final - alliant information technologyltech.alliant.edu/.../2245311/...report_10_02_2014.pdf ·...

ALLIANT INTERNATIONAL UNIVERSITY

VALUATION ANALYSIS

OF CERTAIN ASSETS OF ALLIANT INTERNATIONAL UNIVERSITY

as of

June 30, 2013

Report Date:

October 2, 2014

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ACCOUNTANTS & CONSULTANTS

October 2, 2014 Dr. Geoffrey Cox, President Alliant International University One Beach Street, Suite 100 San Francisco, CA 94133 Dear Mr. Cox: Burr Pilger Mayer, Inc. (“BPM” or “we”) has been engaged to provide an independent valuation of the fair market value of the substantially all of the operating assets of Alliant International University (“Alliant” or “the University”) as of June 30, 2013 (the “valuation date”), excluding real estate owned by Alliant and certain assets and liabilities excluded from the transaction and our analysis. We understand that the purpose of our analysis (as defined below) may be used by you for business planning purposes. We are not being engaged to make specific transaction recommendations. Our work is designed solely to provide information to allow informed decisions. Accordingly, this valuation opinion should not be used for any other purpose or distributed to third parties without the express knowledge and written consent of BPM. This engagement was conducted in accordance with SSVS for a valuation engagement. The estimate of value that results from a valuation engagement is expressed as a conclusion of value. We are presenting our analysis to you in this Detailed Report., which describes the facts and reasoning upon which our conclusion of value is based. Our conclusion of value is subject to the Assumptions and Limiting Conditions set forth in the report. The standard of value for this report is “fair market value”, defined as the amount at which goods and services would change hands between a willing seller and a willing buyer when neither is acting under compulsion and when both have reasonable knowledge of the relevant facts.1 The fair market value is determined under the conditions, limitations and assumptions contained in this report. Our report is based upon historical and prospective financial information provided to us by BPM management and third parties. Had we audited or reviewed the underlying data, matters may have come to our attention that would have resulted in our using amounts that differ from those provided. Accordingly, we take no responsibility for the underlying data presented in this report. It is our opinion that the fair market value of the operating assets of Alliant International University, which excludes certain assets and liabilities including $16.0 million in debt and $57.0 million in real estate, as of June 30, 2013, is reasonably estimated in the amount of:

$26.810 million 1 Revenue Ruling 59-60

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Valuation of the Invested Capital of Alliant International University

Approach

Exhibit

Estimated Fair Market Value (millions)

Weight

Weighted Value (millions)

Income Approach - Discounted Cash Flow Method

Exhibit B.1 $26.050 40% $10.420

Market Approach - Guideline Public Company Method

Exhibit C.1 $26.470 40% $10.588

Market Approach - Merger and Acquisition Method

Exhibit D.1 $29.000 20% $5.800

Cost Approach Exhibit E $28.662 0% $0

Estimated Fair Market Value (Rounded)

$26.810

Asset

Exhibit


Tradenames Exhibit F.1 $4.290

Accreditations & Curriculum Exhibit G.1 $11.200

Workforce Workpaper $5.750 This report has been prepared solely for business planning purposes. We have no present or contemplated financial interest in Alliant. Our fees for this valuation are based upon our normal hourly billing rates, and are in no way contingent upon results of our findings. We have no responsibility to update this report for events and circumstances occurring subsequent to the date of this report. This report is not to be copied or made available to any persons, other than the persons to which this report has been addressed and their professional advisors, without the express written consent of Burr Pilger Mayer, Inc. If you have any questions, please feel free to contact us. Very truly yours, BURR, PILGER MAYER, INC.

Samuel L. Renwick, CFA Senior Director & Valuation Practice Leader Contributing Appraisers: J. Gregory Endicott, CPA/ABV, ASA Alex Nebesar, CFA

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C O N T E N T S

I. Introduction .......................................................................................................................... 1

Scope of Engagement ................................................................................................................................... 1 Valuation Methodologies ............................................................................................................................. 1

II. University Background ....................................................................................................... 3

Transaction Overview................................................................................................................................... 3

III. Economic Outlook ............................................................................................................. 5

IV. Industry Review – Colleges & Universities in the US........................................................ 9

V. Financial Review ................................................................................................................ 14

Overview....................................................................................................................................................... 14 Selected Income Statement Review .......................................................................................................... 14

Revenue .................................................................................................................................................. 14 Operating Expenses ................................................................................................................................ 14

Balance sheet review ................................................................................................................................... 14 Assets ..................................................................................................................................................... 14 Liabilities ............................................................................................................................................... 15 Summary ................................................................................................................................................ 15

VI. Valuation Analysis ............................................................................................................ 16

Income Approach ....................................................................................................................................... 16 Discounted Cash Flow Method ................................................................................................................ 16 Key Assumptions ........................................................................................................................................ 17

Revenues ................................................................................................................................................. 17 Operating Expenses ................................................................................................................................ 17 Income Tax Expense .............................................................................................................................. 18 Capital Expenditures ............................................................................................................................. 18 Depreciation ............................................................................................................................................ 18 Debt-free Operating Working Capital Needs .......................................................................................... 18 Discount Rate ......................................................................................................................................... 18

Perkins Federal Loan Program .................................................................................................................. 22 Residual Value .............................................................................................................................................. 22 Market Approach ........................................................................................................................................ 22 Guideline Public Company Method ......................................................................................................... 23 Transaction Method .................................................................................................................................... 23 Cost Approach ............................................................................................................................................. 24 Working Capital ........................................................................................................................................... 24 Fixed Assets ................................................................................................................................................. 24 Long-Term Liabilities ................................................................................................................................. 25 Tradenames .................................................................................................................................................. 25 Accreditations – Background and Description ....................................................................................... 26 Accreditations – Valuation ......................................................................................................................... 35 Workforce ..................................................................................................................................................... 37

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Cost Approach – Conclusion .................................................................................................................... 37

VIII. Summary of Estimated Values ...................................................................................... 38

Assumptions and Limiting Conditions ................................................................................... 39

Certification ............................................................................................................................. 42

Statement of Qualifications ..................................................................................................... 44

Exhibits .................................................................................................................................... 47

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I. INTRODUCTION Scope of Engagement In the course of estimating the value of the invested capital of Alliant, we performed those procedures we considered necessary to arrive at our conclusions. These steps included, but are not limited to, the elements of valuation outlined in Revenue Ruling 59-60:

History and nature of the Subject;

Economic and industry conditions;

Financial condition of the Subject;

Earnings capacity of the Subject;

Dividend-paying capacity of the Subject;

The existence of intangible value;

Previous sales of the stock, if any; and

Sales of comparable businesses. We have relied on financial and other information supplied to us by Alliant, as well as certain external sources that we believe to be reliable. Alliant’s management representations upon which we relied include the following items:

Letter of Intent dated September 10, 2013 from University Ventures Fund and Arist Medical Education Corporation

Audited Financial Statements for Fiscal Years 2013 and 2012

List of assets and liabilities excluded from the transaction as of June 30, 2014

5 Year Forecast Financial Statements

Appraised values for the San Diego and San Francisco real estate and list of real estate as provided by management

Fixed asset list as of June 30, 2013

Workforce census report

Estimated costs to re-create the Accreditations

Management presentation from University Ventures Fund and Arist Medical Education Corporation

Other documents provided by Alliant in an online shared dropbox Our conclusions are dependent upon the accuracy and completeness of the data supplied to us, and are subject to change if this data changes.

Valuation Methodologies There are three generally recognized valuation methodologies: the cost approach, the income approach, and the market approach, although they may be called by different names. The valuation process estimates the value of a business interest or an asset by using one or more of these

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approaches to guide the analysis and valuation conclusion. These methodologies are recognized in the valuation industry and used in actual practice by investors in the private equity markets. The cost approach to valuing an asset, an interest, or a company measures value based on the amount necessary to construct or acquire an asset of equal “utility.” This approach also incorporates adjustments to reflect deterioration, or physical or economic obsolescence. This approach is often used to establish the value of the assembled workforce, an intangible asset incorporated into goodwill for financial accounting purposes. The income approach is based on the practice in the securities markets of estimating the present value of net future economic benefits (including cash flows, cost savings, tax savings, and proceeds from sale) that accrue to the owners of an asset or a business interest. One variation of the income approach, the discounted cash flow method, uses future estimated cash flows from the investment, discounted to the valuation date at an appropriate rate of return that reflects the risks of that specific investment, usually by comparison to similar investments. Another variation of the income approach, the excess earnings method, seeks to identify residual cash flows attributable specifically to the asset being valued, by applying a charge for the use of other contributory assets. The relief from royalty method is an income approach that is also commonly applied to value certain intangible assets. This method seeks to identify royalty income that the owner of the intangible asset could realize in licensing the use of the asset to third parties, or alternatively, the royalty cost that the owner avoids from incurring through ownership of the asset. The increment / decrement approach is a form of income approach applied to value an intangible asset through an analysis of the cash flow differential with and without use of the asset. The market approach indicates value through the analysis of the market price of comparable assets or business interests that have been traded in arms-length transactions. This approach is often difficult to apply to intangible assets, due to the lack of comparable transactions available. The guideline public company method, a form of the market approach, is often applied as a secondary method and/or a “sanity check” in the determination the University’s business enterprise value.

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II. UNIVERSITY BACKGROUND

Transaction Overview

On September 10, 2013, Alliant International University signed a letter of intent regarding a potential asset acquisition by University Ventures Fund and Arist Medical Education Corporation (jointly “Arist”).

Under the terms of the proposed transaction, Arist agreed to acquire substantially all of the operating assets of Alliant, including, without limitation, the “Alliant” name, cash and cash equivalents, accounts receivable, equipment, records, contracts and leases, prepaid expenses, intellectual property, employee contracts, goodwill, etc.2 Arist would also assume all operating liabilities of Alliant, except those certain liabilities which Alliant would retain, which shall be defined in the Definitive Agreement. We have been informed by management at Alliant that the $16.0 million in debt outstanding, the approximately $57.0 million in San Francisco and San Diego real estate, as well as certain other assets and liabilities would not be included in the transaction. As such, we have not valued these assets or included them in our concluded values. Prospective Acquirer3 Arist, in partnership with University Ventures Fund, began in 2011 with an investment in the Cyprus branch campus of England’s University of St. George’s Medical School, one of Europe’s leading medical institutions. Arist is a global health sciences university that incorporates art, science and technology of medical and health professions education. Arist is actively making strategic investments that will expand their network from Europe to the U.S. and into Latin America.

Arist is a principal initiative of University Ventures Fund (“UVF”), an investment firm dedicated solely to investments in the higher education sector. UVF partners with universities and colleges by directing private capital to develop programs that address major economic and social needs. It is a hands-on investor that seeks “innovation from within” in order to create growth and build value. Its goal is to set new standards for student outcomes as it drives the development of a more advanced, more efficient era in higher education across the globe.

UVF is led by four principals with over 50 years of collective experience as entrepreneurs, investors, and leaders in higher education and an exceptional track record for establishing some of higher education’s largest and most successful organizations.

2 See Exhibit A, Section 2.1 of the Letter of Intent, dated September 10, 2013. 3 www.arist.com and universityventuresfund.com

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Prospective Acquiree4 Alliant International University (AIU) is a private, non-profit higher education institution based in California. The university offers graduate degree programs in architecture, communications, elementary education, environmental studies, and psychology. It also provides undergraduate degrees in Consulting Psychology, Industrial and Organizational Psychology, Industrial and Organizational Psychology, Organizational Behavior, and Organization Development. Alliant schools include California School of Organizational Studies, California School of Professional Psychology, College of Arts and Sciences, Graduate School of Education, School of Social and Policy Studies, and United States International College of Business. The university was founded in July 2001 by the merger of United States International University and Alliant University and California School of Professional Psychology. It has campuses in Fresno, Irvine, Los Angeles, Sacramento, San Diego, the San Francisco Bay Area, and Mexico City, and an affiliation agreement with an institution in Hong Kong.

4 www.capitaliq.com

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III. ECONOMIC OUTLOOK National Economic Report – June 20135

The U.S. economy, which had grown by an upwardly revised 3.1% during the third quarter of 2012 but then expanded by only 0.4% in the fourth quarter, rebounded during the first quarter of 2013. The U.S. Commerce Department reported on May 30 that the economy grew by 2.4%—a significant improvement, though below expectations of a 3.0% jump. Yet even this good news faded on June 26 when the first-quarter growth figure was downgraded sharply to just 1.8%. In contrast, the news on employment was largely positive. The U.S. Labor Department reported on July 5 that the number of people who held jobs in June rose for the tenth straight month, with 195,000 new positions having been added. The Department also raised new-jobs figures for the previous two months by a combined 60,000 (although many of the job gains for all three months took place in lower-paying professions). Concurrently, the U.S. unemployment rate, which had edged up from 7.5% in April to 7.6% in May, held at 7.6% in June. Still, concerns remain. The U.S. budget deficit notched its fourth $1 trillion shortfall in a row last year, although the Congressional Budget Office projected in February that the deficit for FY 2013 could drop to $825 billion. Nevertheless, total Federal debt, at $16.8 trillion, is rapidly nearing the $17 trillion mark. Federal spending also continues to rise, and now claims 24.0% of the nation’s gross domestic product—the highest level in 70 years. The budget approved by the U.S. Senate in March, the first passed by that body in five years, would boost spending by another 62% over the next decade while raising taxes by almost $1 trillion. In other areas, on the positive side, stocks again leaped into record territory, industrial production and manufacturing rebounded, auto sales were up strongly, new and existing home sales surged, consumer spending rose, and gas prices retreated. Consumer confidence measures were mixed, although mostly positive. First-quarter GDP growth revised downward. After a nearly flat growth rate of 0.4% during the fourth quarter of 2012, U.S. economic growth picked up speed during the first quarter of 2013, but not by as much as expected. Overall, the U.S. Commerce Department reported on May 30, first-quarter growth was 2.4%, below economists’ originally forecast rate of 3.0%. The 2.4% rate had been revised downward from the 2.5% reading released on April 26. Then, on June 26, the growth rate was revised downward again to a final figure of just 1.8%, held back by moderate consumer spending, weak business investment, and declining exports. In addition, the 0.4% fourth-quarter rate—which originally had been estimated at a 0.1% decline—was the lowest growth rate in two years. Previously, the Commerce Department had revised the growth rate for the third quarter of 2012 upward to 3.1% from earlier readings of 2.0% and 2.7%. Most economists do not believe the fourth quarter’s flagging growth nor the first quarter’s lower-than-projected rate signal that a new recession is on the way, however, pointing out that the economy is still expected to grow by at least 2.0% for all of 2013. Fed allays concerns on bond-buyback program. On January 30, the Federal Reserve declared that it was leaving in place the monthly bond-buying stimulus plan it had launched in October—now pegged at $85 billion a month—arguing that support was still needed to lower unemployment. 5 www.keyvaluedata.com, National Economic Report, June, 2013.

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The Fed on May 1 reaffirmed its commitment to this third round of quantitative easing (“QE3”). However, on May 23, Fed chairman Ben Bernanke laid out conditions that might cause the Fed to reduce its monthly purchases of U.S. Treasuries and mortgage-backed bonds, raising concerns in the financial sector that the accommodating monetary policy soon might end. On July 11, Bernanke allayed these concerns, saying the Fed thought stimulus was still needed. America on the wrong track. According to a July 3 Rasmussen Reports poll, just 30% of likely U.S. voters think that the United States is heading in the right direction (down from 32% in April), as compared with 63% saying that the United States is on the wrong track (up from 59% in May). Tax hikes are slowing the economy. According to a new study by the Federal Reserve Bank of San Francisco, released on June 7, the recent reductions in the growth of Federal spending are not the cause of the nation’s sluggish economic recovery. In fact, the San Francisco Fed reports, “Federal fiscal policy was unusually expansive during the Great Recession,” thanks largely to President Obama’s economic stimulus program, which was passed by Congress in 2009. Looking forward, the report says that, “surprisingly, despite all the attention Federal spending cuts and sequestration have received,… they are not the main contributors to the projected drag.” Rather, “the excess fiscal drag on the horizon comes almost entirely from rising taxes. Specifically, we calculate that nine-tenths of that projected 1 percentage point excess fiscal drag comes from tax revenue rising faster than normal as a share of the economy: Current recovery is weakest in U.S. history. According to a study from the Joint Economic Committee of the U.S. House of Representatives, the current U.S. economic recovery ranks tenth out of ten recoveries in the post-World War II era. For instance, data from the Bureau of Economic Analysis show that real (inflation-adjusted) GDP expanded by only 6.7% in the 11-quarter recovery since the recession ended. Real GDP in the Reagan recovery at the same stage had increased by 17.6%; the comparable figure during the Clinton recovery was 8.7%. Similarly, job growth was just 4.1% during the current recovery but was 10.7% at the same stage of the Reagan recovery. Put another way, GDP growth is in the midst of its longest sub-3% annual growth rate since the beginning of the Great Depression; it hasn’t topped 3% since 2005—before Federal Reserve Chairman Ben Bernanke took over—and is unlikely to do so this year. As a report on CNBC sums up, “the mere size of [the U.S.] gross domestic product won’t hide the reality that, in terms of actual growth, this is… the worst economy in 83 years.” Underground economy growing. According to an April 24 report by CNBC, the size of the underground economy in the U.S.—a “shadow economy… composed of those who can’t find a full-time or regular job”—is growing rapidly, approaching developing-world proportions. One study places the underground economy at $2 trillion. It “may be helping to prevent the real economy from sinking further,” says CNBC. Federal government viewed unfavorably. According to an April 15 poll from the Pew Center for People and the Press, while 63% of respondents say that they have a favorable view of their local governments and 57% a favorable view of their state government, just 28% rate the Federal government favorably, down five points from last year and the lowest mark ever for a Pew Research Center survey.

