CENTREPOINT ALLIANCE LIMITED - M&A Activity 2013

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Announcement to the Market

18 September 2013

Proposed acquisition of Associated Advisory Practices Ltd and Associated Advisory Practices (No 2) Ltd – Supplementary Scheme Booklets

Further to the announcements on 20 June 2013, 19 July 2013 and 8 August 2013, Centrepoint Alliance Limited (ASX Code: CAF) (‘Centrepoint’) is pleased to advise that ASIC has registered the Supplementary Scheme Booklets in relation to its proposed acquisition of the remaining 45% of the shares in Associated Advisory Practices Ltd (‘AAP’) and Associated Advisory Practices (No 2) Ltd (‘AAP2’) that Centrepoint does not currently own.

The AAP and AAP2 Supplementary Scheme Booklets are currently being distributed to AAP and AAP2 shareholders and copies are appended to this notice.

Scheme meetings were adjourned to allow for the preparation and circulation of Supplementary Scheme Booklets which incorporate the audited financial results for the FY13 for Centrepoint, AAP and AAP2.

It should be noted that the Non-Executive Directors of AAP and AAP2 continue to recommend that, in the absence of a superior proposal, AAP and AAP2 shareholders vote in favour of the Schemes. The Independent Expert has also maintained that the Schemes are fair and reasonable and therefore in the best interests of the AAP and AAP2 shareholders.

The new date for the AAP and AAP2 shareholder Scheme meetings is 1 October 2013 and if all necessary shareholder and Court approvals are received, it is anticipated the Schemes will be implemented on 14 October 2013.

For further information please contact: Ian Magee Company Secretary Centrepoint Alliance Limited Ph: 08 9420 1203

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Supplementary Scheme Booklet

Associated Advisory Practices Ltd

ACN 118 000 150

For the acquisition by Centrepoint Alliance Limited ACN 052 507 507 ( CAF ) of all of the Redeemable Preference Shares in Associated Advisory Practices Ltd ACN 118 000 150 ( AAP )

For the scheme of arrangement between AAP and the AAP Shareholders.

The Non-Executive Directors continue to recommend that, in the absence of a superior proposal, AAP Shareholders vote in favour of the Scheme. The NonExecutive Directors intend to do so for the AAP Shares they hold or control. The Independent Expert has maintained that the Scheme is fair and reasonable and therefore in the best interests of the AAP Shareholders.

Important Note:

You will need to submit a new proxy form (which accompanies this Supplementary Scheme Booklet) for the Scheme Meeting in order for your vote to be counted. Any proxy previously submitted will not be valid for the Scheme Meeting. See the ‘How to Vote’ section of this Supplementary Scheme Booklet for further details.

This is an important document and requires your immediate attention. It should be read in its entirety. If you are not sure what to do, you should consult your investment or other professional adviser.

Legal Adviser McCullough Robertson Lawyers

Revised key dates for AAP Shareholders ------------------------------------------------------------------ 3	Revised key dates for AAP Shareholders ------------------------------------------------------------------ 3	Revised key dates for AAP Shareholders ------------------------------------------------------------------ 3
Important notices ------------------------------------------------------------------------------------------- 4
Letter from the Non-Executive Directors of AAP --------------------------------------------------------- 6
Answers to additional key questions ---------------------------------------------------------------------- 8
How to vote -------------------------------------------------------------------------------------------------- 9
Supplementary Disclosure --------------------------------------------------------------------------------- 11
1	Value	of Scheme Consideration and Independent Expert’s conclusion ---------------------- 11
	1.1	Independent Expert’s opinion 11
	1.2	Change in value of Scheme Consideration 11
	1.3	Summary of changes to the original Independent Expert’s Report 11
2	Further information about AAP ------------------------------------------------------------------ 12
	2.1	AAP financial information 12
3	Further information about CAF ------------------------------------------------------------------- 13
	3.1	Further information about PIS 13
	3.2	CAF financial information 14
	3.3	CAF condensed consolidated income statement for the financial years ended 30 June 2012
		and 30 June 2013 15
	3.4	CAF condensed consolidated balance sheet for the financial years ended 30 June 2012 and 30
		June 2013 16
	3.5	CAF capital structure 17
	3.6	Listed disclosing entity 17
4	Further information about Post Scheme CAF Group ------------------------------------------- 17
	4.1	Post Scheme CAF Group consolidated balance sheet 17
5	Additional information ---------------------------------------------------------------------------- 20
	5.1	Amendments to Implementation Deed 20
	5.2	Amendments to Scheme 20
	5.3	Deed Poll 21
	5.4	Status of conditions 21
	5.5	Consents to be named 21
	5.6	CAF directors’ intentions 21
	5.7	Lodgement of this Supplementary Scheme Booklet 22
	5.8	No unacceptable circumstances 22
	5.9	CAF share price information 22

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5.10 Other material information	22
6 Glossary --------------------------------------------------------------------------------------------	23
Annexure A --------------------------------------------------------------------------------------------------	24
Revised Independent Expert’s Report	24
Annexure B --------------------------------------------------------------------------------------------------	25
Revised Scheme	25
Annexure C --------------------------------------------------------------------------------------------------	26
New notice of Scheme Meeting	26
Corporate directory ----------------------------------------------------------------------------------------	29

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Revised key dates for AAP Shareholders

The Scheme Meeting of AAP Shareholders will now be held at 10.00am on 1 October 2013 at Level 2, Fawkner Centre, 499 St. Kilda Road, Melbourne, Victoria 3004 where voting on the resolution to approve the Scheme will take place. This is the same Scheme Meeting that was originally scheduled for 12 August 2013, which was postponed by an order of the Court.

Event	Date*
Date and time for deciding eligibility to vote at	29 September 2013 at 10.00am
Scheme Meeting
Last date and time to lodge proxies for Scheme Meeting	29 September 2013 at 10.00am
Scheme Meeting (which is to be reconvened on 10 days	1 October 2013 at 10.00am
notice to AAP Shareholders, by order of the Court)
Second Court Date	4 October 2013
Effective Date for the Scheme (transfers of AAP Shares will	4 October 2013
not be registered after this date)
Record Date (AAP Shareholders on the register at 8.00pm on	11 October 2013
this date will be entitled to the Scheme Consideration)
Implementation Date	14 October 2013
Payment of the Scheme Consideration (issue of CAF Shares	14 October 2013
to AAP Shareholders)
Trading of CAF Shares Commences	16 October 2013

All dates following the Scheme Meeting are indicative only and are subject to change. All times referred to in this Scheme Booklet are Queensland times unless stated otherwise.

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Important notices

This Supplementary Scheme Booklet

This Supplementary Scheme Booklet supplements disclosure in the Scheme Booklet dated 19 July 2013. You should read the Scheme Booklet and this Supplementary Scheme Booklet in their entirety before deciding how to vote on the resolutions to be considered at the Scheme Meeting. If you are not sure what to do, you should consult your investment or other professional adviser.

A copy of the Scheme Booklet that was sent to AAP Shareholders on 19 July 2013 is available from AAP’s Company Secretary upon request.

Responsibility for information

The AAP Information in this Supplementary Scheme Booklet has been provided by, and is the responsibility of, AAP. Neither CAF nor AAP’s advisers assume any responsibility for the accuracy or completeness of the AAP Information.

The CAF Information in this Supplementary Scheme Booklet has been provided by, and is the responsibility of, CAF. Neither AAP nor its advisers assume any responsibility for the accuracy or completeness of the CAF Information.

The Independent Expert has prepared the Revised Independent Expert’s Report in Annexure A. None of AAP, CAF or their advisers assumes any responsibility for the accuracy or completeness of the Revised Independent Expert’s Report. However, AAP has given factual information that the Independent Expert has relied on in preparing the Revised Independent Expert’s Report. The accuracy and completeness of that information is the responsibility of AAP.

ASIC involvement

A copy of this Supplementary Scheme Booklet has been given to ASIC. ASIC takes no responsibility for the content of this Supplementary Scheme Booklet.

Important Notice associated with Court order under section 411(1) of the Corporations Act

At the First Court Hearing on 15 July 2013, the Court ordered AAP to convene a Scheme Meeting to be held on 12 August 2013 to consider and vote on the Scheme. The notice convening the Scheme Meeting is set out in Annexure E of the Scheme Booklet. At a further court hearing on 9 August 2013, the Court ordered that the Scheme Meeting be postponed and on 17 September 2013 the Court ordered that the Scheme Meeting be reconvened for 1 October 2013.

The fact that the Court has ordered that the Scheme Meeting be convened is no indication that the Court:

(a) has formed a view as to the merits of the proposed Scheme or as to how the AAP Shareholders should

vote (on this matter the AAP Shareholders must reach their own decision); or

(b) has prepared, or is responsible for, the content of the Scheme Booklet, which forms the explanatory statement attached to the Notice of Scheme Meeting or this Supplementary Scheme Booklet.

The Court’s order for the convening of the Scheme Meeting is not an endorsement by the Court of the Scheme. On these matters the AAP Shareholders must reach their own decision.

Disclosure about forward looking statements

Certain statements in this Supplementary Scheme Booklet relate to the future. Those statements may not be based on historical facts. They may reflect the current expectations of AAP or, for the CAF Information, CAF about future events or results. Those statements involve known and unknown risks, uncertainties, assumptions and other factors that may cause the actual events or results to differ materially from the statements. Deviations as to future conduct, results, performance and achievements are both normal and expected. None of AAP nor CAF, their respective directors, officers or advisers, or any other person gives any representation, assurance or guarantee that the events or outcomes expressed or implied in any forward looking statement in this document will actually occur. You are cautioned against relying on any such statements.

You should carefully review the information in this Supplementary Scheme Booklet. Sections 2.1 and 2.2 of the Scheme Booklet set out reasons to vote in favour and reasons not to vote in favour of the Scheme.

All subsequent written and oral forward looking statements attributable to AAP or CAF or any person acting on their behalf are qualified by this cautionary statement.

The forward looking statements included in this Supplementary Scheme Booklet are made at the date of this Supplementary Scheme Booklet. Subject to any continuing obligations under the Listing Rules (if applicable) or the Corporations Act, AAP and CAF do not give any undertaking to update or revise any such statements after the date of this Supplementary Scheme Booklet to reflect any change in expectations in relation to such statements or any change in events, conditions or circumstances on which any such statement is based.

Foreign selling restrictions

This Supplementary Scheme Booklet and the Scheme are subject to Australian disclosure requirements which may be different from those applicable in other jurisdictions. This Supplementary Scheme Booklet and the Scheme do not in any way constitute an offer of securities in any place in which, or to any person to whom, it would not be lawful to make such an offer.

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In particular, this Supplementary Scheme Booklet may not be released or distributed in the United States. This Supplementary Scheme Booklet does not constitute an offer to sell, or a solicitation of an offer to buy, securities in the United States. Any securities described in this document have not been, and will not be, registered under the US Securities Act of 1933 (as amended) and may not be offered or sold in the United States except in transactions exempt from, or not subject to, registration under the US Securities Act and applicable United States state securities laws.

Privacy and personal information

AAP will need to collect personal information in connection with the Scheme. The personal information may include the names, contact details, details of shareholdings of AAP Shareholders and contact details of persons appointed by AAP Shareholders as proxies, corporate representatives or attorneys at the Scheme Meeting. The collection of some of this information is required or authorised by the Corporations Act. AAP Shareholders who are individuals, and other individuals whose personal information is collected, have rights to access the personal information collected about them and can contact AAP by calling Linda Kaddatz on (07) 5574 0244 if they wish to exercise those rights.

The information may be disclosed to print and mail service providers, and to CAF, its related entities and their advisers

in connection with the Scheme. If this information is not collected, AAP may be hindered in, or prevented from, conducting the Scheme Meeting or implementing the Scheme. AAP Shareholders who appoint an individual as their proxy, corporate representative or attorney to vote at a Scheme Meeting should inform that individual of these information matters.

Defined Terms

Capitalised terms used in this Supplementary Scheme Booklet have the meaning given to them in section 11 of the Scheme Booklet or as otherwise specified in this Supplementary Scheme Booklet.

Date

This Supplementary Scheme Booklet is dated 18 September 2013.

Queries

If you have any questions or require any further information, you can call Linda Kaddatz (AAP Company Secretary) on (07) 5574 0244 (9:00am to 5:00pm on weekdays) or email her at [email protected].

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Letter from the Non-Executive Directors of AAP

18 September 2013

Dear AAP Shareholder

This Supplementary Scheme Booklet is an update to the Scheme Booklet dated 19 July 2013, and contains further information in relation to CAF’s offer to acquire all redeemable preference shares in the capital of AAP under a scheme of arrangement. If you have not received a copy of the Scheme Booklet or have lost it, you can request another copy from the Company Secretary.

The additional information in this Supplementary Scheme Booklet addresses the adjustment to the CAF consolidated FY13 results arising from the updated estimates of the potential client claims liabilities for CAF’s subsidiary, Professional Investments Services Pty Ltd ( PIS ), that were foreshadowed in the notice sent to all AAP Shareholders and announced to the ASX by CAF on 8 August 2013.

Given the lapse of time, the Board has also taken the opportunity to provide AAP shareholders with updated audited financial information in respect of both CAF and AAP set out in sections 2 to 4 of this Supplementary Scheme Booklet.

As stated in the ASX announcement, the Scheme Meeting initially scheduled for 12 August 2013 was postponed by order of the Court and a new date for the Scheme Meeting set for 1 October 2013. The Scheme Meeting is being reconvened on 10 days notice in accordance with ASIC guidance and by an order of the Court.

As a result of the above matters, the Independent Expert has reviewed its opinion provided in the Independent Expert’s Report in the Scheme Booklet and provided a revised Independent Expert’s Report ( Revised Independent Expert’s Report ). After taking into account the changes regarding CAF and AAP and the Scheme since the Independent Expert’s Report was provided for the Scheme Booklet, the Independent Expert has concluded that the value of the Scheme Consideration has changed from between $0.52 to $0.58 per AAP Share to $0.47 to $0.52 per AAP Share (noting however that the actual number of CAF Shares to be issued as the Scheme Consideration payable to AAP Shareholders has not changed).

Notwithstanding this change, the Independent Expert maintains that the Scheme is fair and reasonable and therefore in the best interests of AAP Shareholders. The Revised Independent Expert’s Report is set out in Annexure A of this Supplementary Scheme Booklet and should be read as a replacement to the Independent Expert’s Report provided with the Scheme Booklet. A summary of the Independent Expert’s considerations and the key changes in the Revised Independent’s Expert Report is set out in section 1.3 of this Supplementary Scheme Booklet.

Based on the conclusion of the Independent Expert and the other matters set out in the Scheme Booklet and this Supplementary Scheme Booklet, the Non-Executive Directors continue to recommend that AAP Shareholders vote in favour of the Scheme at the Scheme Meeting, in the absence of a superior proposal. Non-Executive Directors who hold AAP Shares intend to vote their AAP Shares in favour of the Scheme.

At the date of this Supplementary Scheme Booklet, the Board has not received a superior proposal.

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The reasons for the Non-Executive Directors’ recommendation in favour of the Scheme have not changed. These reasons and other relevant considerations for AAP Shareholders are set out in section 2 of the Scheme Booklet.

Action you should take

A Scheme Booklet dated 19 July 2013 containing all information relevant to the Scheme was sent to AAP Shareholders. Other than as outlined in this Supplementary Scheme Booklet, no other terms or conditions of the Proposal have changed. Shareholders are encouraged to read this Supplementary Scheme Booklet (including the Revised Independent Expert’s Report and Scheme), together with the Scheme Booklet, carefully in full and, if required, to seek their own investment or other professional advice.

I encourage you to read this Supplementary Scheme Booklet and the Scheme Booklet in full and vote by attending the Scheme Meeting or, if you are unable to attend, by completing and returning the revised proxy form accompanying this Supplementary Scheme Booklet by 29 September 2013.

You will need to submit a new proxy form (which accompanies this Supplementary Scheme Booklet) for the Scheme Meeting in order for your vote to be counted. Any proxy previously submitted will not be valid for the Scheme Meeting.

If you have any questions, you can contact Linda Kaddatz, AAP Company Secretary, by phone on (07) 5574 0244 (9:00am to 5:00pm on weekdays) or by email to [email protected].

Yours faithfully

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Jason Cutrupi

On behalf of the Non-Executive Directors of AAP

Craig Hargraves

Barry Smith

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Answers to additional key questions

Why was the Scheme	The Scheme Meeting was postponed to allow the Board to assess and
Meeting postponed?	provide AAP Shareholders with further details on the adjustment to the
	CAF consolidated FY13 results arising from the updated estimates of the
	potential client claims liabilities for PIS. It has also allowed the Board to
	provide AAP Shareholders with updated audited financial information for
	CAF and AAP.
What are the changes	The amendments to the Independent Expert’s report are summarised in
to the Independent	section 1.3. The Revised Independent Expert’s Report is set out as
Expert’s Report?	Annexure A.
Are there any changes	You will receive the same number of CAF Shares for your AAP Shares as
to the Scheme	was set out in the Scheme Booklet (i.e. 1.25 CAF Shares per AAP Share).
Consideration?	However, the value of the CAF Shares (determined by the Independent
	Expert) has changed from between $0.52 to $0.58 per AAP Share to $0.47
	to $0.52 per AAP Share.
Has there been a	Yes, the Implementation Date is now expected to occur on 14 October
change to the	2013.
Implementation Date?
Are there any	There are a number of conditions precedent to the implementation of the
conditions required to	Scheme, which includes a condition that the AAP2 scheme is approved by
be satisfied before the	AAP2 shareholders. These are set out in section 9.2 of the Scheme
Implementation Date?	Booklet.
What do the Directors	The Non-Executive Directors continue to recommend that you vote in
recommend?	favour of the Scheme, in the absence of a superior proposal. The Non-
	Executive Directors who hold AAP Shares intend to vote their shares in
	favour of the Scheme. The Excluded Directors have a material interest in
	the Scheme and therefore refrain from making a recommendation.
What did the	The Independent Expert maintains that the Scheme is fair and reasonable
Independent Expert	and therefore in the best interests of AAP Shareholders.
conclude?
Can I vote?	All AAP Shareholders who are registered holders of AAP Shares at 10.00am
	on 29 September 2013 are entitled to vote at the Scheme Meeting.
Why should I vote in	The Non-Executive Directors continue to recommend that you vote in
favour of the Scheme?	favour of the Scheme, in the absence of a superior proposal.
	The Independent Expert maintains that the Scheme is fair and reasonable
	and therefore in the best interests of AAP Shareholders.
	Other reasons why you may vote in favour of the Scheme are set out in
	section 2.1 of the Scheme Booklet.
Why might I vote	You may believe that the Scheme is not in the best interests of the AAP
against the Scheme?	Shareholders. Also, you may not wish to become a shareholder of CAF.
	Other reasons why you may vote against the Scheme are set out in
	section 2.2 of the Scheme Booklet.
Who can help answer	If you have any questions, you can contact Linda Kaddatz, AAP Company
my questions?	Secretary, by phone on (07) 5574 0244 (9:00am to 5:00pm on weekdays)
	or by email at [email protected] .

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How to vote

Scheme Meeting

The meeting originally scheduled for 12 August 2013 has been reconvened for 1 October 2013 (by order of the Court) and is to be held at 10.00am at Level 2, Fawkner Centre, 499 St. Kilda Road, Melbourne, Victoria 3004.

Those persons who are registered as AAP Shareholders on 29 September 2013 at 10.00am will be eligible to vote at the Scheme Meeting.

The resolution at the Scheme Meeting must be passed by:

(a) a majority in number (more than 50%) of AAP Shareholders, present and voting (in person or by proxy, attorney or corporate representative); and
(b) at least 75% of the votes cast at the Scheme Meeting (in person or by proxy, attorney or corporate representative).

If all other Conditions Precedent have been satisfied or waived, the Court will then be asked to approve the Scheme.

What should you do?

1 Read this Supplementary Scheme Booklet and the Scheme Booklet carefully.
2 If you have any questions, you can contact Linda Kaddatz, AAP Company Secretary, by phone on (07) 5574 0244 (9:00am to 5:00pm on weekdays) or by email at [email protected].
3 Exercise your right to vote in person or by completing the revised proxy form accompanying this Supplementary Scheme Booklet. You will need to submit a new proxy form for the Scheme Meeting in order for your vote to be counted.
4 The Non-Executive Directors believe the Scheme is a matter of importance for all AAP Shareholders and therefore urge you to vote.

Voting in person

If you intend to vote in person (including by attorney or corporate representative), you should arrive at the venue by 9.00am on 1 October 2013 so that your shareholding may be checked against the register and your attendance noted. Attorneys should bring with them the original or a certified copy of the power of attorney under which they have been authorised to attend and vote at the meeting.

To vote in person, a corporation may appoint an individual to act as its representative. The appointment must comply with the requirements of section 250D of the Corporations Act. The representative should bring to the meeting evidence of their appointment, including the authority under which it is signed.

Voting by proxy

A revised proxy form accompanies this Supplementary Scheme Booklet. You may appoint a proxy. The proxy need not be an AAP Shareholder. You or your attorney must sign the proxy form. If you are a corporation, the proxy form must be signed by two directors or by a director and a secretary or, for a proprietary company that has a sole director who is also the sole secretary, by that director, or by its

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attorney or duly authorised officer. Otherwise, the relevant authority (e.g. in the case of proxy forms signed by an attorney, the power of attorney) must either have been exhibited previously to AAP or be enclosed with the proxy form.

The duly signed proxy form and the original or a certified copy of any relevant authority (if not exhibited previously to AAP) must be received by AAP no later than 10.00am Queensland time on 29 September 2013. Your proxy form will not be valid unless it is actually received by AAP before that time and date.

You must return your proxy form to AAP by emailing it in unalterable form (e.g. PDF file format), posting it in the reply paid envelope provided (for use in Australia) or by delivering or faxing your proxy form to:

Post or deliver to:		Associated Advisory Practices Ltd (attention Linda Kaddatz), Level 14, Corporate Centre One, Corner of Bundall Road and Slatyer Avenue, Bundall, Queensland4217
Fax to:		0755740190 (or ifdiallingfromoutsideAustralia +61-7-55740190)
Emailto:		[email protected]

What happens if you have already submitted a proxy form?

Any proxy form (which accompanied the Scheme Booklet) previously submitted to AAP will no longer be valid. You will need to submit a new proxy form which accompanies this Supplementary Scheme Booklet.

What happens if you have not yet submitted a proxy form?

If you have not yet submitted a valid proxy form you may appoint a proxy by completing and returning the revised proxy form accompanying this Supplementary Scheme Booklet in accordance with the instructions on that form. Any proxies submitted using the old proxy form will be invalid and not counted at the Scheme Meeting.

Intention of Chairman

The Chairman intends to vote proxies for which he is appointed as proxy, as follows:

(a) to vote in favour of the resolution all directed proxies received in favour of the resolution proposed in relation to the Scheme;
(b) to vote against the resolution all directed proxies received against the resolution proposed in relation to the Scheme; and
(c) to vote in favour of the resolution all undirected proxies received in relation to the Scheme.

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Supplementary Disclosure

1 Value of Scheme Consideration and Independent Expert’s conclusion

1.1 Independent Expert’s opinion

The Independent Expert has maintained that the Scheme is fair and reasonable and therefore in the best interests of the AAP Shareholders.

The Revised Independent Expert’s Report is set out as Annexure A.

1.2 Change in value of Scheme Consideration

As set out in the Revised Independent Expert’s Report, the Independent Expert has concluded that the value of the Scheme Consideration has changed from between $0.52 to $0.58 per AAP Share to $0.47 to $0.52 per AAP Share (noting however that the actual number of CAF Shares to be issued as the Scheme Consideration payable to AAP Shareholders has not changed).

The Independent Expert has valued AAP in the range of nil to $0.14 per AAP Share.

1.3 Summary of changes to the original Independent Expert’s Report

Shareholders are encouraged to read the Revised Independent Expert’s Report carefully and in full. However, AAP notes that the findings of the Independent Expert have not changed materially. Key changes are as follows:

(a) As noted in section 1.2 above, the Independent Expert has changed its assessment of the value of the Scheme Consideration (to between $0.47 and $0.52 per AAP Share).
(b) The Revised Independent Expert’s Report has been prepared with reference to audited FY13 results for AAP and CAF (rather than to management accounts for the period from 1 January 2013 and forecast results for May and June 2013). The audited financial results identify certain changes as against forecasts (e.g. in relation to the AAP management fee arrangements). However, on a normalised basis there has not been a material change to the results (see section 5.7.1 of the Revised Independent Expert’s Report).
(c) The Revised Independent Expert’s Report, at section 5.6.4, includes further commentary in relation to the legal claims provisioning for PIS. This commentary reflects the increase of approximately $4 million in the PIS claims provision. Further details in relation to this provision are set out in section 3.1 of this Supplementary Scheme Booklet.
(d) Section 3 (industry overview) of the Revised Independent Expert’s Report has been updated to reflect the Independent Expert’s regard to new industry commentary (in a ‘post-FoFA’ context) and in view of updated expectations for 2014 to 2015.
(e) The comparable industry multiples have increased to reflect the Independent Expert’s regard to recently released results for FY13 for potentially comparable companies. For example, the comparable trading multiple has changed from a range of 8.5 to 9.0 times, to 9.0 to 9.5 times (at section 7.2.4).

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2 Further information about AAP

2.1 AAP financial information

The table below sets out AAP’s statement of comprehensive income for the financial years ended 30 June 2012 and 30 June 2013:

Product margin revenue	Year Ended 30 Jun 2013 Audited $ Year Ended 30 June 2012 Audited $
	3,186,828 3,318,431 (474,146) (446,169) 2,712,682 2,872,262 71 1,789 (12,350) (11,791) (7,500) (7,500) (1,296) (1,983) (2,266,544) (1,148,905) (4,250) (1,062)) (155,842) (33,264) 264,971 1,669,546 10,778 30,235 275,749 1,699,781 (76,386) (511,793) 199,363 1,187,988 - - 199,363 1,187,988
Product margin paid
Net product margins
Other income
Audit fees
Director’s fees & expenses
Licenses & subscriptions
Management fees
Other expenses
Professional fees
Profit from operating activities
Financial income
Profit before income tax
Income tax expense
Profit for theyear

Other comprehensive income
Other comprehensive income for the period, net of income tax
Total comprehensive income for the year

The balance sheet of AAP as at 30 June 2013 and 30 June 2012, extracted from the audited financial statements for the year ended 30 June 2013, is set out below:

	As At 30 June 2013 Audited $ As At 30 June 2012 Audited $

Assets
Cash and cash equivalents	126,847 713,073
Trade and other receivables	1,152,493 766,947
Current tax receivable	135,963 -
Total current assets	1,415,303 1,480,020

Non-current assets
Deferred tax assets	34,844 2,816
Total non-current assets	34,844 2,816
Total assets	1,450,147 1,482,836

Liabilities
Trade and other payables	1,033,197 637,977
Current tax liabilities	- 101,839

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Total current liabilities	1,033,197 739,816
Total liabilities	1,033,197 739,816
Net assets	416,950 743,020

Equity
Share capital	1 1
Retained earnings	416,949 743,019
Total equity	416,950 743,020

Please refer to AAP’s financial statements for the year ended 30 June 2012 and 30 June 2013 for details on AAP’s accounting policies and the accompanying notes to the accounts. Copies of these statements are available by contacting Linda Kaddatz, by phone on (07) 5574 0244 (9.00am and 5.00pm on weekdays) or by email at [email protected].

Within the knowledge of the Board, and other than as disclosed in the Scheme Booklet and this Supplementary Scheme Booklet, the financial position of AAP has not materially changed since 30 June 2013.

Share capital during 2013

The table below sets out updated details for the Redeemable Preference Shares and A class redeemable preference shares on issue as at 30 June 2012 and 30 June 2013.

No. of Shares Start of period Issued Redeemed End of period Cost of Shares* Start of period Issued Redeemed End of period	Redeemable preference shares 'A' class shares Total 30-Jun-13 30-Jun-12 30-Jun-13 30-Jun-12 30-Jun-13 30-Jun-12 3,755,299 4,269,118 4,329,227 4,444,444 8,084,526 8,713,562 1,097,156 409,370 - - 1,097,156 409,370 (1,658,881) (923,189) (425,972) (115,217) (2,084,853) (1,038,406)
	3,193,574 3,755,299 3,903,255 4,329,227 7,096,827 8,084,526
	Redeemable preference shares 'A' class shares Total 30-Jun-13 30-Jun-12 30-Jun-13 30-Jun-12 30-Jun-13 30-Jun-12 - - - - - - - - - - - - - - - - - -
	- - - - - -

Redeemable Preference Shares and A class redeemable preference shares are issued for nil consideration.

As set out in the Scheme Booket, CPW continues to hold one ordinary share and one Z class share in AAP.

3 Further information about CAF

3.1 Further information about PIS

As foreshadowed by the ASX announcement released by CAF on 8 August 2013, having received two independent actuarial reports indicating an increase in the client claims provision for PIS, CAF has increased its legacy claims provision by $4.5 million as at 30 June 2013. This has been reflected in an aggregate $10 million cost for additional client claims provisioning in CAF’s FY13

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statement of comprehensive income, providing for a total legal claims provision of $20.8 million in CAF’s FY13 consolidated balance sheet.

The CAF Board is reviewing and considering its options for reducing the risk of future increases in the PIS claims provision - for instance, by investigating the potential to obtain stop loss insurance to cover a proportion of the potential claims liability.

3.2 CAF financial information

The historical financial information provided below has been extracted from CAF's audited financial reports for the financial years ending 30 June 2012 and 30 June 2013. This extract does not and cannot be expected to provide as full an understanding of the financial performance, financial position and activities of CAF as the full 2012 and 2013 annual reports. Copies of CAF's full financial reports are available on CAF's web site or at www.asx.com.au.

