Initiation of Coverage Generation Development Group (ASX:GDG)

Initiation of Coverage Generation Development Group (ASX:GDG) The emerging leader in a growing niche BUY Rating. $0.80 TP (last close: $0.61) Ronan Barratt +612 8288 5426 ronan.barratt@moelisaustralia.com

Table of Contents I. Investment Summary 2 II. Company Overview 4 III. Investment Bonds Overview 8 IV. Estimates and Valuation 15 V. Board & Management 20 2

I. Investment Summary 3

I. Investment Summary INVESTMENT THESIS Fastest growing player in an expanding market: The investment bond industry is a $7.8bn FUM market, currently growing at ~5-6% p.a. with an expectation this growth rate may increase over time. GDG is emerging as the new industry leader, growing at 3x the industry rate (~16% p.a.) and winning ~40% of incremental industry FUM flows. Tax-effective product with high barriers to entry: Investment bonds are the next most tax-effective product after superannuation and can only be offered by APRA-registered life companies of which there are only 4 major providers in Australia. High rates of recurring income with average investment bond churn of 13 years. Regulatory & Political Tailwinds: Recent regulatory changes capping superannuation balances are driving investors into alternative tax-effective investments such as investment bonds. Labour s policy proposals would also be supportive as they would reduce the relative attractiveness of competing asset classes (further caps to super, negative gearing, discretionary trust tax, higher marginal tax rate, lower CG discount). Deep experience across board & management: Led by Executive Chairman, Rob Coombe with ~35 years corporate experience (ex CEO of BT Financial Group, ex Head of Westpac Retail and Business Banking). SUMMARY METRICS Investment Summary Rating BUY 12mth Price Target $0.80 Current Share Price (19-Dec-18) $0.61 Capital Upside 31.9% Dividend Yield 3.3% Total Return 35.1% Capital Structure Current Share Price (19-Dec-18) $0.61 Fully Diluted Shares 127.2m Market Capitalisation 77.6m Less: Net Cash 12.2m Enterprise Value 65.4m Valuation 2019e 2020e 2021e P/E 35.1x 28.0x 20.1x EPS Growth 42.1% 25.7% 39.0% PEG (12mth fwd) 0.92 0.76 0.52 Management aligned to shareholder wealth: Executive Chairman (Rob Coombe) owns a ~6% shareholding and does not currently receive a cash salary (instead remunerated through LTI s). Exec management s LT incentives are based on total shareholder return (vs. ASX small industrials index) and FUM growth targets. Net cash balance sheet, capital-light model: Post ~2 years of investments into product and platform, incremental FUM are now expected to drop through at high-rates of return. Free options over future M&A: In addition to the recently announced investment in Ascalon Capital Partners, GDG is exploring opportunities across Superannuation, Annuities and Life Insurance. We believe today s share price ascribed no value to these opportunities. Unique corporate structure offers GDG shareholders zero tax on capital gains or dividend income: GDG s Pooled Development Fund status makes capital gains and dividend income non-assessable. GDG FUM & MARKET SHARE GROWTH $m 1000 900 800 700 600 500 400 300 200 100 0 562 7.9% 9.0% 9.7% 887 11.4% Jun/15 Jun/16 Jun/17 Jun/18 GDG FUM FUM CAGR: 16% GDG Market Share (RHS) 14.0% 13.0% 12.0% 11.0% 10.0% 9.0% 8.0% 7.0% 6.0% 4

