beginning of year

Amortization charge for the year

Disposals

At end of year

Closing net book value

December 31, 2017

Cost

354,923

942,715

1,015,216

22,433

$ 2,335,287

255,810

(202,283 )

76,231

(167,371 )

9,584

(80,832 )

10,459

(16,032 )

352,084

(466,518 )

$ 408,450

$ 1,701,869

851,575

795,948

943,968

16,860

$ 2,220,853

- $

10,445

$ 2,508,262

At beginning of year

1,763,813

1,335,020

1,082,968

41,032

$ 4,222,833

Additions

Disposals

Reclassification

At end of year

Accumulated depreciation

At beginning of year

248,347

(286,200 )

125,000

(125,000 )

248,347

(286,200 )

1,850,960

1,210,020

1,082,968

41,032

$ 4,184,980

419,139

856,930

797,512

8,755

$ 2,082,336

Amortization charge for the year

221,984

85,785

(286,200 )

67,287

150,417

13,678

388,734

150,417

(286,200 )

354,923

1,496,037

942,715

267,305

1,015,216

67,752

22,433

$ 2,335,287

18,599

1,849,693

Impairment

Disposals

At end of year

Closing net book value

Additions

The capital additions of $1.08 million relate mainly to the continued development and enhancement of
cloud based online systems in the Exempt Edge division and development of a mobile application for
use by the Registered Plans division.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSOLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT |

18. TRADE AND OTHER PAYABLES

Trade and other payables

Government taxes

Agents and commissions payable

Amounts due to related parties

19. DEFERRED REVENUE

Annual health spending account fee

Annual registered plan services administration fees

December 31,
2018

December 31,
2017

719,340

437,742

307,946

207,067

107,539

543,195

213,819

83,388

$ 1,341,892

1,278,144

December 31,
2018

December 31,
2017

393,520

297,156

6,300

16,100

399,820

313,256

At December 31, 2018, deferred revenue totaled $0.40 million (December 31, 2017 - $0.31 million).
Deferred revenue is comprised mostly of Health’s annual fees for maintaining customers’ health
spending accounts. The unearned portion of these annual fees is recognized as deferred revenue at
the time of billing and revenue is recognized on a straight-line basis in relation to Olympia rendering
these services.

20. OTHER LIABILITIES AND CHARGES

Other liabilities and charges (current)

Bonuses payable

General accruals

Professional fees accrual

Medical benefits payable

Straight-line rent

Other

Leasehold inducements

Onerous contract obligation

Vacation payable

Legal fees accrual

December 31,
2018

December 31,
2017

597,426

469,802

223,235

132,558

124,436

122,483

85,996

85,688

73,635

69,595

13,026

180,376

208,758

362,910

109,321

63,289

85,688

96,888

71,049

$ 1,528,078

1,648,081

Leasehold inducements received are being amortized on a straight-line basis over the life of the lease.
The current portion of this liability is recorded in other liabilities and charges and the long-term portion is
recorded in other liabilities.

Other liabilities (non-current)

Leasehold inducements

100

December 31,
2018

December 31,
2017

791,705

1,068,776

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS| OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT

21. SHARE CAPITAL AND CONTRIBUTED SURPLUS

Number of
common
shares

Share
capital

Contributed
surplus

Total

At January 1, 2017 and January 1, 2018

2,406,352

$ 7,886,989

Balance at December 31, 2017 and 2018

2,406,352

$ 7,886,989

86,373

$ 7,973,362

86,373

$ 7,973,362

The total authorized number of common shares is unlimited (December 31, 2017 - unlimited common
shares). All issued shares are fully paid.

22. INCOME TAXES

a) The significant components which give rise to deferred income tax assets and liabilities are

as follows:

Bad debts provision and other

Non-capital losses

Carrying amount of equipment higher than the tax basis

December 31,
2018

December 31,
2017

154,456

129,961

1,314,559

1,360,561

(225,759 )

(54,991 )

$ 1,243,256

1,435,531

b) Income tax expense is recognized based on management’s best estimate of the weighted average
annual income tax rate expected for the full financial year. The average annual rate used for the year
ended December 31, 2018, was 27% (December 31, 2017 - 27%).