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3.3 CAF condensed consolidated income statement for the financial years ended 30 June 2012 and 30 June 2013

	Continuing Operations	Year Ended Year Ended
		30 Jun 2013 Audited 30 Jun 2012 Audited
		$’000 $’000
	Revenue
	Advice and financial product revenue	128,013 177,260
	Advice and financial product fees paid	(92,685) (131,975)
	Advice and financial product revenue (net of fees)	35,328 45,285
	Interest income	14,207 14,201
	Other revenue/income	3,095 2,604
		52,630 62,090
	Expenses
	Borrowing expenses	(5,015) (5,451)
	Employee benefit expenses	(22,550) (24,753)
	Professional consulting fees	(4,313) (9,206)
	Client claims	(9,980) (16,736)
	Insurances	(2,066) (3,124)
	Property costs	(3,689) (4,216)
	Impairment of assets	(993) (1,635)
	Other general and administration expenses	(10,656) (11,494)
	Loss before tax	(6,632) (14,525)
	Income tax expense	(571) (2,774)
	Net loss for the period from continuing operations	(7,203) (17,299)
	Discontinued operations
	Loss after tax from discontinued operations	(85) -
	Net loss for the period	(7,288) (17,299)
	Other comprehensive income
	*Items that may be classified subsequently to profit and loss:*
	Foreign currency translation	1,456 16
	Total comprehensive loss for the period	(5,832) (17,283)

	Net loss attributable to:
	Owners of the parent	(7,781) (17,881)
	Non-controlling interests	493 582
	Net loss for the period	(7,288) (17,299)

	Total comprehensive loss attributable to:
	Owners of the parent	(6,325) (17,875)
	Non-controlling interests	493 592
	Total comprehensive loss for the period	(5,832) (17,283)

25440979v3 | Supplementary scheme booklet

3.4 CAF condensed consolidated balance sheet for the financial years ended 30 June 2012 and 30 June 2013

	As at As at
	30 Jun 2013 Audited 30 Jun 2012 Audited
	$’000 $’000
Assets - Current
Cash and cash equivalents	9,352 14,621
Trade and other receivables	13,730 23,895
Interest bearing receivables	107,622 95,299
Other assets	2,760 4,155
Current tax asset	225 -
Total current assets	133,689 137,970
Assets - Non-current
Trade and other receivables	92 562
Interest bearing receivables	557 1,044
Other assets	1,119 1,950
Property, plant and equipment	1,193 1,593
Intangible assets and goodwill	6,521 8,232
Deferred tax assets	7,052 7,297
Total non-current assets	16,534 20,678
Total Assets	150,223 158,648
Liabilities - Current
Trade and other payables	37,544 40,866
Interest bearing liabilities	71,656 64,990
Provisions	10,250 7,422
Current tax liability	121 247
Total current liabilities	119,571 113,525
Liabilities - Non-current
Trade and other payables	- 328
Interest bearing liabilities	90 253
Provisions	13,324 17,380
Total non-current liabilities	13,414 17,961
Total Liabilities	132,985 131,486
Net Assets	17,238 27,162

Equity
Contributed equity	24,809 28,675
Reserves	69 (1,405)
Accumulated losses	(7,913) -
Equity attributable to shareholders	16,965 27,270
Non-controlling interests	273 (108)
Total Equity	17,238 27,162

25440979v3 | Supplementary scheme booklet

3.5 CAF capital structure

In addition to the CAF securities disclosed in section 6.7 of the Scheme Booklet, as announced by CAF on 2 August 2013, CAF granted 4,100,000 performance rights in respect of CAF Shares at nil cost. 1,500,000 of the rights were granted to Managing Director, John de Zwart (which are subject to shareholder approval at CAF’s upcoming AGM), and the remaining 2,600,000 were issued to five senior executives. The performance rights will vest either partially or in full in September 2016, if certain profit targets are met.

3.6 Listed disclosing entity

The headlines of continuous disclosure notices given by CAF to ASX in the period since the date of the Scheme Booklet are set out in the following table. All of these notices are available from www.asx.com.au.

03/09/2013 Investor Presentation - Annual Results 30 June 2013

02/09/2013 Appendix 4E & Annual Report Cover 30/08/2013 Full Year Statutory Accounts 08/08/2013 FY13 Claims Liability Results 02/08/2013 LTI - Managing Director & Executives 19/07/2013 Update on financial information in AAP Scheme Booklets 19/07/2013 Proposed acquisition of AAP - Scheme Booklets

4 Further information about Post Scheme CAF Group

4.1 Post Scheme CAF Group consolidated balance sheet

The pro forma balance sheet below comprises a pro forma balance sheet of the CAF group together with supporting notes. The pro forma balance sheet presented in this section is for illustrative purposes only.

Basis of preparation

The pro forma balance sheet is based on the most recent audited balance sheets for AAP (extracted from the audited financial report for the year ended 30 June 2013) and CAF (extracted from the audited financial report for the year ended 30 June 2013) with a number of pro forma adjustments outlined below.

Broadly, the pro forma balance sheet has been prepared in accordance with the recognition and measurement principles prescribed in Australian Accounting Standards, International Financial Reporting Standards and the Corporations Act. The pro forma balance sheet is presented in an abbreviated form insofar as it does not include all of the disclosures required by the Australian Accounting Standards applicable to annual financial reports prepared in accordance with the Corporations Act.

The pro forma balance sheet should be read in conjunction with other information contained in this Supplementary Scheme Booklet and the accounting policies of AAP and CAF as disclosed in their most recent financial reports.

25440979v3 | Supplementary scheme booklet

Pro forma balance sheet adjustments

The pro forma balance sheet has been adjusted for the following transactions to reflect the impact of the proposed merger and other pro forma adjustments described assuming they had occurred at 30 June 2013:

(a) Impact of proposed scheme

Following implementation of the Proposal, there will be no material change in control of CAF as a result of the Scheme. No single shareholder will obtain or lose a controlling interest in CAF as a result of the Scheme. The largest shareholder in CAF currently holds a 22.11% interest in CAF. Assuming no change in individual holdings, the same shareholder will hold a 20.77% interest following implementation of the proposed schemes.

The Proposal will result in CAF and CPW holding all the issued share capital in AAP. The Scheme will have a material effect on control of AAP.

The pro forma balance sheet assumes that CAF acquires all the non-controlling interest of both AAP and AAP2 at their values from the 30 June 2013 scheme transaction costs noted below.

The valuation range for AAP and AAP2, as confirmed by the Independent Expert, has been assumed in deriving the acquisition consideration for the pro forma balance sheet. Based on this assumption, consideration is determined by the outstanding shares valued at $0.28 per share resulting in an excess of $1.555 million between the acquisition consideration and non-controlling interests of AAP and AAP2 arising in the pro forma balance sheet which has been presented as intangible assets.

(b) Transaction costs associated with the merger

Estimated transaction costs associated with the two proposed schemes, including the preparation of this Supplementary Scheme Booklet, have been adjusted in the pro forma balance sheet. CAF has estimated transaction costs of the two proposed schemes for the Revised Independent Expert Report of $20,000 which are considered tax deductible over five years and give rise to a deferred tax asset.

CAF has estimated cash transaction costs for the supplementary work in relation to the two proposed schemes for legal, due diligence and accounting of $40,000, which are considered tax deductible over five years and give rise to a deferred tax asset.

25440979v3 | Supplementary scheme booklet

Consolidated Statement of financial position as at 30 June 2013

Assets	CAF GROUP JOURNAL REFERENCE	ACQUISITION ADJUSTMENTS PRO FORMA GROUP
	$’000	$’000 $’000

*Current*
Cash and cash equivalents	9,352	9,352
Trade and other receivables	13,730	13,730
Interest bearing receivables	107,622	107,622
Current tax asset	225	225
Other assets	2,760	2,760
Total current assets	133,689	133,689
*Non-current*
Trade and other receivables	92	92
Interest bearing receivables	557	557
Other assets	1,119	1,119
Property, plant and equipment	1,193	1,193
Intangible assets and goodwill	6,521 a	1,555 8,076
Deferred tax assets	7,052 b	18 7,070
Total non-current assets	16,534	1,573 18,107
Total assets	150,223	1,573 151,796

Liabilities
*Current*
Trade and other payables	37,544 b	60 37,604
Interest bearing liabilities	71,656	71,656
Provisions	10,250	10,250
Current tax liability	121	121
Total current liabilities	119,571	60 119,631
*Non-current*
Trade and other payables	-	-
Interest bearing liabilities	90	90
Provisions	13,324	13,324
Total non-current liabilities	13,414	13,414
Total liabilities	132,985	60 133,045
Net assets	17,238	1,513 18,751
Equity
Contributed equity	24,809 a	1,697 26,506
Reserves	69	69
Retained earnings	(7,913) b	(42) (7,955)
Equity attributable to shareholders	16,965	1,655 18,620
Non-controlling interests	273 a	(142) 131
Total equity	17,238	1,513 18,751

25440979v3 | Supplementary scheme booklet

JOURNAL	JOURNAL	Dr	Cr
ADJUSTMENTS	REFERENCE	$’000	$’000
Intangible Assets & Goodwill	a	1,555
Non-controlling interest	a	142
Share Capital	a		1,697

To record scrip for scrip transaction:

3,193,574 AAP shares exchanged for 1.25 CAF shares at 28 cents per share and

1,782,019 AAP2 shares exchanged for 1.16 CAF shares at 28 cents per share

Retained Profit	b	42
Deferred Tax Asset	b	18
Accounts Payable	b		60

To record supplementary scheme transaction costs being $40k legal fees and $20k for Independent Expert Report

5 Additional information

5.1 Amendments to Implementation Deed

CAF and AAP have agreed to certain amendments to the Implementation Deed, as follows:

(a) AAP and CAF had committed to implement the Scheme on or before the Sunset Date (being 30 September 2013 or such other date as agreed by the parties). The parties have agreed to extend the Sunset Date to 31 October 2013 ( Revised Sunset Date ). If the Scheme is not effective by the Revised Sunset Date, either AAP or CAF may terminate the Implementation Deed in which case the Scheme will not proceed. The Revised Sunset Date has the effect of extending the exclusivity period for the Scheme.
(b) The Implementation Date has been amended from ‘the fifth Business Day following the Scheme Record Date’ to a ‘date no later than the fifth Business Day following the Scheme Record Date’. As identified in the revised timetable, it is intended that the Scheme will be implemented on the next Business Day after the Record Date.
(c) AAP and CAF have acknowledged that the reference to the Second Court Hearing Date is actually a reference to the third court hearing in relation to the Scheme, where final Court approval will be sought for the Scheme. The actual second court hearing, held on 17 September 2013, was to approve this Supplementary Scheme Booklet.

5.2 Amendments to Scheme

A copy of the Scheme agreed by AAP and CAF at the time of signing the Implementation Deed was provided in Annexure D of the Scheme Booklet. As a result of the postponement of the Scheme Meeting, the parties have agreed to amend the Scheme, as follows:

(a) To reflect the revised timetable, as a result of the postponement of the Scheme Meeting, by amending the definitions of the Implementation Date and Sunset Date, on the same terms as with the Implementation Deed (as set out above).

25440979v3 | Supplementary scheme booklet

(b) To include specific escrow provisions (for the avoidance of doubt) to reflect the arrangements set out in the Scheme Booklet, whereby the CAF Shares received by AAP Shareholders under the Scheme will be subject to escrow restrictions for up to 24 months from the Effective Date.

No other changes are proposed to the Scheme. A copy of the revised Scheme with the changes marked is set out in Annexures B of this Supplementary Scheme Booklet.

5.3 Deed Poll

The terms of the Deed Poll have not changed and it remains in the format set out in Annexure C of the Scheme Booklet. However, given the amendments to the Scheme (as set out above), CAF has agreed to re-execute the Deed Poll prior to the Scheme Meeting.

5.4 Status of conditions

As at the date of this Supplementary Scheme Booklet, AAP is not aware of any circumstances which would cause the Conditions Precedent summarised in section 9.2 of the Scheme Booklet to not be satisfied.

5.5 Consents to be named

The Independent Expert has consented to the inclusion of the Revised Independent Expert’s Report in Annexure A and to the references to the Revised Independent Expert’s Report in this Supplementary Scheme Booklet being made in the form and context in which each such reference is included and has not withdrawn that consent before the date of this Supplementary Scheme Booklet. Other than in respect of the Revised Independent Expert’s Report and any other statements attributed to the Independent Expert, the Independent Expert has not authorised or caused the issue of this Supplementary Scheme Booklet, and has not made, or purported to make, any statement in this Supplementary Scheme Booklet.

McCullough Robertson has given and has not withdrawn its consent to be named as legal adviser to AAP in the form and context in which it is named and has not withdrawn that consent before the date of this Supplementary Scheme Booklet. Other than in respect of those statements attributed to McCullough Robertson, McCullough Robertson has not authorised or caused the issue of this Supplementary Scheme Booklet, and has not made, or purported to make, any statement in this Supplementary Scheme Booklet.

CAF has consented to the inclusion of the CAF Information in the form and context in which that information appears and has not withdrawn that consent before the date of this Supplementary Scheme Booklet. Other than in respect of those statements attributed to CAF, CAF has not authorised or caused the issue of this Supplementary Scheme Booklet, and has not made, or purported to make, any statement in this Supplementary Scheme Booklet.

5.6 CAF directors’ intentions

The CAF board’s present intention (recognising that this may change in due course) is to make no change other than in the normal course of business in relation to each of the following:

(a) the continuation of the business of AAP;
(b) the use of the fixed assets of AAP; or
(c) the future employment of the present employees of AAP.

25440979v3 | Supplementary scheme booklet

Following the implementation of the Scheme, CAF intends to undertake an internal reorganisation pursuant to which the remaining shares in AAP (representing a 55% interest in AAP) which are not subject to the Scheme and are held by CPW, a wholly owned Subsidiary of CAF, will be transferred to CAF. As a result of this internal reorganisation AAP will become a wholly owned Subsidiary of CAF.

5.7 Lodgement of this Supplementary Scheme Booklet

This Supplementary Scheme Booklet was given to ASIC on 6 September 2013.

5.8 No unacceptable circumstances

The Directors believe that the Scheme does not involve any circumstances in relation to the affairs of any AAP Shareholder that could reasonably be characterised as constituting ‘unacceptable circumstances’ for the purposes of section 657A of the Corporations Act.

5.9 CAF share price information

The latest recorded price before the date on which this document was lodged for registration was $0.31.

The highest recorded price during the 3 months immediately before the date this document was lodged for registration was $0.355 (17 June 2013).

The lowest recorded price during the 3 months immediately before the date this document was lodged for registration was $0.225 (3 July 2013).

5.10 Other material information

Other than as contained or referred to in the Scheme Booklet and this Supplementary Scheme Booklet there is no information material to the making of a decision by AAP Shareholders whether or not to vote in favour of the Scheme that is known to any Director and which has not previously been disclosed to AAP Shareholders.

25440979v3 | Supplementary scheme booklet

6 Glossary

AAP Information

means the information in this Supplementary Scheme Booklet, other than the CAF Information and the Revised Independent Expert’s Report in Annexure A.

CAF Information means information in sections 3 and 4. Implementation Date means the date stated in this Supplementary Scheme Booklet or such other date that is no later than the fifth Business Day following the Record Date.

Revised Independent Expert’s means the revised report of the Independent Expert set out in Report Annexure A. Scheme means the revised scheme of arrangement set out in Annexure B. Supplementary Scheme Booklet means this supplementary scheme booklet.

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Annexure A

Revised Independent Expert’s Report

25440979v3 | Supplementary scheme booklet

when it counts

WMS Corporate Services Pty Ltd AFSL 418958 ABN 28 069 284 073

Suite 1401, Level 14, The Rocket 203 Robina Town Centre Drive Robina Qld 4226 PO Box 5287 Robina TC Qld 4230 PH +61 7 5556 3300 FAX +61 7 5556 3399

www.wmssolutions.com.au

6 September 2013

The Directors Associated Advisory Practices Ltd Level 14, Corporate Centre One Cnr Bundall Road & Slatyer Ave BUNDALL QLD 4217

Dear Sirs,

Independent Expert’s Report

Introduction

On 20 June 2013, Centrepoint Alliance Limited (“CAF”) and Associated Advisory Practices Ltd (“AAP” or “the Company”) announced they had signed a Merger Implementation Deed (“MID”) to effect the acquisition of all the Redeemable Preference Shares (“RPS”) of AAP under a scheme of arrangement (“the Scheme”) .

Under the Scheme, each RPS holder will be entitled to consideration of 1.25 CAF Shares. If the Scheme becomes effective, on the Implementation Date, CAF will issue AAP shareholders 1.25 CAF shares for each RPS they hold.

Shares offered as part of this Scheme are subject to the following escrow periods:

50% restricted for 18 months; and
50% restricted for two years.

A Second scheme of arrangement is running in parallel with this proposed Scheme and involves a similar transaction whereby CAF is offering scrip consideration of 1.16 CAF shares for each RPS in Associated Advisory Practices (No 2) Ltd (“AAP2”) . The two schemes are interdependent. That is, one cannot proceed if the second scheme does not also proceed.

We note that on 8 August 2013 it was announced to the market that CAF results would be materially impacted by an increase in the provision for client claims as determined by the independent actuary. The AAP Scheme of Arrangement was adjourned so that consideration could be given to the revised results. This report reflects the revised financials and supercedes the report included in the Scheme Booklet announced to the market on 19 July 2013.

Associated Advisory Practices Ltd Independent Expert’s Report & Financial Services Guide 6 September 2013

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WMS Corporate Services Pty Ltd t/as WMS Corporate Finance (“WMS”) has been engaged by the Independent Directors of AAP to provide an Independent Expert’s Report stating whether, in its opinion, the Scheme is fair and reasonable and therefore in the best interests of the nonassociated shareholders of AAP.

The Scheme is subject to a number of conditions precedent including approval by the Court and by AAP shareholders. Our Report is to be attached to the Supplementary Scheme Booklet to assist AAP shareholders in deciding whether to approve the Scheme.

Summary and opinion

We have considered the terms of the Scheme as outlined in the body of this Report and have concluded that the Scheme is fair and reasonable and therefore in the best interests of the AAP shareholders.

In deriving our opinion we have considered:

Whether the value of a Scheme Share is higher or lower than the value of the consideration being offered by CAF under the Scheme;
Other qualitative factors which we believe represent either advantages or disadvantages to shareholders;
The likelihood of an alternative superior offer being made to shareholders; and
The alternatives available to shareholders.

We have summarised below our analysis in forming the above opinion.

Fairness

As detailed in section 2.2, in accordance with our basis of evaluation we have assessed whether or not the Scheme is fair to non-associated AAP shareholders with reference to:

The value of a Scheme Share (on a controlling basis); and
The value of the Scheme Consideration being 1.25 CAF shares for each Scheme Share held by AAP shareholders.

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The results of our analysis are summarised in the following table:

$	Low High
Value of Merged Entity Share Conv ersion ratio Value of Scheme Consideration	0.38 0.42 1.25 1.25
	0.47 0.52
Value of a Scheme Share	- 0.14

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----- Start of picture text -----

Value of Scheme
Share
Value of Scheme
Consideration
- 0.10 0.20 0.30 0.40 0.50 0.60
----- End of picture text -----

As indicated in the previous table, the value of the Scheme Consideration is higher than the assessed value range of a Scheme Share. Based on this, the Scheme is considered fair to AAP shareholders.

Reasonableness

In assessing the reasonableness of the Scheme, we have also considered the potential commercial and qualitative factors being the advantages and disadvantages of approving the Scheme and the position of AAP shareholders if the Scheme does not proceed.

We have considered, in section 9 of this Report, these commercial and qualitative factors which are summarised below:

Liquidity - AAP shareholders will receive shares in a listed entity;
The view of the AAP Board;
Escrow periods;
Transaction costs;
No alternative offers received;
AAP shareholders’ position if the Scheme is not approved;
FoFA implications;
Shareholder exit costs; and
Tax consequences.

After considering the matters detailed in the attached Independent Expert’s Report, in the opinion of WMS, the Scheme is in the best interests of non-associated AAP shareholders.

Associated Advisory Practices Ltd Independent Expert’s Report & Financial Services Guide 6 September 2013

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Other matters

This Independent Expert’s Report constitutes general financial product advice only and has been prepared without taking into consideration the individual circumstances of shareholders. The decision of whether or not to accept the Scheme is a matter for each AAP shareholder to decide based on their own views of the value of AAP and CAF and expectations about future market conditions, AAP and CAF’s performance, risk profile and investment strategy.

The Directors and Management of AAP have prepared the Scheme Booklet and Supplementary Scheme Booklet (collectively the “Scheme Booklets”) in relation to this Scheme and as such AAP shareholders should have regard to these when considering the Scheme. Shareholders should also consider the taxation implications in relation to the Scheme as the Scheme Booklets contains only general information in relation to the taxation implications of the Scheme. If AAP shareholders are in doubt about the action they should take in relation to the Proposed Scheme, they should seek their own professional advice.

This Report has been prepared exclusively for AAP shareholders and therefore neither WMS nor any member, employee or consultant thereof undertakes any responsibility to any person, other than AAP shareholders, in respect of this Independent Expert’s Report, including any errors or omissions however caused.

WMS has prepared a Financial Services Guide (“FSG”) in accordance with the Corporations Act as set out in Section 10.

The opinion expressed in this letter reflects circumstances and conditions as at the date of this letter and must be read in conjunction with the full Independent Expert’s Report as attached.

Yours faithfully WMS Corporate Services Pty Ltd

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Aaron Lavell Director

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David Hayes Director

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1		The Scheme ..................................................................................................................................................................................... 9
	1.1	Background .............................................................................................................................................................................. 9
	1.2	Structure .................................................................................................................................................................................... 9
	1.3	Conditions Precedent ............................................................................................................................................................. 9
2		Purpose and scope ...................................................................................................................................................................... 10
	2.1	Purpose .................................................................................................................................................................................... 10
	2.2	Basis of Evaluation .................................................................................................................................................................. 10
	2.3	Control Transactions .............................................................................................................................................................. 11
	2.4	Qualifications .......................................................................................................................................................................... 11
	2.5	Limitations and reliance on information ............................................................................................................................. 12
	2.6	Consents .................................................................................................................................................................................. 13
3		Industry Overview.......................................................................................................................................................................... 14
	3.1	Financial Planning and Investment Advice in Australia .................................................................................................. 14
	3.2	Funds Management Services in Australia .......................................................................................................................... 18
	3.3	Future of Financial Advice (“FoFA”) ................................................................................................................................... 21
4		Profile of AAP ................................................................................................................................................................................. 24
	4.1	Background ............................................................................................................................................................................ 24
	4.2	Capital Structure .................................................................................................................................................................... 24
	4.3	Operations .............................................................................................................................................................................. 25
	4.4	Management and Personnel ............................................................................................................................................... 26
	4.5	Financial Performance .......................................................................................................................................................... 27
	4.6	Financial Position .................................................................................................................................................................... 29
5		Profile of CAF ................................................................................................................................................................................. 30
	5.1	Background ............................................................................................................................................................................ 30
	5.2	Capital Structure .................................................................................................................................................................... 31
	5.3	Directors and Executive Team ............................................................................................................................................. 32
	5.4	Share Trading .......................................................................................................................................................................... 32
	5.5	Profile of Insurance Premium Funding Division .................................................................................................................. 33
	5.6	Profile of Centrepoint Wealth Division ................................................................................................................................ 34
	5.7	Financial Performance .......................................................................................................................................................... 36
	5.8	Financial Position .................................................................................................................................................................... 39
6		Valuation methodology............................................................................................................................................................... 41
	6.1	Definition of market value .................................................................................................................................................... 41
	6.2	Common valuation methodologies ................................................................................................................................... 41
7		Our selected valuation approach – AAP ................................................................................................................................. 44
	7.1	Valuation approach – All AAP Equity ................................................................................................................................. 44
	7.2	Valuation – All AAP Equity .................................................................................................................................................... 45
	7.3	Surplus assets and liabilities ................................................................................................................................................... 50
	7.4	Summary of Value – All AAP Equity ..................................................................................................................................... 51
	7.5	Allocation of Value to Redeemable Preference Shares ................................................................................................. 51
	7.6	Valuation cross check ........................................................................................................................................................... 53
8		Valuation of Merged Entity ......................................................................................................................................................... 54
	8.1	Approach ................................................................................................................................................................................ 54
	8.2	Future Maintainable Earnings (combined) ........................................................................................................................ 54

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	8.3	Earnings multiples ................................................................................................................................................................... 55
	8.4	Surplus assets and liabilities of CAF ..................................................................................................................................... 56
	8.5	Summary of valuation analysis of CAF (inclusive of AAP and AAP2) ............................................................................ 58
	8.6	Valuation Crosscheck - ASX quoted price valuation....................................................................................................... 59
9		Evaluation of the Scheme ........................................................................................................................................................... 62
	9.1	Approach ................................................................................................................................................................................ 62
	9.2	Conclusion of valuation analysis ......................................................................................................................................... 62
	9.3	Qualitative factors (Advantages and Disadvantages) ................................................................................................... 62
	9.4	Other considerations ............................................................................................................................................................. 64
	9.5	Conclusion .............................................................................................................................................................................. 64
10		Financial services guide ............................................................................................................................................................... 66
11		Appendix 1 – Potentially Comparable Companies and Transactions ................................................................................. 69
	11.1	Potentially Comparable Companies.................................................................................................................................. 69
	11.2	Potentially Comparable Transactions ................................................................................................................................ 69
	11.3	Background ............................................................................................................................................................................ 70

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Independent Expert’s Report & Financial Services Guide 6 September 2013

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Glossary

AAP	Associated Advisory Practices Ltd
AAP2	Associated Advisory Practices (No 2) Ltd
AASB	Australian Accounting Standards
A-IFRS	Australian Equivalent to International Financial Reporting Standards
AFS Licence	Australian Financial Services Licence
ALCo	Australian Loan Company Pty Ltd
ASIC	Australian Securities and Investment Commission
ASX	Australian Stock Exchange
ATO	Australian Tax Office
CAF	Centrepoint Alliance Limited
CAGR	Compound Annual Growth Rate
CAPF	Centrepoint Alliance Premium Funding Pty Ltd
Corporations Act	Corporations Act 2001 (Cth).
CPW	Centrepoint Wealth Pty Ltd
DCF	Discounted cash flow
EBIT	Earnings Before Interest and Tax
EBITDA	Earnings Before Interest, Tax, Depreciation and Amortisation
FME	Future maintainable earnings
FPA	Financial Planning Association
FUA	Funds Under Advice
FUM	Funds Under Management
FY09a	Financial Year Ended 30 June 2009 – Audited
FY10a	Financial Year Ended 30 June 2010 – Audited
FY11a	Financial Year Ended 30 June 2011 – Audited
FY12a	Financial Year Ended 30 June 2012 - Audited
FY13a	Financial Year Ended 30 June 2013 – Audited
FY14f	Financial Year Ending 30 June 2014 – Unaudited Forecast
GFC	Global Financial Crisis

Associated Advisory Practices Ltd

Independent Expert’s Report & Financial Services Guide 6 September 2013

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IDL	Investment Diversity Ltd
IPF	Insurance Premium Funding
Mentor	Mentor Investment Services Limited
MID	Merger Implementation Deed
NAB	National Australia Bank
NCS	NAB Custodian Services
NPAT	Net Profit After Tax
NPBT	Net Profit Before Tax
PIS	Professional Investment Services Pty Ltd
RPS	Redeemable Preference Share
Scheme Share	Redeemable Preference Share in AAP
the Company	Associated Advisory Practices Ltd
the Scheme	Scheme of Arrangement
Ventura	Ventura Investment Management Ltd
WMS	WMS Corporate Services Pty Ltd t/as WMS Corporate Finance
$	Australian Dollar

Associated Advisory Practices Ltd

Independent Expert’s Report & Financial Services Guide

6 September 2013

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1 The Scheme

1.1 Background

Associated Advisory Practices Ltd (“AAP” or “the Company”) is an Australian unlisted public company which is primarily engaged in the provision of wholesale support services to Australian Financial Services licensees.

Centrepoint Alliance Limited (“CAF”) is an Australian listed public company which primarily provides wealth management and financial advice, insurance funding, financial planning, investment advice, risk management, funds management and administration platform services and finance broking to a diverse range of clients.

On 20 June 2013, AAP and CAF announced they had signed a Merger Implementation Deed (“MID”) to effect the acquisition of AAP Redeemable Preference Shares (“RPS”) under a scheme of arrangement (“the Scheme”) . CAF through a related body corporate already owns 100% of other share classes in AAP.

1.2 Structure

CAF will acquire 100% of the RPS in AAP under the Scheme in consideration for the issue of 1.25 CAF Shares for each Scheme Share held at the Record Date. If the Scheme is implemented, on the Implementation Date, CAF will issue AAP shareholders 1.25 CAF shares for each AAP share which they hold.

CAF shares issued under this Scheme are subject to the following escrow periods:

50% restricted for 18 months; and
50% restricted for two years.

1.3 Conditions Precedent

Section 3.1 of the MID outlines a number of conditions that are required to be satisfied (or waived by one or other, or both together, of AAP and CAF), including:

This Independent Expert’s Report concludes that the Scheme is fair and reasonable and therefore in the best interests of AAP shareholders and this opinion does not change or withdraw prior to the scheme meetings;
No material adverse change to AAP or CAF;
The Court approves the Scheme in accordance with Section 411 (4)(b) of the Corporations Act ;
No prescribed occurrences occur in relation to AAP or CAF;
AAP Redeemable Preference Shareholder Approval;
All Regulatory Approvals being obtained;
AAP and CAF warranties being true and correct; and
AAP’s Board does not change its recommendation in relation to the Scheme.

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The Scheme is conditional on the lodgement with ASIC of court orders approving the Scheme. Additionally, it is noted that a similar transaction involving CAF and Associated Advisory Practices (No 2) Ltd (“AAP2”) is running in parallel with this transaction. This second scheme of arrangement is interdependent with the Scheme before AAP shareholders. For clarity, one scheme cannot proceed in the absence of the other scheme also proceeding.

Full disclosure of all conditions precedent to the Scheme is included in the Scheme Booklets.

2 Purpose and scope

2.1 Purpose

The Scheme is to be implemented pursuant to Section 411 of the Corporations Act . Section 411(3) of the Corporations Act requires that an explanatory statement be issued in relation to a proposed scheme of arrangement under Section 411 of the Corporations Act which must include any information considered material to the making of a decision by a member as to whether to accept or reject the relevant proposal.

The Directors of AAP have requested WMS Corporate Services Pty Ltd t/as WMS Corporate Finance (“WMS”) to prepare this Report pursuant to Section 411 of the Corporations Act and Part 3 of Schedule 8 of the Corporations Regulations .

Part 3 of Schedule 8 of the Corporations Regulations specifies that the explanatory statement for the scheme that is to be sent to members must be accompanied by a report prepared by an independent expert in the instances where a party to the scheme has a shareholding of at least 30% in the other party or where there are common Directors. Both of these criteria are triggered in this instance.