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Economic data to shift. The U.S. economy will officially become 3% bigger in July as part of a re-estimation of all Federal economic statistics, which now will take into account such 21st century components as film royalties, spending on research and development, and billions of dollars’ worth of other intangible assets. Fed lowers economic growth forecast. The U.S. Federal Reserve, on March 21, released new forecasts for economic growth in the coming years, but foresaw only minimal short-term improvements. The Fed’s projection for GDP growth in 2013 of from 2.3% to 2.8% was down slightly from its December forecast of from 2.3% to 3.0%. The slight decline was positive news only in that it came in the face of the ongoing Federal budget sequester. Further, according to The New York Times, “other identifiable threats, including the euro crisis, rising oil prices, and dysfunctional politics, don’t seem as dire as they did in 2012.” Previously, the Fed reported that it saw growth coming in at no higher than 3.5% in 2014 and at no higher than 3.7% in 2015. California According to California Economic Indicators,6 the California economy made steady progress in the first half of 2013. California approached midyear 2013 with a steadily falling unemployment rate. Real estate markets were also improving and home building improved intermittently. Preliminary estimates show that personal income dropped 1.8 percent in the first quarter of 2013 from the fourth quarter of 2012, reflecting in part the expiration of the payroll tax holiday and the acceleration of income from 2013 into 2012. California's unemployment rate fell to 8.5 percent in June, a drop of 0.1 percentage points from May. The year-over-year drop of 2.1 percentage points was the second-largest since the series began in 1976. The gap with the U.S. unemployment rate–7.6 percent in June–has narrowed. However, the unemployment rate is still well above pre-recession levels. Although California’s unemployment rate has been declining, the proportion of workers that have been looking for work for longer than six months has remained high. This has worrying implications both for future growth and the welfare of workers who have experienced extended periods of unemployment. Home building continued to improve amid month-to-month alternating gains and losses indicative of a gradual recovery. After a brisk acceleration in April, residential permits issued slowed to a seasonally adjusted annual rate of 73,456 units in May. This was, though, still up over 40 percent from a year earlier. Single-family permits were up nearly 49 percent, while multi-family permits were up over 32 percent. New home permits rose during the first five months of 2013 to nearly 88 percent higher from the same months of 2012. Nonresidential construction also continued to make progress. The value of permits issued in May rose almost 60 percent from a year earlier. For the first five months of 2013 as a whole, nonresidential permits were up 71 percent from the same months of 2012.

6 Department of Finance, State of California, California Economic Indicators, May-June 2013.

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Assuming there are no major changes to near-term fiscal policy, economic recovery is expected to gain momentum going into 2014. The fiscal problems are expected to lessen throughout the year and all but fade away by 2015.7

7 California Economic Forecast, Volume 5, Issue 6, June 2013.

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IV. INDUSTRY REVIEW – COLLEGES & UNIVERSITIES IN THE US8 Industry Definition

The IBISWorld Industry report #61131a defines colleges and universities in the US as public and private universities and colleges that offer academic courses and grant baccalaureate or graduate degrees. The requirement for admission is a high school diploma or equivalent general academic training. Instruction is typically provided on physical campuses, although online education and other unorthodox settings are gaining popularity. This industry does not include for-profit institutions or community colleges.

Accredited undergraduate and postgraduate degrees are the major products higher education institutions offer. Degrees are offered in a variety disciplines, including business, sciences and the humanities.

8 IBISWorld Industry Report 61131a, “Colleges & Universities in the US,” April 2013.

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Industry institutions generate revenue by providing education for undergraduate and postgraduate degrees. According to data from the National Center for Education Statistics, the number of bachelor’s degrees earned each year is estimated to increase at an annualized rate of 2.2%. However, this segment’s share of all university degrees has declined in recent years due to the growing popularity of graduate courses. IBISWorld expects bachelor’s degrees to marginally decline to 66.7% of revenue in the five years to 2013.

Over the past five years ending in 2013, IBISWorld expects the Colleges and Universities industry to exhibit steady growth. High unemployment and dire economic conditions caused more individuals to pursue higher education to boost their competitiveness in the job market, and the steady growth of high school retention rates also increased college enrollment. Enrollment growth, along with tuition hikes, helped fuel revenue growth. However, despite strong demand for higher education, revenue fell as the financial crisis slashed private university endowments by $64.0 billion over 2009. Since 2008, state funding for public universities also declined an average of 12.5% per year, contributing to a 3.5% revenue decline in 2012. Nevertheless, in the five years to 2013, IBISWorld expects revenue to increase at an annualized rate of 4.1% to $445.2 billion. In 2013, revenue is estimated to increase 1.0% due to a slowdown in government education funding.

Industry operators are nonprofit educational institutions. Over the past five years, industry operators suffered from budget shortfalls due to falling government funding for universities. In addition, industry losses averaged 32.8% of revenue over 2009 due to plummeting endowment income. As a result, colleges and universities implemented cost-cutting measures, such as hiring freezes and furloughs. In particular, industry institutions have turned to part-time lecturers and nontenure-track faculty to reduce wage costs. In the five years to 2013, while employment is expected to increase at an average annual rate of 1.1%, wages’ share of revenue is estimated to fall from 64.1% in 2008 to 55.3% in 2013. Tuition also increased on average 3.3% per year over the past five years, which helped make up for falling funding.

In the five years to 2018, IBISWorld projects industry revenue will increase due to steady demand for higher education. In addition, government funding will increase as the economy recovers, though it will remain below 2010 levels until 2016. High school retention rates are forecast to slowly increase, and more high school graduates will attend college, increasing enrollment over the next five years. The growth of online education will also allow industry institutions to reach older students that require more flexible schedules. As a result, industry revenue is forecast to increase at an average annual rate of 3.5% to $528.6 billion over the next five years. Key External Drivers Government funding for universities Governments provide funding through education appropriations and research grants. Public universities especially depend on government funding because they typically lack the endowment and donation network of private universities. Government funding for universities is expected to slowly decrease in 2013, representing a threat for this industry.

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External competition Industry operators face competition from other institutions, including community colleges and for-profit universities. When demand for these alternative institutions goes up, industry operators will likely experience declines. External competition for colleges and universities is expected to remain steady in 2013. High school retention rate An increase in the number of students graduating from high school directly correlates to an increase in the number of college freshman in a given university. Higher freshmen enrollment typically results in greater revenue from tuition. High school retention rate is expected to slowly increase in 2013. S&P 500 Industry participants, especially private universities, maintain employee pension funds, endowments and general investments. A strong S&P 500 performance will result in greater industry revenue. The S&P 500 is expected to increase in 2013, representing an opportunity to this industry. National unemployment rate The unemployment rate typically increases when the economy is performing poorly. During periods of high unemployment, high schools students are more likely to stay in school and pursue higher education, which increases demand for the industry’s services. The unemployment rate is expected to decrease in 2013. Current Performance In the five years to 2013, the Colleges and Universities industry is expected to grow due to strengthening demand for college education and recovering endowment income. The recession caused dramatic declines and fluctuations in endowment funds and state budget allocations for higher education. Industry revenue sharply declined over 2008 and 2009 before recovering. However, college enrollment has grown due to the growing number of high school graduates over the past five years, leading to higher tuition revenue. Positive net endowment income and other investment income over the past five years also supported revenue growth. As a result, IBISWorld expects industry revenue to increase at an annualized rate of 4.1% in the five years to 2013 to total $445.2 billion. Investment income from endowment funds declined sharply in 2008 as the recession strained the US financial markets, which caused industry revenue to fall 13.5% over the year. This continued in 2009 as the financial sector collapsed, causing revenue to contract 24.3%. Charitable donations also declined due to the recession’s effect on donors’ wallets. In addition, government for universities plummeted in 2011 and 2012 as state and local governments faced budget deficits. In 2012, revenue declined 3.5% due to decreased government funding. As a result, many schools increased tuition and reduced the number of courses offered to mitigate the negative effects of falling government funding and investment income. In 2013, state governments are expected to slowly narrow budget deficits, leading to a slower decline in education funding. Tuition and enrollment are also estimated to further increase. Consequently, IBISWorld expects industry revenue to slowly increase 1.0% over 2013.

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Decreased Funding All industry institutions are nonprofit institutions and do not generate profit. However, industry operators have experienced volatile revenue and costs over the past five years. Cash-strapped states have reduced education appropriations due to the recession and prolonged deficit issues. Over the five years to 2013, government funding for universities is expected to decrease at an average annual rate of 0.9%, including a 5.7% decline in 2011 and a 5.5% decline in 2012. Similarly, the value of endowments, which are usually made up of different funds contributed by donors, also plummeted during the recession. Endowment funds comprise a major source of revenue for larger, independent institutions, contributing about one-third of universities’ annual operating revenue at their peak. During the recession, the decline in disposable income caused many alumni to cut back on discretionary spending. The value of endowments had increased strongly until financial crisis, which reduced up to a quarter of these funds’ value. Private universities’ investments lost over $64.0 billion in 2009, which exacerbated university budget shortfalls. Over the year, industry institutions operated at a deficit totaling 32.8% of revenue. As a result, schools cut back on programs funded by endowments, including merit-based scholarships. Nevertheless, endowment funds recovered quickly once the financial sector improved. As endowments resumed their upward climb, private universities’ investment income totaled $28.4 billion in 2010, a significant improvement over the losses in 2009. Despite improving funding, budget cuts and poor investment income have forced many public universities to cut the number of classes offered; other budget-saving moves, such as salary freezes, were also implemented. In the five years to 2013, employment is estimated to increase at an average annual rate of 1.1% to 3.1 million, while wages are estimated to increase at a similar rate of 1.0% per year on average. Both are considerably slower than revenue growth over the past five years. The number of establishments (universities) has also remained flat, increasing only at an average annual rate of 0.4% to 2,228 from 2008 to 2013. A low number of new campuses made it even more difficult for industry operators to meet the growing demand for higher education. Tuition and Fee Hikes Many institutions have increased tuition fees to make up for the decline in government funding and charitable donations. According to data from the National Center for Education Statistics, public institutions have increased tuition fees by an average of 4.0% per year over the past five years. The University of California Board of Regents, in particular, increased tuition fees 32.0% in 2009 due to budget shortfalls, and subsequent tuition hikes have also been passed. Several schools systems across the country have been forced to take similar action to prevent serious funding problems. As a result, revenue from tuition fees has increased as a share of total revenue. According to the State Higher Education Finance Report, about 47.0% of revenue for public institutions was generated from tuition over 2012, compared with just 36.4% in 2008. Students were previously allowed to choose their lender for federal student loans. However, all federal student loans are provided through the Direct Loan program as of July 2010. The program, passed under the Health Care and Education Reconciliation Act of 2010, is aimed at generating $6.0 billion in

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annual savings for the federal government over the next 10 years. A portion of the savings will go toward Pell Grants, on which many students rely as a form of financial aid for postsecondary education. Higher government funding for Pell Grants results in greater demand for industry services. In the 2012 to 2013 academic year, students are eligible for a Pell Grant of up to $5,550. Furthermore, despite tuition increases, the recession caused enrollment to rise. High unemployment forced many people to go back to school to improve their chances of finding employment; the number of college students is expected to increase on average 1.0% annually to 15.8 million students over the five years to 2013. Strengthening demand, along with tuition hikes, has contributed to revenue growth over the past five years. Outlook Over the five years to 2018, the Colleges and Universities industry is projected to exhibit steady growth. Labor market improvements will likely cause some individuals to seek employment rather than higher education, though a growing number of new high school graduates will keep college enrollment strong. The growth of online education, through platforms like Coursera and Udacity, will also let colleges offer services to a rising number of nontraditional students. These courses will increase interest in industry institutions, which can boost enrollment and revenue. In the five years to 2018, the number of college students is anticipated to increase at an annualized rate of 1.0% to 16.6 million. Government funding for universities is also anticipated to rise as state budget deficits narrow. As a result, IBISWorld forecasts that industry revenue will grow an average of 3.5% per year to $528.6 billion over the five years to 2018. In 2014, still-high unemployment will encourage college students to remain in school and pursue higher levels of education. Workers laid off during the recession will also return to school to improve future employment prospects. These factors will provide a small boost to revenue in the short-term, though slowly improving government funding will slightly hamper revenue growth. In 2014, IBISWorld projects revenue to increase 2.7%. International student enrollment is anticipated to rise over the five years to 2018 despite the negative impact of the global financial crisis. US institutions are still extremely competitive on a global scale, occupying top spots in world university rankings. Universities and colleges will likely make education more accessible to international students by expanding their use of distance education technologies, developing links with other colleges across the world and improving their marketing efforts. Online distance education will allow industry operators to increase enrollment without major facility expansions. In the five years to 2018, the number of establishments is forecast to increase at an average annual rate of 0.2% to 2,250, which is slower growth than the previous five years.

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V. FINANCIAL REVIEW

Overview The historical financial review of Alliant includes a review of the University’s audited financial statements for the years ended June 30, 2010 (“fiscal 2010”) through June 30, 2013 (“fiscal 2013” or “Valuation Date”). In our opinion, the period covered in our review and analysis is adequate to identify existing financial and operational trends that impact our estimate of value. The following comments are representative of the financial position and results of operations of Alliant as of the Valuation Date and the prior periods analyzed.

Selected Income Statement Review Revenue Alliant’s business model is primarily driven by tuition, fees and scholarships for educational programs. As such, revenue is recognized on an accrual basis, including actual services completed. For the University as a whole, revenue has decreased from approximately $77.5 million in fiscal 2010 to $74.2 million in fiscal 2013. Operating Expenses The University's major operating expenses consist of instructional, academic, and institutional support. Alliant’s operating expenses have averaged 98% of total revenue for fiscal years 2010 through 2013. Net income The University has reported net operating losses in the two most recent historical periods analyzed (fiscal 2012 and 2013). As of June 30, 2013, the University posted a $2,241,828 net loss before tax.

Balance sheet review Assets The University’s current assets of nearly $22.7 million consist primarily of cash and cash equivalents, accounts receivable, investments, and prepaid expenses as of the valuation date. Fixed assets composition is comprised of land, buildings, leasehold improvements and furniture, fixtures, and books. Excluded from these assets are approximately $2.9 million in investments, $106k in accounts receivable, and $764k in pledges receivable that will remain with the foundation. Assets of $13.1

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million related to the Perkins Federal Loan Program were also excluded, with the exception of approximately 15% of the $3.2 million in cash, as this represents the University’s contribution. Liabilities The University’s net current liabilities of $18.8 million consist primarily of accounts payable, deferred revenue and accrued expenses. As of the valuation date, Alliant had $16.0 million in notes payable and roughly $4.7M in other current liabilities that will remain with the Foundation, and $9.2 million in U.S. government loans related to the Perkins Federal Loan Program that were excluded from this analysis. Summary Alliant’s historical financial statements show declining trends for both its revenue and operating margins. The University’s long term business model will require not only investment to enhance the University’s financial position by increasing utilization of its asset base, but also to control costs to resume and maintain positive operational margins.

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VI. VALUATION ANALYSIS

Income Approach The income approach generally includes the value of all assets used in the operation of the subject since all cash flows are considered. Therefore, our result is an indication of the value of the invested capital of the Subject. We applied the income approach through the use of the discounted cash flow method on an invested capital basis. The discounted cash flow method was deemed more appropriate than a capitalization of earnings method because the discounted cash flow method is the only method that adequately considers any future changes in the Subject’s operating results.

Discounted Cash Flow Method The discounted cash flow (“DCF”) method is based upon the theory that the total value of a business is equal to the present value of the projected future cash flows plus the present value of the residual value. The present value determination is based on using a discount rate that reflects the expected rate of return that the market requires in order to attract funds to the particular investment. This rate is often referred to as a “cost of capital.” Our determination of value was calculated using a net free cash flow to invested capital in order to capture the future economic benefits available to both equity and debt holders. This base amount was calculated for a ten-year period as shown in Exhibit B.1. The key assumptions incorporated in the cash flow projections are set forth in Exhibits B.2 to B.7. We established a discount rate by applying the Modified Capital Asset Pricing model to derive the cost of equity, and subsequently derived a WACC based on relative proportions of debt and equity for similar publicly traded market participants. The residual value of cash flows was determined by applying the Gordon Growth Model to the net free-cash flow from year seven forward. The formula for the Gordon Growth Model is:

Where PV = Present value. FCFo = Free cash flow for period o, the period immediately preceding the effective valuation date. g = Forecasted long-term growth rate. k = Present value discount rate. The fair market value of Alliant’s invested capital is equal to the sum of the present value of the University’s net free cash flow to invested capital plus the residual value. The University’s free cash flow to invested capital was determined as follows:

FCFo * (1+g)

k-gPV=

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Net Income excluding interest expense (after tax) +Depreciation and Amortization –Capital Expenditures –Increases in Operating Working Capital =Net Free Cash Flow to Invested Capital

Key Assumptions Revenue and expense estimates were provided by Alliant’s management, and were based on management’s expectations of the overall growth and profitability of the University and the industry in which they operated. To verify the reasonableness of management’s estimates, we reviewed industry data regarding the expected growth of the industry, the historical financial performance of the University, and the potential risk factors affecting the University. We also reviewed guideline company profitability and other metrics in assessing management’s estimates. Revenues Management expects Alliant's estimated revenues to return to a growth pattern as the University projects an increase in tuition revenue, primarily associated with growth in their undergraduate operations. Fiscal 2014 growth is expected to decline approximately 6.3%, and then averaging a 5.7% increase over the next five years. Operating Expenses Based on discussions with management, as a result of increasing utilization of capacity and CSFT closure, operating expenses as a percentage of sales are estimated to begin declining from 108.2% in fiscal 2015 to 102.2% in fiscal 2016 and then continue declining throughout the projection period to 85.1% in 2023 (the terminal year) (see Exhibit B.2). Additionally, the analysis excludes real estate, as it is expected to be excluded from the prospective transaction. Alliant owns three pieces of property; two located in San Diego, and one in San Francisco. One of the properties in San Diego is vacant land. The other property in San Diego consists of approximately 277,219 square feet, while the property in San Francisco consists of approximately 10,000 square feet. In conjunction with treating the real estate as separate asset, a fair market rent expense needs to be imputed for the use of the two occupied properties. Accordingly, the analysis utilizes two recent appraisals for the San Diego and San Francisco properties, and applies a 10% cap rate to estimate an imputed annual rent expense. Additionally, through discussions with management, it is understood that these locations are under-utilized. As such, 80% of the calculated rent was included in Alliant’s operating expenses for the forecasted period. See Exhibit B.2 for further information.

