ASPEN GROUP — Investor Presentation 2017

Aug 30, 2017

ASPEN GROUP LIMITED

Results Presentation FY17 31 August 2017

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Contents

1 FY17 Highlights

2 Financial Results

3

Market Update 4 Portfolio and Acquisitions Update 5 Operating Model

6

Outlook Appendices

7

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FY17 Highlights

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1.1

FY17 Highlights

Aspen continues it’s acquisitions program enabled by enhanced platform

STRATEGIC

• Reset business strategy and established action plans focused on scaling of the Group

• Strong pipeline of potential acquisitions in varying stages of diligence > $90 million

• Established $80 million finance facility supporting strategic objectives

• Exit of 3 non-core assets ~$34 million in progress and program continues

• Reset corporate overheads to be in line with the revised operational scale of the business

• Renewed focus on operations and operational management

FINANCIAL

• Earnings and distribution in line with guidance - 90% payout ratio

• Positive operating cash flows at $5 million up 6% on FY16

• Secured earnings through 1 year contract extension of Woodside at Aspen Karratha Village

• Zero debt on balance sheet

PORTFOLIO

• 60%[1] core assets growth achieved through tourism park acquisitions negotiated in FY17

• Secured 91 DA approvals across all sites ~7% increase in development potential – DA granted at Four Lanterns for 28 new homes

• DA granted at Tomago Van Village for 53 new homes

• Expansion of Adelaide Caravan Park 10 new sites added

• Growth opportunities through value enhancing development (VED) and asset repositioning

• Includes Koala Shores - Acquisition remains conditional, expected to be completed Q2 FY18

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1.2

Key milestones

• 1H 2H 2018

• FY17 FY17

• • Simplification of • Acquisitions – Tourist • Targeting ~$70 - $90 corporate structure & Parks million in acquisitions ‒

• reduced corporate overhead ‒ Barlings BeachKoala Shores[1] • Development to commence at Tomago

• • Management change • Established $80 million and Four Lanterns ‒ Appointment of CEO finance facility • Exit of non-core assets Joel Cann and CFO • Woodside tenancy ~$34 million

• Emmanuel Zammit contract at Aspen

• • Acquisition – Tourist Karratha Village Park extended to January ‒ Tween Waters 2019

• • 1H FY17 distribution • Spearwood South 2.1cps in line with Industrial property guidance contracted for sale settling in September 17

• 2H FY17 distribution 2.5 cps in line with guidance

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1. Acquisition remains conditional - expected to be completed Q2 FY18

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Financial Results

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Key performance metrics

2.1

Performance reflects rebasing of group at lower scale

Operational Performance	FY17 $m	FY16 $m	Change %
Statutory (loss) / profit	(0.2)	9.9	(102.2%)
Revenue1	19.0	19.7	(3.6%)
Operating earnings2 MER%3	4.5 4.2%	4.8 3.5%	(6.2%) -
Distributable earnings		FY17 $m	CPS
Operating earnings		4.5	4.4
Add: Property depreciation		1.0	1.0
Less: Stay in business capex		(0.4)	(0.4)
Distributable earnings		5.1	5.0
Distribution			4.6
Payout Ratio			90%

1. FY16 figure presented on a deconsolidated basis excluding APPF performance for comparative purposes

2. Excludes the non-controlling interest share of APPF results

3. MER based on average total assets

Statutory Loss

• Current year impacted by

• Impairments and losses related to legacy assets and liabilities totalling $2.5 million

• Net impairment in the value of core assets $0.9 million

• Investment driven acquisition costs incurred of $1.4 million

Revenue

• Prior year includes APPF management fees of $0.9 million

• Portfolio revenue adjusted for APPF management fees increased 2% due to distribution gains under the revised operating model

Operating earnings

• $4.5 million – 6.2% decrease from the prior year, entirely due to a reduction in earnings as a result of the disposal of the Aspen Parks Property Fund (APPF) during the prior year

Distribution

• 4.6 cps in line with guidance

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Reconciliation of statutory profit to operating earnings