2.2 Basis of Evaluation

Australian Securities and Investment Commission (ASIC) Regulatory Guide RG111 “ Content of expert report s” expresses that in the circumstances where a scheme of arrangement is used to achieve a change of control, then it expects a person preparing an independent expert report to perform substantially the same form of analysis as for a takeover bid made pursuant to Chapter 6 of the Corporations Act and provide an opinion as to whether the proposal is “fair and reasonable”.

RG 111 defines the term ‘fair and reasonable’ and draws a distinction between the meaning of the terms “fair” and “reasonable”. An offer is “fair” if the value of the consideration is equal to, or greater than, the value of the securities subject to the offer. The comparison must be made assuming 100% ownership of AAP, irrespective of the percentage holding of the bidder or its associates.

RG 111 considers an offer to be reasonable if:

The offer is “fair”; or
Despite not being fair, the expert believes that there are sufficient reasons for security holders to accept the offer in the absence of any higher offer.

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RG 111 sets out some of the factors that an expert might consider in assessing the reasonableness of a proposal, including:

Whether the vendor is to receive a premium for control;
Whether the proposal offers a better long-term profit outlook (such as the incoming shareholder offering superior management skills);
Whether there are further transactions planned for the entity and if any are contemplated, whether those transactions are arm’s length transactions; and
Whether any proposed acquisition by way of sale, if approved, might deter the making of a takeover bid for the entity.

Paragraph 17 of RG 111 indicates that where an independent expert would conclude that a proposal is “fair and reasonable” if it was in the form of a takeover bid, the expert would also be able to conclude that the Scheme is “in the best interests” of shareholders.

WMS has considered the definition of “fair and reasonable” as set out in RG 111 and deems it as the most appropriate approach in forming its opinion in relation to whether or not the Scheme is “in the best interests” of the shareholders.

2.3 Control Transactions

RG 111.30 states that if the bidder is offering non-cash consideration in a control transaction, the expert should examine the value of that consideration and compare it with the valuation of the target’s securities, whether the transaction is effected by a takeover bid, a scheme of arrangement or an issue of shares.

RG111.31 goes on to state that the comparison should be made between the value of the securities being offered (allowing for a minority discount) and the value of the target entity’s securities, assuming 100% of the securities are available for sale.

This comparison reflects the fact that:

CAF is obtaining or increasing control of AAP; and
AAP shareholders will be receiving scrip constituting minority interests in the combined entity.

On the basis of the above, we consider this Scheme to be a control transaction.

As this is a control transaction, when deriving the value of individual AAP shares and comparing it with the Scheme Consideration, we have included a premium for control in our valuation of AAP.

2.4 Qualifications

WMS Corporate Services Pty Ltd holds an AFS Licence under the Corporations Act 2001 and is duly licensed to prepare a report of this nature. WMS provides a full range of Corporate Advisory Services and has advised on numerous corporate valuations, acquisitions, and restructures. Prior to accepting this engagement, WMS considered its independence with respect to AAP with reference to the RG 112 Independence of Expert.

WMS Director Aaron Lavell FCA FFin has assumed overall responsibility for this report. He has more than 20 years experience in providing valuation advice and his professional qualifications are appropriate to the advice being offered in this instance.

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WMS Director David Hayes CA FFin has countersigned this report and has been involved in the preparation of same. He has more than 15 years experience in providing valuation advice and reporting entity disclosures and standards. His professional qualifications are appropriate to the advice being offered in this instance.

Other WMS staff have assisted with the compilation of data for this report under the supervision of the authors. The opinions expressed are those of the authors. In addition to adherence to relevant ASIC regulatory guides, this report has regard to APES 225 Valuation Services (May 2012) issued by the Accounting Professional and Ethical Standards Board Limited.

2.5 Limitations and reliance on information

The WMS report and opinion is based on economic, market and other conditions prevailing at the date of this report. Such conditions can change significantly over relatively short periods of time.

WMS has prepared this report on the basis of financial and other information provided by AAP and publicly available information. WMS has considered and relied upon this information. WMS has no reason to believe that any information supplied was false or that any material information has been withheld. WMS has evaluated the information provided to it by AAP and other experts through inquiry, analysis and review, and nothing has come to our attention to indicate the information provided was materially misstated or would not afford reasonable grounds upon which to base our report. Nothing in this report should be taken to imply that WMS has audited any information supplied to us, or has in any way carried out an audit on the books of accounts or other records of AAP or CAF.

This report has been prepared to assist the Directors of AAP in advising its shareholders in relation to the Scheme. This report should not be used for any other purpose. In particular, it is not intended that this report should be used for any purpose other than as an expression of the WMS opinion as to whether the Scheme is fair and reasonable and therefore in the best interests of AAP shareholders.

The company has indemnified WMS, its affiliated companies and their respective officers and employees, who may be involved in or in any way associated with the performance of services contemplated by AAP’s engagement letter dated 12 June 2013, against any and all losses, claims, damages and liabilities arising out of or related to the performance of those services whether by reason of their negligence or otherwise, excepting gross negligence and wilful misconduct, and which arise from reliance on information provided by AAP, which AAP knew or should have known to be false and/or reliance on information, which was material information AAP had in its possession and which AAP knew or should have known to be material and which AAP did not provide to WMS. AAP will reimburse any indemnified party for all expenses (including without limitation, legal expenses) on a full indemnity basis as they are incurred.

WMS does not have, at the date of this report, and has not had within the previous two years, any relationship with AAP that could reasonably be regarded as capable of affecting its ability to provide an independent and unbiased opinion in relation to the proposed acquisition. WMS is entitled to receive a fee based on commercial rates and including reimbursement of out of pocket expenses for the preparation of this report. Except for this fee, WMS will not be entitled to any other pecuniary or other benefit, whether direct or indirect, in connection with the making of this report. The payment of this fee is in no way contingent upon the success or failure of the Scheme.

All amounts in this report are expressed in Australian dollars ($) unless otherwise stated.

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2.6 Consents

WMS consents to the issuing of this report in the form and context in which it is included in the Scheme Booklets to be sent to the shareholders of AAP. Neither the whole nor part of this report nor any reference thereto may be included in or with or attached to any other document, resolution, letter or statement without the prior written consent of WMS as to the form and content in which it appears.

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3 Industry Overview

Both AAP and CAF operate within the Australian wealth management market. WMS have considered IBISWorld Industry Research Report K6419b (“Financial Planning and Investment Advice in Australia) and K6419a (“Funds Management Services in Australia”). Where relevant to our analysis, we have reproduced elements of the reports in the following subsections. Inclusion of these excerpts does not constitute an opinion on the proposed Scheme by IBISWorld or the reports authors.

A material division of CAF operates in the insurance premium funding industry. Our analysis of the key drivers and critical success factors of this industry concludes that they are sufficiently similar to those identified in the abovementioned research reports. Accordingly we have not separately commented on the insurance premium funding industry in the following subsections.

3.1 Financial Planning and Investment Advice in Australia[1]

3.1.1 Executive Summary

The Financial Planning and Investment Advice Industry has recently undergone fundamental change. The government announced an overhaul of the industry, addressing issues of conflicts of interest, transparency and client’s best interest. A number of the larger dealer groups made early moves to become compliant with the new regulations, implementing fee-for-service based remuneration model.

The industry comprises a handful of large firms and a vast number of individual proprietors. The largest firms are the wealth management arms of large financial institutions, including banks and the dealer groups they own.

Over the next two years, the structure of the industry will shift significantly. FOFA legislation was implemented in July 2013 and its long-term effects remain unclear. Despite this, demographic trends, superannuation legislation, a rebounding economy and the complexity of the financial environment will support growing demand for financial advice. Additionally, greater transparency, professionalism and client confidence as a result of regulatory changes will benefit industry players. In the five years through 2018-19, industry revenue is forecast to grow at a compound rate of 4.0% to reach $5.4 billion.

3.1.2 Key External Drivers

Population aged 50 and over - Those approaching or planning for retirement are more likely to need the services of a financial adviser. In addition, older age groups tend to have a greater share of wealth, accumulated over a longer working history.

Consumer sentiment index - As consumer sentiment rises, investors are more willing to seek the advice of a financial advisor in order to select the best asset for investment.

Real household disposable income - Low income levels subsequent to the financial downturn have proven a threat to industry participants.

1 IBISWorld Industry Research Report K6419b Financial Planning and Investment Advice in Australia August 2013 by Tim Stephen.

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3.1.3 Fee for service

Fee-for-service can be based on a fixed or hourly rate per session, or a value may be placed on the provision of the Statement of Advice (SOA). The fee may be paid upfront or an arrangement can be made for it to be paid off over a predetermined length of time. This model avoids the imposition of ongoing annual fees embedded in the cost of particular products. In the case of fees based on the value of assets under advice, there may still be the potential for conflict of interest, as revenue is based on the amount a client invests in financial products.

3.1.4 Industry Outlook

The 2014-15 year is forecast to be a promising one. The industry is expected to slowly find its groove and adjust to the amendments made to the Corporations Act related to FOFA reforms. While there is expected to be a period of uncertainty, during which the industry will suffer from both a shortage of skilled advisors and subdued demand, many large advisory firms will have been FOFA-compliant for some time. These firms are in prime position to benefit when consumer sentiment and disposable income rebound. Revenue is forecast to grow by 5.7% in 2014-15.

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Products and services segmentation (2013-14)
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7.6%
9.8%
Tax advice
Other
21.7%
Self-managed
super fund advice 34.5%
Superannuation
and retirement
advice
26.4%
Investment advice
and management
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3.1.5 Opportunities and threats

Regardless of whether various forecasts of the effects of FOFA turn out to be accurate, the shift in regulatory framework will undoubtedly present both opportunities and threats. Competition will intensify as industry players fight hard for what is expected to be a short term decline in demand. Competition will also come from accountants, who will compete with advisors subsequent to new laws regarding the licensing of accountants wishing to provide SMSF-related services. The expected increase in demand for scaled advice presents an opportunity for dealer groups and financial institutions to train specialist advisors with specific knowledge of an area of personal finance. Being perceived as an expert will be advantageous for a brand that wishes to gain a dominant presence in a niche area of the market.

Transferring pricing structures to the new fee-for-service system will prove difficult for many dealer groups and independent advisors. Characteristics and skill sets required of a pre-FOFA advisor will differ from those of an FOFA-compliant advisor, and new training will need to be undertaken. Industry players that become FOFA compliant or even partially compliant earlier will now have a significant advantage.

3.1.6 Demand Determinants

The major driver of demand for financial advice over the past five years has been the increasing number of individuals seeking advice on superannuation matters and the significant increase in funds placed in superannuation. In turn, this has been driven by demographic factors and superannuation legislation. Like most developed countries, the average age of the population is increasing, resulting in growing numbers of people approaching retirement age with an accumulation of wealth. This has increased demand for financial planning in general. There has also been a raft of superannuation legislative changes introduced by the government, beginning with the mandatory increase in superannuation contribution in 2002-03 and followed more recently by legislation increasing compulsory contributions from 9% to 12%.

Another factor affecting demand is the level of household income available for investment, which affects the level of demand for investment advice, especially by retail investors. A fall in disposable income can reduce the amount of savings available for investment and thus reduce the need to seek advice.

The complexity and range of investment markets and products affects the demand for specialised investment advisory services. There are currently several thousand different investment products from which retail investors can choose to invest. Financial literacy also has an effect on the demand for investment advice. Consumer awareness also has an effect on the demand for investment advice. As people become more aware of the need to plan their finances, the need arises for the services of investment advisers.

3.1.7 Key Success Factors

Ability to effectively communicate and negotiate - The ability to effectively communicate with clients and negotiate a better fee structure with financial product suppliers is crucial.

Must have licence - Compliance with ASIC licence requirements is necessary.

Having a loyal customer base - For retail advisers, a strong referral client base is necessary to build up a strong client base for return on investments.

Having a good reputation - Having a good reputation will attract potential investors.

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Market research and understanding - Research support from the head office must be strong and reputable for the investment advisers to rely on.

Qualified work force - Strong qualifications, in-depth experience, good product knowledge, access to a strong research base and strong marketing skills are invaluable.

3.1.8 Barriers to Entry

Barriers to entry in the industry relate predominantly to licensing conditions and achieving scale to be able to compete.

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8.2%
Major players National Australia
(Market share) Bank Limited
8.4%
Westpac Banking
Corporation
8.8%
Australia and New
Zealand Banking
52.3% Group Limited
Other
10.1%
Commonwealth
Bank of Australia
12.2%
AMP Limited
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To operate in the industry, a financial adviser must either hold an Australian Financial Services (AFS) licence, or be an authorised representative of an AFS licence holder. The AFS licence application requirements and ongoing licence conditions make it costly for an individual to obtain such a licence, and in most cases the licence will be held by a body corporate.

The industry is predominantly structured as dealer groups, with a corporate entity holding the AFS licence and providing a range of services to the financial planners operating in the group. The services and equipment required to operate a financial advice business include meeting compliance and licensing requirements, having access to administrative and investment product research services and IT requirements including client asset management software. It is generally considered that dealer groups need to have a considerable portfolio of funds under advice to justify the cost of holding a separate AFS licence, and this provides a barrier to new entrants operating on a small scale.

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3.2 Funds Management Services in Australia[2]

3.2.1 Executive Summary

Industry growth has also been fuelled by Australia’s growing number of high net worth individuals and a stronger culture of private and national saving. The industry is expected to continue growing as global financial markets stabilise.

Over the next five years, the long-term trends underpinning growth in the industry, which include an ageing population, growing wealth, new products and government support of superannuation savings will reassert themselves.

3.2.2 Key External Drivers

National savings ratio – The government has introduced a raft of superannuation legislation, which has provided a high and steady inflow of superannuation money into the industry.

All Ordinaries Index – The performance of stock markets will affect the value of funds under management by changing the value of equity securities held in trusts and funds.

MCSI World Index – As the value of funds invested overseas is steadily growing whether in developed or emerging markets, the performance of foreign financial markets will influence the value of funds reported by fund managers.

10-year bond rate – The movement of interest rates will affect the investment mix, which will also affect this industry’s revenue and demand for industry services.

3.2.3 Current Performance

Like most of the financial services industries, the Funds Management Services industry’s revenue took a huge hit during the financial crisis.

The total FUM have some way to go before they can reach their 2007 peak. Financial market recovery has been interrupted by the United States’ credit rating going down and the possibility of eurozone default. Although the markets have since calmed, investors remain jittery as several sectors in the economy remain weak and highly exposed to external factors.

3.2.4 Industry Outlook

A number of factors have underpinned the appeal of the industry to Australia’s investors, including the ageing of the population, growing wealth, new and evolving investment products and the inflow of funds due to superannuation legislation. These longstanding features of the Australian Funds Management Services industry will continue to underpin industry growth over the next five years. Following the financial crisis-induced downturn in the industry, there will be a recovery over the next five years as investment performance improves and the level of FUM grows. Industry revenue is forecast to grow at a compound annual rate of 4.7% over the five years through 2018-19, to $7.6 billion. Industry revenue is forecast to rise by 12.3% in 2014-15.

2 IBISWorld Industry Research Report K6419a Funds Management Services in Australia July 2013 by Andrei Ivanov.

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Industry consolidation is expected to rise over the five years through 2018-19. Banks are likely to increase their interests in smaller fund managers. Consolidation is also more likely to occur as superannuation funds grow in size and start to bring fund management capabilities in house.

Fund management is increasingly being bundled with a range of other financial services under the wealth management umbrella. The four big banks, all of which have significant fund management operations, have increased their share of the wealth management and financial advice industries over the past few years. The largest fund managers in the industry have large teams of directly employed or affiliated financial advisers, and their funds are offered to investors through proprietary administration platforms. The wide reach of their distribution networks is used to channel investor dollars via financial advisers into their own managed funds. Financial advisers may receive a commission for placing investors in a particular fund and financial advisers operating within a particular dealer group are often restricted in the range of managed funds they can offer investors.

3.2.5 Products & Services

Fund managers offer the opportunity to invest in a wide variety of investment funds with varying investment strategies. These strategies differ depending on the level of risk and return sought by investors, the investment approach adopted (as with value or contrarian investing), and whether the investment is in domestic, regional or global assets.

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Products and services segmentation
(2013-14)
5.3%
Other Assets 11.1%
11.4% Debt Securities
Land and buildings
17.4%
Overseas assets
40.5%
Australian equities
14.3%
Deposits
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3.2.6 Demand Determinants

The level of demand for funds management is reflected in the net inflow of funds into pooled investments. A range of factors, including some longer-term trends, drives the level of funds under management. The ageing of the population, growing accumulation of wealth in the hands of older investors, and strong growth in superannuation fund assets are longer-term trends that are expected to result in future industry growth.

A very important feature of demand in the industry is the amount of money flowing from superannuation.

The industry has benefited from increased demand at the retail level, which is a reflection of the growing sophistication of both the Australian workforce and the funds management products offered in the Australian marketplace. High levels of domestic economic activity, and this, growing household incomes, has resulted in a growing demand for managed investments outside of superannuation contributions.

3.2.7 Market Share Concentration

The Funds Management Services in Australia Industry is heavily concentrated, with the four major players accounting for 73.4% of the total industry revenue. Future consolidation within the industry is expected to further increase the concentration. This trend can be explained by several factors. Economies of scale are easily achievable with large amounts of funds under management. Administrative and technological costs can be spread among a larger base of funds, reducing the overall fee charged and attracting new clients. Additionally, the big four banks are anticipated to continue penetrating the funds management business as they seek new growth opportunities. This will involve further acquisition of smaller players.

3.2.8 Barriers to Entry

Within the Funds Management Services industry, it can be difficult to establish networks without prior experience. New entrants to this industry face a number of difficulties in attracting investors. Importantly, it can take time to build up a reputation and investment performance history comparable with those of existing industry players. Most boutique investment managers have built up a wealth of experience and contacts working with large financial institutions.

There are costs involved in establishing a new business including the cost of brand building, distribution and constructing a team of skilled staff. The cost of operating a fund is lower the greater the value of FUM. This can make it difficult for new fund managers who are in the process of growing their assets from a low base to compete on fees.

3.2.9 Regulation & Policy

The Managed Investments Act introduced in 1998 regulates the industry. Operators must also hold an Australian Financial Services (AFS) Licence. This requirement was introduced in 2004.

The most fundamental change following the introduction of the Managed Investment Act (MIA) in 1998 was the requirement that each managed investment scheme have a single responsible entity. Responsibilities previously split between trustees and managers were combined and imposed as statutory duties. It is now an entity that is ultimately responsible and which – while it may privately outsource certain functions – cannot delegate this ultimate liability in law for the exercise of those functions.

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3.3 Future of Financial Advice (“FoFA”)[3]

The Australian Government announced proposed reforms in April 2010. The reforms focus on improving the quality of advice and enhancing retail investor protection. This announcement included a number of key measures such as:

A prospective ban on conflicted remuneration structures;
A duty requiring advisers to act in the best interests of their clients when giving personal advice; and
A requirement for advisers to obtain client agreement to ongoing advice fees.

Additional details were released a year later in the Future of Financial Advice 2011 Information Pack. New elements include:

A prospective ban on up-front and trailing commissions and like payments for both individual and group risk within superannuation from 1 July 2013;
A prospective requirement for advisers to get clients to opt-in (or renew) their advice agreement every two years from 1 July 2012;
A prospective ban on any form of payment relating to volume or sales targets from any financial services business to dealer groups, authorised representatives or advisers, including volume rebates from platform providers to dealer groups;
A prospective ban on soft dollar benefits, where a benefit is $300 or more (per benefit) from 1 July 2012. The ban does not apply to any benefit provided for the purposes of professional developments and administrative IT services if set criteria are met; and
Expanding a new form of limited advice called scaled advice, which can be provided by a range of advice providers, including superannuation trustees, financial planners and potentially accountants, creating a level playing field for people who provide advice. Scaled advice is advice about one area of an investor’s needs, such as insurance, or about a limited range of issues.

3.3.1 Ban on Volume Payments

The April 2010 FoFA announcement included a ban on conflicted remuneration, including volume-related payments. The measure was targeted at removing payments that have similar conflicts to product provider set remuneration, such as commissions.

Through the consultation process some industry participants proposed a more narrow application of this ban, for example by allowing volume bonuses to be paid from platform providers to financial advisory dealer groups in certain circumstances. Notwithstanding the merit of these proposals, if structural reform in the industry is to truly transpire, all conflicted remuneration, including volume rebates from platform providers to dealer groups, must cease.

As such, there will be a broad comprehensive ban, involving a prohibition of any form of payment relating to volume or sales targets from any financial services business to dealer groups, authorised representatives or advisers.

3 Australian Government, Future of Financial Advice, Information Pack 28 April 2011.

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3.3.2 Equity Arrangements

We have regard to ASIC Regulatory Guide 246, Conflicted Remuneration (issued March 2013). Conflicted Remuneration provisions aim to bring many of the benefits given to those persons who provide financial products advice to retail clients. Specific to the AAP business model, we highlight ASIC guidance in relation to equity arrangements.

RG246.107 states that equity arrangements with a representative may be put in place to more closely align the interests of the representative to the ongoing success of the AFS licensee’s business. The example cited in the guide is where the profitability of a licensed dealer group improves as more fee-for-service revenue from clients is received based on advice given by representatives of the dealer group. This is more likely to result in increased dividends for representatives with shares in the dealer group. Other factors relevant in determining whether an equity arrangement with a representative is conflicted remuneration include:

How direct the link is between the value of the equity arrangement and the value or number of financial products recommended or acquired based on the advice of the representative. For example, a benefit is less likely to be conflicted remuneration if it is not dependent on the type of financial products acquired by retail clients or the type of financial product advice given;
The remuneration a representative is eligible to receive from the equity arrangements (e.g. dividends);
The potential value of the equity interest;
The portion of the AFS licensee’s business that involves, or is dependent on, remuneration generated from providing financial product advice to clients’ and
The criteria a representative needs to satisfy to be eligible for an equity interest in the AFS licensee’s business. For example, a benefit is more likely to be conflicted remuneration if eligibility is based on meeting financial product sales targets.

3.3.3 Grandfathering of Conflicted Remuneration[4]

The effect of regulation 7.7A.16 is to grandfather benefits given under pre-FoFA arrangements except where they relate to a new client coming onto the platform after 1 July 2014. Arrangements between financial services licensees and platform operators entered into after 1 July 2013 will not be grandfathered and must be negotiated on a FoFA-compliant basis.

It may be that contracts are amended from time to time for various reasons, including allowing parties to restructure for efficiency purposes (which may result in a change to the name of a party to a contract). Subregulation 7.7A.16(3) allows for changes to the parties to the arrangement without this event triggering a new arrangement for the purposes of the grandfathering provisions.

4 Australian Government, Exposure Draft – FOFA Regulations on Grandfathering.

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Subregulations 7.7A.16A(4) and (5) allows for a client to increase their interest in an existing managed investment scheme or superannuation scheme without being taken to have acquired a new financial product. This means that non-platform operators can continue to pay conflicted remuneration in relation to clients who increases their exposure to a product that the client held before 1 July 2014. In addition, if it is possible for the client to change the nature of their interest without resulting in the acquisition of a different underlying product, this will not cause grandfathering to cease. This may be the case, for example, where a client moving between generic investment risk options (that is, from the ‘growth’ option to the ‘balance option’) in a managed investment scheme or superannuation scheme.

With regard to platform operators, conflicted remuneration can continue to be paid in relation to new investments on that platform only if the client had an interest held through the platform before 1 July 2014.

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4 Profile of AAP

4.1 Background

AAP was established in 2006 and provides services and support for AFS Licence holders.

AAP has 77 independently owned boutique licensees. At 30 June 2013, AAP affiliated dealers had $1,737m in FUA.

4.2 Capital Structure

As at 30 June 2013, the AAP shares on issue are depicted in the following table:

Shareholder	Redeemable Preference Shares	A Class Redeemable Preference Shares	Ordinary Share	Z Class Share	TOTAL	Percentage	# Shareholders





Dealer Groups	3,193,574	0	0	0	3,193,574	45%	122
CPW		3,903,255	1	1	3,903,257	55%	1
Total	3,193,574	3,903,255	1	1	7,096,831	100%	123

According to the Company’s share register, CAF owned 55% of AAP’s equity via its subsidiary Centrepoint Wealth Pty Ltd (“CPW”) . It is important for the reader of this report to understand the various rights attaching to each share class.

4.2.1 Redeemable Preference Share (“RPS”):

The holder of an RPS has the right:

To a return of capital in proportion to the amount of the total issue price paid or credited as being paid on the share on a winding up of the Company, pari passu with ordinary shares and;
To participate in a preferential non-cumulative dividend as declared by the Board from time to time;
To a distribution of surplus assets on a winding up of the Company, pari passu with ordinary shares; and
To vote at general meetings of the Company on the basis of one vote for each share held.

We have reviewed the shareholding composition of the RPS class and note that no one shareholder holds an entitlement greater than 10% of issued RPS. Accordingly, the only significant voting block across all classes of shares is held by CPW.

The Company agreed to a revenue restructure to take effect from 1 January 2012. From this time, an additional fee has been paid to CPW equal to 55% of net profit before tax. Whilst this arrangement stays in place, CPW will not be entitled to a dividend.

To effect this restructure, RPS Shares held by CPW have been exchanged for A Class Shares. We understand that Scheme Shareholders suffered no detrimental effects from this change and receive the same level of profit share moving forward.

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We are mindful that RPS shares may be redeemed for nil consideration at the absolute discretion of the Board and the risk that this confers from a valuation perspective. At the shareholder level, RPS are issued and redeemed in accordance with the performance of the dealer relative to the performance of all dealers on an aggregated basis.

As a collective share class, the equity balance is preserved by adjustments made to the CPW holding such that dealer groups combined have an equity entitlement to 45%. Further, we note there are no instances where redemptions have been undertaken to the detriment of RPS holders collectively.

At a Shareholder level however, RPS may not be transferred, assigned or sold without the prior approval of the Board in their absolute discretion. There is also no history of transactions involving RPS for positive consideration. Accordingly, the value of RPS attaches to the receipt of future economic benefits namely in the form of dividends. We note that it is contemplated that dividends will cease under the FoFA reforms (see Section 3.3.2) and that management have received legal advice confirming same.

4.2.2 Ordinary Share and A Class Share Rights:

Notwithstanding management have advised us there is a commercial basis to the restructure previously described, under a fair market value assessment we consider the fee received to approximate the receipt of dividend income as like equity proportions prevail. Noting the voting rights and with a company wind up not contemplated, we consider the rights of these share classes to be sufficiently similar to those of RPS holders at this time.

4.2.3 Z Class Share Rights:

The rights conveyed to the Z class share include the preferential right to cast 51% of the total right exercisable at any meeting of the company. This share has no right to participate in dividends and the return on a winding up is limited to $1. This share is considered dissimilar to RPS.

4.3 Operations

4.3.1 Funds

AAP provides support services to approximately 77 AFS Licence holders. The Company aggregates the product placement of advisor practices and is remunerated directly from the product providers.

The types of services that AAP extends to its practice clients include:

Practice Development and Management;
Professional Standards;
Human Resources, Marketing and Communications Support;
Research;
Technical; and
Training.

4.3.2 Fee structure

Revenue is derived from two broad classes being:

Investment Product Provider Placement Rebates; and
Insurance Provider Placement Rebates.

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We highlight that no amount is received from dealer groups directly and that revenue is paid by third party Investment Product providers or insurers. We are advised that approximately one quarter of revenue received relates to insurance products.

All revenue received by AAP is volume based in nature and is a reflection of the advice given by AFS dealers in the group and the subsequent execution of investment decisions and insurance policies written on behalf of retail clients.

4.3.3 Administration

AAP’s company administration is outsourced to CPW (a subsidiary of CAF). Under an informal service agreement, CAF is required to provide administrative and support services including staff, office space and computer access. From discussion with CAF and AAP management, we understand that fees payable by AAP approximate the commercial cost of providing these services. The management fee is calculated as 40% of net revenue.

We are advised that a further amount is incurred by CAF in relation to senior management time and compliance undertakings. No amount is paid by AAP in lieu of these costs.

AAP Dealer groups are furnished with a services agreement. Amongst other things, this agreement authorises AAP to negotiate directly with relevant Fund Managers and Insurers.

4.4 Management and Personnel

AAP’s Board of Directors as at the date of this report were as follows:

4.4.1 Directors

• Jason Cutrupi Non Executive Director Appointed 17 September 2012 • John Barry Smith Non Executive Director Appointed 1 November 2007 • Craig William Hargraves Non Executive Director Appointed 22 April 2010 • Soula Cargakis Executive Director Appointed 17 September 2012 • John de Zwart Executive Director Appointed 19 April 2013

Mr de Zwart is also a Director of CAF and we are advised that Ms Cargakis is also not an independent director of AAP in respect of this Scheme.

4.4.2 Competitors

We are advised that the key competitors to AAP are:

Jigsaw (AMP Owned);
Pathways (Netwealth Owned); and
Licensee Select (Westfinance Bank Owned).

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4.4.3 FoFA and Other Sensitivities

As previously described, individual dealer groups have incentive based arrangements based on their respective contribution to net dealer revenue. We note that this volume based mechanism is not compliant with the FoFA reforms and will discontinue from 1 July 2014. Accordingly, no issues and or redemptions can be made to RPS holders beyond this time linked to net revenue.

Further, as described at Section 3.3.2 and in accordance with legal advice described by management, no dividends can be paid to the holders of the RPS from 1 July 2014.

4.5 Financial Performance

4.5.1 Reported financial performance

The income statements of AAP are set out in the table below. The periods FY11a to FY13a are subject to audit.