Earnings from continuing operations before income tax

Anticipated income tax expense

Non-deductible expenses

Adjustment in respect of prior years

Other

Current tax expense

Deferred tax recovery

December 31,
2018

December 31,
2017

$ 13,589,034

$ 9,732,727

3,669,039

2,627,836

28,833

(16,179 )

5,127

32,132

6,570

2,363

$ 3,686,820

$ 2,668,901

$ 3,353,276

$ 2,746,447

333,544

(77,546 )

$ 3,686,820

$ 2,668,901

Deferred income tax assets are recognized for loss carry-forwards and other deductible temporary
differences to the extent that the realization of the related tax benefit is probable through future taxable
profits or other tax planning opportunities. The non-capital losses will start to expire in 2034.

101

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSOLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT |

December 31,
2018

December 31,
2017

$ 16,238,728

$ 15,052,797

7,994,985

6,389,209

3,594,972

2,617,874

1,787,377

2,098,223

1,290,633

1,382,680

244,194

510,812

$ 31,150,889

$ 28,051,595

December 31,
2018

December 31,
2017

1,395,391

1,107,766

1,295,264

421,420

1,452,281

403,709

$ 3,112,075

$ 2,963,756

December 31,
2018

December 31,
2017

556,484

676,520

379,704

239,146

115,299

366,884

209,806

129,470

$ 1,290,633

1,382,680

December 31,
2018

December 31,
2017

$ 1,381,682

(25,768)

48,934

861

$ 1,430,616

(24,907)

23. ADMINISTRATIVE EXPENSES

Salaries, management fees and bonuses

General administration

Management compensation (note 33)

Rent

Employee benefit expense (note 25)

Bad debts

24. DIRECT EXPENSES

Commission expense

Trailer Health commissions

Service costs paid

25. EMPLOYEE BENEFITS

Benefit expenses

Medical benefits

Other benefits

Share ownership assistance scheme

Long-term service awards and education assistance

26. OTHER LOSSES/(GAINS), NET

Unrealized foreign exchange loss/(gain)

Loss on disposal of assets and other

102

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS| OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT

27. EARNINGS PER SHARE

Basic and diluted

Basic earnings per share is calculated by dividing the profit attributable to equity holders of Olympia by
the weighted average number of common shares in issue during the period.

Year ended

December 31,
2018

December 31,
2017

Net earnings from continuing operations attributable to shareholders of Olympia

$ 9,967,821

$ 7,105,454

Net loss from discontinued operations

Total net earnings

Weighted average number of shares (basic and diluted)

Basic and diluted earnings per share - continuing operations

Basic and diluted loss per share - discontinued operations

Basic and diluted earnings per share - combined operations

28. DIVIDENDS PER SHARE

(388,022 )

(1,025,612 )

$ 9,579,799

$ 6,079,842

2,406,352

4.14

(0.16 ) $

3.98

2.95

(0.42 )

2.53

The aggregate dividends declared amounted to $5.41 million (December 31, 2017 - $5.70 million).

29A. CHANGES IN NON CASH WORKING CAPITAL

Trade and other receivables

Current taxes receivable

Current taxes payable

Prepaid expenses

Trade and other payables

Deferred revenue

Inventory

Other liabilities and charges

Other liabilities

29B. NON-CASH FINANCING AND INVESTING ACTIVITIES

Disposal of equipment and other

Disposal of intangible assets

December 31,
2018

December 31,
2017

$ (1,045,598 ) $

(398,896 )

(96,575 )

(87,467 )

215,954

86,564

74,212

(17,676 )

(277,071 )

117,683

114,012

167,448

270,988

91,344

124,732

874,666

$ (1,147,657 ) $

1,361,977

December 31,
2018

December 31,
2017

915,645

76,027

991,672

Non-cash investing and financing activities disclosed in other notes is the issuance of a promissory
note for the sale of assets - Note 5.