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Income Tax Expense Although Alliant is not taxed at the entity level, we have tax-affected cash flow available under the premise that the most likely buyer is a C-corporation that would have to pay taxes. We estimated the income tax rate at the combined Federal and California State levels to be 38.1%. Capital Expenditures Excluding real estate, capital expenditures for Alliant are primarily limited to equipment, software, library books and furniture and fixtures. Management has indicated that expenditures are forecast to be approximately $1.0 million per each forecast year. Depreciation Depreciation for Alliant was based on straight line depreciation for existing fixed assets with a remaining useful life of five years. This estimate was based on assumptions that as of the acquisition date, some of the existing fixed assets have been partially depreciated. New capital additions will have an average useful life of five years based on the typical turnover rate of fixed assets (see Exhibit B.4). Debt-free Operating Working Capital Needs As of June 30, 2013, Alliant’s debt-free working capital as a percent of revenue was approximately 2.7% of total revenue, as presented in Exhibits B.5(a) and B.5(b). This amount excludes all Perkins Federal Loan Program related assets and liabilities, as well as all assets and liabilities excluded from the transaction. Historically, Alliant’s working capital has varied throughout the year. Projected working capital, as presented in Exhibit B.5(a), is based on the observed median amount in the guideline company analysis presented in Exhibit C.2. Discount Rate When considering any investment, an investor is exposed to various risks. These include company, industry, economic, market, interest rate, and credit risks. The riskier the investment, the higher the return expected. Discount and capitalization rates, as used in an income approach to valuing a business, represent the return an investor would require in order to choose a particular investment. It represents anticipated future returns; past returns, however, are often used to help determine a reasonable future rate. The capital asset pricing model (CAPM) and the modified capital asset model (Modified CAPM) are used to determine a theoretically appropriate required rate of return of an asset. This data is after consideration of corporate level income taxes. Accordingly, application of this method requires either an adjustment to cash flows for an assumed level of taxes or adjustment to the discount rate to put it on a pre-tax basis. We have chosen to adjust the University’s cash flow for an assumed level of taxes calculated at the University’s expected effective income tax rate. The model takes into account the asset's sensitivity to non-diversifiable risk (also known as

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systematic risk or market risk), often represented by the quantity beta (β), as well as the expected return of the market and the expected return of a theoretical risk-free asset. The modified CAPM captures additional risk that is associated with smaller publicly traded stocks and other company-specific risks relative to the traditional CAPM. The components of the cost of capital for Alliant using the Modified CAPM are discussed below:

1. Risk-Free Rate: The United States Treasury Bond Rate is considered the “riskless” rate of return for an investment. The rate used is the current 20-year U.S. Treasury Bond rate provided by the Federal Reserve Statistical Release as of June 30, 2013.

2. Beta (levered): Beta is a measure of the systematic risk of a specific stock of a specific industry in relationship to the overall market, as measured by the S&P 500. The equity risk premium multiplied by Beta results in an estimate of the required rate of return, over-and-above the rate of return on a risk free investment.

3. Beta (unlevered): After deriving the levered Beta, we then calculated an unlevered Beta in order to remove the financial effects of leverage on our analysis. We analyzed the comparable set and determined that a selection of 0.65 was appropriate for the University, which was equal to the rounded median beta seen in the peer group.

4. Equity Risk Premium: This is an additional return that an investor expects “for the additional risk associated with investing in equities as opposed to investing in riskless assets.”9 While the premium is designed to reflect what an investor expects in the future, the equity risk premium is often based on historical data. We have used the long horizon expected equity risk premium (supply side) of 6.7% as provided by Morningstar’s Ibbotson SBBI 2013 Valuation Yearbook. The supply side premium extracts the price-earnings ratio growth that is embedded in the historical returns. The resulting premium is the difference between the historic arithmetic mean total return of their large company stock index (Standard & Poor’s 500), adjusted to remove price-earnings ratio growth, and the historic arithmetic mean income return of long-term government bonds.

5. Size Premium: There is generally more risk associated with the typical small business than

with a major Standard & Poor’s 500 company; therefore, investors in small businesses frequently demand a higher rate of return. The size premium reflects this additional premium an investor expects for the added risk of investing in small companies as opposed to large companies. The size premium is captured in Morningstar’s Ibbotson SBBI 2013 Valuation Yearbook, which breaks the size premium data down into ten deciles based on market capitalization. We are using 4.23% as our size premium; this comes from decile 10a, which is the smallest decile and includes companies of similar size as Alliant.

9 Morningstar’s Ibbotson SBBI 2013 Valuation Yearbook

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6. Adjustment for Company-Specific Risk Factors: An additional adjustment can be made to recognize risk factors unique to the particular company being valued. This can be a positive adjustment to reflect greater risk, or a negative adjustment to reflect reduced risk.

Based on all of the above factors, we consider the University to be of equal risk than alternative investment opportunities in the market. Further, certain risk attributes as described above are not fully captured in the historical published Ibbotson risk premiums. Based on these considerations, and taking into account the selected size premium, a 4.0% company-specific risk premium was added that represents the risk associated with increasing capacity in undergraduate programs as well as the recent volatility in earnings. Our calculation of the equity discount rate that will be incorporated into the WACC in order to arrive at an estimate of value is determined as follows:

Risk-Free Rate of Return 10 3.3% Levered Beta 11 0.70 Equity Risk Premium 12 6.7% Size Premium 13 4.2% Company-Specific Risk Premium 4.0%

Equity Cost of Capital 16.2%

Equity Cost of Capital (rounded) 16.0% To determine Alliant’s cost of debt, we relied on industry research to assess the University's cost of borrowing. We estimated determined that 5.4% represents an appropriate average cost of short and long-term financing, based on Moody’s Baa rated debt at June 30, 2013. Since the 5.4% represents a pre-tax cost of debt, the selected tax rate of 38.1% was applied to arrive at an after-tax cost of debt of 3.3%. To determine the appropriate capital structure, we relied upon the capital structures of companies similar to Alliant. In selecting comparable guideline companies, the standard sought is usually one of reasonable and justifiable similarities. In our search for comparable companies the following criteria of comparability were applied:

The company had to be primarily in the same industry, defined as SIC Code: 8220 Colleges, universities, professional schools, and junior colleges.

The geographic location had to be primarily in the United States or Canada.

Sufficient company financial information had to be available to the public.

10 Based on current yield on 20-year U.S. Treasury Bonds (constant maturities) as of June 30, 2013, "Selected Interest Rates, H15," The Federal Reserve Statistical Release, www.Federalreserve.gov. 11 Source: Capital IQ 5-year average beta of the identified guideline comparable companies. After-tax. 12 Based on the arithmetic mean of equity risk premium of equity investments over U.S. Treasury Bonds, from the SBBI Valuation Edition 2013 Yearbook, published by Ibbotson Associates. 13 Based on the arithmetic mean of micro-cap stocks risk premium over equity risk premium of equity investments, from the SBBI Valuation Edition 2013 Yearbook, published by Ibbotson Associates.

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The company could not currently be involved in negotiations to be acquired or in the process of being acquired.

Utilizing these criteria and management’s input as to their publically traded competitors, our search for comparable companies included a review of major databases that contained relevant financial and operating information on actively traded companies. Our search highlighted a number of companies that possessed various indices of potential comparability. After a careful review of the respective companies’ financial and operating data, twelve were found to possess sufficient comparability and adequate financial history to support the determination of value for Alliant. A listing of the companies selected and a brief discussion of the companies are set forth below.

American Public Education, Inc. (APEI) together with its subsidiary, American Public University System, Inc., provides online higher education focusing on the needs of the military and public service communities. Apollo Group Inc. (APOL) together with its subsidiaries, provides online and on-campus educational programs and services at the undergraduate, master’s, and doctoral levels. Bridgepoint Education, Inc. (BPI) together with its subsidiaries, provides postsecondary education services. Capella Education Co. (CPLA) through its subsidiaries, operates as an online postsecondary education services company primarily in the United States. CIBT Education Group Inc. (MBA) through its subsidiaries, operates as an educational, investment, marketing, and management organization worldwide. Corinthian Colleges Inc. (COCO) operates as a post-secondary education company. DeVry, Inc. (DV) together with its subsidiaries, provides educational services worldwide. EVCI Career Colleges Holding Corp. (EVCI) through its subsidiaries, provides on-campus career college education in the United States. Grand Canyon Education, Inc. (LOPE) together with its subsidiaries, provides postsecondary education services in the United States and Canada. It focuses on offering graduate and undergraduate degree programs in the areas of education, healthcare, business, and liberal arts. ITT Educational Services Inc. (ESI) provides postsecondary degree programs in the United States. It offers master, bachelor, associate, and career oriented education programs in various fields, such as information technology, electronics technology, drafting and design, business, criminal justice, and nursing and health sciences.

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Lincoln Educational Services Corporation (LINC) provides career-oriented post-secondary education services in the United States. The company offers degree and diploma programs for recent high school graduates and working adults in the areas of studies, such as automotive technology, health sciences, skilled trades, hospitality services, and business and information technology. Strayer Education Inc. (STRA) through its subsidiary, Strayer University, provides post-secondary education services for working adults. It offers undergraduate and graduate degree programs in various fields of business administration, accounting, information technology, education, health services administration, public administration, and criminal justice.

Based on our analysis and professional judgment, we determined that the capital structure as applicable to Alliant is 88.0% equity and 12.0% debt. Our assumptions and calculations related to the WACC are disclosed in Exhibit B.6. Consequently, the estimated WACC for Alliant was approximately 15.0% (rounded).

Perkins Federal Loan Program As mentioned previously, all assets and liabilities related to the Perkins Federal Loan Program were excluded from this analysis, except for Alliant’s share of the cash contributed to the program. This amount is $488k, which represents 15.2% of $3.2 million in Perkins cash, based on the Institution Capital Contribution of $2.3M and Federal Capital Contribution of $12.9M. The University’s share of the cash in the Perkins program was added to the value of the enterprise, as detailed in Exhibit B.1.

Residual Value The residual value was determined by applying the Gordon Growth Model to year 2023 net free-cash flow as described prior in the discounted cash flow method section of this report. In fiscal 2023, projected cash flows for Alliant are estimated to reach their long-term growth rate of 3.5%, as predicted by IBISWorld’s research report highlighted in the review above. In the long term, depreciation and capital expenditure amounts are assumed to converge, and thus represent no future consideration to the University's value. Utilizing the Discounted Cash Flow Method of the Income Approach and a WACC of 15.0%, we derived an estimate of equity for Alliant of $26.050 million (rounded) on a 100.0% controlling, marketable interest. See Exhibit B.1.

Market Approach The Market Approach measures the value of equity through an analysis of recent sales or offerings of comparable securities, both privately-held and publicly-traded, and of subject company

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transactions. Valuation indications from these transactions are used to value the common stock of the University making adjustments to the data as needed given the relative desirability of the comparable transactions. We applied the market approach using subject company transactions, guideline public companies, and guideline transactions.

Guideline Public Company Method The market guideline public company (“GPC”) method relies on the values of publicly traded companies deemed to be comparable by Management and independent research. Valuation ratios were calculated and then applied to the subject, making adjustments for differences between the GPCs and the subject, to determine the fair market value. The GPC method provides an estimate of the total value of the subject company based upon prices paid in share transactions. The same guideline companies identified in the income approach section were utilized for the GPC method. Business descriptions are presented in Exhibit C.4. While it is recognized that differences exist between the University and the guideline companies, an investor could consider these companies as reasonable volatility benchmarks. The University has a recent history of losses and projects continued losses through 2015. There were differences between the University and some of the comparable companies, generally regarding the business model, size, profitability, and lifecycle stage. Multiple selection rationale and indicated values from this market approach are presented in Exhibit C.1. The indications of value in this market approach are from a non-controlling perspective, as they represent minority interests in guideline companies that trade on public exchanges. The interest in Alliant represents a controlling interest; as such, a premium for control was added to the indicated value in the GPC method. A premium of 15% was selected, based on a Mergerstat review of control premiums paid. As shown in Exhibit C.1, the indicated equity value on a controlling basis using the guideline public company method was $26.470 million.

Transaction Method The market guideline transaction method provides an estimate of the total value of the subject company based upon prices paid in actual transactions of other similar businesses. As presented in Exhibit D.1, this method was applied by identifying market transactions that have occurred within the School and Educational Services industries as defined by Capital IQ for the five years prior to the valuation date. We filtered the transactions for those with sufficient data to calculate meaningful ratios and for those considered most relevant to the University. Valuation ratios were calculated and then applied to the subject 2013 revenue, making adjustments for differences between the transactions and the subject, to determine the fair market value of the University.

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There were several differences between the acquired companies described on Exhibit D.1 and the University, generally relating to business models, margins, financial structure of the transactions, and liquidity. The selected multiple based on low end of observed range, with input from transaction on October 16, 2012 of Apollo Group at 1.0 times revenue, including a discount to incorporate real estate lease back expense of approximately 37%. Based upon the market transaction data, provided in Exhibit D.1, the indicated equity value of the University on a controlling basis, as of the Valuation Date was $29.000 million as presented in Exhibit D.1. Based upon the level of comparability with the subject and the limitations of information related to these transactions, we placed limited reliance on this approach.

Cost Approach The Cost Approach measures the value of an asset by the cost to reconstruct or replace it with another of like utility, less depreciation from physical deterioration and functional and economic obsolescence. The cost approach recognizes that a prudent investor would not ordinarily pay more for property or an asset than the cost to replace it. The net asset method is a form of the cost approach in which an appraisal of the assets of a business (current, fixed, and intangible) is performed. The sum of the assets’ values represents the total asset value of a company. Liabilities of a company, which are excluded in the hypothetical transaction, are deducted from the total asset value of the company. The remainder is an estimate of the fair market value of the net assets or equity of the company. A summary of the cost approach is presented in Exhibit E. As part of the cost approach analysis, several intangible assets were identified and added to Alliant’s adjusted balance sheet. These assets included the Alliant and associated tradenames, accreditations and the assembled workforce. A description of these assets and the other assets that comprise Alliant’s balance sheet is below. Working Capital For the purposes of this analysis, working capital includes cash and cash equivalents, accounts receivable, and prepaid and other current assets. Based on our discussions with University management, the fair market value was assumed to be equal to book value given the nature of the working capital assets. As mentioned earlier in this report, current assets and liabilities that were excluded from the transaction, including Perkins cash, was excluded from working capital. Fixed Assets Fixed assets primarily consist of $57.0 million in real estate in San Francisco and San Diego, which is excluded from the transaction and have been excluded from this analysis. This value is based on recent appraisals provided by management and current offers to acquire the real estate, less transaction costs. The remaining $4.9 million in fixed assets is based on net book value provided by management.

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Long-Term Liabilities Long-term liabilities consists of $16.0 million in debt that is excluded from the transaction and this analysis, as well as $9.2 million in U.S. government loans and $2.5 million in deferred gains that were also excluded from this analysis. Tradenames Based on discussions with Alliant management, the University’s tradenames are considered to be inseparable and have name recognition in education industry as well as contractual protection. Per management, revenue is correlated through use of the tradenames, and accordingly, the tradenames were estimated to have value. The asset was valued based on the relief-from-royalty method. This method is based on the assumption that, in lieu of ownership, a firm would be willing to pay a royalty in order to exploit the related benefits of this asset class. The royalty rate selected was based on review of comparable licensing transactions for tradename assets. Revenue Based on discussions with management, approximately 100.0% of the University’s revenues relate to the tradenames. As of the Valuation Date, management’s intent was to utilize the tradenames indefinitely. Their intent is based on their presumption that brand loyalty is and that Alliant has established itself as a quality service provider in the country. Royalty Rate The royalty rate selected was based on a search for licensing arrangements of similar assets, using Royalty Source’s transaction database. We selected pre-existing tradename licensing agreements which were most applicable to Alliant, resulting in a royalty rate range from 1.5% in the 1st quartile to 10.0% in the 3rd quartile based on average rates selected (see Exhibit F.3). From our analysis of comparable transactions, a pre-tax royalty rate of 1.0% was selected. This rate represents the royalty rate we consider most closely represents similar industries, name recognition, and profitability to Aliant within the peer group selected. Discount Rate The discount rate selected for the tradenames was based on the assumption that these assets are an integral part of the University's operations and considered to be of greater risk as the University as a whole, as represented by the WACC. Therefore a discount rate of 17.0% was applied, as shown in Exhibit F.1. Tax Amortization Benefit The tax amortization benefit analysis reflects the benefit derived from the ability to amortize intangible assets over 15 years for tax purposes under Section 197 of the Internal Revenue Service code. Such amortization creates a tax benefit that increases the value attributable to an intangible asset. Accordingly, the tax amortization benefit was computed for the customer relationships and added back to the respective asset value. The formula for the amortization benefit is:

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AB = PVCF * [n /( n – {[ PV( Dr, n, -1) * ( 1 + Dr)^0.5] * T}) – 1]

Where AB = Amortization Benefit PVCF = Present value of cash flows from the asset n = 15 year amortization period Dr = Asset specific discount rate T = Tax rate Residual Value The residual value was determined by applying the Gordon Growth Model to year 2023 after-tax cash flows as described prior in the discounted cash flow method section of this report Estimated Fair Market Value These assumptions were used in the analysis to calculate operating income for the tradenames. Cash flow was then calculated by deducting income tax expense from operating income. The total cash flow was then discounted to present value utilizing the 17.0% selected discount rate. The present value of the after-tax cash flows was added to the present value of the amortization tax benefit to arrive at an estimated fair market value of the Alliant and associated tradenames of $4.3 million (rounded) as of June 30, 2013 (Exhibit F.1).