II. Company Overview 5

II. Company Overview Existing Operations GDG (formerly Austock) is a ~$80m market cap financial services company specialising in the provision of investment bonds, a tax-effective retirement savings product. GDG is considering diversification opportunities across other areas of financial services including funds management incubation, superannuation, annuities and life insurance. SNAPSHOT COMPANY STRUCTURE Size: Market Cap: $80m. FUM: $935m as at 30 Sep 18. 3 rd largest investment bond provider. Product: Investment bonds - the next most tax-effective investment structure after superannuation. History: Formerly Austock (ASX: ACK), rebranded in 2018 to Generation Developments Group (ASX: GDG). Management: Led by Executive Chairman, Rob Coombe (ex head of BT Financial Group and Westpac Retail Banking). Growth Strategy: Be the industry leader for investment bonds and potentially expand into other financial services product offerings over time. Generation Development Group (Pooled development fund structure) Generation Life (FUM: $935m, ~95% group revenue) Specialist investment bond provider. Austock Financial Services (FUA: $1.7bn, ~5% group revenues) Provides administration services (e.g. fund accounting, business registry). FUM GROWTH MARKET SHARE $m 1000 800 600 400 200 0 FUM CAGR: 16% 887 562 11.4% 9.7% 9.0% 7.9% Jun/15 Jun/16 Jun/17 Jun/18 14.0% 13.0% 12.0% 11.0% 10.0% 9.0% 8.0% 7.0% 6.0% 2.2b, 28% 0.8b, 11% 0.9b, 11% 2.0b, 26% 0.9b, 11% 1.0b, 13% Total Investment Bond Market FUM: $7.8bn Aus Unity IOOF GDG Centuria Commonwealth Other GDG FUM GDG Market Share (RHS) Source: Company Reports, Moelis Research, Strategic Insight 6

II. Company Overview Diversification Opportunities GDG is currently exploring options to expand into other areas of financial services including funds management incubation, superannuation, annuities and life insurance. There may also be opportunities that emerge across areas of wealth management as a result of the Royal Commission s disruption to existing business models. We view these opportunities as essentially free options over the existing business valuation. FUNDS MANAGEMENT INCUBATION In Sep 18 GDG announced that it had entered into an agreement to invest in Ascalon Capital Partners (Ascalon), a wholly owned subsidiary of Westpac. Ascalon is an incubator partner of boutique fund managers in the APAC region. GDG s strategy is to launch a series of APAC-based total return funds in which GDG will hold some form of ownership stake (either equity or royalties). Ascalon Acquisition Timeline SUPERANNUATION Consolidation across Australia s Superannuation sector is likely to continue as it follows overseas models (such as Canada) with a smaller number of large funds. KPMG estimates that the number of super funds in Australia will be halved over the next 10 years, as higher operating costs enhance scale benefits. The Productivity Commission s Nov 18 report found that funds with high fees and poor performance have about 2m member accounts and $100bn in assets. GDG could potentially play a role in this industry consolidation across corporate funds. AUS Superannuation Funds (many lacking scale) ANNUITIES Annuities are a fast growing market which is currently dominated by Challenger (ASX: CGF) with a ~75% market share. GDG s life insurance licence provides it with the opportunity to potentially enter the annuity market, however this would be much more capital intensive vs. investment bonds due to capital reserve requirements. LIFE INSURANCE The life insurance industry has come under attack throughout the Banking royal commission for misleading practices and outdated operations. The brand damage and financial distress being suffered by incumbents may create an opportunity for new entrants. There are ~$25bn in life insurance premiums written each year, GDG could potentially play in this market due to its life insurance licence status. Banking royal commission puts direct life insurance on the ropes Sep 18 Source: Company Reports, Moelis Research 7

II. Company Overview Ascalon Acquisition In Sep 18 GDG announced it had entered into an agreement to acquire Ascalon Capital Partners ( Ascalon ) from Westpac in March 2019. ACQUISITION OVERVIEW GDG COMPANY STRUCTURE (POST ASCALON) Ascalon is an incubator partner of boutique fund managers in the APAC region. The Ascalon platform consists of ~6 experienced employees with welldeveloped networks across APAC and a proven track record of strong performance across underlying funds. GDG s strategy involves: Seeding and accelerating APAC hedge funds in exchange for investment manager economics (e.g. % of revenue). Making a key new hire in distribution to assist in sourcing seed funds. Target to start with new US$250-500m fund. ACQUISITION TIMELINE ASCALON S TRACK RECORD Source: Company Reports, Moelis Research 8