103

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSOLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT |

30. RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES

Revolving credit facility

Cash in circulation due to bank

31. COMMITMENTS

Operating lease commitments

2017

Cash flows

2018

$ 4,812,347

(605,000 ) $ 4,207,347

3,823,110

(3,823,110 )

$ 8,635,457

$ (4,428,110 ) $ 4,207,347

Olympia leases various offices under operating lease agreements. The initial lease terms are between
twelve months and fifty months and the majority of lease agreements are renewable at market rates
when the lease period ends.

Future aggregate minimum lease payments under operating leases are listed in the table below:

2019

2020

2021

2022

32. CONTINGENCIES

December 31,
2018

1,024,581

1,009,885

923,397

147,932

3,105,795

Olympia is not a money lender nor does it guarantee or participate in loans or mortgages of any type,
except in its capacity as trustee of conventional and syndicated mortgages.

Olympia is defendant and plaintiff in a number of legal actions that arise in the normal course of
business, the losses or gains from which, if any, are not anticipated to have a material effect on the
consolidated financial statements.

33. RELATED PARTY TRANSACTIONS

Olympia’s president and CEO owns and controls 29.26% of Olympia’s shares. During the year,
Olympia entered into transactions with the following related parties:

• Companies and businesses controlled by the president and CEO of Olympia;

• Companies and businesses associated with the directors of Olympia;

• Companies and businesses controlled by management of Olympia;

• Family members of the president, management and directors; and

• Key management and directors.

104

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS| OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT

The following transactions with related parties were measured at the exchange amount, which is the
amount of consideration agreed to by the parties:

Service revenue

Companies and businesses controlled by the president and CEO

December 31,
2018

December 31,
2017

11,639

20,736

Interest revenue

Companies and businesses controlled by the president and CEO

December 31,
2018

December 31,
2017

37,335

5,276

Administrative expenses

Companies and businesses controlled by the president and CEO

Olympia Charitable Foundation

December 31,
2018

December 31,
2017

$ 3,594,972

2,617,874

98,432

58,899

$ 3,693,404

$ 2,676,773

Administrative expenses paid to associated entities totaled $3.69 million for the year ended December
31, 2018 (December 31, 2017 - $2.68 million), and consisted of the following:

• The Olympia Charitable Foundation is funded by Olympia and the employees of Olympia. Olympia
donated a total of $98,432 for the year ended December 31, 2018 (December 31, 2017 - $58,899).

• Management fees are paid to Tarman based on a percentage of pre-tax profits of Olympia’s
divisions, except for the Private Health Services Plan division, where the management fee is based
on a percentage of health claims administered. These fees are for services provided as president and
CEO of Olympia. For the year ended December 31, 2018, this amounted to $3.59 million
(December 31, 2017 - $2.62 million).

105

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSOLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT |

Trade and other receivables include amounts receivable from related parties

December 31,
2018

December 31,
2017

Companies and businesses controlled by the president and CEO (current)

57,522

365,028

Companies and businesses controlled by the president and CEO (non-current)

1,428,539

$ 1,486,061

365,028

Receivables from associated entities totaled $1.49 million for the year ended December 31, 2018
(December 31, 2017 - $365,028), and consisted mainly of the following:

• A receivable in the amount of $nil (December 31, 2017 - $7,388) from Target Capital Inc. (“Target”), a
company previously controlled by the president and CEO of Olympia, which reflected an arrangement
whereby Olympia paid a portion of the remuneration for Target’s personnel who delivered services to
both Olympia and Target.

• A receivable in the amount of $57,488 (December 31, 2017 - $236,503) from Tarman, a company
controlled by Olympia’s president and CEO, reflects the legal services and other expense recoveries
provided to Tarman Inc.

• A receivable in the amount of $34 (December 31, 2017 - $716) from Namena Island, Toy Box II
and Camera 2 Canvas Inc., companies controlled by the president and CEO of Olympia, for
expense recoveries.