Accreditations – Background and Description The value of Accreditation14 Accreditation in the United States is a means to assure and improve higher education quality, assisting institutions and programs using a set of standards developed by peers. An institution or program that has successfully completed an accreditation review has in place the needed instructional, student support and other services to assist students to achieve their educational goals. Accreditation has helped to provide the conditions necessary for the United States to develop diverse, flexible, robust and often admired higher education. Accreditation is a both a process and a status. It is the process of reviewing colleges, universities, institutions and programs to judge their educational quality – how well they serve students and society. The result of the process, if successful, is the award of “accredited status.” Accreditation is carried out through nongovernmental organizations created in whole or in part by the higher education community. Some accrediting organizations review colleges and universities. Others review specific programs, e.g., law, medicine, engineering. In a number of fields, especially the health professions, graduation from an accredited program is a requirement for receiving a license to practice. At present, 80 recognized organizations accredit more than 7,000 institutions and 19,000 programs serving more than 24 million students.

14 "The Value of Accreditation" Council for Higher Education Accreditation (CHEA), June 2010

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All accrediting organizations create and use specific standards both to assure that institutions and programs meet threshold expectations of quality and to assure that they improve over time. These standards address key areas such as faculty, student support services, finance and facilities, curricula and student learning outcomes. All accrediting organizations use common practices, including a self-review by the institution or program against the standards, an on-site visit by an evaluation team of peer experts and a subsequent review and decision by the accrediting body about accredited status. This review is repeated every three to ten years if the institution or program is to sustain its accreditation. Established accrediting organizations themselves are usually subject to external review, a process called “recognition.” This involves periodic examination of the organizations based on a set of standards; the external examination is carried out by the U.S. Department of Education or, in the private sector, the Council for Higher Education Accreditation. “Accredited status” means that students and the public can expect that a school or program lives up to its promises. It means that a student can have confidence that a degree or credential has value. Accreditation signals that the public can have confidence in the worth of an institution or program. For students, accreditation provides value related to not only judging quality, but also obtaining employment, receiving student aid and transferring credits. Accreditation:

Encourages confidence that the educational activities of an accredited institution or program

have been found to be satisfactory.

Assists with student mobility: Accredited status indicates to institutions judging requests for

transfer or applications for graduate school that the sending institution or program has met

threshold expectations of quality.

Signals to prospective employers that a student’s educational program has met widely

accepted standards, with graduation from an accredited program, in some cases, a

prerequisite for entering a profession.

Provides access to federal and sometimes state financial aid, available to qualified students

who attend institutions accredited by recognized accrediting organizations. To the public, the accreditation process provides value not only through judging quality, but also assuring reliable information about institutions and programs, promoting accountability and identifying successful improvement efforts. Accreditation:

Confirms that the public presentation of an educational program, student services and

graduate accomplishments is fair and accurate.

Promotes accountability through ongoing external evaluation of the institution or program,

with a finding that there is compliance with general expectations in higher education or a

professional field as reflected in the accreditation standards.

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Identifies institutions and programs that have voluntarily undertaken explicit activities

directed at improving the quality of the institution and its professional programs and are

carrying them out successfully. Summary of Alliant’s Accreditation Programs Alliant has the following six accreditation programs:

Western Association of Schools and Colleges (WASC)

American Psychological Association (APA)

National Council for Accreditation of Teacher Education - Council for the Accreditation of Educator Preparation (NCATE - CAEP)

The Commission on Accreditation for Marriage and Family Therapy Education (COAMFTE)

California Bar Examiners (CBE)

Commission on Teacher Credentialing (CTC) Western Association of Schools and Colleges (WASC)15 The Western Association of Schools and Colleges (WASC) is one of six official academic bodies responsible for the accreditation of public and private universities, colleges, secondary and elementary schools in the United States and foreign institutions of American origin. The Commission extends its services to public and private schools located in California, Hawaii, Guam, American Samoa, Commonwealth of the Marianas, the Marshall Islands, the Federated States of Micronesia, and to American/International Schools in East Asia and the Pacific that apply for its service. WASC is composed of three commissions: 1. Accrediting Commission for Senior Colleges and Universities The Accrediting Commission for Senior Colleges and Universities is responsible for the evaluation of the quality and effectiveness of colleges and universities offering the baccalaureate degree and above in California, Hawaii, Guam, and the Pacific Basin. It embodies 3 types of Accreditation16: Regional Accreditation is a form of institutional accreditation that involves a comprehensive review of all institutional functions. Regional accrediting organizations do not accredit individual programs, although new programs are actively reviewed through the substantive change process. Voluntary, non-governmental, institutional accreditation, as practiced by WASC and other regional commissions, is a unique characteristic of American education. Accreditation is granted at the completion of a peer review process, and assures the educational community, the general public, and other organizations that an accredited institution has met high standards of quality and effectiveness.

15 http://www.acswasc.org/about_overview.htm 16 http://www.wascsenior.org/about/regionalaccreditation

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No institution in the United States is required to seek accreditation. However, because of the recognized benefits, most of the eligible institutions in this and other regions have sought to become accredited. Regional accreditation is granted to public and private, nonprofit and for-profit, two- and four-year institutions. A second type of institutional accreditation focuses on institutions in special areas of study. For example:

Theology (Association of Theological Schools - ATS),

Art and Design (the National Association of Schools of Art and Design - NASAD)

Music (the National Association of Schools of Music - NASM) A third type of accreditation is specialized or professional accreditation, which focuses on programs in a specific discipline within an institution, but does not evaluate the entire institution. Specialized accreditation exists in the fields of education, law, medicine, chiropractic, computer science, and more than 90 other disciplines. Most specialized accreditors require regional accreditation as a foundation for their reviews and as assurance of the fiscal integrity and health of the institution. 2. Accrediting Commission for Community and Junior Colleges The Accrediting Commission for Community and Junior Colleges (ACCJC) accredits associate degree granting institutions in California, Hawaii, the Territories of Guam and American Samoa, the Commonwealth of the Northern Mariana Islands, the Republic of Palau, the Federated States of Micronesia, and the Republic of the Marshall Islands. Accreditation processes vary among regional commissions. The ACCJC requires member colleges to carry out a self-study, compose a report, and undergo peer review every six years.17 3. Accrediting Commission for Schools The Accrediting Commission for Schools extends its services to public, independent, church-related, and proprietary schools of the following levels and types: elementary schools; junior high/middle/intermediate schools, comprehensive/college preparatory high schools, continuation high schools, alternative high schools, occupational/vocational high schools, regional occupational programs/centers, adult schools, and vocational skill centers. Many of the schools accredited also include postsecondary courses, e.g., courses which require a high school diploma or G.E.D. The Accrediting Commission for Schools is composed of thirty-two representatives from educational organizations. WASC accreditation is based on a six-year accreditation cycle. A school beginning the accreditation process with WASC following the required initial visit can be granted either candidate or initial accreditation status, each of which carries a maximum term of three-years. At the end of the initial accreditation or candidacy period, the school must conduct a full Self-Study review and undertake a full Self-Study WASC accreditation visit.

17 http://en.wikipedia.org/wiki/Accrediting_Commission_for_Community_and_Junior_Colleges#cite_note-8

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These are the general guidelines for schools located in California, Hawaii, and the Pacific Islands; accreditation terms, lengths of visits, and size of committees may vary for schools located overseas and for some schools with joint WASC affiliations. Please feel free to contact the WASC Office for further information regarding these types of schools.18 The Commission grants a term of accreditation that shows a strong correlation to existing student achievement results and growth and current programmatic and operational actions based on the WASC criteria and accreditation term factors as noted in the content of the visiting committee report and the term recommendation of the visiting committee.19 As a result of the full Self-Study WASC accreditation visit, the following accreditation terms may be granted20:

Six-Year Term

Six-Year Term with a Midterm Review Required

Three-Year Term

Limited Term (One- or Two-Year Term) American Psychological Association (APA) The American Psychological Association is the largest scientific and professional organization representing psychology in the United States. APA is the world's largest association of psychologists, with more than 134,000 researchers, educators, clinicians, consultants and students as its members.21 APA policy on the use of the title psychologist is contained in the Model Act for State Licensure of Psychologists: Psychologists have earned a doctoral degree in psychology and may not use the title “psychologist” and/or deliver psychological services to the public, unless the psychologist is licensed or specifically exempted from licensure under the law. State licensing laws specify state specific requirements for the education and training of psychologists leading to licensure. Psychologists who are exempted from licensure could include researchers, educators, or general applied psychologists who furnish services outside of the health and mental health field. 22

Full membership with the APA requires doctoral training whereas associate membership requires at least two years of postgraduate studies in psychology or approved related discipline. The minimal requirement of a doctoral dissertation related to psychology for full membership can be waived in certain circumstances where there is evidence that significant contribution or performance in the field of psychology has been made.23 Membership status is effective Jan. 1 through Dec. 31. Members receive an invoice each year when it is time to renew their subscriptions and your membership.24 APA’s mission is to advance the creation, communication and application of psychological knowledge to benefit society and improve people's lives. It does this by: 25

18 http://www.acswasc.org/about_cycle.htm 19 http://www.acswasc.org/about_cycle.htm 20 http://www.acswasc.org/about_cycle.htm 21 http://www.apa.org/about/index.aspx 22 http://www.apapracticecentral.org/ce/state/model-act.aspx 23 http://www.apa.org/about/division/officers/handbook/membership.aspx 24 http://www.apa.org/membership/member/index.aspx 25 http://www.apa.org/about/index.aspx

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Encouraging the development and application of psychology in the broadest manner

Promoting research in psychology, the improvement of research methods and conditions and the application of research findings

Improving the qualifications and usefulness of psychologists by establishing high standards of ethics, conduct, education and achievement

Increasing and disseminating psychological knowledge through meetings, professional contacts, reports, papers, discussions and publications.

The American Psychological Association aspires to excel as a valuable, effective and influential organization advancing psychology as a science, serving as:26

A uniting force for the discipline

The major catalyst for the stimulation, growth and dissemination of psychological science and practice

The primary resource for all psychologists

The premier innovator in the education, development, and training of psychological scientists, practitioners and educators

The leading advocate for psychological knowledge and practice informing policy makers and the public to improve public policy and daily living

A principal leader and global partner promoting psychological knowledge and methods to facilitate the resolution of personal, societal and global challenges in diverse, multicultural and international contexts

An effective champion of the application of psychology to promote human rights, health, well-being and dignity

National Council for Accreditation of Teacher Education - Council for the Accreditation of Educator Preparation (NCATE - CAEP) July 1, 2013, marked the de facto consolidation of the National Council for Accreditation of Teacher Education (NCATE) and the Teacher Education Accreditation Council (TEAC), making the Council for the Accreditation of Educator Preparation (CAEP) the new, sole specialized accreditor for educator preparation. (CAEP accreditation is specific to educator preparation and is different from regional accreditation. It is the educator preparation provider, specifically, that receives CAEP accreditation — not the larger organization or institution of higher education that may house the provider.) Under de facto consolidation, NCATE and TEAC are subsidiaries of CAEP, maintaining their recognition by the U.S. Department of Education and the Council for Higher Education Accreditation (CHEA) for the purpose of maintaining the accreditation of educator preparation providers until such time as said providers come up for accreditation under CAEP.27

26 http://www.apa.org/about/apa/strategic-plan/default.aspx 27 http://caepnet.org/about/history/

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CAEP seeks to advance excellence in educator preparation through evidence-based accreditation that assures quality and supports continuous improvement to strengthen P-12 student learning.28 On August 29, 2013, the CAEP Board of Directors approved new accreditation standards based on consensus recommendations from the CAEP Commission on Standards and Performance Reporting. CAEP requires that educator preparation providers (EPPs) seeking accreditation complete a self-study and host a site visit, during which site visitors determine whether or not the provider meets CAEP standards based on evidence of candidate performance, use of data in program self-improvement, and EPP capacity and commitment to quality.29 To be eligible for accreditation by the Council for the Accreditation of Educator Preparation (CAEP), an unaccredited Educator Preparation Provider (EPP) must complete the application and meet the eligibility requirements. CAEP staff reviews the materials submitted to ensure that all eligibility requirements are met. EPPs meeting all requirements have up to five years to achieve accreditation.30 The Commission on Accreditation for Marriage and Family Therapy Education (COAMFTE)31 Marriage and Family Therapy Education (COAMFTE) is a specialized accrediting body that accredits master's degree, doctoral degree, and post-graduate degree clinical training programs in marriage and family therapy throughout the United States and Canada. The Council for Higher Education Accreditation (CHEA) officially recognizes the COAMFTE. CHEA is a non-governmental organization that works to foster and facilitate the role of accrediting bodies in promoting and insuring the quality and diversity of American post-secondary education. CHEA regularly reviews the policies and practices of COAMFTE for continued recognition. The COAMFTE is made up of nine (9) Commissioners - seven (7) professional members and two (2) public members. Professional Commission members must be senior marriage and family therapy educators or clinicians. Public members represent the interests of the general public and are not professional marriage and family therapy educators, supervisors or practitioners. In selecting Commission members, every effort is made to maintain a balance with regard to race, ethnicity, gender, and geographic location. The Commission must also reflect a balance regarding academicians and practitioners as well as training contexts (master's, doctoral, and post-degree). Specialized accreditation of marriage and family therapy programs is a public service that aims to:

Encourage programs to continue their own self-study and development; and

Indicate that programs are meeting established standards and their own stated

objectives.

28 http://caepnet.org/about/ 29 http://caepnet.org/accreditation/standards/ 30 http://caepnet.org/accreditation/eligibility/ 31 http://www.aamft.org/imis15/content/coamfte/about_coamfte.aspx

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This specialized accreditation is both a process and a condition. The process, or the act of accrediting, entails assessing a program's operations through compliance with specified professional standards developed by a national consensus of professionals in the field. The condition, or the state of being accredited, provides a credential to the public which attests that a program has accepted and is fulfilling its commitment to educational quality. The COAMFTE works cooperatively with its parent organization, the American Association for Marriage and Family Therapy (AAMFT), state licensing and certification boards, and the Association of Marital and Family Therapy Regulatory Boards (AMFTRB). The COAMFTE program educational standards often serve as the foundation for the development of individual credentialing requirements. The accreditation process is a voluntary process that requires self-study by the program, an on-site review by a selected group of peers, and a review and decision by the COAMFTE to determine compliance with accreditation standards. Once a program has become accredited, it is required to submit annual reports demonstrating continued compliance with standards. Accredited programs are reviewed at least every six years. In fostering quality assurance and program improvement, the COAMFTE's accreditation process benefits the public, programs, students, and the profession. Accreditation serves programs by providing a stimulus for self-evaluation and a cost-effective review mechanism which strengthens the reputation and credibility of a program because of the public regard for accreditation. Accredited programs become eligible for funding under several Federal grant programs. Students can be assured that the appropriate knowledge and skill areas will be included in the course of study that are necessary for entry into a chosen field and that the program demonstrates financial stability. An accredited degree assures a prospective employer that the student has undertaken a superior course of professional preparation. An accredited degree also allows students to apply for Clinical Membership in AAMFT through the accelerated Accredited Program Track in the absence of state licensure. The MFT Profession benefits because specialized accreditation contributes to the unity of the profession. It brings together practitioners, teachers, and students in the vital activity of setting standards for the education of entry level professionals, and of continually improving professional preparation, education, research, scholarship, and clinical practice. The COAMFTE's scope of accreditation includes three types of programs:

Master's Degree Programs provide students with broad areas of theory and practice in

marriage and family therapy. These programs provide entry level educational requirements

for independent clinical practice in the profession. They are designed to prepare individuals

for beginning a career in marriage and family therapy by providing basic didactic and clinical

skills, as well as professional development and socialization.

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Doctoral Degree Programs prepare students for academic careers, research, advanced clinical

practice and supervision. The doctoral curriculum includes advanced instruction in marriage

and family therapy research, theory construction and supervision.