$'000	FY11a FY12a FY13a
Net product margins
Product margin rev enue Product margins paid	3,538 3,318 3,187 (462) (446) (474)
Net product margins	3,076 2,872 2,713
Other income Directors fees Management fee Other expenses Professional fee	6 2 - (8) (8) (8) (1,231) (1,149) (2,267) (2) (3) (6) (15) (45) (168)
Profit from operating activities	1,826 1,669 264
Interest Income	40 30 11
Total financing income	40 30 11
Net profit before tax (NPBT)	1,866 1,699 275
Income tax	(555) (512) (76)
Net profit after tax (NPAT)	1,311 1,187 199

Rev enue Variance % NPBT Variance % NPBT Margin % NPAT Variance % NPAT Margin % Management Fees %	n/a -7% -6% n/a -9% -84% 61% 59% 10% n/a -9% -83% 43% 41% 7% 40% 40% 84%

We note the following in regards to the income statements of AAP:

Revenue has decreased year on year across the review period. This is consistent with underlying market conditions and investor confidence. Additionally, the loss of some dealers has had an impact as AAP (unlike AAP2) is closed to new dealers;
Average FUA of associated dealers was $1,729m in FY12 compared with $1,718m in FY13a;

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Management fees are levied to CAF on the basis of 40% of net revenue. In return for this management fee, CAF provides administrative and technical support; and
In FY13, it was agreed to restructure the operations of AAP. CAF have forgone the entitlement to receive dividends on ordinary and A Class Shares in lieu of a 55% management fee derived from Net Profit before Tax. The 55% fee represents the equity holding percentage attributable to CAF ownership. We note that although we are instructed by management there is commercial basis for this management fee, in our opinion it is specific to the existing ownership and management provided by CAF and would not be replicated by a hypothetical purchaser.

4.5.2 Normalised Financial Performance

Outlined in the following table are the restated financial statements subsequent to the application of normalisation adjustments as presented by the Directors of AAP. This exercise has been conducted on FY12a and FY13a results only.

$'000	FY12a	FY13a
Net product margins	2,872	2,713
Other income	2	-
Directors fees	(8)	(8)
Management fee	(1,166)	(1,118)
Other expenses	(3)	(6)
Professional fee	(45)	(168)
Normalised Profit from operating activities	1,652	1,413
Financing Income	30	11
Normalised Net profit before tax (NPBT)	1,682	1,424
Income tax	(505)	(427)
Normalised Net profit after tax (NPAT)	1,177	997

The following table details each of the normalisation adjustments made with respect to AAP. As a starting point, we have adopted the NPBT from continuing operations.

$'000	FY12a	FY13a
Reported NPBT	1,699	275
Management fee paid	1,149	2,267
Direct Costs incurred by CPW	(1,051)	(1,160)
Equity Model / Scheme Transaction Costs	-	143
Corporate Ov erhead Allocation	(115)	(101)
Income Tax (30%)	(505)	(427)
Normalised Net profit after tax (NPAT)	1,177	997

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We note that a number of ‘one-off’ or ‘non-recurring’ items have been determined by the Directors of CAF and identified as normalisation adjustments. We have discussed the adjustments below:

We have added back the management fees paid to CAF and will separately assess same on the basis of the actual costs incurred in providing such support;
We have deducted amounts representative of the direct costs incurred by CAF in providing management services to AAP. These costs have been allocated to AAP and AAP2 based on the respective proportion of revenues derived;
We have deducted further amounts representative of the corporate overheads incurred by CAF and not previously quantified which relate to AAP. These costs have been allocated to AAP and AAP2 based on the respective proportion of revenues derived;
Non-recurring costs associated with professional fees incurred exploring suitability of the Equity Model of AAP and the likely impacts of FoFA introduction have been added back. Included in this figure are fees incurred in connection with the proposed acquisition of AAP by CAF; and
Income tax has been assessed at the corporate tax rate in Australia being 30%.

4.6 Financial Position

The balance sheets of AAP as at 30 June 2012a (audited), 31 December 2012a ( audit review ) and 30 June 2013 (audited) are set out in the table below:

$'000	FY12a 1H13a FY13a
Assets Cash and cash equiv alents Trade and other receiv ables Income tax receiv able Total current assets Deferred tax assets Total non-current assets Total assets Liabilities Trade and other payables Income tax payable Total current liabilities Total liabilities	713 832 127 767 877 1,152 136 1,480 1,709 1,415 3 1 35
	3 1 35
	1,483 1,710 1,450
	638 964 1,033 102 - -
	740 964 1,033
	740 964 1,033
Net assets	743 746 417

We note the following in relation to the financial position of AAP:

The net asset position is consistent between 30 June 2012 and 31 December 2012; and
The net cash balance at 30 June 2013 is significantly less than the prior two corresponding periods. This is consistent with the implementation of additional management fees as described at Section 4.5.1. Additionally, dividends totaling $261k were paid in June 2013.

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5 Profile of CAF

5.1 Background[5]

Centrepoint Alliance Limited (“CAF”) (formerly Alliance Finance Corporation Limited) was founded in 1991 by Martin Kane as an insurance premium funding company. It was incorporated in Australia as a company limited by shares and was subsequently listed on the Australian Stock Exchange in June 2002.

On 30 September 2005, Centrepoint Alliance Limited merged with the Centrepoint Finance Pty Ltd Group, of which Rick Nelson was a co-founder.

During the year ended 30 June 2009, the Group ceased its commercial finance activities, which included the sale on 31 December 2008 of its finance broking businesses and the cessation of its equipment finance operations.

On 13 December 2010 the Company acquired 100% of Centrepoint Wealth Pty Ltd (“CPW”) (formerly Professional Investment Holdings Limited) and its controlled entities through a scheme of arrangement.

Today, CAF is a specialist financial services company that provides wealth management, financial advice, insurance funding, financial planning, investment advice, risk management, funds management, administration platform services and finance broking to a diverse range of clients. CAF is listed on the ASX, at the close of trade on 2 September 2013, had a market capitalisation of approximately $24m.

5 Centrepoint Alliance Limited

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Following the merger with CPW in December 2010, CAF now operates through two main business segments being Wealth Management and Insurance Premium Funding. This is depicted graphically in the following chart[6] :

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----- Start of picture text -----

CAF
WEALTH FUNDING
FINANCIAL PREMIUM
ADVICE PRODUCTS FUNDING
AAP & INVESTMENT
PIS PLATFORM
AAP2 PRODUCT
----- End of picture text -----

We have individually discussed in detail each of these business segments in sections 5.5 and 5.6 of this Report.

5.2 Capital Structure

As at 26 August 2013, CAF had a total of 93,465,646 issued and fully paid ordinary shares (92,609,215 net of reserved shares). A further 400,000 share options remain unexercised as at the date of this report.

The table which follows details CAF substantial shareholdings as at 26 August 2013:

Shareholder	Number of CAF Shares	Percentage held
TIGA Trading Pty Ltd	20,669,589	22.11%
River Capital Pty Ltd	5,593,777	5.98%
Wilson Asset Management Group	5,182,174	5.54%

6 Centrepoint Alliance Limited Investor Presentation, 6 Month to December 31 2012

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5.3 Directors and Executive Team

The CAF Directors who have been in office from 1 July 2012 until the date of this Report are as below:

Rick Nelson (Chairman)
• John de Zwart (Managing Director) • Tony Robinson (Managing Director)
Noel Griffin (Non Executive Director)
Stephen Maitland (Non Executive Director)
Matthew Kidman (Non Executive Director)
• Christopher Castles (Non Executive Director)

Appointed 15 April 2013 Resigned 30 April 2013 Resigned 30 January 2013

Mr de Zwart is also a Director of AAP.

In addition to Mr de Zwart, Bob Dodd (CEO – Insurance Premium Funding), Ian Magee (CFO and Company Secretary), Mathew Walker (Managing Director of Ventura Investment Management Ltd and Investment Diversity Ltd), Soula Cargakis (General Manager of AAP) and David Johnstone (Group Head of Corporate Development) comprise the executive team.

5.4 Share Trading

The Chart below illustrates the daily closing CAF share price and total volume of CAF shares traded daily for the 12 months to 19 June 2013. This represents the last day of trading of CAF shares on the ASX prior to the announcement of the Scheme on 20 June 2013.

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----- Start of picture text -----

0.7 1,500,000
0.6
1,250,000
0.5
1,000,000
0.4
750,000
0.3
500,000
0.2
250,000
0.1
0 -
1/06/2012 1/09/2012 1/12/2012 1/03/2013 1/06/2013
Volume Closing Price
Closing Price ($)
Volume (Number of Shares)
----- End of picture text -----

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The price of CAF shares in the 12 months to 19 June 2013 has ranged from an intra-day high of $0.61 on 8 February 2013 to a low of $0.14 on 17 July 2012.

We make the following comments in relation to the trading of CAF shares on the ASX over this 12 month period:

There were 70 days in which no trading in CAF shares occurred. This is one indicator that CAF shares are illiquid;
The median closing share price for the period of $0.40;
The Volume Weighted Average Price across the last year is 32.9 cents which is not dissimilar to the closing price of 30 cents as at 19 June 2013; and
Recent share trading has been in the range of 22.5 cents to 33.0 cents which is below the observed ranges prior to the market announcement. This is discussed further at Section 8.6.3.

Further detailed analysis of the trading of CAF shares on the ASX is included in section 8.6 of this Report.

5.5 Profile of Insurance Premium Funding Division

5.5.1 Overview

As noted at Section 5.1, CAF (originally Alliance Finance Corporation Limited) was founded in 1991. It was incorporated in Australia as a company limited by shares and was subsequently listed on the ASX in June 2002.

CAF operates in the financial services sector and provides Insurance Premium Finding (“IPF”) to customers through insurance brokers and their authorised representatives. We are advised that CAF is the only independent, publicly listed IPF business in Australia.

CAF has conducted the IPF business (since December 2010) through Centrepoint Alliance Premium Funding Pty Ltd (“CAPF”) a wholly owned subsidiary. CAPF provides IPF financing solutions to fund insurance premiums. Clients are able to spread the cost of annual insurance as monthly payments instead of a larger single annual payment.

CAPF sources its business from insurance brokers and their authorised representatives and agencies. The broker is paid a commission as a percentage of the amount funded.

5.5.2 Operations

Revenue for the CAPF business is comprised of interest income derived from providing a funding facility that enables commercial and domestic clients to pay their insurance premiums in equal monthly instalments. These funding facilities or loans are generally from 6 to 12 months in duration and no longer than the expiry date of the underlying insurance policy.

We are advised that each facility is structured so that instalments are due from the client in advance from the inception date of the insurance policy. Settlement of the premiums to the insurance broker or insurer from CAPF is usually on deferred credit terms. This means that prior to settlement of any loan to a broker, CAPF will have received at least one instalment from the client and often up to three.

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This funding is distributed through a network of insurance brokers and a commission as a percentage of the loan amount is paid to the broker. The broker determines the level of commission required which is then added to the funder’s base rate and on charged to the client. CAPF has a number of partnerships with key broking groups and its network totals approximately 400 licensed brokers. CAPF has a preferred funder agreement with IBNA Group of insurance brokers.

In accordance with Accounting Standard AASB 139, CAPF is required to adopt the effective interest rate method of disclosure, and as such the cost of commission on financing activities has been netted off against interest and fee income.

Any non–interest income is largely derived from fees associated with the preparation of documents etc. related to the underlying insurance funding facility.

5.5.3 NAB Bank Facilities

CAPF holds a multi option facility, including a receivables finance facility with the NAB. These facilities enable CAPF to provide funding to IPF clients.

Improved trading performances have resulted in improved lending margins and reduced covenant obligations. Latest guidance affirms the supportive relationship with the NAB. On 4 July 2013 a revised bank facility agreement has been executed that provides a facility limit of $145m and is valid until January 2015.

5.6 Profile of Centrepoint Wealth Division

5.6.1 Overview

The Centrepoint Wealth Pty Ltd (“CPW”) division (formally Professional Investment Holdings Ltd) provides two distinct service types being advice services and investment products and services.

Professional Investment Services Pty Ltd (“PIS”) a wholly owned subsidiary represents the largest CPW business unit in terms of Revenue and employee Full Time Equivalents (“FTE”) . Accordingly, this overview is deliberately PIS centric.

PIS’s core operations are the provision of financial advice and the distribution of financial and risk products to the wealth management sector.

PIS work with its adviser network by providing services, support and education to assist in financial planning for clients.

PIS was formed in Australia by a group of five financial advisers and seven accountants. PIS obtained a Dealer's Licence on 6 August 1996, and it’s AFS Licence on 8 December 2003.

5.6.2 Operations - PIS

PIS is one of Australia’s leading independent providers of financial advice and product solutions, which are distributed through one of the largest financial advice networks in Australia.

The principal services provided to clients include financial planning services, risk insurance services and distribution of financial products through the PIS network of advisors and accountants.

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PIS provide the following financial planning and distribution services:

Financial advice, risk insurance advice and distribution of financial products from product manufacturers to the investing public through the CPW group’s distribution network;
Tools and techniques to facilitate referral relationships between accounting practices and other professional services firms and financial advisers; and
A broad range of financial and business development services, backed by ongoing support and expertise to its financial advisers.

5.6.3 ASIC Surveillance - PIS

PIS has been the subject of ASIC’s ongoing surveillance in respect of matters relating to its AFS Licence. The surveillance culminated in PIS and the ASIC entering into an enforceable undertaking (“EU”) on 20 December 2010.

PIS has been cooperating with ASIC requests and we are advised that there are no impediments currently imposed on PIS with respect to capital management and/or provisions for claims other than those already disclosed to the market. Additionally, we are advised that there are no restrictions imposed by ASIC on the use of the AFS Licence which impact underlying earnings.

PIS has completed its requirements under the EU and is now undertaking an ongoing monitoring program involving an Independent Expert to ensure the quality of the advice and governance. This is expected to be completed by April 2014.

5.6.4 Clients Claims - PIS

PIS is subject to legal claims in the ordinary course of business, primarily relating to client claims. Liabilities have been recognised for the amount of client claims where it is expected that a future payment of economic benefits may be required and the amount is capable of reliable measurement.

From FY12, an additional provision has been made to account for unreported claims. These amounts have been calculated based on an actuarial assessment. The bulk of recent claims relate to legacy advice provided between 2004 and 2010. Recent independent actuary advice has resulted in an increase to the FY13 claims expense (of approximately $4m) to approximately $10m for the period.

Further amounts may arise beyond the claims recognised in the reported financial information, and it is impractical to quantify the amount of the contingent liability. However, if an additional liability was significant it may have a material adverse impact on the financial position of CPW.

5.6.5 Operations – Other Investment Products and Services

This business unit incorporates funds management and investment platforms.

Recent transactions within this business unit include:

The acquisition of the remaining 83% interest in Ventura Investment Management Ltd (16 August 2011); and
The acquisition of the remaining 63% interest in Mentor Investment Services Ltd (30 December 2011).

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5.6.6 Mortgage broking and commercial lending through Australian Loan Company Pty Ltd (“ALCo”)

ALCo is an aggregator that operates nationally within the broking industry, and provides fullservice business support throughout Australia. ALCo provides residential and business finance services.

From 10 November 2011 ALCo became a wholly controlled subsidiary of CPW. ALCo officially started operations on 2 June 2003 and maintains lender accreditations with a number of banks, credit unions and other financial institutions.

5.6.7 Support services to financial planners and other licensed dealers through AAP and AAP2

AAP and AAP2 fall within the advisory arms of CPW. The activities undertaken are separately described at section 4.

5.7 Financial Performance

The income statements of CAF are set out in the table which follows. All periods displayed are subject to audit.

$'000	FY11a FY12a FY13a
Net asset fees and product margins Other income Borrowing expenses Employee benefit expenses Professional fees Client claims Insurances Property costs Impairment of intangible assets Other general and administration expenses Profit from operating activities Interest Income Total financing income	43,260 45,285 35,328 5,983 2,604 3,095 (4,718) (5,451) (5,015) (23,471) (24,753) (22,550) (6,522) (9,206) (4,313) (11,936) (16,736) (9,980) (3,697) (3,124) (2,066) (5,121) (4,216) (3,689) (4,345) (1,635) (993) (10,789) (11,494) (10,656) (21,356) (28,726) (20,839) 9,075 14,201 14,207
	9,075 14,201 14,207
Net profit before tax (NPBT)	(12,281) (14,525) (6,632)
Income tax	(844) (2,774) (571)
Net profit after tax (NPAT)	(13,125) (17,299) (7,203)
Loss from Discontinued Operations (after tax) Foreign Currency Translation Change in Fair Value of Inv estments	- - (85) (587) 16 1,456 457 - -
Comprehensive Profit/(Loss) for the Period	(13,255) (17,283) (5,832)
Non-Controlling Interests	(653) (592) (493)
Comprehensive Profit/(Loss) of Parent	(13,908) (17,875) (6,325)

We note the following in regards to the financial performance of CAF:

Full year revenue for the period ending 30 June 2013 is significantly lower than FY11 and FY12 and is the result of unusually high advisor attrition;

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The Directors have commented in the FY13 Director’s Report that the underlying operations of CAF traded profitably (pre tax) during the period, with the principle difference being attributable to increased provisions for client claims;
Loss making international operations have been divested and are reported as discontinued operations in the FY13 results; and
The NPAT results prior to the minority interests disclosure represents 100% aggregation of the AAP and AAP2 trading results on consolidation.

5.7.1 Normalised Financial Performance

Outlined in the following table are the restated financial statements subsequent to the application of normalisation adjustments as presented by the Directors of CAF. This exercise has been conducted on FY12a and FY13a results only.

$'000	FY12a FY13a
Net asset fees and product margins Other income Borrowing expenses Employee benefit expenses Professional fees Client Claims Insurances Property costs Impairment of intangible assets Other general and administration expenses Normalised Profit from operating activities Interest Income Total financing income	45,285 35,328 2,453 2,474 (5,451) (5,015) (23,771) (22,124) (3,612) (3,103) (720) (720) (3,124) (2,066) (4,216) (3,689) (1,286) (389) (11,266) (8,831) (5,708) (8,135) 14,201 14,207
	14,201 14,207
Normalised Net profit before tax (NPBT)	8,493 6,072
Income tax	(2,548) (1,822)
Normalised Net profit after tax (NPAT)	5,945 4,250

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The following table details each of the normalisation adjustments made with respect to CAF. As a starting point, we have adopted the NPBT from continuing operations. Earnings reported at this level ignore the impacts of non-recurring and non-core items such as discontinued operations, foreign currency gains or losses and changes in the value of investments.

$'000	FY12a	FY13a
Reported NPBT	(14,525)	(6,632)
Net Claims Expense for the period	16,736	9,980
Assessed Recurring Prov ision for Claims	(720)	(720)
External Professional Fees (Claim Resolution)	1,931	-
Enforceable Undertaking Professional Fees	3,663	594
Restructure Sav ings	-	1,825
Costs associated with FoFA Implementation	-	329
International Business Loss (Discontinued)	124	-
Gain on sale of inv estments	(151)	(621)
Staff Redundancies	982	426
Impairment of intangible assets	349	604
Non-Controlling Interests	104	-
AAP & AAP2 Equity Model / Scheme Transaction Costs	-	287
Income Tax (30%)	(2,548)	(1,822)
Normalised Net profit after tax (NPAT)	5,945	4,250

We note that a number of ‘one-off’ or ‘non-recurring’ items have been determined by the Directors of CAF and identified as normalisation adjustments. We have discussed the adjustments below:

We have added back the provision made for reported and unreported client claims on the basis that the expense is abnormally large and is incurred to address legacy advisor issues and is not representative of the ongoing trading performance. The provision is treated as surplus liability (see Section 8.4.5);
CAF may be subject to legal claims in the ordinary course of business, primarily relating to client claims. We have deducted an amount for claims in recognition that the occurrence of same has a recurring element. We have determined that a monthly accrual of $60k (that is, $720k per year) is prudent and we have adopted same in our analysis. We note that management have indicated that recent claim amounts have settled for materially less than this sum. If future claims relating to post June 2010 advice are materially more than $720k per annum, then our assessed share value would be overstated ;
In FY12 an abnormally large expense was recognised for professional fees. These fees were incurred to resolve legacy client claims and are non-recurring in nature. In FY13, the claims provision includes amounts for professional fees;
Enforceable undertaking costs incurred as part of the ASIC surveillance program have been added back on the basis that such costs are outside the ordinary course of business and are non-recurring in nature. The provision is treated as a surplus liability;
We have included savings identified by management as a result of an internal restructuring program. These savings principally reflect ongoing payroll and occupancy savings;
Non-recurring costs associated with FoFA regulatory reforms and readiness programs have been added back. We note ongoing FoFA compliance costs are included in the trading results;

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For comparability, the loss incurred by the international business units have been added back in FY12 on the basis that these operations were discontinued in FY13;
Gains derived from the sale of investments have been deducted due to their non-recurring nature;
Although staff redundancies occur in the normal course of business, management have identified non-recurring expenses incurred as part of the internal restructure program. The add back relates to two senior roles which no longer exist and can easily be quantified;
Impairment expenses in relation to advisor network intangibles have been added back. Impairment write-downs have been assessed based on earnings and therefore the inclusion of same represents double counting from a valuation perspective; The loss incurred from equity accounted investments has been added back as these amounts are not reflective of core business operations. These investments are separately valued and included as surplus assets of CAF; and
Income tax has been assessed at the corporate tax rate in Australia being 30%.

5.8 Financial Position

The net assets of CAF as at 30 June 2012 (audited) and 30 June 2013 (audited) are set out in the following table:

$'000	FY12a FY13a
Assets Cash and cash equiv alents	14,621 9,352
Trade & Interest Bearing Receiv ables	119,194 121,352
Current tax asset Other assets Total current assets	- 225 4,155 2,760 137,970 133,689
Trade and other receiv ables	1,606 649
Other assets Property, plant and equipment Intangible assets and goodwill Deferred tax assets Total non-current assets Total assets Liabilities Trade and other payables Interest bearing liabilities Prov isions Current tax liability Total current liabilities Trade and other payables Interest bearing liabilities Prov isions Total non-current liabilities Total liabilities	1,950 1,119 1,593 1,193 8,232 6,521 7,297 7,052
	20,678 16,534
	158,648 150,223
	40,866 37,544 64,990 71,656 7,422 10,250 247 121
	113,525 119,571
	328 - 253 90 17,380 13,324
	17,961 13,414
	131,486 132,985
Net assets	27,162 17,238

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We note the following in regards to the financial position of CAF:

The majority of interest bearing receivables and interest bearing debt relates to the Insurance Premium Funding business segment;
Historically the recoverability of deferred tax assets recognised has been supported by projections prepared by management which indicate that the deferred tax assets will be recouped from earnings to be achieved over a period of approximately 4 years. In the event that the projected earnings are not achieved, an amount of the deferred tax asset may require write-off in future financial years; and
Provisions (current and non-current) includes amounts for employee entitlements, however, each balance is principally comprised of amounts relating to adviser client claims.

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6 Valuation methodology

6.1 Definition of market value

There is no single definition of the term “value” which is suitable for all purposes. The value of a particular asset or business will vary from time to time and there may be differing values at the same time according to the purpose for which it is necessary to establish a value. The basic premise of valuation and the underlying assumptions for the purpose of this analysis may be stated as follows:

“Fair market value” is virtually universally accepted as the price that a willing but not anxious buyer, acting at arm's length, with adequate information, would be prepared to pay to a willing but not anxious seller for the shares, units or assets in question; and
The fair market value concept assumes continued operations by the business in the industry in which it is presently engaged.

These principles were established by the High Court of Australia in Spencer v The Commonwealth of Australia (1907).

Fair market value does not incorporate any special value that may be considered additional value that may accrue to a particular purchaser and is unique to each such purchaser. In a specific transaction, potential acquirers may be prepared to pay a special value that may reflect synergies realised from this particular acquisition.

6.2 Common valuation methodologies

ASIC RG111.69 considers that it is generally appropriate for an independent expert to consider using the following methodologies when assessing the value of the target entity:

The discounted cash flow method (“DCF”) and the estimated realisable value of any surplus assets;
The application of earnings multiples to the estimated future maintainable earnings (“FME”) or cash flows of the entity, added to the estimated realisable value of any surplus assets;
The amount that would be available for distribution to security holders on an orderly realisation of assets (“Net Assets”) ;
The quoted price for listed securities , when there is a liquid and active market; and
Any recent genuine offers received by the target for the entire business, or any business units or assets as a basis for valuation of those business units or assets.

Each methodology outlined above may be appropriate in certain circumstances. The decision as to which methodology to apply generally depends on the nature of the business being valued, the methodology most commonly adopted in valuing such businesses and the availability of appropriate information.

6.2.1 Discounted cash flow (“DCF”)

The DCF methodology involves applying an appropriate discount rate to cash flow projections of the business to calculate its net present value. The forecast cash flows are discounted by a discount rate that reflects the time value of money and the risk inherent in the cash flows.

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Due to the DCF’s sound theoretical base, this methodology is the most technically accurate for all valuations, assuming that sufficient reliable data is available.

The DCF methodology is particularly appealing in valuing:

Start-up businesses as there is no history of earnings;
Businesses or assets in high growth phase; and
Finite assets or projects with a limited life (e.g. property development and mining).

6.2.2 Capitalisation of FME

The Capitalisation of FME methodology involves capitalising the estimated future earnings of the business by applying appropriate earnings multiple that reflects the underlying investment rate of return.

This methodology requires consideration of the following factors:

To estimate an FME, consideration must be given to historical performance, the current position and future expectations. In order to ascertain an appropriate level of future earnings, the historical earnings of the business (as disclosed in financial statements) are typically adjusted for amounts which are abnormal, non-recurring or not representative of the expected future operations of the business;
To determine an appropriate earnings multiple rate, factors such as risk, growth prospects, current returns, competition and the industry as a whole need to be considered; and
An assessment of any surplus assets and liabilities, being those which are not essential to the generation of the future maintainable earnings.

The Capitalisation of FME methodology should be considered for valuing businesses with a history of stable earnings that is predictive of future earnings. FME is an appropriate basis for valuing a profitable business where liquidation is not anticipated.

6.2.3 Net Assets

Where an entity does not actively trade, or the value of the net assets is greater than that calculated by using an earnings methodology, it is usually appropriate to value the entity using an asset based methodology.

In the absence of distressed transactions, there are two common methods of applying an asset based approach being:

Orderly Realisation of Assets; and
Net assets on a going concern basis.

The first method involves the determination of the net realisable value of the assets used in the business on the basis of an orderly realisation of those assets. Thus the ‘Orderly Realisation of Assets’ methodology includes a reduction for the reasonable costs of carrying out the sale of assets and the time value of money, but is not a valuation on the basis of a forced sale where the assets might be sold at values materially different from their fair market value.

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The net assets on a going concern basis methodology again estimates the market value of the net assets employed by the business however no allowance is made for realisation costs on the basis that asset disposal is not contemplated.

Each methodology should be considered for valuing businesses with an unprofitable trading future (i.e. inability to continue as a going concern) and businesses with a majority of readily marketable assets (i.e. investment or property companies). The application of either method ignores value which may be ascribed to internally generated intangible assets or goodwill.

Additionally, each methodology is appropriate where there are surplus non-operational assets included in an entity.

6.2.4 Market based

Market based assessments relate to the valuation of companies, the shares of which are traded on a stock exchange. While the relevant share price would, prima facie, constitute the market value of the shares, such market prices usually reflect the prices paid for small parcels of shares and as such do not include a control premium relevant to a significant parcel of shares.

An alternate methodology has regard to genuine offers received for the business, individual business units or specific assets. The existence of such offers may serve as a proxy for value in the absence of an established and observable market.

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7 Our selected valuation approach – AAP

The valuation of RPS in AAP on a controlling basis is a two step process. We value AAP as a whole and in a subsequent procedure allocate value among classes of issued securities having regard to the financial risk, voting rights and distribution rights.

7.1 Valuation approach – All AAP Equity

Subsequent to our analysis of AAP’s financial results and operations as at the date of this report and with reference to generally accepted valuation methodologies in addition to the direction provided by RG111 above, we consider it appropriate to value the AAP shares by applying a ‘dual basis’ methodology. That is, by adopting a Capitalisation of FME method to value the business operations of the AAP and the Net Assets approach to value the assets and liabilities that are surplus to the core trading operations.

In forming our opinion as to the most appropriate valuation methodology to apply to AAP, we have considered and dismissed a number of acceptable valuation methodologies as outlined below:

Due to the lack of suitable forecast financial information, the use of the DCF methodology is inappropriate in this instance;
As AAP has a history of trading at a profit, any value determined using an asset based approach is merely a representation of the value in the underlying business assets at a point in time. Such techniques fail to ascribe value to the recurring nature of a return on the assets employed in the Company and result in an understating of the assessed value. Accordingly, we think the use of asset based methodologies are inappropriate in this instance; and
AAP shares are not listed on a public exchange. Additionally, we are advised that there have been no recent genuine offers received for the sale of AAP business operations or underlying share capital. Accordingly we think the use of market based methodologies are inappropriate in this instance.

We think the capitalisation of FME methodology is the most appropriate valuation technique in this instance having regard to the following:

AAP has a history of profitable trading and this is forecast to continue;
The principal value of AAP results from the continued operations rather than the divestment of business assets; and
Information from comparable listed companies is readily available.

7.1.1 Control premium

We have based our value of a share in AAP on a control basis and as such have included a premium for control. The inclusion of this premium is in accordance with regulatory guidance (RG 111.11) for transactions involving a change or increase in control.

This approach is in accordance with ASIC RG111.30 which states that if the bidder is offering noncash consideration in a control transaction, the expert should examine the value of that consideration and compare it with the valuation of the target’s securities, whether the transaction is effected by a takeover bid, a scheme of arrangement or an issue of shares.

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Numerous empirical studies demonstrate significant premiums being paid in takeover transactions by companies listed on international stock markets. The studies have generally found an average premium in the range of 20% to 35% above the price of a minority shareholding[7] .

Premiums identified in takeovers also include some amount that may be paid for synergies or strategic benefits increasing the premium paid. An appropriate premium for pure control would be lower than the average discount range of 20% to 35% measured in the takeover studies although this is practically difficult to quantify. We note that observations from empirical studies should be viewed with caution and that more control should have regard to the industry specific results and the particulars of the subject transaction.

7.2 Valuation – All AAP Equity

We have selected the Capitalisation of FME as our primary valuation methodology to value AAP. When applying this methodology, we have considered the following:

When estimating the FME of AAP we have had regard to the net profit after tax (NPAT) as the most appropriate earnings base for our analysis;
We have assessed an appropriate range of earnings multiples to apply to AAP’s FME having regard to potentially comparable listed companies, potentially relevant transactions along with other factors specific to AAP; and
We have considered other assets, liabilities and contingent liabilities of AAP that may be deemed surplus and therefore are not reflected in the core business earnings of the Company.