III.Investment Bonds Overview 9

III: Investment Bonds What are investment bonds? WHAT IS AN INVESTMENT BOND? An investment bond is essentially a tax-effective structure for investing into a managed fund. It offers the next most tax-effective structure after superannuation, but has many advantages over superannuation including access to funds and estate planning. The lower tax rate within an investment bond (<30%) vs. direct investing (47.5% for those on highest marginal tax rate (MTR)) allows for more capital to be re-invested and compounded over time. In addition, after a 10 year holding period, redemptions on investment bonds are free of capital gains tax. The underlying investments within an investment bond are typically just regular managed funds (e.g. Perpetual Balanced Growth fund). Investment bonds can only be offered by APRA-regulated life insurance companies, given the bond is essentially deemed a life insurance contract with an investment attached. SALES PROCESS Invest o r Selects investment bond type & underlying investment option(s). Pay ~140bps fees to GDG. Investment Bond Provider ( GDG) Set up / administer investment bond. Pay ~80bps fees to underlying fund mgr. Retain ~60bps in management fees. Fund M anager ( e.g. Perpet ual) M anage underlying investments Receive ~80bps in management fees. Invest ment B o nd Houses investment, utilises taxeffective structure of life insurance contract. M anaged Fund E.g. Perpetual Balanced Growth holding underlying assets (shares, property etc). PRODUCT BENEFITS Tax-effectiveness: An arbitrage of ~50-100bps p.a. can be achieved when investing via an investment bond structure vs. directly into the managed fund. This is created via the lower tax rates on distributions within the bond (<30%) vs. direct investors (~47.5%), which allows for more capital to be re-invested over time. Any unrealised gains at redemption are non-assessable assuming the bond has been held for at least 10 years. Ease of access/redemption: Unlike super, investors can redeem funds at any time. Estate planning advantages: Ownership of the bond passes directly to beneficiaries with no tax event or court intervention (the bond is deemed a nonprobate asset due to its legal status as a life insurance policy) vs many other individual assets that are contestable, even if they form part of a will. No limits to investment size: Initial contributions are uncapped with additions of up to 125% of the prior years balance permissible in each subsequent year. Simplicity/low touch: No tax reporting required (income & gains are non assessable). Flexibility: Can switch owner or investment options with no tax event. Access to government benefits: Income is exempt from means tested government benefits (e.g. age pension, aged care fees). Source: Company Reports, Moelis Research FINANCIAL OUTPERFORMANCE The arbitrage in using the investment bond structure vs. a direct investment into a managed fund is largely driven by: Lower tax rates paid on distributions throughout the life of the bond (<30% vs. 47.5%), allowing for more capital to compound over time. Tax-free capital gains on redemption after 10 years. Example using investment with 4% returns 10

III: Investment Bonds GDG Product Offering GDG investment bonds offer over 45 underlying investment options (managed funds) that can be held within the bond structure, covering a range of risk profiles and asset classes. There are over 9,000 individual bonds that make up GDG s $935m in FUM, translating into an average bond size of ~$100k per bond. The products carry highly recommended ratings from Zenith. GDG BOND PRODUCTS UNDERLYING INVESTMENT OPTIONS INVESTMENT OPTION PROFILE / FEE SPLIT Diversified product targeting investors looking for alternative to Super. For child s future financial needs (education, first home deposit, wedding). Targets parents/family. Effectively a pre-paid funeral plan. Targets those looking to ease financial pressure on dependents. Source: Company Reports, Moelis Research 11