Post-Graduate Degree Clinical Training Programs provide clinical education in marriage

and family therapy to trainees with a master's or doctoral degree in MFT, or in a closely

related field. A program may allow for specialized training in a particular modality or

treatment population. Accreditation is awarded to programs that evidence compliance with accreditation standards. A site visit is required to assist the COAMFTE in the evaluation of the program’s compliance with Accreditation Standards. The Commission may require programs to address stipulations to Accreditation Standards by a specific date. Initial Accreditation is granted for a period of five (5) years. Renewal of Accreditation is granted for six (6) years. (Shorter periods of accreditation may be awarded at the discretion of the Commission.)32 California Bar Examiners (CBE) 33 The Committee of Bar Examiners (“the Committee”) is authorized by law to accredit law schools in California (“accredited law schools”) and oversee and regulate those law schools. The Committee is the degree-granting authority for law schools subject to these rules. The Accredited Law School Rules apply to law schools seeking provisional accreditation by the Committee, provisionally accredited law schools, and law schools accredited by the Committee, excluding those law schools fully and provisionally approved by the American Bar Association. If the Committee grants provisional accreditation, the provisionally accredited law school is subject to annual inspection and its students are subject to the First-Year Law Students’ Examination requirement. The Committee grants provisional accreditation for a specified period, typically for two years.34 Commission on Teacher Credentialing (CTC) The purpose of the Commission is to inspire, educate and protect the students of California. The Commission envisions all of California's diverse learners, preschool through grade 12, will be inspired and prepared to achieve their highest potential by a well-prepared and exceptionally qualified educator workforce.35 The California Commission on Teacher Credentialing is an agency in the Executive Branch of California State Government. It was created in 1970 by the Ryan Act and is the oldest of the autonomous state standards boards in the nation. The major purpose of the agency is to serve as a state standards board for educator preparation for the public schools of California, the licensing and

32 Accreditation Manual: Policies and Procedures, Commission on Accreditation for Marriage and Family Therapy Education (COAMFTE), September 2013 33 Admissions and Educational Standards, Adopted July 2007, Division 2, Accredited Law School Rules 34 http://rules.calbar.ca.gov/LinkClick.aspx?fileticket=d-EEG4iWTQM%3D&tabid=1227 35 http://www.ctc.ca.gov/

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credentialing of professional educators in the State, the enforcement of professional practices of educators, and the discipline of credential holders in the State of California. 36 Accreditations usually have the life of five years.37 The California Commission on Teacher Credentialing consists of nineteen Members, fifteen voting Members and four ex-officio, non-voting Members. The Governor appoints fourteen voting Commissioners and the State Superintendent of Public Instruction or his/her designee serves as the fifteenth voting Member. The four ex-officio Members are selected one each by the major elements of the California higher education constituency: Association of Independent California Colleges and Universities; Regents of the University of California; California Postsecondary Education Commission; and the California State University. The Governor-appointed Commissioners consist of six classroom teachers, one school administrator, one school board member, one school counselor or services credential holder, one higher education faculty member from an institution for teacher education, and four public members. Governor appointed Commissioners are typically appointed to four-year terms, and serve as volunteers in unpaid positions.38

Accreditations – Valuation Two methods were used to value Alliant’s six accreditations: the relief-from-royalty method of the income approach, as described above in the tradenames valuation, and the cost to recreate method of the cost approach. Accreditations – Relief-From-Royalty Method This method is based on the assumption that, in lieu of ownership, a firm would be willing to pay a royalty in order to exploit the related benefits of this asset class. The royalty rate selected was based on a discount of the rate selected in the tradename valuation. Revenue Revenue for each of the six accreditations was based on the percentage of revenue attributable to the program for which each accreditation covers, as based on discussions with management. Royalty Rate The royalty rate was based on a with and without analysis where the value of Alliant using the discounted cash flow method presented in Exhibits B.1 through B.7 was compared to the value of Alliant using the same discounted cash flow methodology with a decrease in revenue in the first five years of the forecast period. Based upon discussions with management it was estimated that without the accreditations, there could be an approximately 90% drop in revenue. Accordingly, the going-concern capability of Alliant would be questionable and there would likely need to be a liquidation of assets to maximize value. We measured the difference between an estimated

36 http://www.ctc.ca.gov/commission/default.html 37 http://www.ctc.ca.gov/credentials/renew-manually.html 38 http://www.ctc.ca.gov/commission/default.html

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liquidation value (without accreditations) and the going-concern value (with the accreditations) as presented in the discounted cash flow methodology referred above in order to calculated the implied royalty rate of 1.75%. Discount Rate The discount rate selected for the accreditations was based on the assumption that these assets are an integral part of the University's operations and considered to be of greater risk as the University as a whole, as represented by the WACC. Therefore a discount rate of 16.0% was applied. Tax Amortization Benefit The tax amortization benefit analysis reflects the benefit derived from the ability to amortize intangible assets over 15 years for tax purposes under Section 197 of the Internal Revenue Service code. Such amortization creates a tax benefit that increases the value attributable to an intangible asset. Accordingly, the tax amortization benefit was computed for the customer relationships and added back to the respective asset value. The formula for the amortization benefit is: AB = PVCF * [n /( n – {[ PV( Dr, n, -1) * ( 1 + Dr)^0.5] * T}) – 1]

Where AB = Amortization Benefit PVCF = Present value of cash flows from the asset n = 15 year amortization period Dr = Asset specific discount rate T = Tax rate Residual Value The residual value was determined by applying the Gordon Growth Model to year 2023 after-tax cash flows as described prior in the discounted cash flow method section of this report Estimated Fair Market Value These assumptions were used in the analysis to calculate operating income for the six accreditations. Cash flow was then calculated by deducting income tax expense from operating income. The total cash flow was then discounted to present value utilizing the 16.0% selected discount rate. The present value of the after-tax cash flows was added to the present value of the amortization tax benefit to arrive at an estimated fair market value of the accreditations. Please refer to Exhibit G.1 for a summary of each of the accreditations, with Exhibits G.2 through G.12 indicating detailed information for each accreditation. Accreditations – Cost to Recreate Method The cost approach measures the value of an asset by the cost to reconstruct or replace it with another of like utility, less depreciation from physical deterioration and functional and economic

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obsolescence. The cost approach recognizes that a prudent investor would not ordinarily pay more for property or an asset than the cost to replace it. Based on discussions with management at Alliant, the cost to recreate each of the six accreditations was estimated based on the required steps necessary for each accreditation. Since this methodology may not adequately capture the full value of the accreditations (and the curricula which is a necessary prerequisite of the accreditations), it was only relied upon in the absence of the ability to apply the relief from royalty analysis described above. Please refer to Exhibit G.1 through G.12 for each of the steps and the analysis for the six accreditations. Workforce Alliant has approximately 500 employees at various levels. The total cost of the assembled workforce includes salary burden, placement fees, search costs, training and productivity. Based on discussions with the University and data provided by management, the value of the assembled workforce is $5.7 million as of June 30, 2013.

Cost Approach – Conclusion Based on our analysis of the Cost Approach, the indicated value of the net assets of Alliant on a controlling basis, including Alliant’s share of the cash in the Perkins program of $488k, is $28.662 million as of June 30, 2013. Please refer to Exhibit E for more information. The Cost Approach was used as a reasonableness test but was not replied upon in this analysis.

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VIII. SUMMARY OF ESTIMATED VALUES Based on our analysis, it is our opinion that the fair market value of the operating assets of Alliant International University, which excludes certain assets and liabilities including $16.0 million in debt and $57.0 million in real estate, as of June 30, 2013, is reasonably estimated in the amount of:

$26.810 million

Approach

Exhibit


Weight

Weighted Value (millions)

Income Approach - Discounted Cash Flow Method

Exhibit B.1 $26.050 40% $10.420

Market Approach - Guideline Public Company Method

Exhibit C.1 $26.470 40% $10.588

Market Approach - Merger and Acquisition Method

Exhibit D.1 $29.000 20% $5.800

Cost Approach Exhibit E $28.662 0% $0

Estimated Fair Market Value (Rounded)

$26.810

Asset

Exhibit


Tradenames Exhibit F.1 $4.290

Accreditations & Curriculum Exhibit G.1 $11.200

Workforce Workpaper $5.750

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ASSUMPTIONS AND LIMITING CONDITIONS In addition to those cited elsewhere in this report, other assumptions and limiting conditions pertaining to the estimate of value stated in this report are summarized below.

1. The estimate of value arrived at herein is valid only for the stated purpose as of the date of the valuation.

2. Financial statements, tax returns and other related information provided to Burr Pilger Mayer, Inc. in the course of this engagement, have been accepted without any verification as fully and correctly reflecting the enterprise’s business conditions and operating results for the respective periods, except as specifically noted herein. Burr Pilger Mayer, Inc. has not audited, reviewed, compiled, or attested under the Statements on Standards for Attestation Engagements (SSAEs) to any financial information provided to us or derived from that information and, accordingly, we express no audit opinion or any other form of assurance on this information.

3. Public information and industry and statistical information have been obtained from sources we believe to be reliable. However, we make no representation as to the accuracy or completeness of such information and have performed no procedures to corroborate the information.

4. We do not provide assurance on the achievability of results forecasted by others because events

and circumstances frequently do not occur as expected; differences between actual and expected results may be material; and achievement of forecasted results is dependent on actions, plans and assumptions of management.

5. The estimate of value arrived at herein is based on the assumption that the current level of management expertise and effectiveness would continue to be maintained and that the character and integrity of the enterprise would not be materially or significantly changed through any sale, reorganization, exchange, or diminution of the owners’ participation.

6. This report and the estimate of value arrived at herein are for the exclusive use of our client for the sole and specific purposes as noted herein. They may not be used for any other purpose or by any other party for any purpose. Furthermore the report and estimate of value are not intended by the author, and should not be construed by the reader, to be investment advice in any manner whatsoever. The estimate of value represents the considered opinion of Burr Pilger Mayer, Inc., based on information furnished to them by management and other sources.

7. Neither all nor any part of the contents of this report (especially the estimate of value, the identity of any valuation analyst(s), or the firm with which such valuation analysts are connected or any reference to any of their professional designations) should be disseminated to the public through advertising media, public relations, news media, sales media, mail, direct transmittal, or any other means of communication, including but not limited to the Securities and Exchange Commission or other governmental agency or regulatory body, without the prior written consent and approval of Burr Pilger Mayer, Inc.

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8. Future services regarding the subject matter of this report, including, but not limited to testimony or attendance in court, shall not be required of Burr Pilger Mayer, Inc. unless previous arrangements have been made in writing.

9. Burr Pilger Mayer, Inc. is not an environmental consultant or auditor, and it takes no responsibility for any actual or potential environmental liabilities. Any person entitled to rely on this report, wishing to know whether such liabilities exist, or the scope and their effect on the value of the property, is encouraged to obtain a professional environmental assessment. Burr Pilger Mayer, Inc. does not conduct or provide environmental assessments and has not performed one for the subject property.

10. Burr Pilger Mayer, Inc. has not determined independently whether Alliant is subject to any present or future liability relating to environmental matters (including, but not limited to CERCLA/Superfund liability), nor the scope of any such liabilities. Burr Pilger Mayer, Inc.’s valuation takes no such liabilities into account, except as they have been reported to Burr Pilger Mayer, Inc. by Alliant or by an environmental consultant working for Alliant, and then only to the extent that the liability was reported to us in an actual or estimated dollar amount. Such matters, if any, are noted in the report. To the extent such information has been reported to us, Burr Pilger Mayer, Inc. has relied on it without verification and offers no warranty or representation as to its accuracy or completeness.

11. Burr Pilger Mayer, Inc. has not made a specific compliance survey or analysis of the subject property to determine whether it is subject to, or in compliance with, the American Disabilities Act of 1990, and this valuation does not consider the effect, if any, of noncompliance.

12. No change of any item in this report shall be made by anyone other than Burr Pilger Mayer, Inc., and we shall have no responsibility for any unauthorized change.

13. Unless otherwise stated, no effort has been made to determine the possible effect, if any, on the subject business due to future Federal, state, or local legislation, including any environmental or ecological matters or interpretations thereof.

14. If prospective financial information approved by management has been used in our work, we have not examined or compiled the prospective financial information and therefore, do not express an audit opinion or any other form of assurance on the prospective financial information or the related assumptions. Events and circumstances frequently do not occur as expected, and there will usually be differences between prospective financial information and actual results, and those differences may be material.

15. We have conducted interviews with the current management of Alliant concerning the past,

present, and prospective operating results of the University/Company. 16. Except as noted, we have relied on the representations of the owners, management, and other

third parties concerning the value and useful condition of all equipment, real estate, investments used in the business, and any other assets or liabilities, except as specifically stated to the contrary in this report. We have not attempted to confirm whether or not all assets of the

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business are free and clear of liens and encumbrances or that the entity has good title to all assets.

17. This report reflects facts and conditions existing at the valuation date. Subsequent events have

not been considered, and we have no obligation to update our report for such events and conditions.

18. This report is designed to give an estimate of value. It does not purport to be a comprehensive list

of all of the considerations undertaken in order to arrive at our estimate of value. It is not an accounting report, and it should not be relied on to disclose unreported assets or liabilities, or to verify financial reporting.

19. The text of this report is Copyright ©2013, Burr Pilger Mayer, Inc. All rights are reserved and

no reproduction, publication, distribution, or other use of this summary report is authorized without the prior consent of Burr Pilger Mayer, Inc.

The work papers for this engagement are being retained in our files and are available for your reference. We would be available to support our valuation conclusions should this be required. Those services would be performed for an additional fee.

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CERTIFICATION We certify that, to the best of knowledge and belief:

the statements of fact in this report are true and correct;

the reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are our personal, unbiased professional analyses, opinions, and conclusions;

Burr Pilger Mayer, Inc. and its employees have no present or prospective interest in or bias with respect to the property that is the subject of this report, and we have no personal interest or bias with respect to the parties involved;

Burr Pilger Mayer, Inc. has performed no services, as an appraiser or in any other capacity, regarding the property that is the subject of this report within the three-year period immediately preceding acceptance of this assignment;

our engagement in this assignment was not contingent upon developing or reporting predetermined results;

our fee for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal;

our analyses, opinions, and conclusions were developed and this report has been prepared in conformity with Uniform Standards of Professional Appraisal Practice and with the American Institute of Certified Public Accountants’ Statement on Standards for Valuation Services No. 1 (“SSVS”);

no one provided significant business and/or intangible asset appraisal assistance to the persons signing this certification/representation;

the analyses, opinions, and conclusion of value included in the valuation report are subject to the specified assumptions and limiting conditions, and they are the personal analyses, opinions, and conclusions of value of the valuation analyst;

the economic and industry data included in the valuation report have been obtained from various printed or electronic reference sources that the valuation analyst believes to be reliable. The valuation analyst has not performed any corroborating procedures to substantiate that data;

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the parties, for whom the information and use of the valuation report is restricted, are identified; the valuation report is not intended to be and should not be used by anyone other than such parties;

we have no obligation to update the report or the opinion of value for information that comes to our attention after the date of the report;

all Accredited Senior Appraisers employed by Burr Pilger Mayer, Inc. are in compliance with the

requirements of the American Society of Appraisers' mandatory re-certification program. Samuel L. Renwick, CFA Senior Director & Valuation Practice Leader Contributing Appraisers: J. Gregory Endicott, CPA/ABV, ASA Alex Nebesar, CFA

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STATEMENT OF QUALIFICATIONS

SAMUEL L. RENWICK

EXPERIENCE: Sam leads BPM’s Valuation Group and is the co-chair of BPM’s Life Sciences Industry Group. He specializes in providing valuation, forecasting and advisory services to technology, biopharmaceutical, medical device and equipment, diagnostic companies, and clinical research and manufacturing organizations, as well as other IP-centric technology companies. His experience includes buy-side and sell-side advisory engagements for licensing, financing and mergers and acquisitions, as well as for tax and financial reporting matters for large public companies to small venture-backed enterprises. Sam has a broad background in estate and gift tax valuation and oversees all BPM tax-related valuation engagements. Whether developing dynamic, patient flow models for late-clinical therapeutic assets, developing financial models to assist in decision analysis for a technology company or developing an opinion of value for a security for compliance purposes, he combines his breadth of industry knowledge with deep expertise in finance and financial models to create compelling communications regarding the value proposition of an asset, portfolio of assets or a company. Sam has worked with more than 400 life sciences and technology companies in his career.

EDUCATION: BA/Economics and Business – Westmont College, Honors MBA/Finance – UCLA Anderson, Honors, J. Fred Weston award for Academic Excellence in Finance Chartered Financial Analyst (CFA)

AFFILIATIONS: UCLA Anderson Business Honor Society CFA Institute Chartered Financial Analyst Society of San Francisco Member, Fair Value Forum Licensing Executive Society

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J. GREGORY ENDICOTT

EXPERIENCE: Greg is the Managing Director and works cohesively with many organizations, providing expertise in a multitude of areas. He helped form the Strategic Value Group, LLC in 2004 after serving as an Associate Managing Director at Kroll Inc. Prior to his position with Kroll Inc., Greg was with Arthur Andersen LLP handling valuations of various business assets related to mergers, acquisitions, divestitures, joint ventures, tax planning, corporate reorganizations and financial reporting. Greg has substantial experience with valuations for transactional purposes for both for profit and not-for-profit entities. Much of his experience also relates to multi-disciplinary valuations where various tangible and intangible assets are valued. He is responsible for directing all aspects of the firm's valuation and transaction advisory services practice and has substantial experience with providing valuation, transaction and

EDUCATION: MBA/Finance, Real Estate –California State University, San Diego BS/Liberal Arts – Lewis and Clark College, Portland, Oregon

AFFILIATIONS: American Institute of Certified Public Accountants – Member, accredited in Business Valuation American Health Lawyers Association – Associate Member American Society of Appraisers – Accredited Senior Appraiser American Bar Association – Associate Member Healthcare Financial Management Association – Member Association for Corporate Growth – Member Certified Public Accountant in Oregon Certified Public Accountant in Washington

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ALEX NEBESAR

EXPERIENCE: Alex has 10 years of experience with national and international investment asset management and valuation firms. His background includes building financial models, economic and investment analysis, and documentation. Alex has conducted business and intangible asset valuation for financial statement reporting, mergers and acquisitions, corporate reorganizations, legal matters, and tax planning purposes.

EDUCATION: BS/Mathematics – University of Puget Sound, Tacoma, Washington Chartered Financial Analyst (CFA)

AFFILIATIONS: CFA Institute Chartered Financial Analyst Society of San Francisco

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EXHIBITS A Summary of Values

B.1 Income Approach – Discounted Cash Flow Method

B.2 Income Approach – Discounted Cash Flow Method (A – C)

B.3 Income Approach – Discounted Cash Flow Method (D – F)

B.4 Income Approach – Discounted Cash Flow Method (G – H)

B.5(a-b) Income Approach – Discounted Cash Flow Method (I)

B.6 Income Approach – Discounted Cash Flow Method (J)

B.7 Weighted Average Cost of Capital

C.1 – C.4 Market Approach – Guideline Public Company Method

D.1 – D.2 Market Approach – Merger and Acquisition Method

E Cost Approach – Net Asset Value Method

F.1 – F.3 Tradename Analysis

G.1 – G.12 Accreditation Analysis

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Alliant International University Exhibit A

Valuation Analysis of Certain Assets of Alliant International University Summary of Values

As of June 30, 2013 (In thousands of USD)

Estimated Weighted

Approach Exhibit Fair Market Value Weighting Value

Income Approach - Discounted Cash Flow Method Exhibit B.1 $26,050 40% $10,420

Market Approach - Guideline Public Company Method Exhibit C.1 $26,470 40% $10,588

Market Approach - Merger and Acquisition Method Exhibit D.1 $29,000 20% $5,800

Cost Approach Exhibit E $28,662 0% $0

[1] Estimated Fair Market Value (Rounded) $26,810

Estimated

Asset Exhibit Fair Market Value

Tradenames Exhibit F.1 $4,290

Accreditations & Curriculum Exhibit G.1 $11,200

Workforce Workpaper $5,750

Notes:

[1] Estimated fair market values include Institution share of Perkins cash at $488k and excludes Perkins related cash of $3.2M,asset of $9.9M, and

liabilities of $9.2M, as well as list of excluded assets and liabilities provided by management.

.