7.2.1 Future Maintainable Earnings

The correct determination of FME is to assess the level of profits that AAP can expect to derive from future periods notwithstanding the fluctuations of the business cycle.

We have utilised NPAT as the earnings base for our primary methodology after considering a number of factors specific to the operations of companies within the funds management industry, including:

Price earnings multiples as generally adopted to assess entities within the financial services and funds management sectors;
Generally, parties in these industries do not have high gearing;
Businesses in the wealth management industry typically do not require a high level of depreciable assets to operate their businesses;
Businesses in the wealth management industry generally do not have high amortisation charges and thus there is not likely to be a material difference in the amortisation charges between companies; and
The earnings of businesses are affected by variation of funds under advice (“FUA”) values, which in turn are influenced by movements in underlying asset classes, such as equities.

7 Kaplan Higher Education, Applied Valuation, 2011.

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Outlined in the table below are the normalised earnings for FY12a and FY13a.

$'000	FY12a	FY13a
Reported NPBT	1,699	275
Management fee paid	1,149	2,267
Direct Costs incurred by CPW	(1,051)	(1,160)
Equity Model / Scheme Transaction Costs	-	143
Corporate Ov erhead Allocation	(115)	(101)
Income Tax (30%)	(505)	(427)
Normalised Net profit after tax (NPAT)	1,177	997

It is our opinion the FME for AAP that best represents the risk profile and future prospects of AAP is approximately $1.0m .

7.2.2 FoFA

Our assessment on the likely impact that FoFA will have on the earnings of AAP has regard to industry research and discussions with senior management. In forming our view, we are mindful of the key drivers in revenue of AAP namely FUM.

Broadly, AAP derives income from two revenue stream being payments for:

Product placement rebates; and
Insurance premium placement rebates.

The volume based revenue derived by APP may be subject to the FoFA reforms. The application of the reforms may not contemplate advisory businesses such as AAP for the following reasons:

AAP is not an Australian Financial Services Licensee and as such is not contemplated in the draft legislation; and
AAP does not provide investment advice to retail customers.

Based on discussions with Management, legal advice received by AAP issued by a national legal firm and our analysis of the FoFA Guidance, as at the date of this report, we believe it is likely that AAP will continue to derive revenue on the basis that it is not conflicted revenue.

Notwithstanding this, the platform operators in applying their own interpretations to the legislation may discontinue reseller margins from 1 July 2013 for new dealers. Should this occur, we consider the following to be likely impacts on AAP earnings:

Grandfathering provisions will enable a continuation of reseller margins post 1 July 2013. This status is preserved by increases in existing investments and may also be preserved where investments are merely ‘switched’ between like investment products;
We are unable to source information which will reliably enable us to model likely investment changes which will trigger a change in grandfathering classification but note that such changes would result in reduced earnings for AAP should platform operators consider AAP revenue as conflicted;

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Offsetting these decreases are the likely increases to be received from growth in FUA and additional inflows (to existing investments). Macquarie Bank research contemplates a compounding annual growth rate (“CAGR”) of 5.1% in FUM through to 2017 after allowing for the regulatory impacts such as FoFA; and
An additional positive for the industry is the increase in compulsory superannuation guarantee from 9% to 9.25% from 1 July 2013 with further increases to occur in subsequent years. As above, these additional inflows into exiting investments will not alter the entitlement for AAP to receive reseller margins on a larger base.

One way
Impact	Factor
	Growth in value of FUA in grandfathered products
	Additional inflows into grandfathered products
	Lost clients
	Investment changes which trigger loss of grandfathered status

Taking the above factors into consideration and discussions with management, we think it is inappropriate to adjust the FME of AAP (either up or down) due to the lack of certainty surrounding the legislation with respect to its application to the AAP business model.

7.2.3 Earnings multiples

In determining an appropriate earnings multiple by which to capitalise AAP’s estimated FME, we have considered rates of return that an investor would require from a business with a similar risk profile.

Factors we have considered include:

Rates being achieved from practically risk free investments;
The current economic climate;
The growth and direction of the Business;
Historical performance;
The nature of the Business and the market;
Business relationships and management expertise; and
Trading structure.

AAP operates in the financial planning and advisory sector within the financial services market of Australia. In selecting an appropriate range of earnings multiples to apply to the FME of AAP, we have had regard to potentially comparable listed companies in Australia within this sector with similar operations. We also have regard to transactions involving potentially comparable companies.

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Our search of comparable companies and transactions was applied to publicly listed companies in Australia in this sector for ease and assurance of verifiable financial data. We have also had regard to multiples implied by a number of potentially relevant transactions in Australia.

We note that these multiples are reflective of trading in a post GFC environment and are inclusive of market expectations in relation to FoFA reforms.

A description of each of the potentially comparable listed companies is set out in Appendix 1. These multiples are based on the market price for minority or portfolio shareholdings of those companies. That is, the multiples do not include a premium for control.

It is evident the selected comparable companies contain significant differences to AAP’s business in both composition and market focus, as well as underlying performance. Notwithstanding this, we think there is sufficient commonality with respect to the key drivers of these wealth management participants to permit meaningful comparison.

7.2.3.1 Trading multiples

In forming a view on an appropriate range of multiples with which to value AAP, we have had regard to the multiples implicit in the share prices of a number of potentially comparable listed companies across the wealth management sector in which AAP operates.

The trading multiples outlined in Appendix 1 are based on the market price for minority or portfolio shareholdings of those companies. We have regard to actual multiples achieved in the most recent reporting year and where available have given consideration to consensus forecasts for the following period.

Forecast NPAT multiples have been calculated based on the consensus broker forecasts reported on Morningstar with market capitalisation as at 2 September 2013. Consensus brokers include Bell Potter, CBA Institutional Equities, JP Morgan, Morningstar Australasia and Ord Minnett.

7.2.3.2 Transaction multiples

We have also considered multiples implied by transactions involving potentially comparable companies in Australia in the wealth and fund management sector. Again these are outlined at Appendix 1.

From our analysis we have been unable to find any transactions that would be deemed sufficiently comparable to AAP to permit meaningful comparison. This assessment is made having regard to AAP’s size and lack of operating diversification.

7.2.4 Selected multiple

In determining an appropriate range of earnings multiples to apply to AAP, we have placed no reliance on transaction multiples (See Section 7.2.3.2) however we do consider the trading multiples discussed in section 7.2.3.1 to be meaningful. We consider a multiple range of 9.0 to 9.5 times to be appropriate in this instance. In forming this opinion, we have regard to the diversified nature of the business activities undertaken by the comparable companies. The observed diversification provides greater protection against material earnings variances. Accordingly, we think the earnings multiple for AAP should be at the lower end of the observed results in recognition of same.

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We have applied further adjustments to our assessed earnings multiple as depicted in the following table and described to the subsequent paragraphs.

The table below outlines each discount factor applied to the listed comparable sector average:

	Premium/(Discount)	NPAT Multiple
Premium or Discount factor		Low	High
Comparable Trading Multiples (WMS Assessed)		9.00	9.50
Premium for Control	10%	0.90	0.95
Controlling Interest		9.90	10.45
Unlisted Company Discount	(55%)	(5.45)	(5.75)
Selected Multiple AAP		4.46	4.70
say		4.50	4.70

7.2.5 Premium for control

As the proposed acquisition by CAF constitutes a control transaction, we have regard to regulatory guidance specifying that the AAP valuation analysis is to be undertaken on a control basis.

Numerous empirical studies demonstrate significant premiums being paid in takeover transactions of public companies. The studies have generally found an average premium in the range of 20% to 35% above the price of a minority shareholding. Premiums identified in takeovers also include some amount that may be paid for synergies and strategic benefits increasing the premium paid.

We have regard to the 2013 Control Premium Study undertaken by RSM Bird Cameron. This study identifies to median control premium for banks and diversified finance companies to be 20.5% based on an assessment 20 days pre-announcement.

Given the material variation observed across industry types, we consider the use of industry specific results to be more appropriate in forming our assessment of an appropriate control premium to apply.

Having regard to the subject transaction, we note the following:

AAP is consolidated by CAF for accounting purposes in recognition of the majority equity ownership; and
All administrative, finance and financial support is currently provided by CAF.

Accordingly, we consider material synergies available to CAF (and other like potential acquirers) are reflected in the normalised earnings of AAP. To avoid double accounting, we have adjusted our assessed control premium downward.

We conclude that an appropriate premium for pure control of AAP would be lower than the range observed in the takeover studies. We consider an appropriate premium for control to be 10% in this instance.

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7.2.6 Unlisted Company Discount

Our assessment of the unlisted company discount has two components. Each factor is outlined below:

The size of AAP relative to the size of comparable companies is a key factor when determining the appropriate multiple with which to value the Company. It is generally accepted larger more complex businesses will be valued using higher multiples than smaller businesses within a similar industry. Smaller companies such as AAP generally have greater inherent risks in the business, such as reliance on key personnel and suppliers and limited access to funding;
Liquidity of shares – a minority interest in an unlisted company will generally trade at a lower multiple than the equivalent interest in a listed company. The reason for this difference is that the minority interest in an unlisted company is less liquid than the equivalent in a listed company; and
An additional discount is appropriate given the AAP constitution is highly restrictive with respect to share transfers.

Based on AAP’s relative earnings and risk profile, we have applied an earnings multiple range of 4.5 to 4.7 times. In our opinion, this multiple range appropriately reflects AAP’s unlisted status, financial position and forecast growth while allowing for the risks relating to a business that is exposed to the Australian financial services industry. This multiple is on a controlling basis.

7.3 Surplus assets and liabilities

We have taken into consideration the following surplus assets and liabilities for valuation purposes.

7.3.1 Cash

We have had regard to the cash balance as at 30 June 2013. As there is a positive level of working capital, we think it is appropriate to include cash as a surplus asset in this instance.

7.3.2 Costs associated with the scheme

We have had regard to costs associated with this transaction which would be payable by AAP and which are not contingent on whether the transaction is implemented. Such costs would impact the value of AAP on a stand alone basis, irrespective of whether the Scheme is completed or not. We have been advised by AAP management that such non-contingent costs are estimated to be $128k.

Costs which are only payable on successful completion of the transaction have not been considered.

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7.3.3 Summary

We are advised by AAP management that there are no further known material surplus assets or liabilities. On the basis of the above disclosures, we summarise below the various surplus assets and liabilities of AAP:

$'000
Cash	127
Transaction Costs	(128)
Surplus Assets/(Liabilities)	(1)

7.4 Summary of Value – All AAP Equity

On the basis of the above analysis, we summarise below our calculation of the equity value of AAP on a controlling basis:

$'000	Low High
Future Maintainable Earnings Earnings Multiple Implied Equity Value (on a control basis)	997 997 4.50 4.70
	4,487 4,686
Surplus Assets/(Liabilities)	(1) (1)
Equity Value (on a control basis)	4,485 4,685

7.5 Allocation of Value to Redeemable Preference Shares

We allocate value among classes of issued securities having regard to the financial risk, voting rights and distribution rights.

In assessing the value to RPS holders, we have regard to the future economic benefits that ownership of this share class is likely to convey. This benefit is typically the result of two elements being:

Revenue – Receipt of Dividends; and
Capital – The ability to divest for profit.

We address each of these considerations separately.

7.5.1 Revenue

Our assessment of the AAP business model and specifically the dividend policy considers ASIC Regulatory Guide 246 as discussed at Section 3.3.2. We have also held discussions with Management and reviewed a legal opinion provided to AAP. These discussions leave us to conclude that dividends paid by AAP to its AFS licensees would constitute conflicted remuneration and cannot continue beyond 1 July 2014.

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Accordingly, we have calculated the likely dividends which may be received by RPS holders should the Scheme not proceed. Our basis for this calculation is set out in the following table:

	Indicative
$'000	FY14
Net product margins	2,713
Other income	-
Directors fees	(8)
Management fee (40% of Net Rev enue)	(1,085)
Other expenses	(6)
Professional fee	(25)
Financing Income	11
Transaction Costs	(30)
Management Fee (55% of NPBT)	(864)
Income Tax (30%)	(212)
Net profit after tax (NPAT)	495
Number of Scheme Shares	3,194
Indicative Maximum Dividend (Nominal)	0.15
Indicative Maximum Dividend (Discounted)	0.14

Our assessment of likely dividends assumes payment of an interim and final dividend in equal proportion. We have applied a discount factor to capture the delay until receipt of the dividend occurs. Our present value of the maximum future dividends available is $0.14. Should the board in its discretion elect not to declare dividends in this year, the value would be $nil.

7.5.2 Capital

Having regard to the AAP constitution, we note that there is currently no mechanism for the transfer of RPS. Additionally, we note the commentary in the AAP Information Memorandum provided to prospective dealers which states that:

“The Directors take the view that an investment in AAP is more likely to generate income than capital returns.”[8]

On this basis, we assess the value of RPS attributable to be capital to be $nil in this instance.

7.5.3 Conclusion

Having regard to the likely implications to RPS holders should the Scheme not proceed, we consider the maximum value that may be assigned to a Scheme share to be $0.14. As RPS holders may be redeemed for nil consideration and this redemption remains at the absolute discretion of the board, we think the minimum value attributable to RPS is $nil.

Accordingly, it is our opinion that the value of a Scheme share is in the range of $0.00 to $0.14 as at the date of this Report.

8 Associated Advisory Practices, Information Memorandum 19 December 2012

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7.6 Valuation cross check

We have considered a number of valuation methodologies in attempting to validate our assessment of a Scheme Share including:

Income – noting the inability of RPS holders to participate in dividends beyond 1 July 2014, we consider the use of DCF and Capitalisation of earnings methodologies to be inappropriate in this instance;
Asset – we have regard to the AAP constitution and note that there is no mechanism for RPS holders to participate in a distribution upon winding up; and
Market – there is no mechanism for RPS to be exchanged for a capital sum.

Accordingly, we are unable to validate our assessment of a Scheme Share using an alternative valuation methodology given the particulars of this transaction.

Based on the above, we conclude that the underlying value of a Scheme Share is in the range of $0.00 to $0.14 .

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8 Valuation of Merged Entity

8.1 Approach

To determine the estimated fair market value of the Merged Entity we have regard to the CAF reported results which include the combined contributions of AAP and AAP2 on consolidation. AAP2 results are also included given the interdependency between this Scheme and the Scheme before AAP2 RPS holders.

In forming our opinion as to the most appropriate valuation methodology to apply to the merged entity, we have considered and dismissed a number of acceptable valuation methodologies as outlined below:

Due to the lack of suitable forecast financial information, the use of the DCF methodology is inappropriate in this instance;
As each of the business units within CAF have positive underlying earnings, any value determined using an asset based approach is merely a representation of the value in the underlying business assets at a point in time. Such techniques fail to ascribe value to the recurring nature of a return on the assets employed in the Company and result in an understating of the assessed value. Accordingly, we think the use of asset based methodologies are inappropriate in this instance; and
We think the capitalisation of FME methodology is the most appropriate valuation technique in this instance having regard to the following:
Profitable underlying trading performance which is forecast to continue; and
The principal value of the merged entity results from the continued operations rather than the divestment of business assets; and
Information from comparable listed companies is readily available.
In order to value the combined business segments of CAF, AAP and AAP2 (on a minority basis) we consider the Capitalisation of FME method as the most appropriate in this circumstance.
The value of the combined business (on a minority basis) is based on the Capitalisation of FME method as outlined in section 6.2; and
The value of CAF non-controlled entities is based on a Net Assets approach as outlined in section 6.2.

8.2 Future Maintainable Earnings (combined)

When considering the FME, we have regard to the reported earnings from an aggregated perspective. We have utilised NPAT as the FME base for our primary methodology after considering similar factors when deriving our assessment of the FME for AAP and AAP2.

When determining an appropriate FME for CAF, and to be consistent with the methodology adopted for AAP, we have adopted the NPAT for FY13. As noted previously, AAP is reliant on CAF to provide administrative and technical support services. In our opinion, there are no additional material synergies or dis-synergies as a result of the Scheme.

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8.2.1 CAF normalised NPAT

Outlined in the table below are the normalised earnings for each of the periods being FY12, and FY13:

$'000	FY12a FY13a
Net asset fees and product margins Other income Borrowing expenses Employee benefit expenses Professional fees Client Claims Insurances Property costs Impairment of intangible assets Other general and administration expenses Normalised Profit from operating activities Interest Income Total financing income	45,285 35,328 2,453 2,474 (5,451) (5,015) (23,771) (22,124) (3,612) (3,103) (720) (720) (3,124) (2,066) (4,216) (3,689) (1,286) (389) (11,266) (8,831) (5,708) (8,135) 14,201 14,207
	14,201 14,207
Normalised Net profit before tax (NPBT)	8,493 6,072
Income tax	(2,548) (1,822)
Normalised Net profit after tax (NPAT)	5,945 4,250

In forming our assessment of FME, we have regard to the normalised results for FY12 and FY13. Management have previously prepared a budget for the FY14 period. A reforecasting exercise is undertaken following the release of FY13 results however this information is not available as at the date of this report. Accordingly, we place little reliance on the FY14f budget information.

Each of the above normalisation adjustments have been discussed in detail in section 5.7.1 of the Report.

Taking the above factors into consideration, it is our opinion the FME for CAF that best represents the risk profile and future prospects of the merged entity is approximately $4.3m.

8.3 Earnings multiples

When determining an appropriate earnings multiple range to capitalise the derived FME for the combined business segments we have analysed current information of potentially comparable companies within the wealth and fund management sector in which CAF and AAP operate as discussed in section 7.2.3.1.

We have also performed an analysis of multiples implied in potentially comparable transactions. We note that the earnings as reported include a 100% contribution from AAP2. We think this is appropriate as this second scheme is intrinsically linked to the Scheme before AAP shareholders. We understand that one cannot proceed without the other.

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8.3.1 Transaction Multiples

In forming our assessment of the comparable trading multiples applicable to CAF, we have regard to the more diversified nature of the business units operated by CAF. We also give consideration to the funds management industry in recognition of that a portion of CAF’s earnings are derived from this activity. We particularly note that observed earnings multiples are higher in this category.

We consider the transactions involving financial planning and advisory companies to be meaningful to our assessment of an earnings multiple for CAF. We note, however, that implicit in these transactions is a control premium. To adjust for this, we have taken the inverse of the control premium observed for financial services transactions (20.5%) and discounted our assessed transaction multiples by same. This is detailed in the following table:

	Premium/(Discount)	NPAT Multiple
Premium or Discount factor		Low	High
Comparable Transaction Multiples (WMS Assessed)		13.50	14.00
Discount for Minority Interest	(17%)	(2.25)	(2.33)
Selected Multiple (Portfolio Basis)		11.25	11.67
say		11.30	11.70

In addition to the factors assessed in section 7.2.3, we have considered the following in relation to the combined operations of CAF, AAP and AAP2:

The elimination of any control premium so as to reflect the value of the combined operation on a minority basis; and
The size and complexity of the CAF combined business segments compared to potentially comparable companies.

In consideration of the relative earnings and risk profile of the CAF combined operations, we have applied an earnings multiple range of 10.0 to 11.0 times. This multiple reflects a minority basis.

In our opinion, this multiple range appropriately reflects the combined business segments of CAF while allowing for the risks relating to a business that is exposed to the Australian financial services industry and associated reforms.

8.4 Surplus assets and liabilities of CAF

We have taken into consideration the following surplus assets and liabilities for valuation purposes:

8.4.1 Cash

As at 30 April 2013 CAF held cash and cash equivalents of $9.3m. To derive a surplus cash figure we have made the following adjustments:

To determine the number of CAF shares in existence on a fully diluted basis, we have assumed that options are exercised in full. Accordingly, we treat as a surplus asset the cash proceeds required to exercise these shares being 400,000 shares at 40 cents ($160k). We note that the options are currently “out of the money”. We have also performed our calculations on the basis that the options are excluded and note that in our opinion the impact is immaterial; and

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In August 2013, the Company granted 4,100,000 performance rights, which are rights to acquire shares at nil cost. The rights will vest either partially or in full in September 2016 if certain profit targets are met. At this time, we cannot reliably predict whether any or all of these rights will vest. Accordingly, we have excluded these rights when determining the number of CAF shares on a fully diluted basis.

The resultant cash position is outlined in the table below:

$'000
Cash Add: Cash on Exercise of Options Surplus Cash	9,352 160
	9,512

The resultant pro forma cash position of approximately $9.5m may be considered surplus as it is in excess of the operational requirements of CAF.

8.4.2 Costs associated with the scheme

We have had regard to the costs associated with this transaction which would be payable by CAF and which are not contingent on whether the Scheme is implemented. Such costs would impact the value of CAF on a stand alone basis, irrespective of whether the Scheme is completed or not. We have been advised by CAF management that such non-contingent costs are estimated to be $5k. In addition, as we are required to value the merged entity, we include a further $128k in transaction costs for each of the schemes involving AAP and AAP2.

Costs which are only payable on successful completion of the transaction have not been considered.

8.4.3 Investments

CAF holds an investment in GPS IP Pty Ltd. We understand that this business is loss making. Accordingly, we ascribe $Nil value to this investment at this time.

8.4.4 Deferred tax assets

As at 30 June 2012, CAF had carried forward revenue tax losses of $39.5m.

The realisation of value from these carried forward tax losses is dependent upon the CAF tax consolidated group generating future taxable income and satisfying the continuity of ownership or same business test. Based on our assessed FME we have undertaken a net present value calculation to determine the value of this surplus asset.

8.4.5 Provision for claims

As we have normalised the non-recurring addition to claim provisions in accordance with actuarial support, it is appropriate for this liability as quantified to be classified as a surplus liability.

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8.4.6 Summary

We are advised by CAF management that there are no further known material surplus assets or liabilities and our analysis supports same. On the basis of the above disclosures, we summarise below the various surplus assets and liabilities of CAF:

$'000
Cash Add: Cash on Exercise of Options Surplus Cash Claims Prov ision Enforceable Undertaking Transaction Costs Non-controlled Inv estments Deferred Tax Asset	9,352 160
	9,512 (20,768) (594) (261) - 7,244
Surplus Assets/(Liabilities)	(4,867)

8.5 Summary of valuation analysis of CAF (inclusive of AAP and AAP2)

On the basis of the above analysis, we summarise below our calculation of the underlying value of the combined business segments of CAF on a minority basis:

$'000	Low High
Future Maintainable Earnings Earnings Multiple Implied Equity Value (on a control basis)	4,250 4,250 10.00 11.00
	42,500 46,750
Surplus Assets/(Liabilities)	(4,867) (4,867)
Equity Value (on a portfolio basis)	37,633 41,883
Number of CAF Ordinary Shares Options Shares Issued Under Scheme (AAP1 & AAP2)	93,466 93,466 400 400 6,069 6,069
	99,935 99,935
Value of a Scheme Share	0.38 0.42

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8.6 Valuation Crosscheck - ASX quoted price valuation

8.6.1 ASX trading

The chart below illustrates the CAF closing share price and total volume of CAF shares traded for the 12 months to 19 June 2013. This represents the last day of trading of CAF shares on the ASX prior to the announcement of the Scheme on 20 June 2013:

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The price of CAF shares in the 12 months to 19 June 2013 has ranged from an intra-day high of $0.61 on 8 February 2013 to a low of $0.14 on 17 July 2012.

We make the following comments in relation to the trading of CAF shares on the ASX over the past 12 months:

There were 70 days in which no trading in CAF shares occurred. This is one indicator that CAF shares are illiquid;
The median closing share price for the period of $0.40;
The Volume Weighted Average Price across the last year is 32.9 cents which is not dissimilar to the closing price of 30 cents as at 19 June 2013; and
Recent share trading has been in the range of 22.5 cents to 33.0 cents which is below the observed ranges prior to the market announcement. This is discussed further at Section 8.6.3.

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We have calculated the VWAP of CAF shares for various periods up to and including 19 June 2013, as illustrated in the following table. These VWAPs have been calculated based on intra-day trading prices and volumes.

Period	Volume	Value	VWAP	Average Shares On Issue	Turnover
1 Week 1 Month 3 Months 6 Months 12 Months	99,437 358,935 1,508,282 4,855,223 14,786,434	34,256 137,520 619,009 2,342,190 4,859,395	0.344 0.383 0.410 0.482 0.329	93,465,646 93,465,646 93,465,646 94,952,508 98,086,882	0.11% 0.38% 1.61% 5.11% 15.07%

8.6.2 Liquidity

For the ASX quoted market price methodology to be reliable there should be a ‘deep’ market in the shares. Paragraph 69 of RG 111 indicates that a ‘deep’ market should reflect a liquid and active market. We consider the following characteristics to be representative of a deep market:

Consistent trading in a company’s securities;
Approximately 1% of a company’s free float shares are traded on a weekly basis;
The spread of a company’s shares must not be so great that a single minority trade can significantly affect the market capitalisation of a company; and
No significant but unexplained movements in share price.

CAF’s shares should meet all of the above criteria to be considered ‘deep’, however, failure of a company’s shares to exhibit all of the above characteristics does not necessarily mean that the value of its shares cannot be considered relevant.

Shares on Issue as at 19 June 2013			93,465,646
Shares subject to Escrow (released 20 June 2013)			(13,696,459)
Free Float			79,769,187
	1 Week	1 Month	3 Months
Volume of Shares Traded in Period	99,437	358,935	1,508,282
% of Free Float Traded	0.12%	0.45%	1.89%

In our assessment of CAF’s free float shares, we have excluded shares held in escrow, as these shares are not considered to be available for trade.

Having regard to the criteria for a deep market described previously, we make the following observations in relation to CAF shares:

Share trading is not consistent. There have been 70 days during the last year in which no trades were executed with respect to CAF shares. There were three days in the week ended 19 June 2013 in which trading of CAF shares did not occur; and
CAF shares traded as a percentage of the free float in the month to 19 June 2013 represents just 0.45%. This is less than half the level required on a weekly basis to support the existence of a deep market.

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Accordingly, we do not consider that there is a deep market in CAF shares. As trading on the ASX is an avenue for a minority interest to be disposed of, we consider the quoted market price to be relevant when considering the value of a CAF share as a cross check valuation method.

The three month VWAP of approximately $0.41 is supportive of our assessed share price using the capitalisation of earnings methodology. We note, however, that our assessed valuation is determined subsequent to the release of various market sensitive company announcements which may not be fully factored into the observed trading price prior to 20 June 2013.

8.6.3 Liquidity – Post Market Announcement

Given the adjournment of the Scheme or Arrangement previously announced to the market, we have also analysed the share price for the period 20 June 2013 to 2 September 2013. We make the following observations in relation to CAF Shares during this 53 day period.

There were nine days (17%) in which no trading in CAF shares occurred;
The share price has traded within a range of 22.5 cents and 33.0 cents; and
The average closing share price during this period was 28.5 cents.

These observations confirm our previous findings that CAF shares do not trade in a deep market. Accordingly, we place limited reliance on the listed share price as a reflection of fair market value in this instance.

Despite CAF shares trading at a significant discount to our assessed value, we note that the trading price exceeds the value of the Scheme Share. Accordingly, these observations support our conclusions with respect to both fairness and reasonableness.

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9 Evaluation of the Scheme

9.1 Approach

When considering whether in our opinion the terms of the Scheme as outlined in the body of this Report are fair and reasonable and therefore in the best interests of the AAP RPS holders we have considered:

Whether the value of a Scheme Share is higher or lower than the value of the consideration being offered by CAF under the Scheme;
Other qualitative factors which we believe represent either advantages or disadvantages to AAP RPS holders;
The likelihood of an alternative superior offer being made to AAP RPS holders; and
The alternatives available to AAP RPS holders.

9.2 Conclusion of valuation analysis

In determining whether the Scheme is fair, we have compared the value of a Scheme Share (on a controlling basis) with the value of the Scheme Consideration being offered (on a minority basis excluding any premium for control). Sections 7.5.3 and 8.5 provide our conclusions in relation to the value of AAP and the Merged Entity.

The results of our analysis are summarised in the following table:

$	Low High
Value of Merged Entity Share Conv ersion ratio Value of Scheme Consideration	0.38 0.42 1.25 1.25
	0.47 0.52
Value of a Scheme Share	- 0.14

Where available we have undertaken crosschecks to support the conclusions of our primary valuation methods. We note that the current CAF trading price is below our assessed share value but highlight that the trading price still exceeds the value of a Scheme Share.

As illustrated in the above table, we conclude that the value of the consideration offered by CAF is above the value of a Scheme Share. Consequently, WMS considers that the Scheme is fair to AAP RPS holders in accordance with prescription set out in RG111.

9.3 Qualitative factors (Advantages and Disadvantages)

In accordance with RG111 an offer is reasonable if it is fair. On this basis, in our opinion the Scheme is reasonable. In assessing the reasonableness of the Scheme, we have also considered the potential advantages and disadvantages to the shareholders and considered whether the advantages outweigh the disadvantages only in the context of the Scheme.

These commercial and qualitative factors are summarised below. We note that individual shareholders may interpret these factors differently depending on their individual circumstances.

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9.3.1 Liquidity - AAP shareholders will receive shares in a listed entity

The Scheme represents an opportunity for the AAP RPS holders to receive shares in CAF being a listed entity. That is, the shares are capable of being divested in an open exchange. We note that trading in CAF does not constitute a deep market (see Section 8.6.2) however, for portfolio interests such as those extended to individual AAP RPS holders under this Scheme, on a weekly basis, there is sufficient market depth to facilitate transactions.

9.3.2 Board view

In the absence of a superior proposal and subject to receipt of an independent expert’s report confirming that the Scheme is in the best interests of shareholders, we understand that the Directors of AAP have recommended the Scheme to RPS holders

9.3.3 Escrow

We understand that the Scheme shares will be subject to the following escrow restrictions:

50% restricted for 18 months; and
50% restricted for two years.

Despite the escrow periods described above, we note that there is currently no exit mechanism for a capital sum available to RPS holders.

9.3.4 Transaction Costs

The Directors of AAP have estimated that transaction costs associated with the Scheme will be approximately $128k. These transaction costs include the preparation of the Scheme Booklets, professional fees and costs associated with preparation and dispatch of documents. These costs will be borne by shareholders regardless of whether the Scheme proceeds.

9.3.5 No alternative offers received

As at the date of our Report, we are not aware of any alternative offers that may be forthcoming despite the considerable time which has lapsed since the offer was announced. Additionally, having regard to the controlling stake already held by CAF and the administrative and technical support afforded to AAP, we consider there to be material impediments to the receipt of an alternative offer.