III: Investment Bonds Industry Overview The investment bond industry comprises $7.8bn FUM and has grown at ~5.4% p.a. over the past 2 years. The sector makes up just ~1% of total retail funds under management, positioning it for strong growth should it attract even modest flows from Super & Discretionary investments. INVESTMENT BOND FUM Industry growth has returned post regulatory limits imposed on superannuation in 2017. FUM ($m) 8.0 7.5 7.0 6.5 7.1 2yr CAGR: 5.4% 7.0 7.4 7.8 WHERE INVESTMENT BONDS FIT IN A small re-allocation from Retail Super / Discretionary Investments towards Investment Bonds would provide a material uplift to the sector s FUM. 286b, 31% 7.8b, 1% 640b, 68% Total Retail FUM: $934bn Superannuation Discretionary Investments Investment Bonds 6.0 Jun/15 Jun/16 Jun/17 Jun/18 PROVIDERS 14 APRA-registered life insurance companies/friendly societies offer investment bonds. Provider FUM (Jun'18, $bn) Market Share 2yr CAGR Aus Unity 2.03 26.0% 6.3% IOOF 1.00 12.8% 8.7% GDG 0.89 11.4% 18.2% Centuria 0.85 10.9% 9.5% Commonwealth 0.83 10.7% 2.8% ANZ Wealth Group 0.69 8.9% -6.4% AMP Group 0.56 7.2% 2.4% National Australia / MLC Group 0.24 3.1% -2.0% KeyInvest 0.21 2.6% 10.2% TAL Group 0.20 2.5% 0.0% Australian Friendly Society 0.15 2.0% 3.5% BT Financial Group 0.11 1.4% -5.0% ClearView Wealth Group 0.02 0.3% -5.4% Suncorp Group 0.02 0.3% 0.0% Total 7.80 100.0% 5.4% 2.2b, 28% 0.8b, 11% Aus Unity GDG 0.9b, 11% Commonwealth 2.0b, 26% 1.0b, 13% 0.9b, 11% IOOF Centuria Other SUPERANNUATION CHANGES Recent changes implemented on 1 July 2017 will limit superannuation contributions and drive investors towards alternative tax-effective investments. Investment bonds set to benefit from super reforms Jan 17 Many high net worth clients simply can t get money into Super. DEXX&R have estimated this market to be in excess of $18bn 2017 Source: Company Reports, Moelis Research, Strategic Insight 12

III: Investment Bonds Competitive Landscape There are 14 licenced providers of investment bonds in Australia. GDG is now the fastest growing of these players but still only holds ~11% market share. In addition to organic growth, consolidation opportunities may exist as smaller, sub-scale players potentially exit the market. INVESTMENT BOND PROVIDERS KEY COMPETITORS Provider FUM (Jun'18, $bn) Market Share 2yr CAGR Aus Unity 2.03 26.0% 6.3% IOOF 1.00 12.8% 8.7% GDG 0.89 11.4% 18.2% Centuria 0.85 10.9% 9.5% Commonwealth 0.83 10.7% 2.8% ANZ Wealth Group 0.69 8.9% -6.4% AMP Group 0.56 7.2% 2.4% National Australia / MLC Group 0.24 3.1% -2.0% KeyInvest 0.21 2.6% 10.2% TAL Group 0.20 2.5% 0.0% Australian Friendly Society 0.15 2.0% 3.5% BT Financial Group 0.11 1.4% -5.0% ClearView Wealth Group 0.02 0.3% -5.4% Suncorp Group 0.02 0.3% 0.0% Total 7.80 100.0% 5.4% Company Description 175 year history as one of Australia s oldest mutual companies. Group FUMA ~$21bn. Largest investment bond player with ~$2bn FUM. ~$640m FUM in funeral plans across ~90,000 clients. ~$200m FUM in education-related bonds (+15% in FY18). Founded as friendly society in 1846. ASX: IFL, Market Cap ~$3.6bn, Group FUMA ~$126bn 2 nd largest investment bond player ~$1bn FUM. Offered under WealthBuilder brand # Investment Options ~70 options ~16 options Admin Fees ~60bps (excl. underlying fund manager fees) ~0.50 2.40% (incl. underlying fund manager fees) Established in 1980 as the Over 50 s friendly society. Renamed to Centuria Capital in 2010. ASX: CNI, Market Cap ~$0.5bn Group FUM ~$5.5bn inc ~$4.6bn property FUM, ~$0.8bn bond FUM. 4 th largest investment bond player. ~8 options ~0.90 1.9% (incl. underlying fund manager fees) Source: Company Reports, Moelis Research, Strategic Insight