Final

Alliant International University Exhibit B.1Valuation Analysis of Certain Assets of Alliant International University Income Approach - Discounted Cash Flow Method


2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

A) Revenue 69,512$ 68,094$ 74,610$ 80,519$ 87,386$ 91,459$ 94,660$ 97,973$ 101,402$ 104,951$ B) Cost of Goods Sold - - - - - - - - - -

Gross Profit 69,512 68,094 74,610 80,519 87,386 91,459 94,660 97,973 101,402 104,951

C) Operating Expenses [1] 73,670 74,204 76,887 79,918 81,388 83,781 85,293 86,809 88,326 89,843 D) Other (Income) and Expense - Net - - - - - - - - - -

EBIT (4,158) (6,110) (2,277) 600 5,998 7,678 9,366 11,164 13,076 15,108

E) Income Tax Expense/(Benefit) 38.1% - - - - - 660 3,568 4,253 4,981 5,755 Net Income (Loss) (4,158) (6,110) (2,277) 600 5,998 7,018 5,798 6,911 8,095 9,352

F) Partial Period Adjustment - - - - - - - - - -

Adjusted Net Income (4,158) (6,110) (2,277) 600 5,998 7,018 5,798 6,911 8,095 9,352

G) Less: Capital Expenditures (1,000) (1,000) (1,000) (1,000) (1,000) (1,000) (1,000) (1,000) (1,000) (1,000) H) Add: Depreciation 1,394 1,294 1,494 1,694 1,694 900 1,000 1,000 1,000 1,000 I) Less: Operating Working Capital Needs (5,818) 160 (736) (668) (776) (460) (362) (374) (387) (401)

Adjusted After-Tax Cash Flow (9,582) (5,655) (2,519) 627 5,916 6,458 5,437 6,537 7,707 8,951

Period 0.500 1.500 2.500 3.500 4.500 5.500 6.500 7.500 8.500 9.500Present Value Factor (WACC) 15.0% 0.933 0.811 0.705 0.613 0.533 0.464 0.403 0.351 0.305 0.265

Present Value of After-Tax Cash Flows (8,935)$ (4,586)$ (1,777)$ 384$ 3,154$ 2,994$ 2,192$ 2,292$ 2,349$ 2,373$

J) Residual Value 80,563$ Period 9.500Present Value Factor 0.265

Present Value of Residual Value 21,355$

Total of Present Value of After-Tax Cash Flows 441$ Present Value of Residual Value 21,355Indicated Enterprise Value Before Tax Benefit 21,796

Plus: Present value of tax shield 3,765Less: Interest Bearing Debt [2] 0Plus: Share of Perkins Cash [3] 488

Estimated Fair Market Value of Enterprise 26,048$

Estimated Fair Market Value of Enterprise (rounded) 26,050$

Tax Amortization Benefit from Acquired Intangibles

Purchase Price 26,810$ Less: Current & Other Assets (FMV) (15,622) Less: Fixed Assets (FMV) (4,970) Plus: Current and Other Liabilities (FMV) 13,658 Net Acquired Intangible Assets 19,875$

Present Value of tax shield 3,765$

Notes: [1] Includes depreciation.[2] $16.0 million in interest bearing debt is not included in the transaction. For other excluded assets and liabilities, please refer to the working capital calculation on Exhibit B.5 (b).[3] Share of $3.2M in Perkins cash based on Institution Capital Contribution of $2.3M and Federal Capital Contribution of $12.9M.

For the Twelve Month Period Ending June 30,

Final

Alliant International University Exhibit B.2

Valuation Analysis of Certain Assets of Alliant International University Income Approach - Discounted Cash Flow Method


A) Revenue FYE

FY 2010 FY 2011 FY 2012 6/30/2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Revenue 77,525$ 82,675$ 78,149$ 74,206$ 69,512$ 68,094$ 74,610$ 80,519$ 87,386$ 91,459$ 94,660$ 97,973$ 101,402$ 104,951$

Year over Year Growth N/A 6.6% -5.5% -5.0% -6.3% -2.0% 9.6% 7.9% 8.5% 4.7% 3.5% 3.5% 3.5% 3.5%

B) Cost of Goods Sold FYE

FY 2010 FY 2011 FY 2012 6/30/2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Cost of Goods Sold (COGS) -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$

COGS as a % of Revenue 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Gross Profit FYE

FY 2010 FY 2011 FY 2012 6/30/2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Gross Profit 77,525$ 82,675$ 78,149$ 74,206$ 69,512$ 68,094$ 74,610$ 80,519$ 87,386$ 91,459$ 94,660$ 97,973$ 101,402$ 104,951$

Gross Margin 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

C) Operating Expenses FYE

FY 2010 FY 2011 FY 2012 6/30/2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

San Francisco Lease Expense (10,000 sqft) [1] 294$ 294$ 294$ 294$ 294$ 294$ 294$ 294$ 294$ 294$

San Diego Lease Expense (277,219 sqft) [2] 2,688$ 2,688$ 2,688$ 2,688$ 2,688$ 2,688$ 2,688$ 2,688$ 2,688$ 2,688$

Operating Expenses (includes depreciation below) 75,600$ 79,655$ 81,662$ 76,146$ 73,670$ 74,204$ 76,887$ 79,918$ 81,388$ 83,781$ 85,293$ 86,809$ 88,326$ 89,843$

Operating Expenses as a % of Revenue 97.5% 96.3% 104.5% 102.6% 106.0% 109.0% 103.1% 99.3% 93.1% 91.6% 90.1% 88.6% 87.1% 85.6%

Depreciation Expense 1,466$ 1,507$ 1,349$ 1,237$ 1,394$ 1,294$ 1,494$ 1,694$ 1,694$ 900$ 1,000$ 1,000$ 1,000$ 1,000$

EBITDA [3] 3,391$ 4,486$ (2,163)$ (704)$ (2,764)$ (4,816)$ (783)$ 2,295$ 7,692$ 8,578$ 10,366$ 12,164$ 14,076$ 16,108$

EBITDA Margin 4.4% 5.4% -2.8% -0.9% -4.0% -7.1% -1.0% 2.8% 8.8% 9.4% 11.0% 12.4% 13.9% 15.3%

Notes:

[1] 10% annual rent expense based upon appraised value of $3.675 milion and 80% occupancy.

[2] 10% annual rent expense based upon appraised value of $33.6 million and 80% occupancy.

[3] EBITDA = Earnings Before Interest, Tax, Depreciation, and Amortization.





Final




D) Other Income and Expenses

FYE

FY 2010 FY 2011 FY 2012 6/30/2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Other (Income)/Expense, net 61$ (5,650)$ (122)$ 301$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$

Other (Income)/Expense, net as a % of Revenue 0.1% -6.8% -0.2% 0.4% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

E) Income Tax Expense

FYE

EBIT FY 2010 FY 2011 FY 2012 6/30/2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

EBIT [1, 2] 398$ 7,164$ (4,740)$ (3,479)$ (4,158)$ (6,110)$ (2,277)$ 600$ 5,998$ 7,678$ 9,366$ 11,164$ 13,076$ 15,108$

EBIT as a % of Revenue 0.5% 8.7% -6.1% -4.7% -6.0% -9.0% -3.1% 0.7% 6.9% 8.4% 9.9% 11.4% 12.9% 14.4%

Income Tax Expense

Income Tax Expense 38.1% -$ -$ -$ -$ -$ 660$ 3,568$ 4,253$ 4,981$ 5,755$

Effective Tax Rate 0.0% 0.0% 0.0% 0.0% 0.0% 8.6% 38.1% 38.1% 38.1% 38.1%

Net Income

FYE

FY 2010 FY 2011 FY 2012 6/30/2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

EBI [3] 398$ 7,164$ (4,740)$ (3,479)$ (4,158)$ (6,110)$ (2,277)$ 600$ 5,998$ 7,018$ 5,798$ 6,911$ 8,095$ 9,352$

EBI as a % of Revenue 0.5% 8.7% -6.1% -4.7% -6.0% -9.0% -3.1% 0.7% 6.9% 7.7% 6.1% 7.1% 8.0% 8.9%

F) Partial Period Adjustment

Net Income

Partial Period (Post-Valuation Date) 365 / 365

Notes:

[1] EBIT = Earnings Before Interest and Tax.

[2] Includes depreciation and exceptional items in historical periods.

[3] EBI = Earnings Before Interest.



2013


Final




G) Capital Expenditures FYEFY 2010 FY 2011 FY 2012 6/30/2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Full year Capital Expenditures 604$ 1,106$ 561$ 1,901$ 1,000$ 1,000$ 1,000$ 1,000$ 1,000$ 1,000$ 1,000$ 1,000$ 1,000$ 1,000$

Capital Expenditures as a % of Revenue 0.8% 1.3% 0.7% 2.6% 1.4% 1.5% 1.3% 1.2% 1.1% 1.1% 1.1% 1.0% 1.0% 1.0%

H) Depreciation

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Beginning Net Fixed Asset Balance 4,970$ 4,576$ 4,282$ 3,788$ 3,094$ 2,400$ 2,500$ 2,500$ 2,500$ 2,500$

Capital Expenditures 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000

Fixed Assets 5,970 5,576 5,282 4,788 4,094 3,400 3,500 3,500 3,500 3,500

Depreciation

Assumptions as to Depreciable Lives:

Beginning Balance - 5.0 year remaining average lives

Additions - 5.0 year average lives

Beginning Balance 1,194$ 994$ 994$ 994$ 794$ -$ -$ -$ -$ -$

2012 Additions 200 200 200 200 200 - - - - -

2013 Additions 100 200 200 200 200 100 - - -

2014 Additions 100 200 200 200 200 100 - -

2015 Additions 100 200 200 200 200 100 -

2016 Additions 100 200 200 200 200 100

2017 Additions 100 200 200 200 200

2018 Additions 100 200 200 200

2019 Additions 100 200 200

2020 Additions 100 200

2021 Additions 100

Total Depreciation 1,466$ 1,507$ 1,349$ 1,237$ 1,394$ 1,294$ 1,494$ 1,694$ 1,694$ 900$ 1,000$ 1,000$ 1,000$ 1,000$

Total Depreciation as a % of Revenue 1.9% 1.8% 1.7% 1.7% 2.0% 1.9% 2.0% 2.1% 1.9% 1.0% 1.1% 1.0% 1.0% 1.0%

Net Fixed Assets 13,798$ 15,654$ 14,725$ 16,042$ 4,576$ 4,282$ 3,788$ 3,094$ 2,400$ 2,500$ 2,500$ 2,500$ 2,500$ 2,500$

Net Fixed Assets as a % of Revenue 17.8% 18.9% 18.8% 21.6% 6.6% 6.3% 5.1% 3.8% 2.7% 2.7% 2.6% 2.6% 2.5% 2.4%



Final

Alliant International University Exhibit B.5 (a)



I) Debt Free Net Operating Working Capital Needs

FYE

6/30/2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Net Operating Working Capital 2,037$ 7,855$ 7,695$ 8,431$ 9,099$ 9,875$ 10,335$ 10,697$ 11,071$ 11,458$ 11,859$

Net Operating Working Capital as a % of Revenue 2.7% 11.3% 11.3% 11.3% 11.3% 11.3% 11.3% 11.3% 11.3% 11.3% 11.3%

Debt Free Net Operating Working Capital (Increase) / Reduction (5,818)$ 160$ (736)$ (668)$ (776)$ (460)$ (362)$ (374)$ (387)$ (401)$


Final

Alliant International University Exhibit B.5 (b)Valuation Analysis of Certain Assets of Alliant International University Income Approach - Discounted Cash Flow Method


I) Debt Free Net Operating Working Capital Needs (continued) - Historical Calculations

6/30/2012 7/31/2012 8/31/2012 9/30/2012 10/31/2012 11/30/2012 12/31/2012 1/31/2013 2/28/2013 3/31/2013 4/30/2013 5/31/2013 6/30/2013 Notes

Current Assets

Cash & Cash Equivalents 3,883$ 4,670$ 12,761$ 4,295$ 7,212$ 3,412$ 4,540$ 3,854$ 3,310$ 3,825$ 5,276$ 616$ 1,764$ Excludes Perkins Cash of $3.2M

Short-Term Investments 13,060$ 7,562$ 15,063$ 15,064$ 11,566$ 11,568$ 5,570$ 21,670$ 16,572$ 15,874$ 9,576$ 13,377$ 4,815$ Excludes $2.9M of Investments

Tuition 3,402$ 3,047$ 9,856$ 5,930$ 5,100$ 4,702$ 3,960$ 7,051$ 5,379$ 4,911$ 4,176$ 3,669$ 4,347$

Student Loans 11,232$ 11,045$ 11,241$ 11,156$ 10,995$ 10,866$ 10,801$ 11,072$ 10,900$ 10,725$ 10,577$ 10,627$ 290$ Excludes $9.9M in Perkins loans

Other (A/R) 1,395$ 809$ 611$ 642$ 401$ 481$ 628$ 667$ 569$ 403$ 611$ 769$ 1,424$ Excludes $106k in Other Receivables

Net Pledges Receivable 2,081$ 2,081$ 2,056$ 2,056$ 2,056$ 2,056$ 2,056$ 1,856$ 1,856$ 1,856$ 1,856$ 1,856$ 1,130$ Excludes $764k of Pledges Receivable

Prepaid and Other 1,845$ 2,174$ 2,831$ 3,387$ 3,130$ 2,783$ 2,580$ 3,061$ 2,832$ 2,037$ 1,610$ 1,720$ 1,462$

Current Liabilities

Accounts Payable (564)$ (932)$ (449)$ (250)$ (513)$ (483)$ (207)$ (556)$ (536)$ (353)$ (308)$ (2,369)$ (1,349)$ Excludes $207k in Accounts Payable

Accrued Payroll and Benefits (5,512)$ (3,301)$ (1,738)$ (1,746)$ (1,870)$ (1,815)$ (2,240)$ (2,554)$ (2,698)$ (2,629)$ (2,855)$ (2,907)$ (4,020)$ Excludes $614k in Accrued Payroll and Benefits

Accrued Expenses and Other Liabilities (2,754)$ (2,719)$ (3,000)$ (2,994)$ (3,196)$ (3,348)$ (3,035)$ (4,286)$ (3,693)$ (3,197)$ (2,779)$ (8,602)$ (1,095)$ Excludes $1.4M in Accrued Expenses and Other Liabilities

Deferred Tuition & Other Deferred Income (5,067)$ (1,933)$ (28,402)$ (20,949)$ (12,342)$ (4,419)$ (419)$ (26,232)$ (19,108)$ (11,904)$ (4,792)$ (323)$ (4,881)$

Lease Liability (1,474)$ (1,503)$ (1,530)$ (1,558)$ (1,584)$ (1,611)$ (1,637)$ (1,662)$ (1,686)$ (1,710)$ (1,734)$ (1,758)$ (2,312)$

U.S. Gov't Loans Potentially Refundable (9,106)$ (8,964)$ (7,578)$ (2,972)$ (8,773)$ (8,735)$ (8,703)$ (3,411)$ (2,206)$ (8,604)$ (8,818)$ (5,651)$ 462$ Excludes $9.2M in Perkins Loans

Net Working Capital 12,422$ 12,036$ 11,722$ 12,063$ 12,182$ 15,457$ 13,894$ 10,530$ 11,491$ 11,234$ 12,397$ 11,024$ 2,037$

Revenue -$ 3,812$ 8,171$ 16,075$ 24,836$ 33,144$ 37,714$ 40,448$ 47,617$ 55,110$ 62,804$ 68,132$ 74,206$

Net Working Capital as % of Revenue N/A 315.7% 143.5% 75.0% 49.0% 46.6% 36.8% 26.0% 24.1% 20.4% 19.7% 16.2% 2.7%

Average Working Capital for FY 2013 $11,422

As a % of FY 2013 Revenue 15.4%

Guideline Company Indications (see Exhibit C.2)

Average Working Capital as a % of Revenue 9.4%

Median Working Capital as a % of Revenue 11.3%

Notes:

Source is "1213 June YE Financial Statement by Object Code - Drilldown.xls" and "1314 June YE BS for APA V7 9_18-14 AA and AIU 3 provided by client.

Final




J) Residual Value

Net Income - Residual Year 9,680$

Add: Depreciation 1,035 Revenue - Residual Year 108,624$

Less: Capital Expenditures (1,035) Debt-Free ONWC % 11.3%

Less: Working Capital Increase (415) Debt-Free ONWC 12,275

Prior Year Debt-Free ONWC 11,859

Cash Flow 9,265$ Net Increase 415$

Divide by: Capitalization Rate

Discount Rate 15.0%

Less: Long-Term Sustainable Growth Rate 3.5%

Capitalization Rate 11.5%

Residual Value 80,563$

Working Capital Change - Residual Year

Final

Alliant International University Exhibit B.7Valuation Analysis of Certain Assets of Alliant International University Weighted Average Cost of Capital


Guideline Company Analysis

Company Name Ticker Symbol

Market

Capitalization

Interest Bearing

Debt

Equity % of Total

Capital

5-Year Levered

Beta Unlevered Beta

American Public Education, Inc. NasdaqGS:APEI 430,435$ -$ 100.0% 0.61 0.61

Apollo Group Inc. NasdaqGS:APOL 1,315,529 57,795 95.8% 0.33 0.32

Bridgepoint Education, Inc. NYSE:BPI 433,620 - 100.0% 2.19 2.19

Capella Education Co. NasdaqGS:CPLA 339,609 - 100.0% 0.73 0.73

CIBT Education Group Inc. TSX:MBA 6,260 1,309 82.7% 0.95 0.84

Corinthian Colleges Inc. NasdaqGS:COCO 127,014 111,973 53.1% 1.01 0.65

DeVry Education Group Inc. NYSE:DV 1,283,499 - 100.0% 0.46 0.46

EVCI Career Colleges Holding Corp. OTCPK:EVCI 17 5,956 0.3% 1.64 0.01

Grand Canyon Education, Inc. NasdaqGS:LOPE 964,670 64,009 93.8% 0.55 0.53

ITT Educational Services Inc. NYSE:ESI 375,053 78,954 82.6% 0.53 0.47

Lincoln Educational Services Corporation NasdaqGS:LINC 83,224 23,568 77.9% 1.07 0.91

Strayer Education Inc. NasdaqGS:STRA 330,605 81,216 80.3% 0.74 0.65

Average 474,128$ 35,398$ 80.5% 0.90 0.70

Median 357,331$ 14,762$ 88.2% 0.74 0.63

Selected 88.0% 0.65

Industry Capital Structure

Equity 88.0%

Interest Bearing Debt 12.0%

Tax Rate 38.1%

Cost of Equity

Modified CAPM: Rf + β(ERP)+ Sp + e

RF = Risk-Free Rate [1] 3.3%

β = Levered Beta 0.70

ERP= Equity Risk Premium [2] 6.7%

Sp= Size Premium [3] 4.2%

e= Other Company-Specific Premiums [4] 4.0%

Cost of Equity 16.2%

Cost of Equity (rounded) 16.0%

Weighted Average Cost of Capital

Equity as a % of Total Capital 88.0%

Cost of Equity (above) 16.2%

14.3%

Debt as a % of Total Capital 12.0%

Cost of Debt [5] 5.4%

After-Tax Cost of Debt (tax rate above) 3.3%

0.4%

Weighted Average Cost of Capital 14.7%

Weighted Average Cost of Capital (rounded) 15.0%

Notes:

[1] Risk free rate at 6/30/2013 based on 20-year U S Treasury note. Federal Reserve Statistical Release

[2] Large Company Stock Premium from 2013 SBBI Yearbook - Valuation Edition, per Ibbotson Associates.