2.2

	June 17	June 16	1
	$m	$m
Statutory (loss) / profit after tax	(0.2)	9.9
Tax benefit	-	-
Statutory (loss) / profit before tax	(0.2)	9.9
Fair value gain on deconsolidation of APPF / Gain on termination of management rights in APPF / Other income	-	(22.5)
Change in fair value of investment properties and PPE	0.7	10.0
Administration / restructuring expenses	(0.1)	1.3
Finance costs	0.1	1.1
Other expenses (including transaction / acquisition costs)	1.8	6.2
Change in fair value of assets held for sale	2.2	(0.1)
Loss from equity accounted investees	-	(1.2)
	4.7	(5.1)
Operating earnings2	4.5	4.8

1. FY16 figure presented on a deconsolidated basis excluding APPF performance

2. Excludes the non-controlling interest share of APPF results

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2.3

Financial position

Balance Sheet FY17 $m	Balance Sheet FY17 $m	FY16 $m Change $m
Accommodation property assets1 71.2		80.0 (8.6)
Assets held for sale 35.5		8.2 27.3
Cash 22.7		48.8 (26.1)
Debt -		- -
Gearing % -		- -
NAV 124.6		129.6 (5.0)
NAV $ per security 1.22		1.26 (0.04)
0.60 0.10 0.35 0.22 0.03 Tourism/ Residential Corporate Assets held for sale Cash Trade and other receivables NAV per security		0.01 (0.09) 1.22 Other Liabilities NAV 30 June 2017
	Tourism/ Residential Corporate Assets held for sale Cash Trade and other receivables

1. Includes $1 million (FY16: $1.8 million) non statutory property carrying value adjustments

Property assets

• Two acquisitions (Tween Waters and Barlings Beach) settled for $20.3 million.

• Acquisition of Koala Shores remains under conditional contract with expected settlement 2Q FY18.

Cash

• Cash utilisation of $26.0 million in FY17

• Acquisition of PPE - $22.5 million

• Distributions paid - $7.4 million

• Share buyback - $0.7 million

Offset by

• Operating cash flows - $5.0 million

NAV

• NAV decline of $0.04 to $1.22 per security

• Decline attributed to net

• Fair value decline of legacy assets $0.02

• Acquisition and due diligence costs written off $0.01

• Changes in legacy provisions $0.01

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Market Update

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Sector Focus – Tourism

3.1

Domestic visitors and expenditure – FY16 and FY17 comparative

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Domestic Tourism NT
Growth Australia VISITORS 1.5m ▼7%
SPEND $1.9b ▲2%
▲3% Visits
QLD
WA VISITORS 21.2m ▲4%
VISITORS 9.5m ▼5% SPEND $15.3b ▲6%
NSW Visits
SPEND $7.3b ▼2%
▲4% Growth
SA Visits
▲1% Growth
NT Visits
▼7% Decline NSW
VISITORS 29.4m ▲4%
SPEND $16.7b ▲3%
SA
VISITORS 6.1m ▲1%
International Tourism
SPEND $3.9b ▲8%
Growth Australia
▲9% Visitors
VIC TAS
VISITORS 22.5m ▲6% VISITORS 2.5m ▲7%
Caravan and Camping SPEND $12.7b ▲12% SPEND $2.3b ▲30%
Sector stable Year on Year
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Source: National Visitor Survey March 2017 Overseas Arrivals and Departures (OAD) March 2017, ABS Cat. No. 3401.0

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3.2

Sector Focus – Tourism

Domestic visitors – Forecast FY18

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Domestic Tourism
Growth Australia NT
NIGHTS 8m ▲1%
▲1.5% Visitor Nights
QLD
WA NIGHTS 87m ▲3.1%
NSW Visits
NIGHTS 43m ▲.6%
▲0.9% Growth
SA Visits
▲2.7% Growth
NT Visits
▲1% Growth NSW
NIGHTS 99m ▲.9%
SA
NIGHTS 22m ▲2.7%
International Tourism
Growth Australia
▲8.7% Visitor Nights
VIC TAS
NIGHTS 66m ▲.7% NIGHTS 11 m ▲.8%
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Source: Tourism Forecasts 2017 Tourism Research Australia

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Sector Focus – Tourism

3.3

Aspen positioned to capitalise in this environment

Increased demand for holidays in regional Australia Tourism accommodation businesses with a Increased demand for strong affordable affordable value proposition holidays strongly placed to gain significant market share of the Increased domestic traveller. demand for domestic Aspen in a strong holidays position to grow by getting the value mix right.