III: Investment Bonds Industry Growth Outlook Over the medium-long term, we expect investment bond industry FUM growth rates to continue to increase, as the product s awareness grows among financial advisers, and its relevance / arbitrage grows as a result of existing and proposed regulatory changes affecting Superannuation, Capital gains tax, negative gearing and family trust structures. Many high net worth s are now unable to get their money into superannuation. DEXX&R have estimated the size of this market to be in excess of ~$18bn p.a. (vs. current investment bond industry FUM of $7.8bn). We note however that in the near-term, general market volatility could impact the total value of the underlying investments within the bonds, affecting FUM levels qtr to qtr. TOTAL RETAIL FUNDS INVESTMENT BONDS FUM 7.8b, 1% Total Retail FUM: $934bn Superannuation Small re-allocation from Retail Super / discretionary investments could provide material FUM uplift for investment bonds FUM ($B) 14.0 12.0 10.0 8.0 7.0 7.4 7.8 8.1 8.5 6.5% CAGR 9.6 9.0 10.3 11.1 11.9 286b, 31% 640b, 68% Discretionary Investments Investment Bonds 6.0 4.0 2.0 0.0 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Regulatory changes will encourage funds to shift from Super into alternatives. SUPERANNUATION FUM GROWTH SUPERANNUATION REGULATORY CHANGES FUM ($B) 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500-6.5% CAGR 4250 2,510 2,709 2,200 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Change $1.6m transfer limit to tax-free pension accounts (previously no cap). After-tax contribution limit reduced from $180k to $100k per yr. Before-tax contributions limit reduced to $25,000 (previously $35k for 49yo & older). People Affected (of 16m account holders) 1% or ~160,000 (holders with >$1.6m balance) <1% or <160,000 (holders planning on >$100k p.a. after-tax contribution) ~3.5% or ~560,000 (holders making >$25k p.a. contributions) $ impact Assuming an average balance of ~$2m for these holders (~$400k above the threshold), this would equate to an addressable market of ~$64bn. Assuming an intended contribution of $50k above the $100k limit, this would equate to an addressable market of ~$8bn. Assuming an intended average annual contribution that is $10k above the $25k limit, this would equate to an addressable market of ~$5.5bn p.a. Source: Company Reports, Moelis Research 14

III: Investment Bonds Regulatory Landscape We see GDG as being well-placed to capitalise on the regulatory trends across financial products and services. In 2017, the Liberal government introduced reforms restricting the use of superannuation. Then, in response to the Financial System inquiry, the Government announced a retirement income framework that included increasing the range of retirement income products available to ensure income is better matched to longevity risk. The Labour governments policy proposals would likely provide a further tailwind, as they decrease the relative attractiveness of competing assets (equities, real estate, super), and therefore increase the arbitrage of the investment bond. Further, the ongoing Royal Commission is disrupting the existing models of GDG s competitors (e.g. IOOF, CBA, AMP). This may support GDG gaining share, or entering new markets. SUPERANNUATION REGULATORY CHANGES DEXX&R estimate there is an additional ~$18bn p.a. available to be captured outside of Superannuation as a result of the Jul 17 reforms. Treasury estimated that of the 16m superannuation account holders, the number affected by the recent regulatory reforms would include: 560,000 holders 160,000 holders 160,000 holders 160,000 holders PROPOSED FRAMEWORK FOR RETIREMENT INCOME PRODUCTS In response to the Financial System inquiry, the government agreed to support the development of more efficient retirement income products. LABOUR S PROPOSED POLICIES The Labour Government s proposals would decrease the attractiveness of competing assets, and hence increase the arbitrage of the investment bond structure. These proposals include: Capital Gains Tax discount: to be reduced from 50% to 25%. Negative Gearing: to be limited to new housing. Superannuation: Lowering the non-concessional contributions cap to $75,000. Discretionary Trusts: Minimum 30% tax rate on distributions. Removal of excess imputation (franking credits) as cash refunds. Source: Moelis Research, Treasury 15