• On November 29, 2017, Olympia obtained approval from the Board of Directors for a $120,000
demand loan to Tarman, a company controlled by the president and CEO of Olympia. The secured
demand loan was fully repaid during the year ended December 31,2018, including accrued interest at
4.00% per annum.

• On June 5, 2018, Olympia announced the sale of substantially all the assets of its wholly owned
subsidiary, Olympia ATM. Olympia ATM entered into an agreement with Tarman, a company owned and
controlled by Olympia’s president and CEO. The sale closed on August 3, 2018.

• The purchase price paid by Tarman was equal to the aggregate net book value of the assets used by the
ATM division. The assets’ book value at June 5, 2018, was estimated to be $1.40 million. The purchase
price was paid by the delivery of a secured demand promissory note (the “promissory note”) for
$1.40 million by Tarman. The outstanding principal amount of the promissory note bears interest at prime
plus 0.25%. All interest accrued under the promissory note shall be paid on an annual basis on or before
the 30th day of June of each calendar year. Subject to Canadian Western Bank’s consent, commencing
June 30, 2020, Tarman is required to repay the outstanding principal amount of the promissory note
in annual installments of $140,000 on or before the 30th day of June of each calendar year, with the
outstanding balance of the principal amount to be repaid in full on or before June 30, 2023.

• Olympia has assessed the expected credit loss as it relates to the promissory note and has determined

it to be nominal.

• For the year ended December 31, 2018, interest of $28,539 has been accrued.

106

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS| OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT

Trade and other payables and provision for other liabilities and charges include amounts payable to
related parties

Companies and businesses controlled by the president and CEO

Directors' fees

December 31,
2018

December 31,
2017

153,502

160,298

69,776

45,377

223,278

205,675

• Payables to associated entities totaled $223,278 for the year ended December 31, 2018

(December 31, 2017 - $205,675), and consisted mainly of the following:

• A payable in the amount of $37,070 (December 31, 2017 - $36,473) to Tarman, a company controlled
by the president and CEO of Olympia, for commissions related to the sale of health plans offered
by OBI.

• A payable in the amount of $693 (December 31, 2017 - $1,538) to Target, Tarman and Camera 2

Canvas Inc., companies controlled by the president and CEO of Olympia, for expense recoveries.

• A management fee payable in the amount of $115,739 (December 31, 2017 - $122,287) to Tarman,
a company controlled by the president and CEO of Olympia, based on a percentage of pre-tax profits
of Olympia’s divisions.

• A payable for directors’ fees of $69,776 (December 31, 2017 - $45,377).

These payables are all current.

Key management compensation

Compensation paid to key management is included in Note 23. Key management includes the Board
of Directors and executive team of OBI, Olympia Trust, EEI, and Olympia. Olympia uses management
or employment contracts as a means to incent certain executives to maximize the profitability of their
applicable business units and the profitability of Olympia as a whole. The compensation paid or payable to
key management is shown in the following table:

Salaries, bonuses and profit sharing

Management fees

Directors’ fees

Short-term employee benefits

December 31,
2018

December 31,
2017

$ 4,583,106

$ 3,734,006

3,594,972

2,617,874

262,163

233,604

193,526

210,495

$ 8,673,845

$ 6,755,901

107

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSOLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT |

34. SUBSEQUENT EVENT

On February 2, 2019, Olympia was subject to a ransomware cyber attack on its information technology
systems. The malware used to perform the attack encrypted Olympia’s network services so it could not
be used. While operations were affected, Olympia’s dedicated staff managed to maintain many basic
operations throughout, with funding of both RSP investment transactions and foreign exchange trades.
On February 11, 2019, Olympia announced that it had resumed all business operations and restored
nearly all information technology systems impacted by the ransomware cyber attack.

Investigations into the attack are ongoing, but there is still no evidence that customers’ personal
information was compromised as a result of the attack.

Olympia remains committed to utilizing all available means to protect its business operations and
customers’ personal information. Olympia will continue to invest in its information technology systems
and security to detect and minimize the risk of unauthorized activity in this age of ever growing highly
sophisticated information security threats.