High international visitation to Australia will be predominantly focused on the capital cities - driving city hotel rates up.

Domestic consumers will be looking outside the major cities for better value for their holiday dollar.

Sluggish economic and wages growth placing household budgets under pressure.

Consumers looking for a great value holiday product that fits into a tight household budget

Lower rates of growth in outbound international travel by Australians is forecast due to weaker economic factors.

The Australian holiday maker will increasingly be looking to holidays domestic destinations for their next holiday. Oil prices predicted to remain stable at the current historically low rate. Lowering barriers to Self-drive holidays will remain a cost effective holiday option with self-drive fuel prices under control. travel

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Source: National Visitor Survey March 2017 Overseas Arrivals and Departures (OAD) March 2017, ABS Cat. No. 3401.0

3.4

Sector Focus – Retirement

Value of intending retirees homes significantly outweighs savings at an average of 495k offering significant opportunity to unlock capital through downsizing

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Total intending to retire
2016: 395,000
2014: 411,000
$286k $268k
Intended Retirement Age
(+3.6%) (+4.7%)
61 yrs
▲from 58 in 2014
2016
2016
Average gross wealth
position of intending
retirees
$286,000 $276k $256k
Average value of intending 2014
retirees home per person
2014 2014 $20k 2016 $18k (-10.0%)
$495,000
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Average Gross Wealth
Average net Worth
Average Debt
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Source: Roy Morgan Single Source: 12 months to October 2014 (n=447) and October 2016 (n=432). Base: Australians 14+ intending to retire in the next 12 months. *Excluding value of owner occupied home.

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Portfolio and Acquisitions Update

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Property portfolio

4.1

60%[1] core assets growth achieved through tourism park acquisitions negotiated in FY17

46% 13% 34% 7% Retirement / Tourism Corporate Industrial Held for Sale 30 June 2016 $m % Core Retirement / Tourism 40.0 47% Corporate 11.0 13% 51.0 59% Non-core Industrial 29.0 34% Held for Sale 6.4 7% 35.4 41% Total Property 86.4 100% $86m	30 June 2017 $m %
	Core
	Retirement / Tourism1 71.1 62%
	Corporate 10.3 9%
	81.4 71%
	Non-core
	Industrial - -
	Held for Sale 33.4 29%
	33.4 29%
	Total Property1 114.8 100%
	62% 9% 29% Retirement / Tourism Corporate Industrial Held for Sale $115m

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Barlings Beach

• Three high quality acquisitions during FY17

• Tween Waters $6.8 million

• Barlings Beach $13.25 million

• Koala Shores $10.2 million[1]

• Strong pipeline of potential acquisitions in varying stages of diligence: > $90 million

• 3 Non-core assets all contracted for sale. Proceeds of ~ $34 million expected in 1H FY18

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1. Includes Koala Shores acquisition which remains conditional - expected to be completed Q2 FY18

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4.2

Accommodation portfolio

Retirement

	Four	Tomago	Mandurah
	Lanterns	Van	Gardens	Total
	Estate	Village3	Estate
State	NSW	NSW	WA	-
Carrying value4 ($m)	9.3	11.3	10.3	30.9
Cap rate %	7.75%	9.00%	8.75%	8.39%
Land tenure	Freehold	Freehold	Freehold	-
Area (ha)	3.9	13.9	6.8	24.6
Value per ha ($m)	2.38	0.81	1.51	1.26
Inventory
Extended	102	73	158	333
Short cabins 1	-	70	-	70
Short sites 2	-	14	-	14
Total	102	156	158	416
DA approved	28	53	-	81
Pre-DA	-	-	-	-
Total	28	53	-	81
Total potential sites	130	1905	158	498
Value per site ($m)	0.07	0.06	0.07	0.06
FY17 occupancy rates (LT)	98%	91%	100%
FY17 occupancy rates (ST)	N/A	56%	100%