IV. Estimates and Valuation 16

FUM ($m) GDG Market Share % of industry flows won IV: Estimates & Valuation GDG Growth Outlook GDG is the fastest growing player within the investment bond industry, having secured 42% of industry flows during FY18. We estimate GDG will grow its market share from ~11% to 21% by 2025. We base this on GDG providing the market-leading product / service offering and continuing to grow its distribution sales network into more dealer groups, positioning it to continue winning share from incumbents. FY19 Q1 METRICS Lead indicators of active financial advisers (those that have written bonds in last 12mths) and new bond numbers indicated strong growth across 1Q19. INVESTMENT BOND INDUSTRY FUM FUM ($B) 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 7.0 7.4 7.8 8.1 8.5 6.5%CAGR 9.0 9.6 10.3 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 11.1 11.9 GDG FUM (MOELIS ESTIMATES) % OF INDUSTRY FLOWS WON 3000 2500 2000 1500 1000 500 0 2680 CAGR: 17% 2307 1981 1698 CAGR: 16% 1451 21% 1235 19% 562 635 716 883 1047 18% 17% 15% 14% 13% 11.3% 9.0% 9.7% 7.9% 2015 2016 2017 2018 2019 2020 20212022 2023 2024 2025 30% 25% 20% 15% 10% 5% 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 46% 15% Aus Unity (Jun'18 FUM: $2.0b) 15% 24% IOOF (Jun'18 FUM: $1.0b) 42% 22% 22% GDG (Jun'18 FUM: $888m) 15% Centuria (Jun'18 FUM: $850m) 7% 4% Commonwealth (Jun'18 FUM: $835m) GDG FUM GDG Market Share (RHS) Jun-17 Jun-18 Source: Company Presentations, Moelis Research, Strategic Insight 17

IV: Estimates & Valuation Financials Profit & Loss At this stage our earnings estimates reflect the investment bond division only, with no upside assumed from Ascalon or any other future M&A transactions. PROFIT AND LOSS GDG FY17a FY18a FY19e FY20e FY21e FUM (closing) $ 720 887 996 1,174 1,353 Growth % 13% 23% 12% 18% 15% Revenue $m 8.3 9.7 11.9 13.5 15.7 Growth % 17.4% 22.4% 13.6% 16.6% Operating Expenses $m (9.9) (11.3) (13.0) (14.1) (15.4) EBITDA $m (1.6) (1.6) (1.1) (0.6) 0.3 D&A $m (0.1) (0.2) (0.5) (0.7) (0.8) % sales % (4.3%) (5.2%) (5.4%) EBIT $m (1.7) (1.8) (1.6) (1.3) (0.5) Net Interest $m 0.4 0.3 0.3 0.3 0.4 Tax $m 2.3 3.1 3.5 3.8 4.2 NPAT $m 0.9 1.5 2.2 2.8 4.0 Growth % 61.3% 45.4% 27.9% 41.5% Margin % 15.6% 18.6% 20.9% 25.4% EPS cps 0.9 1.2 1.8 2.2 3.1 Growth % 42% 26% 39% DPS cps 2.0 2.0 2.0 2.0 2.0 SUMMARY Assumptions Investment Bond Industry FUM growth of ~4-7% p.a.. GDG winning ~30-40% of incremental industry FUM flows. GDG Market Share Growth from 11.4% (FY18) to 16% (FY21). Revenue/Opex growth ratio grows from 1.25:1 (2019) to 2.25:1 (FY21+). Annual tax benefit based on ~25% of operating expenses (life business revenue is non assessable however operating expenses are deductible). Takeaways EPS CAGR (FY18-FY21) of ~30%. Following investments undertaken across FY19/FY20, strong operating leverage starts to be realised in FY21+. We note that dividends and any capital gains are non-assessable to shareholders while GDG retains pooled development fund structure. Source: Company Reports, Moelis Research 18