[3] Micro stock premium reflects a company market capitalization in decile 10a, per Ibbotson 2013 Yearbook.

[4] Represents risk associated with increasing capacity in undergraduate programs as well as volatility in earnings.

[5] Borrowing rate based on Moody's Baa rated debt at 6/30/2013.

Final

Alliant International University Exhibit EValuation Analysis of Certain Assets of Alliant International University Cost Approach - Summary


Adjusted as

Book Value Acquisition Provided by Client Valuation Fair Market Value

June 30, 2013 [1] Adjustments June 30, 2013 Adjustment [2] June 30, 2013

Assets

[3], [8] Cash & Short-Term Investments 5,049$ (6,175)$ (1,126)$ -$ (1,126)$

[3], [8], [9] Accounts Receivable, net 16,171 (10,856) 5,315 - 5,315

[3], [8] Inventory - - - - -

[3] Prepaid Expenses 1,462 - 1,462 - 1,462

[3] Other Current Assets - - - - -

[4] Fixed Assets

San Diego Property - Land, Building and Improvements 36,697 (1,047) 35,650 (35,650) -

San Diego Ranch - Land 17,547 28 17,575 (17,575) -

San Francisco Property - Land, Building, and Improvements 3,455 345 3,800 (3,800) -

PP, FF&E - all locations; Improvements at locations not to be sold 3,188 - 3,188 1,783 4,970

Net Fixed Assets 60,886 (674) 60,213 (55,242) 4,970

[5] Tradenames - - - 4,290 4,290

[6] Accreditations & Curriculum - - - 11,200 11,200

[7] Workforce - - - 5,750 5,750

Goodwill - - - - -

[8] Other Assets 9,972 - 9,972 - 9,972

Total Assets 93,540$ (17,704)$ 75,835$ (34,002)$ 41,833$

Liabilities

[3], [8] Accounts Payable 1,556$ (207)$ 1,349$ -$ 1,349$

[3] Short-Term Notes Payable - - - - -

[3] Current Portion - Long Term Debt - - - - -

[3], [8] Other Current Liabilities 17,262 (2,018) 15,244 - 15,244

[8] Long Term Debt 16,000 (16,000) - - -

[3] Deferred Income Tax - - - - -

[3] Minority Interest - - - - -

[8], [9] Other Liabilities, Total 8,721 (11,655) (2,934) - (2,934)

Total Liabilities 43,538$ (29,880)$ 13,658$ -$ 13,658$

Equity

Equity 50,002$ 12,176$ 62,177$ (34,002)$ 28,175$

Total Equity 50,002$ 12,176$ 62,177$ (34,002)$ 28,175$

Total Liabilities & Equity 93,540$ (17,704)$ 75,835$ (34,002)$ 41,833$

Share of $3.2M in Perkins Cash [10] 488$

Net Asset Value [11] 28,662$

Notes:

[1] Source is "2012-13 Alliant - A-051 - 6-13 - Final FS Electronic - Issued 1-15-14" provided by management.

[2] Valuation adjustments based on fair market value analysis.

[3] Assumes book value equals fair market value due to the nature of these assets and liabilities and is outside the scope of this engagement.

[4] The fair market value of the personal property and FF&E was estimated at 40% of cost, based on data provided by management, and is outside the scope of this engagement.

San Diego and San Francisco properties include land, buildings, and improvements. Acquisition adjustment based on purchase offer, less transaction expenses.

[5] Exhibit F.1

[6] Exhibit G.1

[7] Based on workforce data provided by management.

[8] As per management, adjustments represent assets and liabilities are excluded from the transaction. Source is "1314 June YE BS for APA V7 9_18-14 AA and AIU 3" provided by client.

[9] Excludes Perkins related cash of $3.2M, asset of $9.9M and liability of $9.2M.

[10] Share of $3.2M in Perkins cash based on Institution Capital Contribution of $2.3M and Federal Capital Contribution of $12.9M.

[11] Total assets minus total liabilities, plus share of Perkins cash.

Final

Alliant International University Exhibit F.1Valuation Analysis of Certain Assets of Alliant International University Tradename - Relief from Royalty Method


2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Total Revenue 69,512$ 68,094$ 74,610$ 80,519$ 87,386$ 91,459$ 94,660$ 97,973$ 101,402$ 104,951$

% of Total Revenue Attributed to Tradename 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Total Revenue from Tradename 69,512 68,094 74,610 80,519 87,386 91,459 94,660 97,973 101,402 104,951

Revenue Base of Tradename w/ Pre-Tax Royalty Rate @ 1.0% 695 681 746 805 874 915 947 980 1,014 1,050

Income Tax Expense / (Benefit) 38.1% 265 259 284 307 333 348 361 373 386 400

After-Tax Cash Flows 430 422 462 498 541 566 586 607 628 650

Partial Period Adjustment -

Adjusted After-Tax Cash Flows 430 422 462 498 541 566 586 607 628 650

Period 0.5000 1.5000 2.5000 3.5000 4.5000 5.5000 6.5000 7.5000 8.5000 9.5000

Present Value Factor 17.0% 0.9245 0.7902 0.6754 0.5772 0.4934 0.4217 0.3604 0.3080 0.2633 0.2250

Present Value of After-Tax Cash Flows 398$ 333$ 312$ 288$ 267$ 239$ 211$ 187$ 165$ 146$


Period 9.5000

Present Value Factor 0.2250

Present Value of Residual Value 1121

Total Present Value of After-Tax Cash Flows 2546

Plus: Present Value of Tax Shield 628

Estimated Fair Market Value 4,295$

Estimated Fair Market Value (rounded) 4,290$


Final

Alliant International University Exhibit F.2Valuation Analysis of Certain Assets of Alliant International University Tradename - Selected Royalty Rate


Royalty Rate Data provided by Royalty Source

1 2 3 4 5 6 7 8 9

Low 5.0% 10.0% 1.0% 7.5% 5.0% 3.0% 10.0% 1.3% 1.0%

High 5.0% 10.0% 2.0% 15.0% 5.0% 3.0% 10.0% 1.8% 1.0%

Mean 5.0% 10.0% 1.5% 11.3% 5.0% 3.0% 10.0% 1.5% 1.0%

Total Mean 5.36%

Total Median 5.00%

Quartile 1 1.50%

Quartile 3 10.00%

[1] Selected Pre-Tax Royalty Rate 1.00%

Notes

[1] Alliant's long-term EBITDA margin is 9.4%. The observed guideline companies EBITDA margins were in the range of -3.0% to 27.5%.

Therefore, we concluded that the 1% was reasonable.

Transaction

Final

Alliant International University Exhibit F.3

Valuation Analysis of Certain Assets of Alliant International University Tradename - Royalty Rate Data


GUIDELINE LICENSE AGREEMENT 1

Licensee SIGNIFICANT EDUCATION, LLC aka GRAND CANYON EDUCATION INC

Licensor

Date Jun 2004 Licensed Property Compensation Detail

Duration N/A

Royalty Rate %, low 5.00%

Royalty Rate %, high 5.00%

Industry Educational/Learning Related


Licensee Watch USLicensor Carmel Clay Schools

Date Oct 2007 Licensed Property Compensation Detail

Duration N/A




Notes

Source: RoyaltySource

BLANCHARD EDUCATION, LLC

Licensor grants Licensee (the “Parties”) the right to name the Licensee’s College of Business, “The Ken

Blanchard College of Business”. This grant also includes the right to use the name “Ken Blanchard” to

establish and promote the relationship between the Parties, and to establish and promote the relationship

between Ken Blanchard and the Licensee.

Ken Blanchard’s name may also be used to advertise and promote The Ken Blanchard School of Business.

Licensor will promote the relationship between Ken Blanchard and the Licensee as well as The Ken

Blanchard School of Business, including a prominent presence for Licensee and The Ken Blanchard School

of Business and links to Licensee and The Ken Blanchard School of Business on the website

www.kenblanchard.com and other websites maintained by Ken Blanchard or entities controlled by Ken

Blanchard.

The Parties agree that this Agreement, the rights it grants to Licensee, and the application of these rights by

Licensee shall be mutually exclusive. For clarification, this mutual exclusivity means that Licenseor will not

Royalty: In consideration for the rights granted Significant Education hereunder, including the right of GCU to

name its College of Business the The Ken Blanchard College of Business, Significant Education will agree to

pay Blanchard Education a royalty on all net tuition (“Tuition Royalty”) (with “net tuition” defined as gross

tuition less tuition credits and refunds) received by GCU as follows:

• Five percent (5%) on the net tuition received from 300 level and above Business Courses offered by or

though the Ken Blanchard College of Business while this Agreement is in effect. To avoid any possibility of a

misunderstanding between the Parties, “Business Courses” includes Accounting, Business, Finance,

Management, and Marketing courses, but excludes all Computer Information Systems Classes or Courses.

A school system in Ohio is working on an agreement to protect their logos from inappropriate use. Kroger

grocery stores have been selling the school's apparel for some time without the approval or consent of the

district. The school is about to enter into a licensing agreement with an Ohio-based vendor that supplies

school apparel to Kroger supermarkets. The agreement covers school logos, names, mascots and colors.

Royalty: "The royalty fee is 2 percent higher than most colleges," he said. "It is 8 percent for college

licensing. You have a 10 percent (fee). But I warn you, it's not going to be a lucrative business."

Final





Licensee KNOWLEDGEWORKS GLOBAL PRIVATE LIMITED

Licensor CDMS MANAGEMENT CORPORATION


Duration N/A





Licensee

Licensor NATIONAL GEOGRAPHIC SOCIETY

Date Apr 1997 Licensed Property Compensation Detail

Duration N/A




Notes


GEOSYSTEMS GLOBAL CORP

The Company will pursue commercial opportunities involving Cartographic Products, using certain

trademarks and copyrighted materials under license from Licensor.

"Cartographic Products" shall include products in the print medium where cartography represents the central

theme or majority content of such products, such as maps, globes, road atlases, reference atlases, historical

atlases, and map guide (but not travel guides) products.

"Direct Channels" means and refers to direct marketing distribution channels in North America for

Cartographic Products including, without limitation, individual mailings, catalog programs and the Internet

market, other than National Geographic Membership Channels.

LICENSED TRADEMARKS: NATIONAL GEOGRAPHIC and YELLOW BORDER DESIGN; NATIONAL

GEOGRAPHIC SOCIETY; NATIONAL GEOGRAPHIC MAPS.

"Education Channels" means and refers to distribution channels in North America for Cartographic Products

to schools, educational institutions and teachers including, without limitation, key catalog wholesalers,

cooperative sales through parent/teacher catalogs and direct marketing to school and teachers (including

mailings, telemarketing, conference exhibits and MapQuest- linked Internet programs); provided, however,

that specialty retail stores e.g., Zany Brainy, Noodle Kadoodle) shall be included in Retail Channels and

parent/teacher supply stores shall be included in the separate channel of Teacher Supply Stores.

Royalty: GeoSystems shall pay royalties to NG based on the following royalty rates on the Net Revenues

derived by GeoSystems from the sale of the Products:

Product Royalty Rate

i. NG Products 15.0%/(1)

ii. GeoSystems Products 7.5%

iii. Third Party Products 7.5%

iv. Modified or Remanufactured Products 12.5%/(2)/

v. Licensed Products 50.0%/(3)/

/(1)/ At GeoSystems’ option, in the case of sales of NG Products, GeoSystems may (i) purchase such

Products at 110% of NG’s actual cost of printing, paper and binding with respect to the manufacture of such

Products and pay a royalty of 15% of Net Revenues, or (ii) manufacture the NG Product and pay a royalty of

15% of Net Revenues (in which case GeoSystems shall allow NG to purchase such NG Products at 110% of

GeoSystems’ actual cost of printing, paper and binding).

/(2)/ At GeoSystems’ option, in the case of Modified or Remanufactured Products, it may (i) request NG to

make the required modifications and manufacturing (at GeoSystems’ expense) and pay NG a royalty of

12.5% of Net Revenues or (ii) make the required modifications and manufacturing and pay a royalty of

12.5% of Net Revenues.

/(3)/ For the purposes of calculating the royalties on Licensed Products, Net Revenues shall be reduced by

the out-of-pocket costs for developing and manufacturing such Products.

"Net Revenues" shall mean the gross revenues actually received by GeoSystems from sales of the Products

less credits (including promotional allowances), reasonable reserves for returns, bad debt, product discounts,

shipping and handling charges, and sales taxes or custom duties, if applicable.

The Licensor agrees to grant to Indian Licensee a non-exclusive and non-transferable license to use the

KnowledgeWorks Mark in India in connection with the Indian licensee producing printed goods and materials

and providing content management and content processing services to customers.

Content includes any journals, other publications, articles, documents or other content relating to scientific,

technical or medical information or matters.

Royalty: In consideration of the license grantedherein, KGL will pay CDMS a royalty (the "Royalty") equal to

(a) two percent(2%) of KGL's Net Sales of Goods and Services relating to export sales (but excluding for this

purpose any sales to Cadmus Professional Communications or any other Cadmus affiliate), and (b) one

percent (1%) of KGL's Net Sales of Goods and Services relating to Indian domestic sales; where "Net Sales"

means gross sales less agents'/dealers' commission, transport cost, including ocean freight, insurance,

duties, taxes and other charges, and costs of raw materials, parts, and components imported from a foreign

supplier or its subsidiary/affiliated company; provided that in no event shall the Royalty exceed the

maximum amount permitted to be paid under applicable law.

Final





Licensee

Licensor SMITHSONIAN INSTITUTION


Duration N/A





Licensee

Licensor THE LEARNING EXPRESS, INC.

Date Nov 1999 Licensed Property Compensation Detail

Duration N/A




Notes


LEARNINGEXPRESS.COM, LLC

Effective upon the date hereof, LEI grants to LEC an exclusive (even as to LEI) world-wide, non-transferable,

limited license to use:(i) the LEI names and trademarks set forth on Schedule 2(a)(i)hereto and made a part

hereof, and the Domain Name (all such names and trademarks, including the Domain Name, are the

"Marks"); (ii) all of LEI's other rights of any kind in, to and under the Web site currently operated under the

Domain Name.

LEI has developed plans, methods, manuals, systems and procedures, a uniform and recognizable

marketing image and reputation for toy stores and the sale of related products and services under the name,

trademark and service mark "Learning Express" (referred to herein as the "System") and has licensed the

System to franchisees ("Franchisees") who own and operate retail toy stores ("Retail Stores") under the

name Learning Express.

LEC, the Licensee, wishes to develop, operate and promote an Internet-based on-line store at

www.learningexpress.com (all operations of LEC on or through www.learningexpress.com are, collectively,

the "On-Line Store") to adapt the System for electronic commerce and, accordingly, LEC wishes to obtain a

license to certain of LEI's intellectual property all as described in this Agreement .

SCHEDULE 2(a)(i): MARKS; ; MARK REGISTERED FEDERAL TRADEMARK: "Learning Express" Yes;

(Words Only); Registration Date: July 16, 1991; Registration No.: 1,651,110; ; "Learning Express" Yes; (Train

Logo); Registration Date: April 16, 1991; Registration No.: 1,641,650; ; "Learning Express" Yes; (Logo);

Registration Date: November 12, 1996; Registration No.: 2,015,571; ; LearningExpress.com

Royalty: In consideration of the Licenses, LEC shall: (a) pay to LEI a royalty (the "Royalty") with respect to

each calendarmonth (or portion thereof) during the Term (in each case within twenty (20) days following the

end of such calendar month), commencing with the month ended January 31, 2002, an amount equal to

three percent (3%) of "Net Sales" accrued during such month (or portion thereof for any partial months

during the Term).

TRUDY CORP (SOUNDPRINTS)

The Institution granted an exclusive license to utilize the Smithsonian name in connection with the sale of

realistic wildlife plush toys and educational kits, storybooks, and audio cassettes with contract-manufactured

educational toys to the retail, education and mail order markets.

Royalty: SoundPrints shall pay Smithsonian the percentage of sales proceeds listed below as royalty

payment. Sales proceeds shall be defined by Paragraph 8 (b) above, and royalties shall be payable within

thirty (30) days of the end of the calendar quarter. For the purposes of this contract, quarters are defined as

ending September 30, December 31, March 31 and June 30. - - 5% (five percent) - on wholesale sales of all

toys (plush and otherwise) - - 5% (five percent) - on wholesale sales of toy/book and or tape combinations - -

5% - (five percent) - on books alone - - 5% (five percent) of all retail/direct response sales (based on the

retail price) - - 5% (five percent) - on remainders (as defined in Paragraph 14. Disposal of Seconds).