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Four Lanterns Estate

Tomago Van Village

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Mandurah Gardens Estate

1. Cabins used for short-stay, annual or corporate accommodation

2. Sites used for caravans or designated camping

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1. Assumes future conversion from mixed use to predominately retirement 4. Includes value attributed to non-income earning components (eg) VED and DA’s 5. Total sites net off consolidation of pre-existing lots

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Accommodation portfolio

4.3

Tourism

	BIG4 Tween Waters	Barlings Beach4	BIG4 Koala Shores5	Adelaide Caravan Park	Total
State	NSW	NSW	NSW	SA	-
Carrying value6 ($m)	7.2	13.3	10.2	9.5	40.2
Cap rate %	8.75%	8.50%	-	9.50%	8.89%
Land tenure	Freehold	Freehold	Freehold/ Leasehold	Freehold1	-
Area (ha)	1.9	8.8	6.5	1.5	18.7
							Adelaide Caravan Park		BIG4 Tween Waters
Value per ha ($m)	3.79	1.51	1.57	6.33	2.15
Inventory
Extended	-	23	-	-	23
Short cabins 2	31	206	35	44	316
Short sites 3	65	29	108	49	251
Total	96	258	143	93	590
DA approved	-	-	-	1	1
Pre-DA	-	-	-	-	-
Total	-	-	-	1	1
Total potential sites	96	258	143	94	591		Barlings Beach		BIG4 Koala Shores
Value per site ($m)	0.08	0.05	0.07	0.10	0.07	1. 2.	In-place zoning for medium density residential Cabins used for short-stay, annual or corporate accommodation
FY17 occupancy rates (LT)	N/A	100%	N/A	N/A		3. 4.	Sites used for caravans or designated camping Includes group lodge accommodating ~12 guests
						5.	Acquisition remains conditional - expected to be completed Q2 FY18
FY17 occupancy rates (ST)	49%7	24%7	N/A	71%		6. 7.	Includes value attributed to non-income earning components (eg) VED and DA’s Annualised average occupancy due to timing of acquisition

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Accommodation portfolio

4.4

Corporate

	Aspen
	Karratha	Total
	Village
State	WA	-
Carrying value2 ($m)	10.3	10.3
Cap rate %	17.75%	17.75%
Land tenure	Freehold	-
Area (ha)	2.9	2.9
Value per ha ($m)	3.56	3.56
Inventory
Extended	-	-
Short cabins 1	180	180
Short sites 4	-	-
Total	180	180
DA approved	-	-
Pre-DA	-	-
Total	-	-
Total potential sites	180	180
Value per site ($m)	0.06	0.06
FY17 occupancy rates (LT)	N/A
FY17 occupancy rates (ST)	89%

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Aspen Karratha Village

1. Cabins used for short-stay, annual or corporate accommodation

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1. Includes value attributed to non-income earning components (eg) VED and DA’s

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4.5

Development and pipeline

Tomago Van Village

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Stage 1 construction
Stage 2 construction
Existing buildings
Proposed development site plan
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Development

• Tomago – Development approval granted for 53 new homes, which will allow for progressive development and after consolidations (generally short stay), will provide for a net increase of circa 34 homes by the end of 2020 and shift park revenue composition to predominately permanent residents.

• Project to launch in FY18

• Construction expected to commence Q2FY18 with first settlements in Q4FY18.

Yield, staging and timeframes

• Developed over four stages

• Progressive consolidation of ~40 park owned sites provides for development of 74 new dwellings resulting in net increase of 34 homes

• Anticipated sell out Q2FY20

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4.6

Development and pipeline

Four Lanterns expansion

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Development

• Secured development approval for 28 new homes

• Strong community interest and demand for affordable product in metropolitan Sydney

• Site recycling has enhanced the overall presentation of the park to deliver improved yields

• Construction expected to commence in Q3FY18 subject to external infrastructure provider and first homes to arrive on site Q4FY18

Yield, staging and timeframes

• Twenty eight new homes to be developed in four stages

• Anticipated sell out Q1FY19

• Major works comprise decommissioning of private sewer plant and connection to municipal services