IV: Estimates & Valuation Financials Balance Sheet & Cash Flows GDG is producing positive free cash flow and can self-fund its organic growth within investment bonds, whilst maintaining its ~2cps dividend payout (~3.3% yield). The balance sheet is currently in a ~$12m net cash position (albeit ~$4m of cash is currently held as a prudential reserve). We have not factored in any acquisitions (across investment bonds or other markets) within our estimates. BALANCE SHEET GDG FY17a FY18a FY19e FY20e FY21e Cash 6 3 2 2 3 Cash - Investments Term Deposits 4 10 10 10 10 Other Current Assets 1 2 2 2 2 Current Assets 10 14 13 13 15 PPE and Software 0 1 2 3 3 Goodwill 1 1 1 1 1 Other Non-Current Assets 1 3 3 3 3 Non-Current Assets 2 5 6 7 7 Total Assets 13 19 19 20 21 Short term debt - - - - - Trade Creditors 0 0 0 1 1 Provisions & Other 1 2 2 2 2 Current Liabilities 2 2 2 3 3 Long Term Borrowings - - - - - Total Liabilities 2 2 2 3 3 Net Assets / Equity 11 17 17 17 18 CASH FLOW GDG FY17a FY18a FY19e FY20e FY21e EBITDA (1.6) (2) (1) (1) 0 +/- Working capital increases (0) 0 0 (0) (0) - Interest paid (0) (0) - - - - Tax Paid 4 3 4 4 4 + Other 0 0 (0) 0 0 Cash flow from operations 2 2 2 3 5 - Capex (0) (1) (1) (1) (1) +/- Other (1) (6) 0 0 0 Cash flow from investing (2) (7) (1) (1) (1) +/- Debt Drawn/(Repaid) - - - - - - Dividends paid (2) (2) (2) (3) (3) + Equity raisings - 5 - - - +/- Others - - - - - Cash flow from financing (2) 3 (2) (3) (3) Net change in cash (2) (3) (1) (0) 1 Cash at End of Period 1 3 2 2 3 Free Cash Flow 1 2 4 Source: Company Reports, Moelis Research 19

Dec/2015 Feb/2016 Apr/2016 Jun/2016 Aug/2016 Oct/2016 Dec/2016 Feb/2017 Apr/2017 Jun/2017 Aug/2017 Oct/2017 Dec/2017 Feb/2018 Apr/2018 Jun/2018 Aug/2018 Oct/2018 Dec/2018 IV: Estimates & Valuation Valuation We value GDG s existing operations (investment bonds) at a target price of $0.80 which implies that free options existing on any future M&A activity. KEY TAKEAWAYS Our target price of $0.80 implies an FY21 P/E of ~23x. We deem this as justified given: Strong EPS growth rates (~30% p.a.), producing a PEG of <1.0. Highly recurring nature of earnings (average bond churn of ~13 years.) Accelerating platform leverage in FY20+ (post investment phase). Net cash balance sheet. Options over Ascalon or any future M&A activity. GDG operates with a ~2x higher Opex/FUM ratio vs. industry peer, Centuria, likely due the investments GDG has undertaken into its distribution platform which should support growth. MOE VALUATION We value GDG at $0.80 target price by applying: 50% weighting: DCF using WACC of 11.5%, Perpetuity Growth of 3.0%. 50% weighting: FY21 P/E multiple of 26x. Valuation Metrics FY19e FY20e FY21e P/E 34.6x 27.5x 19.8x EPS Growth 42% 26% 39% FCF Yield 2.7% 4.2% 6.3% FCF Growth 96% 58% 50% NPAT Margin 20.0% 22.6% 27.4% Share Price Target Value P/E Multiple Valuation $0.67 DCF Valuation $0.80 Valuation Per Share $0.73 Valuation Grown at Cost of Equity $0.82 Less: Forecast 12 month dividends $0.02 12 Month Target Price $0.80 Upside (downside) 34.0% GDG VS. CNI The platform investments undertaken by GDG may be illustrated in its much higher opex/fum ratio vs. closest peer, Centuria. SHARE PRICE HISTORY GDG has experienced a ~65% share price decline since Feb 18. Size Market Cap 76m na FUM (FY18) 887 850 Market Share 11% 7% Financials Revenue (FY18) 9m 11m Operating Expenses (FY18) (11.3m) (5.8m) Opex/FUM Ratio 1.4% 0.7% $2.00 $1.80 $1.60 $1.40 $1.20 $1.00 $0.80 $0.60 $0.40 $0.20 $0.00 $1.74 $0.60 Growth FY18 FUM Growth 24% 7% % Industry FUM Flows Won 43% 15% Source: Company Reports, Moelis Research 20