Final





Licensee

Licensor WADE B. COOK

Date Jan 1998 Licensed Property Compensation Detail

Duration 3 years





Licensee

Licensor IOWA MEDICAL SOCIETY

Date Jan 1999 Licensed Property Compensation Detail

Duration N/A



Industry Business Service


Licensee SELF CHANGE CORPLicensor PATRICK TIRABOSCHI

Date Sep 1996 Licensed Property Compensation Detail

Duration N/A



Industry Business Service

Notes


MIDWEST MEDICAL INSURANCE CO

Licensor hereby grants Licensee an exclusive license to use the Licensed Marks ("Iowa Medical Society", the

acronym "IMS") and their associated goodwill, including the phrases Endorsed by the Licensor and

Exclusively Endorsed and Recommended by the Licensor, for the specific purpose of promoting, marketing,

selling, advertising and distributing products under the Licensee Program (including display of the Licensed

Marks upon various printed and media materials used in connection therewith), all subject to the terms of this

Agreement.

Licensor acknowledges and agrees that it may not grant to others a license or sublicense to use the Licensed

Marks in connection with the offer, sale or promotion of professional liability insurance coverages.

"MMIC Program" shall mean the offer and sale by MMIC of professional liability insurance policies meeting

the requirements of this Agreement providing coverage for physicians practicing in the State of Iowa.

"IMS Licensed Marks" shall mean the following marks owned by IMS: the name "Iowa Medical Society", the

acronym "IMS" and various symbols, devices, logos and designs embodying the same.

Royalty: In consideration for the grant to MMIC of a license to use the IMS Licensed Marks and for the IMS

endorsement of the MMIC Program, MMIC agrees to pay IMS an annual royalty comprised of the following

payments:

(a) Fixed Royalty. MMIC shall make an annual payment of $97,000 to IMS during each year for which this

Agreement remains in effect, with such payment to be made no later than the 28th day of February,

commencing with the year 1999;

(b) Variable Royalty. MMIC shall pay IMS a variable royalty based on the gross written premium collected by

MMIC with respect to all physician business written in the State of Iowa during each year for which this

Agreement remains in effect, with such royalty to be calculated as follows: (i) 1.75% (.0175) of the first

$15,000,000 of gross written premium on all physician business written in the State of Iowa; plus (ii) 1.25%

(.0125) of gross written premium on all physician business written in the State of Iowa in excess of

$15,000,000; provided, however, (iii) that in no event shall the variable royalty be less than the sum of

$200,000 on an annual basis.

In this related party agreement, the Company entered into a non-exclusive and nontransferable License

Agreement with the majority stockholder of the Company, who is the owner of the trademark and logo Self

Change Corporation.

This trademark and logo is to be used by the Company in the promotion and advertising of its services in the

permitted territory.

Royalty: The contract provides for the payment of a royalty fee to the licensor of 1% on gross fees earned

from the operation of the machines in the territory (this fee is waived for the initial year of the contract).

WADE COOK FINANCIAL CORP

In a related party transaction, the Company entered into a new Open Ended Product Agreement to be

effective July 1, 1997 and expiring June 30, 2000. The Company has a non-exclusive license which permits

it to produce, market and sell licensed original products and intellectual property that uses the licensee's (the

Company's CEO) name, likeness, identity, trademarks, trade symbols, and educational seminar business.

Cook hereby continues to license rights in the Cook IP, which Cook either owns or controls, to WCFC for the

purpose of producing, marketing, and selling seminars, audio tapes, videotapes, related books and writings,

and other works stemming from the Cook IP on an individual product basis. This license shall be a non-

exclusive worldwide license.

Royalty: Pursuant to this Open Ended Product Agreement, the Company has a non-exclusive license with

Mr. Cook which permits the Company to produce, market and sell licensed original products and intellectual

property in exchange for a royalty of ten percent of the gross sales of the licensed products.

Final

Alliant International University Exhibit G.1Valuation Analysis of Certain Assets of Alliant International University Summary of Accreditations


Accreditation Coverage Exhibit

Income

Approach Exhibit Cost Approach

Concluded

Value

Estimated

Useful Life

Western Association of Schools and

Colleges ("WASC")

Accreditation covers entire Alliant

International University program, including

Mexico

Exhibit G.2 7,890$ 100% Exhibit G.3 230$ 0% 7,890$ 6-7 years

American Psychological Association

("APA")

Covers Clinical Psychology PhD and PsyD

programs at Fresno, Los Angeles, San Diego,

Sacramento and San Francisco campuses

Exhibit G.4 2,120$ 100% Exhibit G.5 490$ 0% 2,120$ 3-5 years

Commission on Accreditation of

Marriage and Family Therapy

Education ("COAMFTE")

Covers the Couple and Family Therapy

master's programs at Irvine, Los Angeles,

Sacramento, and San Diego, and doctoral

programs at Irvine, Sacramento, and San

Diego

Exhibit G.6 940$ 100% Exhibit G.7 120$ 0% 940$ 6 years

California Commission on Teacher

Credentialing ("CTC")

Covers the teaching credentialing programs

in California

Exhibit G.8 80$ 100% Exhibit G.9 80$ 0% 80$ 3 Years

Committee of Bar Examiners of the

California State Bar ("CBOE")

Covers the San Francisco Law School Exhibit G.10 130$ 100% Exhibit G.11 60$ 0% 130$ 4 Years

Secretaria de Educacion Publica

("SEP")

Some coverage of Alliant's Mexico City

Campus are covered (in addition to WASC

accreditation above); full accreditation by SEP

is in progress

N/A N/A Exhibit G.12 40$ 100% 40$ Indefinite (once

achieved)

Total 11,200$

Notes:

The Hufstedler School of Education is in the preliminary phases of applying for accreditation under the National Council for Accreditation of Teacher Education - Council for the Accreditation of Educator Preparation

("NCATE-CAEP"). No value was assigned to this accreditation due to its early stage.

Final

Alliant International University Exhibit G.2Valuation Analysis of Certain Assets of Alliant International University WASC Accreditation - Income Approach


2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Total Revenue 69,512$ 68,094$ 74,610$ 80,519$ 87,386$ 91,459$ 94,660$ 97,973$ 101,402$ 104,951$

[1] % of Total Revenue Attributed to WASC Accreditation 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Total Revenue from Accreditation 69,512 68,094 74,610 80,519 87,386 91,459 94,660 97,973 101,402 104,951

[2] Revenue Base of Accreditation w/ Pre-Tax Royalty Rate @ 1.8% 1,216 1,192 1,306 1,409 1,529 1,601 1,657 1,715 1,775 1,837


After-Tax Cash Flows 753 738 808 872 947 991 1,025 1,061 1,099 1,137


Adjusted After-Tax Cash Flows 753 738 808 872 947 991 1,025 1,061 1,099 1,137

Period 0.5000 1.5000 2.5000 3.5000 4.5000 5.5000 6.5000 7.5000 8.5000 9.5000




Period 9.5000




Plus: Present Value of Tax Shield 1,154



Notes:

[1] Percent of total revenue attributed to WASC accreditation based on total revenue of Alliant International University.

[2] Selected royalty rate based on implied royalty rate from analysis of Alliant with & without accreditations. See Workpaper for more information.


Final

Alliant International University Exhibit G.3

Valuation Analysis of Certain Assets of Alliant International University WASC Accreditation - Cost Approach


Requirement/Step

Approximate Time

(months) 1

Average Hours 1

Level 1

Hourly Rate 2

Estimated Costs

Opportunity Cost of

Capital 3

Indicated Value

2 Years audited financial statements 24.0 N/A N/A N/A 40,000$ 16.0% 54,969$

New Institution Initial Steps

Notification of Intent to Apply & On-Line Eligibility Form 24.0 8 Manager 60.00$ 480$ 16.0% 660$

Application Fee 24.0 N/A N/A N/A 10,000$ 16.0% 13,742$

Workshop Fee 24.0 8 Manager 60.00$ 480$ 16.0% 660$

Accreditation Consultant 24.0 N/A N/A N/A 20,000$ 16.0% 27,484$

Pathway A Steps

Candidacy & Application Form for Eligibility 24.0 960 Manager 60.00$ 57,600$ 16.0% 79,155$


Site Visit Prep & Self Study Materials 24.0 640 Manager 60.00$ 38,400$ 16.0% 52,770$

CPR Site Visit 24.0 24 Manager 60.00$ 1,440$ 16.0% 1,979$

Site Visit Prep & Self Study Materials 24.0 640 Manager 60.00$ 38,400$ 16.0% 52,770$

EER Site Visit 24.0 24 Manager 60.00$ 1,440$ 16.0% 1,979$

Additional Team Costs 24.0 N/A N/A N/A 10,000$ 16.0% 13,742$

Time for final response 6.0 20 Manager 60.00$ 1,200$ 16.0% 1,299$

Total Pre-Tax Cost 317,699$

Less: Income Tax Expense (121,024)

Total After-Tax Cost 196,675

Tax Amortization Benefit 4 15 35,390$


Estimated Fair Market Value Rounded ($000s) 230$

Notes:

[1] Based on company provided data where possible, estimated based on discussions with management.

[2] salary.com, Compliance Manager, San Francisco CA. Base + Bonus median salary $119,570 divided by 2,000 hours

http://swz.salary.com/SalaryWizard/Compliance-Manager-Salary-Details-San-Francisco-CA.aspx

[3] Reflects cost of funds during application and approval process. Exhibit B.7

[4] Calculated as: (Years/(Years-(PV(Asset PV Rate,Years,-1)*(1+Asset PV Rate)^0.5*tax_rate))-1)*Asset Value

Final


Alliant International University Exhibit G.4Valuation Analysis of Certain Assets of Alliant International University APA Accreditation - Income Approach


2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Total Revenue 69,512$ 68,094$ 74,610$ 80,519$ 87,386$ 91,459$ 94,660$ 97,973$ 101,402$ 104,951$

[1] % of Total Revenue Attributed to APA Accreditation 26.8% 26.8% 26.8% 26.8% 26.8% 26.8% 26.8% 26.8% 26.8% 26.8%


[2] Revenue Base of Accreditation w/ Pre-Tax Royalty Rate @ 1.8% 327 320 351 378 411 430 445 460 476 493





Period 0.5000 1.5000 2.5000 3.5000 4.5000 5.5000 6.5000 7.5000 8.5000 9.5000




Period 9.5000







Notes:

[1] Percent of total revenue attributed to APA accreditation based on program revenue as a percent of total revenue of Alliant International University.



Final

Alliant International University Exhibit G.5Valuation Analysis of Certain Assets of Alliant International University APA Accreditation - Cost Approach


Requirement/Step

Approximate Time

(months) 1

Average Hours 1

Level 1

Hourly Rate 2

Estimated Costs

Opportunity Cost of

Capital 3

Indicated Value

New Initiation Steps

Requires Students at All 5 Levels (5 years for full-time residency program) 60.0 240 Manager 60.00$ 14,400$ 16.0% 31,879$

Application for Eligibility (related to Domains A through D of Self Study) 6.0 40 Manager 60.00$ 2,400$ 16.0% 2,599$


Site Visit by CoA Reviewers 24.0 24 Manager 60.00$ 1,440$ 16.0% 1,979$

Site Visit Fee (assumes 3 visitors for Doctoral Programs) 12.0 N/A N/A N/A 15,000$ 16.0% 17,584$



Total Pre-Tax Cost (one location) 74,922$

Total Pre-Tax Cost (for all 9 locations) 674,299





Estimated Fair Market Value Rounded (in $000s) 490$

Notes:






Final


Alliant International University Exhibit G.6Valuation Analysis of Certain Assets of Alliant International University COAMFTE Accreditation - Income Approach


2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Total Revenue 69,512$ 68,094$ 74,610$ 80,519$ 87,386$ 91,459$ 94,660$ 97,973$ 101,402$ 104,951$

[1] % of Total Revenue Attributed to COAMFTE Accreditation 11.9% 11.9% 11.9% 11.9% 11.9% 11.9% 11.9% 11.9% 11.9% 11.9%







Period 0.5000 1.5000 2.5000 3.5000 4.5000 5.5000 6.5000 7.5000 8.5000 9.5000




Period 9.5000





Estimated Fair Market Value 939$

Estimated Fair Market Value (rounded) 940$

Notes:

[1] Percent of total revenue attributed to COAMFTE accreditation based on program revenue as a percent of total revenue of Alliant International University.



Final

Alliant International University Exhibit G.7Valuation Analysis of Certain Assets of Alliant International University COAMFTE Accreditation - Cost Approach


Requirement/Step

Approximate Time

(months) 1

Average Hours 1

Level 1

Hourly Rate 2

Estimated Costs

Opportunity Cost of

Capital 3

Indicated Value

New Initiation StepsLetter of Intent to Seek Accreditation Status 6.0 4 Manager 60.00$ 240$ 16.0% 260$

Application Fee 12.0 N/A N/A N/A 1,200$ 16.0% 1,407$ Self Study 12.0 640 Manager 60.00$ 38,400$ 16.0% 45,015$ Site Visit 12.0 24 Manager 60.00$ 1,440$ 16.0% 1,688$

Site Visit Fee (9 visitors at last visit) 12.0 N/A N/A N/A 16,380$ 16.0% 19,202$



Total Pre-Tax Cost (for one program) 80,594$ Total Pre-Tax Cost (COAMFTE considers there to be two) 161,187



Tax Amortization Benefit 415 17,956$



Notes:

[1] Based on company provided data where possible, estimated based on discussions with management. [2] salary.com, Compliance Manager, San Francisco CA. Base + Bonus median salary $119,570 divided by 2,000 hours



[4] Calculated as: (Years/(Years-(PV(Asset PV Rate,Years,-1)*(1+Asset PV Rate)^0.5*tax_rate))-1)*Asset ValueFinal


Alliant International University Exhibit G.8Valuation Analysis of Certain Assets of Alliant International University CTC Accreditation - Income Approach


2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Total Revenue 69,512$ 68,094$ 74,610$ 80,519$ 87,386$ 91,459$ 94,660$ 97,973$ 101,402$ 104,951$

[1] % of Total Revenue Attributed to CTC Accreditation 1.1% 1.1% 1.1% 1.1% 1.1% 1.1% 1.1% 1.1% 1.1% 1.1%

Total Revenue from Accreditation 737 722 791 854 927 970 1,004 1,039 1,075 1,113






Period 0.5000 1.5000 2.5000 3.5000 4.5000 5.5000 6.5000 7.5000 8.5000 9.5000



Residual Value 100$

Period 9.5000







Notes:

[1] Percent of total revenue attributed to CTC accreditation based on program revenue as a percent of total revenue of Alliant International University.



Final

Alliant International University Exhibit G.9Valuation Analysis of Certain Assets of Alliant International University CTC Accreditation - Cost Approach


Requirement/Step

Approximate Time

(months) 1

Average Hours 1

Level 1

Hourly Rate 2

Estimated Costs

Opportunity Cost of

Capital 3

Indicated Value

New Initiation - Step 1

Initial Program Materials 12.0 320 Manager 60.00$ 19,200$ 16.0% 22,508$

Initial Program Review Fee 12.0 N/A N/A N/A 2,000$ 16.0% 2,345$

Initial Site Visit 12.0 24 Manager 60.00$ 1,440$ 16.0% 1,688$


New Initiation - Step 2

Institution Approval Fee 12.0 N/A N/A N/A 2,000$ 16.0% 2,345$

Step 2 Program Materials, for Each Program 12.0 800 Manager 60.00$ 48,000$ 16.0% 56,269$

Site Visit 12.0 24 Manager 60.00$ 1,440$ 16.0% 1,688$

Focused Site Visit Fees (6 visitors) 12.0 N/A N/A N/A 6,000$ 16.0% 7,034$

Time for Final Response 6.0 60 Manager 60.00$ 3,600$ 16.0% 3,898$

Total Pre-Tax Cost 109,496






Notes:






Final


Alliant International University Exhibit G.10Valuation Analysis of Certain Assets of Alliant International University CBOE Accreditation - Income Approach


2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Total Revenue 69,512$ 68,094$ 74,610$ 80,519$ 87,386$ 91,459$ 94,660$ 97,973$ 101,402$ 104,951$

[1] % of Total Revenue Attributed to CBOE Accreditation 1.7% 1.7% 1.7% 1.7% 1.7% 1.7% 1.7% 1.7% 1.7% 1.7%







Period 0.5000 1.5000 2.5000 3.5000 4.5000 5.5000 6.5000 7.5000 8.5000 9.5000



Residual Value 158$

Period 9.5000







Notes:

[1] Percent of total revenue attributed to CBOE accreditation based on program revenue as a percent of total revenue of Alliant International University.



Final

Alliant International University Exhibit G.11Valuation Analysis of Certain Assets of Alliant International University CBOE Accreditation - Cost Approach


Requirement/Step

Approximate Time

(months) 1

Average Hours 1

Level 1

Hourly Rate 2

Estimated Costs

Opportunity Cost of

Capital 3

Indicated Value

Application for Accreditation

Application Materials 12.0 40 Manager 60.00$ 2,400$ 16.0% 2,813$

Program Fee 12.0 N/A N/A N/A 20,000$ 16.0% 23,445$

Self Study 12.0 480 Manager 60.00$ 28,800$ 16.0% 33,761$

Site Visit 12.0 32 Manager 60.00$ 1,920$ 16.0% 2,251$

Fees for 4 Visitors 12.0 N/A N/A N/A 10,000$ 16.0% 11,723$


Time for final response 6.0 10 Manager 60.00$ 600$ 16.0% 650$







Notes:






Final


Alliant International University Exhibit G.12

Valuation Analysis of Certain Assets of Alliant International University SEP Accreditation - Cost Approach


Requirement/Step

Approximate Time

(months) 1

Average Hours 1

Level 1

Hourly Rate 2

Estimated Costs

Opportunity Cost of

Capital 3

Indicated Value

Application for Accreditation

Negotiations with Londres and Other Officials, Including Meetings with Lawyers in Mexico 24.0 500 Manager 60.00$ 30,000$ 16.0% 41,227$








Notes:






Final


final - alliant information technologyltech.alliant.edu/.../2245311/...report_10_02_2014.pdf ·...

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