Olympia is in the process of quantifying the financial impact of the ransomware attack and its impact
on the Q1, 2019, condensed consolidated financial statements. Olympia has initiated a claim with its
insurance broker.

108

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS| OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT

Transfer Agent

AST Trust Company
600, 333 – 7th Avenue SW
Calgary, AB T2P 2Z1
Tel: 403-776-3900
Fax: 403-776-3916

Auditors

PricewaterhouseCoopers LLP
Chartered Professional Accountants
Suite 3100, 111 – 5th Avenue SW
Calgary, AB T2P 5L3

corporate information

Directors

Brian Newman1 2 3 4
Craig Skauge
Dennis Nerland
Diana Wolfe1 2 3 4
Gerard Janssen1 2 3 4
Rick Skauge
Tony Lanzl

Board Committees

1 Audit Committee
2 Corporate Governance Committee
3 Executive Compensation Committee
4 Investment Committee

Head Office

2300, 125 – 9th Avenue SE
Calgary, AB T2G 0P6
Tel: 403-261-0900
Fax: 403-265-1455
www.olympiafinancial.com
info@olympiafinancial.com

109

OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT | THE EXECUTIVE TEAM
executive team
THE EXECUTIVE TEAM
THE EXECUTIVE TEAM

RICK SKAUGE

RICK SKAUGE
President and Chief
Executive Officer

RICK SKAUGE

President and Chief Executive
Officer

KEN FRY

KEN FRY
President,
Olympia Benefits Inc.
President, Olympia Benefits Inc.

President, Olympia Benefits Inc.

KEN FRY

CRAIG SKAUGE

CRAIG SKAUGE
Executive Vice President
Executive Vice President and
and President, Olympia
President, Olympia Trust Company
Executive Vice President and
Executive Vice President and
Trust Company
President, Olympia Trust Company
President, Olympia Trust Company

GERHARD BARNARD

GERHARD BARNARD
Chief Financial Officer and
Chief Financial Officer and Vice
Vice President, Finance
President, Finance

GERHARD BARNARD

Chief Financial Officer and Vice
President, Finance

DERICK KACHUIK

DERICK KACHUIK
Vice President,
Vice President, Foreign Exchange
Foreign Exchange
Vice President, Foreign Exchange

Vice President, Foreign Exchange

DERICK KACHUIK

ANDREA GILLIS

ANDREA GILLIS
Vice President, Client Services
ANDREA GILLIS
ANDREA GILLIS
Vice President, Client Services
Registered Plans
Registered Plans
Vice President, Client Services
Registered Plans

Vice President, Client Services
Registered Plans

ROBIN FRY

ROBIN FRY
CEO, Olympia Benefits Inc.

ROBIN FRY

CEO, Olympia Benefits Inc.

ROBIN FRY

CEO, Olympia Benefits Inc.

KELLY REVOL

KELLY REVOL
Vice President, Operations
Registered Plans

Vice President, Operations
Registered Plans

KELLY REVOL

Vice President, Operations
Registered Plans

DEAN NAUGLER
Vice President, Corporate
and Shareholder Services

DEAN NAUGLER

Vice President, Corporate and
DEAN NAUGLER
Shareholder Services

Vice President, Corporate and
Shareholder Services

JONATHAN BAHNUIK
General Counsel

JONATHAN BAHNUIK

General Counsel

RYAN MCKENNA
Vice President,
Information Technology

RYAN MCKENNA

Vice President, Information
Technology

STEPHEN PRESTON

STEPHEN PRESTON
Vice President,
Exempt Edge Inc.

STEPHEN PRESTON

Vice President, Exempt Edge Inc.

110

Q1 2019 Report | Olympia Financial Group Inc.

| OLYMPIA FINANCIAL GROUP INC. | 2018 ANNUAL REPORT2300, 125 - 9th Avenue SE Calgary, Alberta T2G 0P6
Tel: 403-261-0900 • Fax: 403-265-1455