VI. Board and Management 21

V: Board & Management GDG has an experienced and aligned board and management team. Executive Chairman Rob Coombe has a ~6% shareholding and is currently paid no cash salary. Rob has over 35 years corporate experience including 15 in a CEO capacity at BT Financial and Westpac Retail/Business banking. Board and Management have interest in ~35% of shares on issue. Long term incentives plan (effective Oct 17) aligned to shareholder wealth: 25% LTI s based on total shareholder return vs. ASX small industrials index over 3 year period. 75% LTI s subject to annual growth in FUM over 3 year period. Non-Exec Remuneration limited to $500k p.a.. SENIOR MANAGEMENT Name Title Photo Experience MANAGEMENT STRUCTURE BOARD Name Title Photo Experience Rob Coombe Catherin e van der Veen Executive Chairman Joint CEO Gen Life See Right Joined Jan 2018. Former joint head wealth strategy CBA. Extensive product, marketing, distribution background. Rob Coombe Executive Chairman Executive Chairman since 18 July 2017. 35 years corporate experience including former CEO of BT Financial, Craveable Brands and Group Executive for WBC Retail and Business Banking. Current Non-Exec Chairman of Craveable Brands, Deputy Chair of Australian Indigenous Education Foundation and Surfing Australia. Lucy Foster Joint CEO Gen Life Joined Jan 2018. Former joint head wealth strategy CBA. Extensive experience in financial services strategy. Bill Bessemer Non-Exec Director Joined Austock in 1995, Chairman 1999-2009, CEO 2012-2017. Over 40 years experience in banking and finance including senior management roles at companies owned by ANZ. Grant Hackett CEO GDG Group Joined 2017, appointed CEO GDG Group Oct 2018. Former GDG GM of Distribution. Former Head of Priority Market Westpac, director Regal Funds Management. John Wheeler Non-Exec Director CEO of Austock 1996-2007. Joined board in 2017. Over 40 years experience in stockbroking, including corporate finance and private equity transactions. Terence Wong CFO Joined Feb 2018. Former head of corporate finance at Energy Australia. Strong M&A and project finance experience. Jonathan Tooth Non-Exec Director Appointed director in 2012. 20 years experience in corporate advisory/ecm services to ASX and unlisted small cap companies. Felipe Araujo Head of Key Accounts Joined Oct 2017. Former relationship director and head of industry specialisation at Westpac. Chris Freeman Non-Exec Director Appointed to board November 2017. 40 years experience in financial services, particularly within IFA market. Current Chairman of Templeton Growth Fund. Source: Company Reports, Moelis Research 22

Appendices 23

Appendix 1: Risks Key Risk Commentary Market Fluctuations Volatility in the underlying investments will impact Funds Under Management quarter to quarter. Key Person Chairman Rob Coombe s experience and network is an important factor in GDG achieving its growth ambitions, particularly as it diversifies into other areas of financial services. Execution Acquisition integration and value extraction, particularly from acquisitions unrelated to existing core operations. Ongoing product development and distribution of investment bonds. Regulatory A low but albeit ever present risk of APRA changes to GDG s life insurance licences and the products that can be offered through it. Risk to Pooled Development Fund status which provides favourable shareholder tax treatment of dividends and capital gains. We expect GDG to outgrow this status within the next ~3 years. Competition Risk of market share growth slowing due to competitive responses from other providers, or changes to other platform fee structures. Access to capital GDG may require additional debt and equity capital should it wish to expand its product offerings into other retirement savings products, or undertake further acquisitions. Source: Moelis Research 24

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