9.3.6 AAP RPS holders’ position if the Scheme is not approved

If the Scheme is not approved, it would be the current Directors’ intention to continue operating the Company in line with its objectives. We specifically highlight the following in relation to the RPS:

1) There is no mechanism to exchange these shares for a capital sum. As such, the value of the shares can only be attributed to the future dividends which may be received;
2) FoFA reforms will prevent equity arrangement where there is a nexus between the payment of dividends and underlying business profits. Accordingly, AAP dealer’s will no longer be entitled to dividends from 1 July 2014; and

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3) There remains absolute discretion for the shareholding to be redeemed by CAF for $nil consideration.

9.3.7 Benefits of having 100% ownership

CAF believe the benefits of having 100% ownership of AAP and the associated total revenue stream is reflected in the consideration it is providing. This consideration has regard to the equity value of AAP as determined at Section 7.4

9.3.8 The interests of AAP RPS holders will be materially diluted

The interests of AAP RPS holders will be diluted down and represent approximately 4.0% of the CAF issued capital should the Scheme proceed as contemplated. Accordingly, they will collectively have significantly less influence and control over the future direction of the Company.

9.3.9 Dividends

Our analysis has not identified any recent periods in which CAF has declared and paid dividends. We understand that it is the intention of the board to declare dividends once retained earnings and cash flow allow.

9.3.10 Tax

Tax consequences specific to individual shareholders need to be regarded by each AAP RPS holder in considering the implications of the Scheme. The specific tax consequences of the Scheme will vary depending on the circumstances of each individual AAP RPS holder.

9.4 Other considerations

This Independent Expert’s Report constitutes general financial product advice only and has been prepared without taking into consideration the individual circumstances of shareholders. The decision of whether or not to accept the Scheme is a matter for each AAP RPS holder to decide based on their own views of value of AAP and CAF and expectations about future market conditions, AAP and CAF’s performance, risk profile and investment strategy.

The Directors and Management of AAP have prepared the Scheme Booklets in relation to this Scheme and as such AAP RPS holders should have regard to this when considering the Scheme. Shareholders should personally consider the taxation implications in relation to the Scheme as the Scheme Booklets contains only general information in relation to same. If AAP RPS holders are in doubt about the action they should take in relation to the Proposed Scheme, they should seek their own professional advice.

This Report is prepared exclusively for AAP RPS holders and therefore neither WMS nor any member, employee or consultant thereof undertakes any responsibility to any person, other than AAP RPS holders, in respect of this Independent Expert’s Report, including any errors or omissions howsoever caused.

9.5 Conclusion

WMS has considered the terms of the Scheme as outlined in the body of this Report and has concluded that the Scheme is fair and reasonable and therefore in the best interests of the AAP RPS holders as a whole, notwithstanding the costs, disadvantages and risks.

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In deriving our opinion we have considered:

Whether the value of a Scheme Share is higher or lower than the value of the consideration being offered by the Scheme;
Other qualitative factors which we believe represent either advantages or disadvantages to AAP RPS holders;
The likelihood of an alternative superior offer being made to AAP RPS holders; and
The alternatives available to AAP RPS holders.

We have considered the likely advantages and disadvantages of the Scheme for the AAP RPS holders, and the advantages and disadvantages for the same shareholders if the Scheme does not proceed. It is WMS’ opinion that the benefits that are likely to accrue to the shareholders as a result of the Scheme outweigh the disadvantages and the other considerations if the Scheme does not proceed.

In forming our assessment, we have considered the dilutionary effect to AAP RPS holders should the similar scheme involving AAP2 RPS holders also proceed.

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when it counts

WMS Corporate Services Pty Ltd AFSL 418958 ABN 28 069 284 073 Suite 1401, Level 14, The Rocket 203 Robina Town Centre Drive Robina Qld 4226 PO Box 5287 Robina TC Qld 4230 PH +61 7 5556 3300 FAX +61 7 5556 3399 www.wmssolutions.com.au

10 Financial services guide

Aaron Lavell and David Hayes, as directors of WMS Corporate Services Pty Ltd ABN 28 069 284 073 (“WMS” or “we” or “us” or “ours” as appropriate), have been engaged to issue general financial product advice in the form of a report to be provided to you.

FINANCIAL SERVICES GUIDE

In the above circumstances we are required to issue to you, as a retail client, a Financial Services Guide (“FSG”). This FSG is designed to help retail clients make a decision as to their use of the general financial product advice and to ensure that we comply with our obligations as financial services licensees.

The FSG includes information about:

Who we are and how we can be contacted;
The services we are authorised to provide under AFSL/Licence No: 418958;
Remuneration that we and/or our staff and any associates receive in connection with the general financial product advice;
Any relevant associations or relationships we have; and
Our complaints handling procedures and how you may access them.

FINANCIAL SERVICES WE ARE LICENSED TO PROVIDE

WMS holds an AFSL which authorises the licensee to provide general financial product advice to retail and wholesale clients on securities and interests in managed investment schemes.

We provide financial product advice by virtue of an engagement to issue a report in connection with a financial product of another person. Our report will include a description of the circumstances of our engagement and identify the person who has engaged us. You will not have engaged us directly but will be provided with a copy of the report as a retail client because of your connection to the matters in respect of which we have been engaged to report.

Any report we provide is provided on our own behalf as a financial services licensee authorised to provide the financial product advice contained in the report.

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GENERAL FINANCIAL PRODUCT ADVICE

In our report we provide general financial product advice, not personal financial product advice, because it has been prepared without taking into account your personal objectives, financial situation or needs. You should consider the appropriateness of this general advice having regard to your own objectives, financial situation and needs before you act on the advice.

FEES, COMMISSIONS AND OTHER BENEFITS THAT WE MAY RECEIVE

We charge fees for providing reports, including this report. These fees are negotiated and agreed with the person who engages us to provide the report. Fees will be agreed on an hourly basis or as a fixed amount depending on the terms of the agreement. In this instance, the Company has agreed to pay us approximately $35,000 for preparing the Report.

Except for the fees referred to above, neither WMS, nor any of its Directors, employees or related entities, receive any pecuniary benefit or other benefit, directly or indirectly, for or in connection with the provision of the report.

REMUNERATION OR OTHER BENEFITS RECEIVED BY OUR EMPLOYEES

All our employees receive a salary. Our employees are eligible for bonuses based on overall productivity but not directly in connection with any engagement for the provision of a report.

REFERRALS

We do not pay commissions or provide any other benefits to any person for referring customers to us in connection with the reports that we are licensed to provide.

INDEPENDENCE

WMS is independent of the entity that engages it to provide a report. The guidelines for independence in the preparation of reports are set out in the Regulatory Guide 112 issued by the Australian Securities and Investments Commission in October 2007.

COMPLAINTS RESOLUTION

INTERNAL COMPLAINTS RESOLUTION PROCESS

As the holder of an Australian Financial Services Licence, we are required to have a system for handling complaints from persons to whom we provide financial product advice. All complaints must be in writing, addressed to The Complaints Officer, WMS, PO Box 5287, Robina TC QLD 4230.

When we receive a written complaint we will record the complaint, acknowledge receipt of the complaint within 15 days and investigate the issues raised. As soon as practical, and not more than 45 days after receiving the written complaint, we will advise the complainant in writing of our determination.

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REFERRAL TO EXTERNAL DISPUTE RESOLUTION SCHEME

A complainant not satisfied with the outcome of the above process, or our determination, has the right to refer the matter to the Financial Ombudsman Service Limited (“FOS”). FOS is an independent company that has been established to impartially resolve disputes between consumers and participating financial services providers.

David Hayes is a member of FOS (Member Number 30725). Further details about FOS are available at the FOS website www.fos.org.au or by contacting them directly via the details set out below:

Financial Ombudsman Service Limited GPO Box 3 MELBOURNE VIC 3001 Toll free: 1300 78 08 08 Facsimile: (03) 9613 6399 Email: [email protected]

CONTACT DETAILS

You may contact us using the details set out at the top of our letterhead of this FSG.

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11 Appendix 1 – Potentially Comparable Companies and Transactions

11.1 Potentially Comparable Companies

	Latest	Market Cap	NPAT	PE Multiple	NPAT	PE Multiple
Company	Financials	$m	FY12	FY12	FY13	FY13
Funds Management
Platinum Asset Management	FY13	3,093	126.4	17.0	129.1	19.3
Perpetual Limited	FY13	1,614	65.4	14.4	75.9	18.1
Tower Limited	Sep-12	303	36.0	9.6
BT Inv estment Management Limited	Sep-12	1,029	41.5	13.3
K2 Asset Management Limited	FY13	128	(1.7)	n/a	13.2	7.8
Magellan Financial Group Limited	FY13	1,612	13.7	18.5	48.5	18.7
Mean				14.6		16.0
Median				14.4		18.4
Financial Planning & Advisory Services
Challenger Limited	FY13	2,760	297.3	7.5	308.5	6.2
IOOF Holdings Limited	FY13	1,973	96.4	13.9	108.8	15.4
Equity Trustee Limited	FY12	138	8.4	13.4
ClearView Wealth Limited	FY13	272	26.6	7.3	16.0	15.2
Prime Financial Group Ltd	FY12	21	2.8	7.4
SFG Australia Limited	FY13	529	24.3	10.7	27.3	16.0
Yellow Brick Road Holdings Limited	FY12	113	(6.8)	n/a
Mean				10.0		13.2
Median				9.1		15.3

M o rning st ar research & W M S analysis - M arket C ap it alisat io n as at 2 Sep t emb er 2 0 13

11.2 Potentially Comparable Transactions

			Equity Value	PE multiple
Company	Acquirer	Date	$m	Historical
Financial Planning & Advisory Services
Plan B Group Holdings Limited*	IOOF Holdings Limited	13/07/12	49	12.3
Count Financial Limited	Commonwealth Bank of Australia	9/12/11	367	15.9
DKN Financial Group Limited	IOOF Holdings Ltd	4/10/11	115	15.2
Shadforth Financial Group	Snowball Group Ltd	14/07/11	210	12.5
Mean (Excluding Outliers)				14.0
Median (Excluding Outliers)				13.9
Funds Management
AXA Asia Pacific Holdings Ltd	AMP Limited	30/03/11	13,740	22.1
Tyndall IM and Tyndall IM NZ	Nikko Asset Management Co. Ltd		94	9.2
Mean (Excluding Outliers)				9.2
Median (Excluding Outliers)				9.2

M o rning st ar R esearch, Pub lic Inf o rmat io n and W M S A nalysis

Shad ed result s have b een exclud ed f ro m M ean & M ed ian calculat io ns

*PE M ult ip le b ased o n earning s g uid ance p ro vid ed t o market

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11.3 Background

Platinum Asset Management Limited (“PTM”) is a non-operating company of Platinum Investment Management Limited, which is an Australian based fund manager which specialises in investing in international equities. Platinum currently manages 12 funds which are predominantly Australian and US Dollars based funds.

Perpetual Ltd (“PPT”) is an independent financial services group operating in funds management, portfolio management, financial planning, financial advisory, and trustee services. PPT offers investment products, financial advice, philanthropic and corporate services to individuals, families, financial advisers and organisations.

Tower Limited (“TWR”) provides a comprehensive range of risk insurance and wealth management products and services to customers throughout New Zealand and the Pacific Islands. Products and services include life and general insurance, superannuation, retail managed funds and master trusts.

BT Investment Management Limited (“BTT”) is an investment manager responsible for the management of the BTT wholesale and retail funds, as well as managing mandates on behalf of Westpac.

K2 Asset Management Holdings Limited (“KAM”) is an Australian based fund manager specialising in absolute return funds. K2 manages three investment funds across Australia and New Zealand, Asia Pacific and International markets.

Magellan Financial Group Limited (“MFG’) is a specialist funds management business based in Sydney, Australia. MFG manages three global equity funds for high net worth and retail investors in Australia and New Zealand. MFG’s three global investment funds are the Magellan Global Fund, the Magellan Infrastructure Fund and the Magellan Flagship Fund.

Challenger Limited (“CGF” formerly Challenger Financial Services Group Limited) is an investment management firm focusing on providing Australians with financial security in retirement. Challenger operates two core investment businesses, an APRA regulated Life division and a fiduciary Funds Management division.

IOOF Holdings Limited (“IFL”) is an Australian financial services provider, offering financial products and portfolio administration services including investments, superannuation, immediate and deferred annuities, and investment trusts, in addition to financial planning and advisory, stockbroking, estate planning and administration, and trustee services.

Equity Trustees Limited (“EQT”) is a financial services company which provides a range of financial services to clients of the private wealth services and corporate fiduciary & financial services business units.

Clearview Wealth Limited (“CVW”) is a financial services company with businesses that specialise in life insurance, wealth management and financial planning solutions. The company has a network of experienced, accredited financial planners based throughout NSW, QLD, VIC, and TAS.

Prime Financial Group Limited (“PFG”) is a National Financial Services & Advisory Group delivering Wealth Management Services and managing over $1.0B of client assets. Prime’s Wealth Management Services include: Financial Planning, Investment Advice, Asset Protection & Life Insurance, Superannuation including Self Managed Superannuation, and Accounting Services.

Associated Advisory Practices Ltd Independent Expert’s Report & Financial Services Guide

6 September 2013

Page | 70

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SFG Australia Limited (“SFW”) provides wealth management services to high net worth and affluent clients, including strategic financial advice, portfolio administration solutions, portfolio construction and management services, insurance (both general and risk) solutions, finance broking, stockbroking, and corporate superannuation services.

Yellow Brick Road Holdings Limited (“YBR” formerly ITS Capital Investments Ltd) is a wealth management company that provides comprehensive financial advice, management, execution and administration services, and related professional services in areas of taxation, accounting, estate planning, insurance and finance broking. YBR operates through its branches in New South Wales, Australian Capital Territory, Victoria, Queensland, South Australia and Western Australia.

Plan B Group Holdings Limited (“PLB”) is an Australian based wealth management company.

Count Financial Limited provides financial advice services and is based in Australia.

DKN Financial Group Limited (“DKN”) is a provider of financial services solutions to wealth management practices. It owns the Lonsdale dealer group which has 300 practices and approximately 750 advisers.

Shadforth Financial Group Holdings Limited is a privately owned financial advisory firm.

AXA Asia Pacific Holdings Limited was an insurance and fund management group, and a subsidiary of AXA SA, the listed French financial services group.

Tyndall Investment Management Australia Ltd and Tyndall Investment Management New Zealand Ltd, are both investment management companies.

Associated Advisory Practices Ltd Independent Expert’s Report & Financial Services Guide 6 September 2013

Page | 71

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Annexure B

Revised Scheme

25440979v3 | Supplementary scheme booklet

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Scheme of arrangement

Associated Advisory Practices Ltd ACN 118 000 150

Scheme Shareholders

Level 11 Central Plaza Two 66 Eagle Street Brisbane QLD 4000 GPO Box 1855 Brisbane QLD 4001 Australia ABN 42 721 345 951 Telephone 07 3233 8888 Fax 07 3229 9949

Offices Brisbane Newcastle Sydney

www.mccullough.com.au

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Parties	--------------------------------------------------------------------------------------------------------	--------------------------------------------------------------------------------------------------------	--------------------------------------------------------------------------------------------------------	1
Agreed	terms	------------------------------------------------------------------------------------------------		1
1	Definitions and interpretation ---------------------------------------------------------------------			1
	1.1	Definitions		1
	1.2	Interpretation		4
2	Preliminary -----------------------------------------------------------------------------------------		~~5~~ ~~4~~
	2.1	Target	~~5~~ ~~4~~
	2.2	Target securities		5
	2.3	Bidder		5
	2.4	Bidder Securities		5
	2.5	Effect of Scheme		5
	2.6	Merger Implementation Deed		6
	2.7	Deed Poll		6
3	Conditions precedent -------------------------------------------------------------------------------			6
	3.1	Conditions precedent to Scheme		6
	3.2	Certificate in relation to conditions precedent		6
	3.3	Termination of Merger Implementation Deed	~~7~~ ~~6~~
	3.4	Sunset Date		7
4	Implementation of Scheme ------------------------------------------------------------------------			7
	4.1	Lodgement of Court order		7
	4.2	Transfer of Scheme Shares		7
	4.3	Entitlement to Scheme Consideration		7
	4.4	Fractional entitlements	~~8~~ ~~7~~
	4.5	Shareholding splitting or division		8
5	Provision of Scheme Consideration ---------------------------------------------------------------			8
	5.1	Scheme Consideration		8
	5.2	Obligations to provide the Scheme Consideration		8
	5.3	General		8
	5.4	Binding instruction or notification	~~9~~ ~~8~~
	5.5	Joint holders		9
6	Quotation of Bidder Shares ------------------------------------------------------------------------			9
7	Dealings in Scheme Shares ------------------------------------------------------------------------			9

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	7.1	Determination of Scheme Shareholders		9
	7.2	Maintenance of Target Register	1~~0~~ ~~9~~
	7.3	Effect of certificates and holding statements		10
	7.4	Information to be made available to Bidder		10
8	Dealing in Bidder Shares -------------------------------------------------------------------------- 10
	8.1	Holding lock during Escrow Period		10
	8.2	Release of holding lock		10
	8.3	Restrictions during Escrow Period	1~~1~~ ~~10~~
	8.4	Takeovers		11
	8.5	Schemes of arrangement		11
	8.6	Application of Listing Rules		11
	8.7	Other permitted Dealings		11
	8.8	Release by the Bidder board	1~~2~~ ~~11~~
9	General Scheme provisions ----------------------------------------------------------------------- 12
	9.1	Appointment of Target as agent and attorney		12
	9.2	Scheme Shareholders' consent		12
	9.3	Agreement by Scheme Shareholders		12
	9.4	Warranty by Scheme Shareholders		12
	9.5	Title to Scheme Shares		12
	9.6	Appointment of Bidder as sole proxy	1~~3~~ ~~12~~
	9.7	Scheme alterations and conditions		13
	9.8	Effect of Scheme		13
	9.9	Enforcement of Deed Poll		13
	9.10	No liability when acting in good faith		13
	9.11	Notices		13
	9.12	Further assurances	1~~4~~ ~~13~~
	9.13	Costs and stamp duty	1~~4~~ ~~13~~
10	Governing law and jurisdiction ------------------------------------------------------------------- 14

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Scheme of arrangement

Dated

Parties

Target Associated Advisory Practices Ltd ACN 118 000 150

of Level 14, Corporate Centre One, Corner Bundall Road & Slatyer Avenue, Bundall, Queensland 4217

Scheme Shareholders

Agreed terms

1 Definitions and interpretation

1.1 Definitions

In this document:

	Term	Definition
	A Class Share ASIC ASX ASX Settlement ASX Settlement Operating Rules Bidder Bidder Register Bidder Share Bidder Share Registry Business Day CHESS Corporations Act	means an A class redeemable preference share in the capital of Target. means the Australian Securities and Investments Commission. means ASX Limited ACN 008 624 691 or the securities exchange operated by it (as the case requires). means ASX Settlement Pty Ltd ACN 008 504 532. means the operating rules of ASX Settlement. means Centrepoint Alliance Limited ACN 052 507 507. means the register of members of Bidder maintained by or on behalf of Bidder in accordance with section 168(1) Corporations Act. means a fully paid ordinary share in Bidder. means Computershare Investor Services Pty Limited. means a day that is not a Saturday, Sunday or a public holiday or bank holiday in Brisbane, Queensland. means Clearing House Electronic Subregister System, operated by ASX Settlement. means the Corporations Act 2001 (Cth).

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	Term	Definition
	Court Deal Deed Poll Effective Effective Date Escrow Period Escrowed Shares Implementation Date Listing Rules Merger Implementation Deed Ordinary Share Permitted Transferee	means the Federal Court of New South Wales or such other court as the Target and Bidder may agree. means: (a) sell, assign, transfer or otherwise dispose of; (b) agree or offer to sell, assign, transfer or otherwise dispose of; (c) enter into any option which, if exercised (whether such exercise is subject to conditions or otherwise), enables or requires the Scheme Shareholder to sell, assign, transfer or otherwise dispose of; and (d) decrease or agree to decrease an economic interest. means the deed poll executed by Bidder under which Bidder covenants in favour of each Scheme Shareholder to perform its obligations under this Scheme and under the Merger Implementation Deed as regards the implementation of this Scheme. means, when used in relation to this Scheme, the coming into effect, pursuant to section 411(10) Corporations Act, of the Court order made for the purposes of section 411(4)(b) Corporations Act in relation to this Scheme but in any event at no time before an office copy of the order of the Court is lodged with ASIC. means the date on which the Scheme becomes Effective. means: (a) in respect of one half of the Escrowed Shares, the period of time beginning on the Effective Date and ending on the date that is 18 months after the Effective Date; and (b) in respect of the other half of the Escrowed Shares, the period of time beginning on the Effective Date and ending on the date that is 24 months after the Effective Date. means, during the Escrow Period, the Bidder Shares issued by the Bidder as the Scheme Consideration. means thedate no later than the fifth Business Day following the Scheme Record Date. means the listing rules of ASX as amended from time to time. means the merger implementation deed between Target and Bidder dated 20 June 2013. means an ordinary share in the capital of Target. means: (a) on death of the Scheme Shareholder, a personal representative of a Scheme Shareholder or another person the personal representative determines is

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	Term	Definition
	Proper ASTC Transfer Redeemable Preference Share Registered Address Related Body Corporate Scheme Scheme Consideration Scheme Date Scheme Meeting Scheme Record Date Scheme Shareholders Scheme Shares Scheme Share Transfer Second Court Hearing Date	entitled to the Bidder Shares; (b) a person entitled to Bidder Shares because of the bankruptcy of a Scheme Shareholder; ~~and~~ (c) a person entitled to shares because of the mental incapacity of a Scheme Shareholder; (d) any spouse or child of the Scheme Shareholder; (e) any company controlled by the Scheme Shareholder; and (f) any trustee of a family trust of which the Scheme Shareholder is a beneficiary. has the meaning given to that term in the Corporations Regulations 2001 (Cth). means a redeemable preference share in the capital of Target. means, in relation to a Scheme Shareholder, the address shown in the Target Register at the Scheme Record Date. has the meaning given to that term by section 9 Corporations Act. means this scheme of arrangement between Target and Scheme Shareholders, under which all the Scheme Shares will be transferred to Bidder under Part 5.1 of the Corporations Act as described in clause 4, in consideration for the Scheme Consideration, subject to any alterations or conditions made or required by the Court pursuant to section 411(6) Corporations Act to the extent they are approved in writing by Target in accordance with clause 9.7. means 1.25 Bidder Shares per Scheme Share. means the date on which the Merger Implementation Deed is executed by all parties to the document. means the meeting of Scheme Shareholders ordered by the Court to be convened pursuant to section 411(1) Corporations Act to consider this Scheme. means 8.00pm on the fifth Business Day after the Effective Date. means each person who is a holder of a Scheme Share at the Scheme Record Date. means all issued fully paid Redeemable Preference Shares, as at the Scheme Record Date. means, for each Scheme Shareholder, a duly completed and executed proper instrument of transfer of the Scheme Shares held by that Scheme Shareholder for the purposes of section 1071B Corporations Act, which may be a master transfer of all Scheme Shares. means the first day on which the application made to the Court for an order approving this Scheme pursuant to

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Term Definition section 411(4)(b) Corporations Act is heard, or if the hearing of the application is adjourned for any reason, the first day of the adjourned hearing. Sunset Date means 8.00pm on ~~30 September 3~~ 1 October 2013 or such other date and time agreed in writing between Bidder and Target . Target Register means the register of members of Target maintained by or on behalf of Target in accordance with section 168(1) Corporations Act. Target Shareholder means a person who is the registered holder of one or more shares in the capital of Target. Z Class Share means a Z class redeemable preference share in the capital of Target.

1.2 Interpretation

In this document:

(a) a reference to a clause, schedule, annexure or party is a reference to a clause of, and a schedule, annexure or party to, this document and references to this document include any schedules or annexures;
(b) a reference to a party to this document or any other document or agreement includes the party’s successors, permitted substitutes and permitted assigns;
(c) if a word or phrase is defined, its other grammatical forms have a corresponding meaning;
(d) a reference to a document or agreement (including a reference to this document) is to that document or agreement as amended, supplemented, varied or replaced;
(e)
a reference to this document includes the agreement recorded by this document;
(f) a reference to legislation or to a provision of legislation (including subordinate legislation) is to that legislation as amended, re-enacted or replaced, and includes any subordinate legislation issued under it;
(g) if any day on or by which a person must do something under this document is not a Business Day, then the person must do it on or by the next Business Day;
(h) a reference to a person includes a corporation, trust, partnership, unincorporated body, government and local authority or agency, or other entity whether or not it comprises a separate legal entity; and
(i) a reference to ‘month’ means calendar month.

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2 Preliminary

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2.1 Target

(a) Target is a public company limited by shares, incorporated in Australia and registered in Queensland.
(b) Its registered office is at Level 14, Corporate Centre One, Corner Bundall Road & Slatyer Avenue, Bundall, Queensland 4217.
(c) Target is not listed and Target’s shares are not quoted on any securities exchange.

2.2 Target securities

As at the Scheme Date, Target had the following securities on issue:

(a) 3,193,574 Redeemable Preference Shares;
(b) 3,903,255 A Class Shares;
(c) 1 Ordinary Share; and
(d) 1 Z Class Share.

2.3 Bidder

(a) Bidder is a public company limited by shares, incorporated in Australia and registered in Western Australia.
(b) Its registered office is at Level 2, 6 Thelma Street, West Perth, Western Australia 6005.
(c) Bidder is admitted to the official list of ASX and Bidder Shares are officially quoted on ASX.
(d) Bidder holds all of the shares in Target other than the Redeemable Preference Shares.

2.4 Bidder Securities

As at the Scheme Date, Bidder had 93,465,646 fully paid ordinary shares and 2,250,000 unissued ordinary shares under options.

2.5 Effect of Scheme

If this Scheme becomes Effective,

(a) on the Implementation Date, in consideration of the transfer of all Scheme Shares to Bidder, Bidder will issue to each Scheme Shareholder the Scheme Consideration by Bidder in respect of each Scheme Share held by the Scheme Shareholder and seek quotation on the ASX of the Bidder Shares, in accordance with the terms of this Scheme and the Deed Poll; and
(b) subject to Bidder having complied in full with its obligations in clause 5 and in the Deed Poll:

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(i) all of the Scheme Shares will be transferred to Bidder on the Implementation Date; and
(ii) Target will enter the name and address of Bidder in the Target Register as the holder of all of the Scheme Shares.

2.6 Merger Implementation Deed

Target and Bidder have entered into the Merger Implementation Deed which sets out the terms on which Target and Bidder have agreed to implement this Scheme.

2.7 Deed Poll

Bidder has executed the Deed Poll in favour of each Scheme Shareholder pursuant to which it has covenanted to perform its obligations under this Scheme, including to provide the Scheme Consideration.

3 Conditions precedent

3.1 Conditions precedent to Scheme

This Scheme is conditional on:

(a) as at 8.00am on the Second Court Hearing Date, neither the Merger Implementation Deed nor the Deed Poll having been terminated;
(b) all of the conditions precedent set out in clause 3.1 of the Merger Implementation Deed (other than the condition precedent in clause 3.1(j) of that deed regarding Court approval pursuant to section 411(4)(b) Corporations Act) having been satisfied or waived in accordance with the terms of that deed as at 8.00am on the Second Court Hearing Date;
(c) the Court having approved this Scheme with or without modification, pursuant to section 411(4)(b) Corporations Act, and if applicable, Target having accepted in writing any modification required by the Court; and
(d) Target having lodged with ASIC an office copy of any order made by the Court pursuant to section 411(4)(b) Corporations Act approving the Scheme (as defined in the Merger Implementation Deed),

and the provisions of clauses 4 to 8 (both inclusive) will not come into effect unless and until each of these conditions precedent has been satisfied.

3.2 Certificate in relation to conditions precedent

(a) On the Second Court Hearing Date, Target and Bidder will each provide to the Court a certificate confirming whether or not all of the conditions precedent set out in clause 3.1 of this Scheme (other than the conditions precedent in clauses 3.1(c) and 3.1(d) of this Scheme) have been satisfied or waived as at 8.00am on the Second Court Hearing Date and confirming whether or not the Merger Implementation Deed has been terminated.
(b) The giving of a certificate by each of Target and Bidder under clause 3.2(a) confirming that any conditions precedent set out in clause 3.1 have been satisfied or waived and that the Merger Implementation Deed has not been terminated as at 8.00am on the Second Court Hearing Date will be conclusive evidence of those matters.

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3.3 Termination of Merger Implementation Deed

Without limiting rights under the Merger Implementation Deed, in the event that the Merger Implementation Deed is terminated in accordance with its terms before 8.00am on the Second Court Date, Target and Bidder are each released from:

(a) any further obligation to take steps to implement the Scheme;
(b) any liability with respect to the Scheme; and
(c) in the case of Bidder, any liability under the Deed Poll.

3.4 Sunset Date

This Scheme will lapse and be of no further force or effect if the Effective Date has not occurred on or before the Sunset Date.

4 Implementation of Scheme

4.1 Lodgement of Court order

Following approval of this Scheme by the Court pursuant to section 411(4)(b) Corporations Act, Target will, as soon as is reasonably practicable, lodge with ASIC an office copy of the Court order approving this Scheme pursuant to section 411(10) Corporations Act.

4.2 Transfer of Scheme Shares

On the Implementation Date, but subject to Bidder having actually provided the Scheme Consideration for the Scheme Shares in the manner contemplated in clause 5.2:

(a) all of the Scheme Shares, together with all rights and entitlements attaching to the Scheme Shares at the Implementation Date, will be transferred to Bidder without the need for any further act by any Scheme Shareholder (other than acts performed by Target as attorney and agent for Scheme Shareholders under clause 9.1) by:
(i) Target delivering to Bidder a duly completed Scheme Share Transfer executed on behalf of the Scheme Shareholders for execution by Bidder; and
(ii) Bidder duly executing the Scheme Share Transfer and delivering it to Target for registration; and
(b) Target will enter the name and address of Bidder in the Target Register as the holder of all of the Scheme Shares as soon as practicable following receipt of the duly executed Scheme Share Transfer from Bidder under clause 4.2(a)(ii).