Proposed development site plan

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4.7

Non – core assets

Aspen’s continues to divest its legacy assets

Spearwood South Industrial Estate

• Contracted for sale at $28.0m (3.4% discount to 1H FY17 book value)

• Settlement expected to occur 29 September 2017

Midland

• Conditional contract $2.5 million

• Anticipated settlement in 1H FY18

Aspen Whitsunday Shores Pty Ltd (AWSS)

• Settled remaining development syndicate land asset for $3.5 million on15 August 2017

• Syndicate to proceed with wind-up

Disposal of AWSS and Midlands attribute immediate uplift in sustainable earnings. Midland and AWSS contributed losses of ~$0.3 million to FY 17 earnings.

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Operating Model

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5.1

Operating model

Operating model aims to produce high yielding returns in affordable accommodation augmented by development returns through the upgrade of sites and expansion of parks

• Aspen continues to identify and pursue opportunities in our three existing sectors – Tourism, Retirement and Corporate acquisitions

• Our operating model enables expansion into adjacent sectors leveraging our capability in Operations, Development and Marketing / Distribution

• Additional efficiency opportunities exist through the establishment and operation of geographic clusters

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RETIREMENT CORPORATE
TOURISM
Sectors
Stay duration
Operating capability
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Operating model

5.2

Create, own and operate communities at affordable prices

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BUY ENHANCE OPERATE
• 3 core sectors – Tourism, • Business plan • Distribution and revenue
Retirement and • Opportunity driven (e.g.) management strategy
Corporate intensification • Operational focus,
• Off or near market • Combined in-house managing financial
• Specialist acquisition operational expertise performance
skills • EPS / DPS
• Financially disciplined
• Execution capabilities
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Outlook

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6.1

Outlook

• Portfolio expansion targeting ~$90 million in acquisitions

• Commence development at Tomago and Four Lanterns

• Complete exit of non-core assets yielding ~$34 million

• Earnings growth expected in line with portfolio expansion

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BIG4 Tween Waters Barlings Beach
6.1
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BIG 4 Koala Shores

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Appendices

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Aspen Portfolio

7.1

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8
Property Number
NSW
Type of sites
1 Four Lanterns Retirement 102
2 Tomago Retirement 157
3 Koala Shores [1] Tourism 143
4 Barlings Beach Tourism 258
7 1
2 5 Tween Waters Tourism 96
6
3 Total 756
4
5
Property Number Property Number
WA SA
Type of sites Type of sites
7 Mandurah Retirement 158 6 Adelaide Tourism 93
8 Karratha Village Corporate 180 Total 93
Total 338
1. Acquisition remains conditional - expected to be completed Q2 FY18
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7.2

Acquisition: BIG4 Tween Waters Holiday Park

South Coast, NSW (7.5hrs South of Sydney) – December 16

Location

Far South Coast, adjacent Merimbula town centre (170kms south of Batemans Bay)

Type

Beachfront, full tourist park with recently renovated cabins and water play park

Scale

96 sites including 31 cabins

Opportunity

• Earnings growth via leveraging of distribution capability and establishment of South Coast cluster

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RETIREMENT CORPORATE TOURISM Sectors Stay duration Operating capability Ingoing yield Extended Short Total Acquisition price Tenure (excl. acq. costs) sites sites area $6.8m 9.4% - 96 1.9 ha Freehold

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7.3

Acquisition: Barlings Beach Holiday Park

South Coast, NSW (6hrs South of Sydney) – January 2016

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Location

Absolute beachfront adjacent to Tomakin Village 17km’s south of Batemans Bay

Type

Beachfront, predominantly tourism park with Canberra, Sydney and local region client base

RETIREMENT CORPORATE TOURISM Sectors Stay duration Operating capability Ingoing yield Extended Short Total Acquisition price Tenure (excl. acq. costs) sites sites area $13.3m[1] 9.1% 194 64 8.7 ha Freehold

Scale

258 sites including 23 permanents, 171 annuals, 35 cabins and 29 sites

Opportunity

Highly stable earnings due to predominant share of annual and permanent sites, earnings improvement opportunity through leveraging of distribution capability.