4.3 Entitlement to Scheme Consideration

On the Implementation Date, in consideration for the transfer to Bidder of the Scheme Shares, each Scheme Shareholder will be entitled to receive from Bidder the Scheme Consideration in respect of each of their Scheme Shares and Bidder must procure that Bidder provides the Scheme Consideration in accordance with clause 5.

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4.4 Fractional entitlements

If a fractional entitlement to a Bidder Share arises from the calculation of the Scheme Consideration payable to a Scheme Shareholder in respect of its Scheme Shares, then the fractional entitlement to a Bidder Share will be rounded to the nearest whole number and will be rounded up if the fractional entitlement is one half.

4.5 Shareholding splitting or division

If Target and Bidder are of the opinion that a Scheme Shareholder has been a party to a shareholding splitting or division in an attempt to gain an advantage by reference to the rounding provided for in the calculation of each Scheme Shareholder's entitlement to the Scheme Consideration, then Target and Bidder reserve the right to round the entitlement of such holdings so as to provide only the number of Bidder Shares that would have been received but for the splitting or division.

5 Provision of Scheme Consideration

5.1 Scheme Consideration

The Bidder Shares to be issued by the Bidder under this Scheme will be duly and validly issued, fully paid and will, upon their issue, rank equally in all respects with all other Bidder Shares then on issue.

5.2 Obligations to provide the Scheme Consideration

The obligation of Bidder to provide the Scheme Consideration to the Scheme Shareholders in respect of each Scheme Share registered in the name of the Scheme Shareholders will be satisfied by Bidder:

(a) on the Implementation Date, passing a resolution of directors and doing all other things necessary to validly issue the Bidder Shares and entering the name and Registered Address of that Scheme Shareholder in the Bidder Register as the holder of the Bidder Shares issued to that Scheme Shareholder;
(b) within five Business Days after the Implementation Date, dispatching or procuring the dispatch to that Scheme Shareholder by pre-paid post to their Registered Address, of an uncertificated holding statement in the name of that Scheme Shareholder representing the Bidder Shares issued to them under the Scheme; and
(c) making an application to ASX for the quotation of the Bidder Shares on ASX in accordance with clause 6.

5.3 General

Each Scheme Shareholder to whom Bidder Shares are to be issued under this Scheme agrees:

(a) to become a member of Bidder for the purposes of section 231 Corporations Act;
(b) to have their name and Registered Address entered in the Bidder Register; and
(c) to be bound by the constitution of Bidder as in force from time to time in respect of the Bidder Shares.

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5.4 Binding instruction or notification

(a) Except for a Scheme Shareholder's tax file number, any binding instruction or notification between a Scheme Shareholder and Target relating to Scheme Shares at the Scheme Record Date (including, without limitation, any instructions relating to payment of dividends or to communications from Target) will from the Scheme Record Date be deemed to be a similarly binding instruction or notification to, and accepted by, Bidder in respect of the Bidder Shares issued to the Scheme Shareholder until that instruction or notification is revoked or amended in writing addressed to Bidder at the Bidder Share Registry.
(b) Any such instructions or notifications accepted by Bidder will apply to and in respect of Bidder Shares issued as part of the Scheme Consideration only to the extent that they are not inconsistent with the other provisions of this Scheme.

5.5 Joint holders

In the case of Scheme Shares held in joint names any uncertificated holding statements or certificates for Bidder Shares to be issued to Scheme Shareholders will record the joint holders as the registered holder of the Bidder Shares and will be forwarded to the holder whose name appears first in the Target Register at the Scheme Record Date.

6 Quotation of Bidder Shares

Bidder will use its best endeavours to procure that the Bidder Shares to be issued pursuant to this Scheme will be quoted on ASX:

(a) initially on a deferred settlement basis on and from the Business Day after the Effective Date (or, if Bidder Shares are subject to a trading halt on that day, on the first Business Day after the trading halt has ended); and
(b) on an ordinary settlement basis on and from the Business Day after the Implementation Date.

7 Dealings in Scheme Shares

7.1 Determination of Scheme Shareholders

(a) For the purpose of determining the persons that are Scheme Shareholders, dealings in Scheme Shares will only be recognised if registrable transfers or transmission applications in respect of those dealings are received on or before the Scheme Record Date at Target’s registered office.
(b) Target will register registrable transfers or transmission applications of the kind referred to in clause 7.1(a) by the Scheme Record Date.
(c) Target will not accept for registration, nor recognise for any purpose, any transfer or transmission application in respect of Scheme Shares received after the Scheme Record Date (other than the transfers contemplated by clause 4.2).
(d) If the Scheme becomes Effective, a holder of Scheme Shares (and any person claiming through that holder) must not dispose of or purport to agree to dispose of any Scheme Shares or any interest in them after the Effective Date and any such disposal will be void and of no legal effect whatsoever.

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7.2 Maintenance of Target Register

For the purpose of determining entitlements to the Scheme Consideration, Target will, until the Scheme Consideration has been provided, maintain or procure the maintenance of the Target Register in accordance with this clause 6. The Target Register in this form will solely determine entitlements to the Scheme Consideration.

7.3 Effect of certificates and holding statements

After the Scheme Record Date (other than statements of holding in favour of Bidder and its successors in title after the Implementation Date), all certificates and holding statements for the Scheme Shares will cease to have effect as documents of title. Subject to provision of the Scheme Consideration by Bidder and registration of the transfer to Bidder contemplated in clause 4.2, after the Scheme Record Date, each entry on the Target Register at the Scheme Record Date (other than entries in respect of Bidder and its successors in title) will cease to have any effect other than as evidence of an entitlement to the Scheme Consideration.

7.4 Information to be made available to Bidder

Target will procure that, as soon as reasonably practicable after the Scheme Record Date, details of the names, Registered Addresses and holdings of Scheme Shares of every Scheme Shareholder as shown in the Target Register at the Scheme Record Date are made available to Bidder in such form as Bidder or the Bidder Share Registry reasonably requires.

8 Dealing in Bidder Shares

8.1 Holding lock during Escrow Period

(a) Subject to clauses 8.4 and 8.5, Scheme Shareholders are deemed to have agreed as a fundamental condition of this Scheme and consented to the following matters in relation to the Scheme Consideration: (i) subject to clause 8.1(a)(iii), to the extent permitted by the ASX Settlement Operating Rules, a holding lock being placed on the Escrowed Shares during the Escrow Period on CHESS or any other register to prevent a Proper ASTC Transfer of the Escrowed Shares; - (ii) the Escrowed Shares being recorded in a sub position on the Bidder Register unless and until those Escrowed Shares are released from that sub-position in accordance with this clause 8; and (iii) Bidder procuring the removal of the holding lock referred to in clause 8.1(a)(i) applicable to the Escrowed Shares immediately after the expiry of the Escrow Period. (b) The holding lock placed on the Scheme Shareholders’ Bidder Shares will prevent the Scheme Shareholders from transferring or disposing those Bidder Shares during the Escrow Period other than as provided in this clause 8.

8.2 Release of holding lock

Subject to clauses 8.4, 8.5, 8.7 and 8.8, the holding lock placed on the Bidder Shares as described in clause 8.1 will be released on the expiry of the Escrow Period.

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8.3 Restrictions during Escrow Period

Subject to clauses 8.4 and 8.5, Scheme Shareholders will not be permitted, during the Escrow Period, to do any of the following:

(a) Deal, directly or indirectly, in any or all of the Escrowed Shares or Deal, directly or indirectly, in any interest or right in respect of any or all of the Escrowed Shares;

(b) create, or agree to create, a security interest or encumbrance over or affecting any or all of the Escrowed Shares; or

(c) do or omit to do any act which would have the effect of transferring effective ownership or control of any or all of the Escrowed Shares.

8.4 Takeovers

(a) If at any time:

(i) any person makes a takeover bid in respect of all of the ordinary shares of the Bidder under Chapter 6 of the Corporations Act; and

(ii) acceptances of that bid are received from the holders of 50% or more of the ordinary shares of the Bidder,

the Scheme Shareholders may deal in any or all of the Escrowed Shares during the Escrow Period in order to accept the takeover bid.

(b) If the takeover bid does not become unconditional, the escrow obligations in this clause 8 continue to apply to any Bidder Shares.

8.5 Schemes of arrangement

Scheme Shareholders may Deal in any or all of the Escrowed Shares during the Escrow Period in order to effect the transfer or cancellation of the Escrowed Shares as part of a merger by scheme of arrangement under Part 5.1 of the Corporations Act, provided that any Escrowed Shares which are the subject of the scheme of arrangement will remain subject to the escrow arrangements set out in this clause 8.5 if the merger by scheme of arrangement does not take effect.

8.6 Application of Listing Rules

To the extent of any inconsistency between this clause 8 and the Listing Rules, the Listing Rules prevail.

8.7 Other permitted Dealings

Scheme Shareholders may Deal in any or all of the Escrowed Shares during the Escrow Period to the extent that the Dealing involves the transfer of any or all of the Escrowed Shares to a Permitted Transferee, provided that:

(a) the transferee of the Escrowed Shares enters into a deed containing terms to the same effect as the provisions of this clause 8, prior to any transfer;

(b) where such a transferee ceases to be a Permitted Transferee, it will immediately notify the Bidder of such event; and

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(c) where such a transferee ceases to be a Permitted Transferee (other than a Permitted Transferee under paragraphs (b) to (d) of the definition of Permitted Transferee) it shall within five days of such event transfer any Escrowed Shares transferred to the Scheme Shareholder who transferred the Bidder Shares to the Permitted Transferee.

8.8 Release by the Bidder board

The Bidder board, in its absolute discretion, may release a Scheme Shareholder from all or part of the escrow restriction in clause 8 by written notice to the Scheme Shareholder.

89 General Scheme provisions

8.19 .1 Appointment of Target as agent and attorney

Each Scheme Shareholder, without the need for any further act, irrevocably appoints Target and each of the directors and secretaries of Target, jointly and severally, as its agent and attorney for the purpose of executing any document or doing any other act necessary or desirable to give full effect to this Scheme and the transactions contemplated by it.

8.29 .2 Scheme Shareholders' consent

Each Scheme Shareholder consents to Target doing all things and executing all deeds, instruments, transfers and other documents as may be necessary or desirable to give full effect to this Scheme and the transactions contemplated by it.

8.39 .3 Agreement by Scheme Shareholders

Each Scheme Shareholder agrees to the transfer of all of their Scheme Shares to Bidder in accordance with the terms of this Scheme.

8.49 .4 Warranty by Scheme Shareholders

Each Scheme Shareholder is deemed to have warranted to Bidder, and is deemed to have authorised Target to warrant to Bidder as agent and attorney for the Scheme Shareholder by virtue of this clause, that:

(a) all of their Scheme Shares (including any rights and entitlements attaching to those shares) transferred to Bidder under this Scheme will, on the date of the transfer, be fully paid and free from all mortgages, charges, liens, encumbrances, pledges, security interests and other interests of third parties of any kind, whether legal or otherwise (but acknowledging that a security interest holder may potentially have an interest in the Scheme Consideration in accordance with the terms of such security interest); and
(b) subject to any restrictions in the terms of issue, they have the full power and capacity to sell and transfer their Scheme Shares (including any rights and entitlements attaching to those shares).

8.59 .5 Title to Scheme Shares

Subject to provision of the Scheme Consideration for the Scheme Shares in accordance with clause 5.2, on and from the Implementation Date and pending registration by Target of Bidder in the Target Register as the holder of all of the Scheme Shares, Bidder will be beneficially entitled to all of the Scheme Shares transferred to it under this Scheme.

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8.69 .6 Appointment of Bidder as sole proxy

(a) is deemed to have irrevocably appointed the Chairman of Bidder as their sole proxy and, where applicable, corporate representative, to attend shareholders' meetings of Target, exercise the votes attached to the Scheme Shares registered in their name and sign any shareholders' resolutions, whether in person, by proxy or by corporate representative;
(b) must not attend or vote at any shareholders' meetings of Target, or sign any resolutions, whether in person, by proxy or by corporate representative, other than in accordance with this clause 9.6; and
(c) must take all other actions in the capacity of the registered holder of Scheme Shares as Bidder directs.

Target undertakes in favour of each Scheme Shareholder that it will appoint the Chairman of Bidder as that Scheme Shareholder’s proxy or, where applicable, corporate representative, in accordance with this clause 9.6.

8.79 .7 Scheme alterations and conditions

If the Court proposes to approve this Scheme subject to any alterations or conditions, Target may, by its counsel or solicitors, and with the consent of Bidder, consent to those alterations or conditions on behalf of all persons concerned, including, for the avoidance of doubt, all Scheme Shareholders, provided that in no circumstances will Target be obliged to do so.

8.89 .8 Effect of Scheme

This Scheme binds Target and all Scheme Shareholders (including any Scheme Shareholders who do not attend the Scheme Meeting, do not vote at that meeting or vote against this Scheme) and, to the extent of any inconsistency and to the extent permitted by law, overrides the constitution of Target.

8.99 .9 Enforcement of Deed Poll

Target undertakes in favour of each Scheme Shareholder to enforce the Deed Poll against Bidder on behalf of and as agent and attorney for the Scheme Shareholders.

8.109 .10 No liability when acting in good faith

Neither Target nor Bidder, nor any of their respective officers, will be liable for anything done or omitted to be done in the performance of this Scheme in good faith.

8.119 .11 Notices

Where a notice, transfer, transmission application, direction or other communication referred to in this Scheme is sent by post to Target, it will not be deemed to be received in the ordinary course of post or on a date and time other than the date and time (if any) on which it is actually received at Target's registered office.

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8.129 .12 Further assurances

Subject to clause 9.7, Target will execute all deeds, instruments, transfers and other documents and do all acts and things (on its own behalf and on behalf of each Scheme Shareholder) as may be necessary or desirable to give full effect to this Scheme and the transactions contemplated by it.

8.139 .13 Costs and stamp duty

Bidder will pay any stamp duty payable on the transfer by Scheme Shareholders of the Scheme Shares to Bidder.

91 0 Governing law and jurisdiction

(a) This Scheme is governed by the laws of Queensland.
(b) Each party irrevocably and unconditionally:
(i) submits to the non-exclusive jurisdiction of the courts of Queensland; and
(ii) waives, without limitation, any claim or objection based on absence of jurisdiction or inconvenient forum.

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Annexure C

New notice of Scheme Meeting

Notice of Court ordered Scheme Meeting of redeemable preference shareholders of Associated Advisory Practices Ltd ACN 118 000 150 (AAP)

Notice is given that, by an order of the Federal Court of Australia ( Court ), the meeting of redeemable preference shareholders of AAP that was to be held on 12 August 2013 will be reconvened at Level 2, Fawkner Centre, 499 St. Kilda Road, Melbourne, Victoria 3004 on 1 October 2013 at 10.00am ( Scheme Meeting ).

Business

The purpose of the Scheme Meeting is to consider, and if thought fit, to agree to a modification to a scheme of arrangement (with or without modification) ( Scheme ) between AAP and the holders of redeemable preference shares in AAP ( AAP Shares ) as at the Record Date ( AAP Shareholders ) under part 5.1 of the Corporations Act 2001 (Cth) ( Corporations Act ) in the manner described in the Supplementary Scheme Booklet accompanying this notice of meeting, and then to consider the revised scheme of arrangement ( Revised Scheme ).

To assist you in making an informed voting decision, further information on the Scheme is set out in the Scheme Booklet previously provided and the Supplementary Scheme Booklet accompanying this notice. A copy of the Revised Scheme is set out in Annexure B to the Supplementary Scheme Booklet and its purpose and effect is explained throughout that document.

Terms used in this notice, including in the resolution set out below, have the same meaning as set out in the glossary of the Scheme Booklet previously provided or in the Supplementary Scheme Booklet which accompanies this notice.

Resolutions

To consider and, if thought fit, to pass the following resolutions:

1 That the scheme of arrangement proposed between Associated Advisory Practices Ltd and holders of its fully paid AAP Shares, as set out in and more particularly described in the Scheme Booklet dated 19 July 2013 is amended by changing the definition of Implementation Date and Sunset Date, and by including a new clause 8 (and accompanying definitions) dealing with the escrow arrangements to apply to the shares to be issued to AAP Shareholders as the scheme consideration, on the terms set out in Annexure B of the Supplementary Scheme Booklet dated 18 September 2013.
2 That, under section 411 of the Corporations Act, the scheme of arrangement proposed to be entered into between Associated Advisory Practices Ltd and holders of its fully paid AAP Shares, designated the Revised Scheme, is approved and the board of directors of AAP is authorised to agree to those modifications or conditions which are thought appropriate by the Court and, subject to approval of the Revised Scheme by the Court, to implement the Revised Scheme with any of those modifications or conditions.

The Revised Scheme is subject to the approval of the Court under section 411(4)(b) of the Corporations Act.

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AAP intends to apply to the Court for approval of the Revised Scheme, subject to the above resolutions being passed by the requisite majorities at the Scheme Meeting.

Requisite majority

In accordance with section 411(4)(a)(ii) of the Corporations Act, this resolution must be passed by a majority in numbers of holders of AAP Shares present and voting (either in person or by proxy) and representing at least 75% of the votes cast on the resolution (either in person or by proxy). The vote will be conducted by poll.

Court approval

The Revised Scheme (with or without modification) is subject to the approval of the Court.

Dated:

Linda Kaddatz Company Secretary

Notes

Voting entitlement

AAP Shares will be taken to be held by the persons who are the registered holders at 10.00am on 29 September 2013. All AAP Shareholders at that time are entitled to vote at the Scheme Meeting.

How to vote

AAP Shareholders entitled to vote at the Scheme Meeting can vote:

(a) by attending the meeting and voting in person;
(b) by appointing an attorney to attend the meeting and vote on their behalf, or, in the case of corporate shareholders, a corporate representative to attend the meeting and vote on its behalf; or
(c) by appointing a proxy to attend and vote on their behalf in their place, using the proxy form accompanying this notice of Scheme Meeting.

Voting in person (or by attorney or corporate representative)

AAP Shareholders or their attorneys who plan to attend the Scheme Meeting should arrive at the venue by 9.00am on 1 October 2013 so that shareholdings may be checked against the register and attendances noted. Attorneys should bring with them the original or a certified copy of the power of attorney under which they have been authorised to attend and vote at the meeting.

To vote in person at the Scheme Meeting, a corporation which is an AAP Shareholder may appoint an individual to act as its representative. The appointment must comply with the requirements of section 250D of the Corporations Act. The representative should bring to the meeting evidence of their appointment, including the authority under which it is signed.

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Voting by proxy

1 A proxy form accompanies this notice of Scheme Meeting.
2 An AAP Shareholder has a right to appoint a proxy.
3 The proxy need not be an AAP Shareholder.
4 An AAP Shareholder entitled to cast two or more votes may appoint two proxies to attend and vote for them. If you want to appoint two proxies, an additional proxy form will be supplied by AAP on request. Where two proxies are appointed, both forms should be completed with the nominated proportion or number of votes each proxy may exercise. Otherwise each proxy may exercise half of the votes.
5 Proxy forms must be signed by the AAP Shareholder or the AAP Shareholder’s attorney. If the AAP Shareholder is a corporation, the proxy form must be signed by two directors or by a director and a secretary, or if it is a proprietary company that has a sole director who is also the sole secretary, by that director, or under hand of its attorney or duly authorised officer. Otherwise, the relevant authority (e.g. in the case of proxy forms signed by an attorney, the power of attorney) must either have been exhibited previously to AAP or be enclosed with the proxy form.
6 The proxy form sent to you with this notice of Scheme Meeting should be used for the Scheme Meeting. To be effective, the proxy form must be sent, delivered or faxed to:

Post or deliver to: Associated Advisory Practices Ltd (attention Linda Kaddatz), Level 14, Corporate Centre One, Corner of Bundall Road and Slatyer Avenue, Bundall, Queensland 4217 Fax to: 07 5574 0190 (or if dialling from outside Australia 61-7- 5574 0190) Email to: [email protected] by: 10.00am on 29 September 2013

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Corporate directory

Directors

John Barry Smith Craig William Hargraves Soula Cargakis Jason Anthony Cutrupi John de Zwart

Company Secretary

Linda Kaddatz

Registered Office

Level 14 Corporate Centre One Cnr Bundall Road & Slatyer Avenue Bundall Qld 4217

Lawyers

McCullough Robertson Lawyers

Auditors

Ernst & Young

Web Site

www.aapgroup.com.au

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Supplementary Scheme Booklet

Associated Advisory Practices (No 2) Ltd ACN 126 371 346

For the acquisition by Centrepoint Alliance Limited ACN 052 507 507 ( CAF ) of all of the Redeemable Preference Shares in Associated Advisory Practices (No 2) Ltd ACN 126 371 346 ( AAP2 )

For the scheme of arrangement between AAP2 and the AAP2 Shareholders.

The Non-Executive Directors continue to recommend that, in the absence of a superior proposal, AAP2 Shareholders vote in favour of the Scheme. The Independent Expert has maintained that the Scheme is fair and reasonable and therefore in the best interests of the AAP2 Shareholders.

Important Note:

Legal Adviser McCullough Robertson Lawyers

Revised key dates for AAP2 Shareholders ---------------------------------------------------------------- 3	Revised key dates for AAP2 Shareholders ---------------------------------------------------------------- 3	Revised key dates for AAP2 Shareholders ---------------------------------------------------------------- 3
Important notices ------------------------------------------------------------------------------------------- 4
Letter from the Non-Executive Directors of AAP2 ------------------------------------------------------- 6
Answers to additional key questions ---------------------------------------------------------------------- 8
How to vote -------------------------------------------------------------------------------------------------- 9
Supplementary Disclosure --------------------------------------------------------------------------------- 11
1	Value	of Scheme Consideration and Independent Expert’s conclusion ----------------------11
	1.1	Independent Expert’s opinion 11
	1.2	Change in value of Scheme Consideration 11
	1.3	Summary of changes to the original Independent Expert’s Report 11
2	Further information about AAP2 -----------------------------------------------------------------12
	2.1	AAP2 financial information 12
3	Further information about CAF -------------------------------------------------------------------13
	3.1	Further information about PIS 13
	3.2	CAF financial information 14
	3.3	CAF condensed consolidated income statement for the financial years ended 30 June 2012
		and 30 June 2013 15
	3.4	CAF condensed consolidated balance sheet for the financial years ended 30 June 2012 and 30
		June 2013 16
	3.5	CAF capital structure 17
	3.6	Listed disclosing entity 17
4	Further information about Post Scheme CAF Group -------------------------------------------17
	4.1	Post Scheme CAF Group consolidated balance sheet 17
5	Additional information ----------------------------------------------------------------------------20
	5.1	Amendments to Implementation Deed 20
	5.2	Amendments to Scheme 20
	5.3	Deed Poll 21
	5.4	Status of conditions 21
	5.5	Consents to be named 21
	5.6	CAF directors’ intentions 21
	5.7	Lodgement of this Supplementary Scheme Booklet 22
	5.8	No unacceptable circumstances 22
	5.9	CAF share price information 22

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5.10 Other material information	22
6 Glossary --------------------------------------------------------------------------------------------23
Annexure A --------------------------------------------------------------------------------------------------	24
Revised Independent Expert’s Report	24
Annexure B --------------------------------------------------------------------------------------------------	25
Revised Scheme	25
Annexure C --------------------------------------------------------------------------------------------------	26
New notice of Scheme Meeting	26
Corporate directory ----------------------------------------------------------------------------------------	29

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Revised key dates for AAP2 Shareholders

The Scheme Meeting of AAP2 Shareholders will now be held at the later of 11.00am and 10 minutes after the close of the AAP scheme meeting on 1 October 2013 at Level 2, Fawkner Centre, 499 St. Kilda Road, Melbourne, Victoria 3004 where voting on the resolution to approve the Scheme will take place. This is the same Scheme Meeting that was originally scheduled for 12 August 2013, which was postponed by an order of the Court.

Event	Date*
Date and time for deciding eligibility to vote at	29 September 2013 at 11.00am
Scheme Meeting
Last date and time to lodge proxies for Scheme Meeting	29 September 2013 at 11.00am
Scheme Meeting (which is to be reconvened on 10 days	1 October 2013 at the later of 11.00am
notice to AAP2 Shareholders, by order of the Court)	and 10 minutes after the close of the
	AAP scheme meeting
Second Court Date	4 October 2013
Effective Date for the Scheme (transfers of AAP2 Shares will	4 October 2013
not be registered after this date)
Record Date (AAP2 Shareholders on the register at 8.00pm	11 October 2013
on this date will be entitled to the Scheme Consideration)
Implementation Date	14 October 2013
Payment of the Scheme Consideration (issue of CAF Shares	14 October 2013
to AAP2 Shareholders)
Trading of CAF Shares Commences	16 October 2013

All dates following the Scheme Meeting are indicative only and are subject to change. All times referred to in this Scheme Booklet are Queensland times unless stated otherwise.

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Important notices

This Supplementary Scheme Booklet

A copy of the Scheme Booklet that was sent to AAP2 Shareholders on 19 July 2013 is available from AAP2’s Company Secretary upon request.

Responsibility for information

The AAP2 Information in this Supplementary Scheme Booklet has been provided by, and is the responsibility of, AAP2. Neither CAF nor AAP2’s advisers assume any responsibility for the accuracy or completeness of the AAP2 Information.

The CAF Information in this Supplementary Scheme Booklet has been provided by, and is the responsibility of, CAF. Neither AAP2 nor its advisers assume any responsibility for the accuracy or completeness of the CAF Information.

The Independent Expert has prepared the Revised Independent Expert’s Report in Annexure A. None of AAP2, CAF or their advisers assumes any responsibility for the accuracy or completeness of the Revised Independent Expert’s Report. However, AAP2 has given factual information that the Independent Expert has relied on in preparing the Revised Independent Expert’s Report. The accuracy and completeness of that information is the responsibility of AAP2.

(a) has formed a view as to the merits of the proposed Scheme or as to how the AAP2 Shareholders should vote (on this matter the AAP2 Shareholders must reach their own decision); or
(b) has prepared, or is responsible for, the content of the Scheme Booklet, which forms the explanatory statement attached to the Notice of Scheme Meeting or this Supplementary Scheme Booklet.

The Court’s order for the convening of the Scheme Meeting is not an endorsement by the Court of the Scheme. On these matters the AAP2 Shareholders must reach their own decision.

Disclosure about forward looking statements

Certain statements in this Supplementary Scheme Booklet relate to the future. Those statements may not be based on historical facts. They may reflect the current expectations of AAP2 or, for the CAF Information, CAF about future events or results. Those statements involve known and unknown risks, uncertainties, assumptions and other factors that may cause the actual events or results to differ materially from the statements. Deviations as to future conduct, results, performance and achievements are both normal and expected. None of AAP2 nor CAF, their respective directors, officers or advisers, or any other person gives any representation, assurance or guarantee that the events or outcomes expressed or implied in any forward looking statement in this document will actually occur. You are cautioned against relying on any such statements.

ASIC involvement

A copy of this Supplementary Scheme Booklet has been given to ASIC. ASIC takes no responsibility for the content of this Supplementary Scheme Booklet.

Important Notice associated with Court order under section 411(1) of the Corporations Act

At the First Court Hearing on 15 July 2013, the Court ordered AAP2 to convene a Scheme Meeting to be held on 12 August 2013 to consider and vote on the Scheme. The notice convening the Scheme Meeting is set out in Annexure E of the Scheme Booklet. At a further court hearing on 9 August 2013, the Court ordered that the Scheme Meeting be postponed and on 17 September 2013 the Court ordered that the Scheme Meeting be reconvened for 1 October 2013.

The fact that the Court has ordered that the Scheme Meeting be convened is no indication that the Court:

All subsequent written and oral forward looking statements attributable to AAP2 or CAF or any person acting on their behalf are qualified by this cautionary statement.

The forward looking statements included in this Supplementary Scheme Booklet are made at the date of this Supplementary Scheme Booklet. Subject to any continuing obligations under the Listing Rules (if applicable) or the Corporations Act, AAP2 and CAF do not give any undertaking to update or revise any such statements after the date of this Supplementary Scheme Booklet to reflect any change in expectations in relation to such statements or any change in events, conditions or circumstances on which any such statement is based.

Foreign selling restrictions

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any way constitute an offer of securities in any place in which, or to any person to whom, it would not be lawful to make such an offer.

Privacy and personal information

AAP2 will need to collect personal information in connection with the Scheme. The personal information may include the names, contact details, details of shareholdings of AAP2 Shareholders and contact details of persons appointed by AAP2 Shareholders as proxies, corporate representatives or attorneys at the Scheme Meeting. The collection of some of this information is required or authorised by the Corporations Act. AAP2 Shareholders who are individuals, and other individuals whose personal information is collected, have rights to access the personal information collected about them and can contact AAP2 by calling Linda Kaddatz on (07) 5574 0244 if they wish to exercise those rights.

The information may be disclosed to print and mail service providers, and to CAF, its related entities and their advisers in connection with the Scheme. If this information is not collected, AAP2 may be hindered in, or prevented from, conducting the Scheme Meeting or implementing the Scheme. AAP2 Shareholders who appoint an individual as their proxy, corporate representative or attorney to vote at a Scheme Meeting should inform that individual of these information matters.

Defined Terms

Capitalised terms used in this Supplementary Scheme Booklet have the meaning given to them in section 11 of the Scheme Booklet or as otherwise specified in this Supplementary Scheme Booklet.

Date

This Supplementary Scheme Booklet is dated 18 September 2013.

Queries

If you have any questions or require any further information, you can call Linda Kaddatz (AAP2 Company Secretary) on (07) 5574 0244 (9:00am to 5:00pm on weekdays) or email her at [email protected].

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Letter from the Non-Executive Directors of AAP2

18 September 2013

Dear AAP2 Shareholder

This Supplementary Scheme Booklet is an update to the Scheme Booklet dated 19 July 2013, and contains further information in relation to CAF’s offer to acquire all redeemable preference shares in the capital of AAP2 under a scheme of arrangement. If you have not received a copy of the Scheme Booklet or have lost it, you can request another copy from the Company Secretary.

The additional information in this Supplementary Scheme Booklet addresses the adjustment to the CAF consolidated FY13 results arising from the updated estimates of the potential client claims liabilities for CAF’s subsidiary, Professional Investments Services Pty Ltd ( PIS ), that were foreshadowed in the notice sent to all AAP2 Shareholders and announced to the ASX by CAF on 8 August 2013.

Given the lapse of time, the Board has also taken the opportunity to provide AAP2 shareholders with updated audited financial information in respect of both CAF and AAP2 set out in sections 2 to 4 of this Supplementary Scheme Booklet.