Potential for additional cabins on beachfront location sites. Presentation enhancement through continued replacement of aging caravans with new cabins on annual sites. 1. Includes $1.25m delayed settlement (12 months)

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7.4

Acquisition: BIG4 Koala Shores Holiday Park[1]

Central Coast, NSW (2hrs North of Sydney) – November 2016

Location

45km from Newcastle, 25km from Tomago Van Village – establishes NSW North Coach cluster. 15 minutes from Newcastle airport

Type

Full tourist park, water frontage, newly renovated cabins and excellent park presentation

Scale

143 sites including 34 cabins

Opportunity

Earnings growth potential via leveraging of distribution capability and clustering with Tomago Van Village

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RETIREMENT CORPORATE TOURISM Sectors Stay duration Operating capability Ingoing yield Extended Short Total Acquisition price Tenure (excl. acq. costs) sites sites area $10.2m 9.5% - 143 6.5 ha Freehold/Leasehold

1. Acquisition remains conditional - expected to be completed Q1 FY18

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Operating earnings

7.6

		FY17	FY16	1
		$m	$m
	Profit / (loss) from operations
	Accommodation
	- Aspen Group properties	7.0	7.2
	- APPF properties	-	9.3
	- APPF management fees / equity	-	0.4
	Non-core	3.4	3.2
	Total gross profit	10.4	20.1
	Operating expenses and depreciation	(6.5)	(12.6)
	Net Financial income / (expenses)	0.6	(1.6)
	Operating profit before tax	4.5	6.0
	Income tax expense	-	-
	Operating profit after tax	4.5	6.0
	NCI (APPF only)	-	(1.2)
	APZ share of operating profit after tax	4.5	4.8
	add backs2	0.6	0.8
	Distributable earnings	5.1	5.6
	APZ distributions	4.7	10.2

1. FY16 figure presented on a deconsolidated basis excluding APPF performance

2. Relates to depreciation less stay in business capex

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Balance sheet

7.7

		Jun 17	Jun 16
		$m	$m
	Cash	22.7	48.8
	Property Assets1	71.2	80.0
	Assets held for sale / other assets	40.2	11.7
	Total Assets	134.1	140.5
	Debt	-	-
	Other	9.5	10.9
	Total Liabilities	9.5	10.9
	Net Assets	124.6	129.6
	Net Assets attributed to Aspen Group	124.6	129.6
	NAV per share	1.22	1.26
	Gearing %	-	-

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1. Includes $1 million (FY16: $1.8 million) in unrecognised non – statutory adjustments

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Disclaimer

This presentation has been prepared by Aspen Group (“Aspen”) and should not be considered in any way to be an offer, invitation, solicitation or recommendation with respect to the subscription for, purchase or sale of any security, and neither this document nor anything in it shall form the basis of any contract or commitment. Prospective investors should make their own independent evaluation of an investment in Aspen. Nothing in this presentation constitutes investment, legal, tax or other advice. The information in this presentation does not take into account your investment objectives, financial situation or particular needs. The information does not purport to constitute all of the information that a potential investor may require in making an investment decision.

Aspen has prepared this presentation based on information available to it. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness of the information, opinions and conclusions contained in this presentation. To the maximum extent permitted by law, none of Aspen , its directors, employees or agents, nor any other person accepts any liability, including, without limitation, any liability arising from fault or negligence on the part of any of them or any other person, for any loss arising from the use of this presentation or its contents or otherwise arising in connection with it.

This presentation contains forward looking information. Indications of, and guidance on, future earnings, distributions and financial position and performance are forward looking statements. Forward looking statements are based on Aspen Group’s current intentions, plans, expectations, assumptions, and beliefs about future events and are subject to risks, uncertainties and other factors which could cause actual results to differ materially. Aspen Group and its related bodies corporate and their respective directors, officers, employees, agents, and advisers do not give any assurance or guarantee that the occurrence of any forward-looking information, view or intention referred to in this presentation will actually occur as contemplated.

All references to dollar amounts are in Australian currency unless otherwise stated.

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