As a result of the above matters, the Independent Expert has reviewed its opinion provided in the Independent Expert’s Report in the Scheme Booklet and provided a revised Independent Expert’s Report ( Revised Independent Expert’s Report ). After taking into account the changes regarding CAF and AAP2 and the Scheme since the Independent Expert’s Report was provided for the Scheme Booklet, the Independent Expert has concluded that the value of the Scheme Consideration has changed from between $0.49 to $0.54 per AAP2 Share to $0.44 to $0.49 per AAP2 Share (noting however that the actual number of CAF Shares to be issued as the Scheme Consideration payable to AAP2 Shareholders has not changed).

Notwithstanding this change, the Independent Expert maintains that the Scheme is fair and reasonable and therefore in the best interests of AAP2 Shareholders. The Revised Independent Expert’s Report is set out in Annexure A of this Supplementary Scheme Booklet and should be read as a replacement to the Independent Expert’s Report provided with the Scheme Booklet. A summary of the Independent Expert’s considerations and the key changes in the Revised Independent’s Expert Report is set out in section 1.3 of this Supplementary Scheme Booklet.

Based on the conclusion of the Independent Expert and the other matters set out in the Scheme Booklet and this Supplementary Scheme Booklet, the Non-Executive Directors continue to recommend that AAP2 Shareholders vote in favour of the Scheme at the Scheme Meeting, in the absence of a superior proposal.

At the date of this Supplementary Scheme Booklet, the Board has not received a superior proposal.

The reasons for the Non-Executive Directors’ recommendation in favour of the Scheme have not changed. These reasons and other relevant considerations for AAP2 Shareholders are set out in section 2 of the Scheme Booklet.

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Action you should take

A Scheme Booklet dated 19 July 2013 containing all information relevant to the Scheme was sent to AAP2 Shareholders. Other than as outlined in this Supplementary Scheme Booklet, no other terms or conditions of the Proposal have changed. Shareholders are encouraged to read this Supplementary Scheme Booklet (including the Revised Independent Expert’s Report and Scheme), together with the Scheme Booklet, carefully in full and, if required, to seek their own investment or other professional advice.

You will need to submit a new proxy form (which accompanies this Supplementary Scheme Booklet) for the Scheme Meeting in order for your vote to be counted. Any proxy previously submitted will not be valid for the Scheme Meeting.

If you have any questions, you can contact Linda Kaddatz, AAP2 Company Secretary, by phone on (07) 5574 0244 (9:00am to 5:00pm on weekdays) or by email to [email protected].

Yours faithfully

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Jason Cutrupi

On behalf of the Non-Executive Directors of AAP2

Craig Hargraves

Barry Smith

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Answers to additional key questions

Why was the Scheme	The Scheme Meeting was postponed to allow the Board to assess and
Meeting postponed?	provide AAP2 Shareholders with further details on the adjustment to the
	CAF consolidated FY13 results arising from the updated estimates of the
	potential client claims liabilities for PIS. It has also allowed the Board to
	provide AAP2 Shareholders with updated audited financial information for
	CAF and AAP2.
What are the changes	The amendments to the Independent Expert’s report are summarised in
to the Independent	section 1.3. The Revised Independent Expert’s Report is set out as
Expert’s Report?	Annexure A.
Are there any changes	You will receive the same number of CAF Shares for your AAP2 Shares as
to the Scheme	was set out in the Scheme Booklet (i.e. 1.16 CAF Shares per AAP2 Share).
Consideration?	However, the value of the CAF Shares (determined by the Independent
	Expert) has changed from between $0.49 to $0.54 per AAP2 Share to
	$0.44 to $0.49 per AAP2 Share.
Has there been a	Yes, the Implementation Date is now expected to occur on 14 October
change to the	2013.
Implementation Date?
Are there any	There are a number of conditions precedent to the implementation of the
conditions required to	Scheme, which includes a condition that the AAP scheme is approved by
be satisfied before the	AAP shareholders. These are set out in section 9.2 of the Scheme Booklet.
Implementation Date?
What do the Directors	The Non-Executive Directors continue to recommend that you vote in
recommend?	favour of the Scheme, in the absence of a superior proposal. The
	Excluded Directors have a material interest in the Scheme and therefore
	refrain from making a recommendation.
What did the	The Independent Expert maintains that the Scheme is fair and reasonable
Independent Expert	and therefore in the best interests of AAP2 Shareholders.
conclude?
Can I vote?	All AAP2 Shareholders who are registered holders of AAP2 Shares at
	11.00am on 29 September 2013 are entitled to vote at the Scheme
	Meeting.
Why should I vote in	The Non-Executive Directors continue to recommend that you vote in
favour of the Scheme?	favour of the Scheme, in the absence of a superior proposal.
	The Independent Expert maintains that the Scheme is fair and reasonable
	and therefore in the best interests of AAP2 Shareholders.
	Other reasons why you may vote in favour of the Scheme are set out in
	section 2.1 of the Scheme Booklet.
Why might I vote	You may believe that the Scheme is not in the best interests of the AAP2
against the Scheme?	Shareholders. Also, you may not wish to become a shareholder of CAF.
	Other reasons why you may vote against the Scheme are set out in
	section 2.2 of the Scheme Booklet.
Who can help answer	If you have any questions, you can contact Linda Kaddatz, AAP2 Company
my questions?	Secretary, by phone on (07) 5574 0244 (9:00am to 5:00pm on weekdays)
	or by email [email protected] .

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How to vote

Scheme Meeting

The meeting originally scheduled for 12 August 2013 has been reconvened for 1 October 2013 (by order of the Court) and is to be held at the later of 11.00am and 10 minutes after the close of the AAP scheme meeting at Level 2, Fawkner Centre, 499 St. Kilda Road, Melbourne, Victoria 3004.

Those persons who are registered as AAP2 Shareholders on 29 September 2013 at 11.00am will be eligible to vote at the Scheme Meeting.

The resolution at the Scheme Meeting must be passed by:

(a) a majority in number (more than 50%) of AAP2 Shareholders, present and voting (in person or by proxy, attorney or corporate representative); and
(b) at least 75% of the votes cast at the Scheme Meeting (in person or by proxy, attorney or corporate representative).

If all other Conditions Precedent have been satisfied or waived, the Court will then be asked to approve the Scheme.

What should you do?

1 Read this Supplementary Scheme Booklet and the Scheme Booklet carefully.
2 If you have any questions, you can contact Linda Kaddatz, AAP2 Company Secretary, by phone on (07) 5574 0244 (9:00am to 5:00pm on weekdays) or by email at [email protected].
3 Exercise your right to vote in person or by completing the revised proxy form accompanying this Supplementary Scheme Booklet. You will need to submit a new proxy form for the Scheme Meeting in order for your vote to be counted.
4 The Non-Executive Directors believe the Scheme is a matter of importance for all AAP2 Shareholders and therefore urge you to vote.

Voting in person

If you intend to vote in person (including by attorney or corporate representative), you should arrive at the venue by 10.00am on 1 October 2013 so that your shareholding may be checked against the register and your attendance noted. Attorneys should bring with them the original or a certified copy of the power of attorney under which they have been authorised to attend and vote at the meeting.

Voting by proxy

A revised proxy form accompanies this Supplementary Scheme Booklet. You may appoint a proxy. The proxy need not be an AAP2 Shareholder. You or your attorney must sign the proxy form. If you are a corporation, the proxy form must be signed by two directors or by a director and a secretary or, for a proprietary company that has a sole director who is also the sole secretary, by that director, or by its

25524839v2 | Supplementary scheme booklet

The duly signed proxy form and the original or a certified copy of any relevant authority (if not exhibited previously to AAP2) must be received by AAP2 no later than 11.00am Queensland time on 29 September 2013. Your proxy form will not be valid unless it is actually received by AAP2 before that time and date.

You must return your proxy form to AAP2 by emailing it in unalterable form (e.g. PDF file format), posting it in the reply paid envelope provided (for use in Australia) or by delivering or faxing your proxy form to:

form to:
Post or deliver to:		Associated Advisory Practices (No 2) Ltd (attention Linda Kaddatz), Level 16, Corporate Centre One, Corner of Bundall Road and Slatyer Avenue, Bundall, Queensland4217
Fax to:		0755740190 (or ifdiallingfromoutsideAustralia +61-7-55740190)
Email to:		[email protected]

What happens if you have already submitted a proxy form?

Any proxy form (which accompanied the Scheme Booklet) previously submitted to AAP2 will no longer be valid. You will need to submit a new proxy form which accompanies this Supplementary Scheme Booklet.

What happens if you have not yet submitted a proxy form?

Intention of Chairman

The Chairman intends to vote proxies for which he is appointed as proxy, as follows:

(a) to vote in favour of the resolution all directed proxies received in favour of the resolution proposed in relation to the Scheme;
(b) to vote against the resolution all directed proxies received against the resolution proposed in relation to the Scheme; and
(c) to vote in favour of the resolution all undirected proxies received in relation to the Scheme.

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Supplementary Disclosure

1 Value of Scheme Consideration and Independent Expert’s conclusion

1.1 Independent Expert’s opinion

The Independent Expert has maintained that the Scheme is fair and reasonable and therefore in the best interests of the AAP2 Shareholders.

The Revised Independent Expert’s Report is set out as Annexure A.

1.2 Change in value of Scheme Consideration

As set out in the Revised Independent Expert’s Report, the Independent Expert has concluded that the value of the Scheme Consideration has changed from between $0.49 to $0.54 per AAP2 Share to $0.44 to $0.49 per AAP2 Share (noting however that the actual number of CAF Shares to be issued as the Scheme Consideration payable to AAP2 Shareholders has not changed).

The Independent Expert has valued AAP2 in the range of nil to $0.23 per AAP2 Share. This is a change to the previous valuation of AAP2 shares which was in the range of nil to $0.21.

1.3 Summary of changes to the original Independent Expert’s Report

Shareholders are encouraged to read the Revised Independent Expert’s Report carefully and in full. However, AAP2 notes that the findings of the Independent Expert have not changed materially. Key changes are as follows:

(a) As noted in section 1.2 above, the Independent Expert has changed its assessment of the value of the Scheme Consideration (to between $0.44 and $0.49 per AAP2 Share).
(b) The Revised Independent Expert’s Report has been prepared with reference to audited FY13 results for AAP2 and CAF (rather than to management accounts for the period from 1 January 2013 and forecast results for May and June 2013). The audited financial results identify certain changes as against forecasts (e.g. in relation to the AAP2 management fee arrangements). However, on a normalised basis there has not been a material change to the results (see section 5.7.1 of the Revised Independent Expert’s Report).
(c) The Revised Independent Expert’s Report, at section 5.6.4, includes further commentary in relation to the legal claims provisioning for PIS. This commentary reflects the increase of approximately $4 million in the PIS claims provision. Further details in relation to this provision are set out in section 3.1 of this Supplementary Scheme Booklet.
(d) Section 3 (industry overview) of the Revised Independent Expert’s Report has been updated to reflect the Independent Expert’s regard to new industry commentary (in a ‘post-FoFA’ context) and in view of updated expectations for 2014 to 2015.
(e) The comparable industry multiples have increased to reflect the Independent Expert’s regard to recently released results for FY13 for potentially comparable companies. For example, the comparable trading multiple has changed from a range of 8.5 to 9.0 times, to 9.0 to 9.5 times (at section 7.2.4).

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2 Further information about AAP2

2.1 AAP2 financial information

The table below sets out AAP2’s statement of comprehensive income for the financial years ended 30 June 2012 and 30 June 2013:

Product margins revenue		Year Ended 30 Jun 2013 Audited $ Year Ended 30 June 2012 Audited $
		2,728,659 2,139,903
Product margins paid		(328,257) (292,914)
Net product margins		2,400,402 1,846,989
Audit fees		(7,410) (1,771)
Directors fees		(7,500) (7,500)
Management fee		(1,993,739) (738,796)
Other expenses		(5,534) (1,396)
Professional fees		(151,254) (11,634)
Results from operating activities		234,965 1,085,892
Financial income		10,690 24,931
Profit before tax		245,655 1,110,823
Income tax expense		(73,525) (333,683)
Profit for theyear		172,130 777,140

Other comprehensive income Other comprehensive income for the year, net of income tax Total comprehensive income for the year
		- -

		172,130 777,140

The balance sheet of AAP2 as at 30 June 2013 and 30 June 2012, extracted from the audited financial statements for the year ended 30 June 2013, is set out below:

	As At 30 June 2013 Audited $	As At 30 June 2012 Audited $

Assets
Cash and cash equivalents	222,835	484,984
Trade and other receivables	960,707	866,364
Tax Assets	88,992	-
Total current assets	1,272,534	1,351,348

Deferred tax assets	32,600	1,252
Total non current assets	32,600	1,252
Total assets	1,305,134	1,352,600

Liabilities
Trade and otherpayables	735,087	307,377
Current tax liabilities	-	252,232
Total current liabilities	735,087	559,609
Total liabilities	735,087	559,609

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Net assets	570,047 792,991	570,047 792,991

Equity
Share capital	1	1
Retained earnings	570,046 792,990
Total equity	570,047	792,991

Please refer to AAP2’s financial statements for the year ended 30 June 2012 and 30 June 2013 for details on AAP2’s accounting policies and the accompanying notes to the accounts. Copies of these statements are available by contacting Linda Kaddatz, by phone on (07) 5574 0244 (9.00am and 5.00pm on weekdays) or by email at [email protected].

Within the knowledge of the Board, and other than as disclosed in the Scheme Booklet and this Supplementary Scheme Booklet, the financial position of AAP2 has not materially changed since 30 June 2013.

Share capital during 2013

The table below sets out updated details for the Redeemable Preference Shares and A class redeemable preference shares on issue as at 30 June 2012 and 30 June 2013.

No. of Shares Start of period Issued Redeemed End of period Cost of Shares Start of period Issued Redeemed End of period No. of Shares*	Redeemable preference shares 'A' class shares Total 30-Jun-13 30-Jun-12 30-Jun-13 30-Jun-12 30-Jun-13 30-Jun-12 1,531,577 1,102,638 4,000,000 4,000,000 5,531,577 5,102,538 468,112 527,103 - 488,112 527,103 (217,670) (98,164) (1,821,979) - (2,039,649) (98,164)	Redeemable preference shares 'A' class shares Total 30-Jun-13 30-Jun-12 30-Jun-13 30-Jun-12 30-Jun-13 30-Jun-12 1,531,577 1,102,638 4,000,000 4,000,000 5,531,577 5,102,538 468,112 527,103 - 488,112 527,103 (217,670) (98,164) (1,821,979) - (2,039,649) (98,164)
	1,782,019 1,531,577 2,178,021 4,000,000 3,960,040	5,531,577
	Redeemable preference shares 'A' class shares Total 30-Jun-13 30-Jun-12 30-Jun-13 30-Jun-12 30-Jun-13 30-Jun-12 - - - - - - - - - - - - - - - - - -
	- - - - -	-
	Redeemable preference shares 'A' class shares Total

Redeemable Preference Shares and A class redeemable preference shares are issued for nil consideration.

As set out in the Scheme Booket, CPW continues to hold one ordinary share and one Z class share in AAP2.

3 Further information about CAF

3.1 Further information about PIS

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3.2 CAF financial information

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3.3 CAF condensed consolidated income statement for the financial years ended 30 June 2012 and 30 June 2013

	Continuing Operations		Year Ended Year Ended
			30 Jun 2013 Audited 30 Jun 2012 Audited
			$’000 $’000
	Revenue
	Advice and financial product revenue		128,013 177,260
	Advice and financialproduct feespaid		(92,685) (131,975)
	Advice and financial product revenue (net of fees)		35,328 45,285
	Interestincome		14,207 14,201
	Other revenue/income		3,095 2,604
			52,630 62,090
	Expenses
	Borrowing expenses		(5,015) (5,451)
	Employee benefit expenses		(22,550) (24,753)
	Professional consultingfees		(4,313) (9,206)
	Client claims		(9,980) (16,736)
	Insurances		(2,066) (3,124)
	Property costs		(3,689) (4,216)
	Impairment of assets		(993) (1,635)
	Other general and administration expenses		(10,656) (11,494)
	Loss before tax		(6,632) (14,525)
	Income tax expense		(571) (2,774)
	Net loss for the period from continuing operations		(7,203) (17,299)
	Discontinued operations
	Loss aftertax fromdiscontinued operations		(85) -
	Net loss for the period		(7,288) (17,299)
	Other comprehensive income
	*Items that may be classified subsequently to profit and loss:*
	Foreigncurrency translation		1,456 16
	Total comprehensive loss for the period		(5,832) (17,283)

	Net loss attributable to:
	Owners ofthe parent		(7,781) (17,881)
	Non-controlling interests		493 582
	Net loss for the period		(7,288) (17,299)

	Total comprehensive loss attributable to:
	Owners of the parent		(6,325) (17,875)
	Non-controllinginterests		493 592
	Total comprehensive loss for the period		(5,832) (17,283)

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3.4 CAF condensed consolidated balance sheet for the financial years ended 30 June 2012 and 30 June 2013

		As at As at
		30 Jun 2013 Audited 30 Jun 2012 Audited
		$’000 $’000
Assets -Current
Cash and cash equivalents		9,352 14,621
Trade and other receivables		13,730 23,895
Interest bearing receivables		107,622 95,299
Otherassets		2,760 4,155
Current tax asset		225 -
Total current assets		133,689 137,970
Assets - Non-current
Trade and other receivables		92 562
Interest bearing receivables		557 1,044
Otherassets		1,119 1,950
Property, plant and equipment		1,193 1,593
Intangible assets andgoodwill		6,521 8,232
Deferred tax assets		7,052 7,297
Total non-current assets		16,534 20,678
Total Assets		150,223 158,648
Liabilities- Current
Trade and other payables		37,544 40,866
Interest bearingliabilities		71,656 64,990
Provisions		10,250 7,422
Current tax liability		121 247
Total current liabilities		119,571 113,525
Liabilities - Non-current
Trade and other payables		- 328
Interest bearingliabilities		90 253
Provisions		13,324 17,380
Total non-current liabilities		13,414 17,961
Total Liabilities		132,985 131,486
Net Assets		17,238 27,162

Equity
Contributed equity		24,809 28,675
Reserves		69 (1,405)
Accumulated losses		(7,913) -
Equity attributable to shareholders		16,965 27,270
Non-controlling interests		273 (108)
Total Equity		17,238 27,162

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3.5 CAF capital structure

3.6 Listed disclosing entity

03/09/2013 Investor Presentation - Annual Results 30 June 2013

02/09/2013 Appendix 4E & Annual Report Cover

30/08/2013 Full Year Statutory Accounts

08/08/2013 FY13 Claims Liability Results 02/08/2013 LTI - Managing Director & Executives

19/07/2013 Update on financial information in AAP Scheme Booklets

19/07/2013 Proposed acquisition of AAP - Scheme Booklets

4 Further information about Post Scheme CAF Group

4.1 Post Scheme CAF Group consolidated balance sheet

Basis of preparation

The pro forma balance sheet is based on the most recent audited balance sheets for AAP2 (extracted from the audited financial report for the year ended 30 June 2013) and CAF (extracted from the audited financial report for the year ended 30 June 2013) with a number of pro forma adjustments outlined below.

The pro forma balance sheet should be read in conjunction with other information contained in this Supplementary Scheme Booklet and the accounting policies of AAP2 and CAF as disclosed in their most recent financial reports.

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Pro forma balance sheet adjustments

(a) Impact of proposed scheme

The Proposal will result in CAF and CPW holding all the issued share capital in AAP2. The Scheme will have a material effect on control of AAP2.

The pro forma balance sheet assumes that CAF acquires all the non-controlling interest of both AAP and AAP2 at their values from the 30 June 2013 scheme transaction costs noted below.

(b) Transaction costs associated with the merger

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Consolidated Statement of financial position as at 30 June 2013

Assets				PRO FORMA GROUP
	CAF GROUP	JOURNAL	ACQUISITION
		REFERENCE	ADJUSTMENTS

	$’000		$’000	$’000

*Current*
Cash and cash equivalents	9,352			9,352
Trade and other receivables	13,730			13,730
Interest bearing receivables	107,622			107,622
Current taxasset	225			225
Other assets	2,760			2,760
Total current assets	133,689			133,689
*Non-current*
Trade and other receivables	92			92
Interest bearing receivables	557			557
Otherassets	1,119			1,119
Property, plant and equipment	1,193			1,193
Intangible assets and goodwill	6,521	a	1,555	8,076
Deferred tax assets	7,052	b	18	7,070
Total non-current assets	16,534		1,573	18,107
Total assets	150,223		1,573	151,796

Liabilities
*Current*
Trade and otherpayables	37,544	b	60	37,604
Interest bearing liabilities	71,656			71,656
Provisions	10,250			10,250
Current tax liability	121			121
Total current liabilities	119,571		60	119,631
*Non-current*
Trade and otherpayables	-			-
Interest bearing liabilities	90			90
Provisions	13,324			13,324
Total non-current liabilities	13,414			13,414
Total liabilities	132,985		60	133,045
Net assets	17,238		1,513	18,751
Equity
Contributed equity	24,809	a	1,697	26,506
Reserves	69			69
Retained earnings	(7,913)	b	(42)	(7,955)
Equity attributable to shareholders	16,965		1,655	18,620
Non-controlling interests	273	a	(142)	131
Total equity	17,238		1,513	18,751

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JOURNAL	JOURNAL	Dr	Cr
ADJUSTMENTS	REFERENCE	$’000	$’000
Intangible Assets & Goodwill	a	1,555
Non-controlling interest	a	142
Share Capital	a		1,697

To record scrip for scrip transaction:

3,193,574 AAP2 shares exchanged for 1.16 CAF shares at 28 cents per share and

1,782,019 AAP2 shares exchanged for 1.16 CAF shares at 28 cents per share

Retained Profit	b	42
Deferred Tax Asset	b	18
Accounts Payable	b		60

To record supplementary scheme transaction costs being $40k legal fees and $20k for Independent Expert Report

5 Additional information

5.1 Amendments to Implementation Deed

CAF and AAP2 have agreed to certain amendments to the Implementation Deed, as follows:

(a) AAP2 and CAF had committed to implement the Scheme on or before the Sunset Date (being 30 September 2013 or such other date as agreed by the parties). The parties have agreed to extend the Sunset Date to 31 October 2013 ( Revised Sunset Date ). If the Scheme is not effective by the Revised Sunset Date, either AAP2 or CAF may terminate the Implementation Deed in which case the Scheme will not proceed. The Revised Sunset Date has the effect of extending the exclusivity period for the Scheme.
(b) The Implementation Date has been amended from ‘the fifth Business Day following the Scheme Record Date’ to a ‘date no later than the fifth Business Day following the Scheme Record Date’. As identified in the revised timetable, it is intended that the Scheme will be implemented on the next Business Day after the Record Date.
(c) AAP2 and CAF have acknowledged that the reference to the Second Court Hearing Date is actually a reference to the third court hearing in relation to the Scheme, where final Court approval will be sought for the Scheme. The actual second court hearing, held on 17 September 2013, was to approve this Supplementary Scheme Booklet.

5.2 Amendments to Scheme

A copy of the Scheme agreed by AAP2 and CAF at the time of signing the Implementation Deed was provided in Annexure D of the Scheme Booklet. As a result of the postponement of the Scheme Meeting, the parties have agreed to amend the Scheme, as follows:

(a) To reflect the revised timetable, as a result of the postponement of the Scheme Meeting, by amending the definitions of the Implementation Date and Sunset Date, on the same terms as with the Implementation Deed (as set out above).

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(b) To include specific escrow provisions (for the avoidance of doubt) to reflect the arrangements set out in the Scheme Booklet, whereby the CAF Shares received by AAP2 Shareholders under the Scheme will be subject to escrow restrictions for up to 24 months from the Effective Date.

No other changes are proposed to the Scheme. A copy of the revised Scheme with the changes marked is set out in Annexures B of this Supplementary Scheme Booklet.

5.3 Deed Poll

5.4 Status of conditions

As at the date of this Supplementary Scheme Booklet, AAP2 is not aware of any circumstances which would cause the Conditions Precedent summarised in section 9.2 of the Scheme Booklet to not be satisfied.

5.5 Consents to be named

McCullough Robertson has given and has not withdrawn its consent to be named as legal adviser to AAP2 in the form and context in which it is named and has not withdrawn that consent before the date of this Supplementary Scheme Booklet. Other than in respect of those statements attributed to McCullough Robertson, McCullough Robertson has not authorised or caused the issue of this Supplementary Scheme Booklet, and has not made, or purported to make, any statement in this Supplementary Scheme Booklet.

5.6 CAF directors’ intentions

The CAF board’s present intention (recognising that this may change in due course) is to make no change other than in the normal course of business in relation to each of the following:

(a) the continuation of the business of AAP2;
(b) the use of the fixed assets of AAP2; or
(c) the future employment of the present employees of AAP2.

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Following the implementation of the Scheme, CAF intends to undertake an internal reorganisation pursuant to which the remaining shares in AAP2 (representing a 55% interest in AAP2) which are not subject to the Scheme and are held by CPW, a wholly owned Subsidiary of CAF, will be transferred to CAF. As a result of this internal reorganisation AAP2 will become a wholly owned Subsidiary of CAF.

5.7 Lodgement of this Supplementary Scheme Booklet

This Supplementary Scheme Booklet was given to ASIC on 6 September 2013.

5.8 No unacceptable circumstances

The Directors believe that the Scheme does not involve any circumstances in relation to the affairs of any AAP2 Shareholder that could reasonably be characterised as constituting ‘unacceptable circumstances’ for the purposes of section 657A of the Corporations Act.

5.9 CAF share price information

The latest recorded price before the date on which this document was lodged for registration was $0.31.

The highest recorded price during the 3 months immediately before the date this document was lodged for registration was $0.355 (17 June 2013).

The lowest recorded price during the 3 months immediately before the date this document was lodged for registration was $0.225 (3 July 2013).

5.10 Other material information

Other than as contained or referred to in the Scheme Booklet and this Supplementary Scheme Booklet there is no information material to the making of a decision by AAP2 Shareholders whether or not to vote in favour of the Scheme that is known to any Director and which has not previously been disclosed to AAP2 Shareholders.

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6 Glossary

AAP2 Information

CAF Information Implementation Date

means the information in this Supplementary Scheme Booklet, other than the CAF Information and the Revised Independent Expert’s Report in Annexure A.

means information in sections 3 and 4.

means the date stated in this Supplementary Scheme Booklet or such other date that is no later than the fifth Business Day following the Record Date.

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Annexure A

Revised Independent Expert’s Report

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when it counts

WMS Corporate Services Pty Ltd AFSL 418958 ABN 28 069 284 073

Suite 1401, Level 14, The Rocket 203 Robina Town Centre Drive Robina Qld 4226 PO Box 5287 Robina TC Qld 4230 PH +61 7 5556 3300 FAX +61 7 5556 3399

www.wmssolutions.com.au

6 September 2013

The Directors Associated Advisory Practices (No 2) Ltd Level 14, Corporate Centre One Cnr Bundall Road & Slatyer Ave BUNDALL QLD 4217

Dear Sirs,

Independent Expert’s Report

Introduction

On 20 June 2013, Centrepoint Alliance Limited (“CAF”) and Associated Advisory Practices (No 2) Ltd (“AAP2” or “the Company”) announced they had signed a Merger Implementation Deed (“MID”) to effect the acquisition of all the Redeemable Preference Shares (“RPS”) of AAP under a scheme of arrangement (“the Scheme”) .

Under the Scheme, each RPS holder will be entitled to consideration of 1.16 CAF Shares. If the Scheme becomes effective, on the Implementation Date, CAF will issue AAP shareholders 1.16 CAF shares for each RPS they hold.

Shares offered as part of this Scheme are subject to the following escrow periods:

50% restricted for 18 months; and
50% restricted for two years.

A Second scheme of arrangement is running in parallel with this proposed Scheme and involves a similar transaction whereby CAF is offering scrip consideration of 1.25 CAF shares for each RPS in Associated Advisory Practices Ltd (“AAP”) . The two schemes are interdependent. That is, one cannot proceed if the second scheme does not also proceed.

We note that on 8 August 2013, it was announced to the market that CAF results would be materially impacted by an increase in the provision for client claims as determined by the independent actuary. The AAP2 Scheme of Arrangement was adjourned so that consideration could be given to the revised results. This report reflects the revised financials and supercedes the report included in the Scheme Booklet announced to the market on 19 July 2013.

Associated Advisory Practices (No 2) Ltd Independent Expert’s Report & Financial Services Guide 6 September 2013

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Summary and opinion

In deriving our opinion we have considered:

Whether the value of a Scheme Share is higher or lower than the value of the consideration being offered by CAF under the Scheme;
Other qualitative factors which we believe represent either advantages or disadvantages to shareholders;
The likelihood of an alternative superior offer being made to shareholders; and
The alternatives available to shareholders.

We have summarised below our analysis in forming the above opinion.

Fairness

As detailed in section 2.2, in accordance with our basis of evaluation we have assessed whether or not the Scheme is fair to non-associated AAP2 shareholders with reference to:

The value of a Scheme Share (on a controlling basis); and
The value of the Scheme Consideration being 1.16 CAF shares for each Scheme Share held by AAP2 shareholders.

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The results of our analysis are summarised in the following table:

$	Low High
Value of Merged Entity Share Conv ersion ratio Value of Scheme Consideration	0.38 0.42 1.16 1.16
	0.44 0.49
Value of a Scheme Share	- 0.23

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----- Start of picture text -----

Value of Scheme
Share
Value of Scheme
Consideration
- 0.10 0.20 0.30 0.40 0.50 0.60
----- End of picture text -----

As indicated in the previous table, the value of the Scheme Consideration is higher than the assessed value range of a Scheme Share. Based on this, the Scheme is considered fair to AAP shareholders.

Reasonableness

We have considered, in section 9 of this Report, these commercial and qualitative factors which are summarised below:

Liquidity - AAP shareholders will receive shares in a listed entity;
The view of the AAP Board;
Escrow periods;
Transaction costs;
No alternative offers received;
AAP shareholders’ position if the Scheme is not approved;
FoFA implications;
Shareholder exit costs; and
Tax consequences.

After considering the matters detailed in the attached Independent Expert’s Report, in the opinion of WMS, the Scheme is in the best interests of non-associated AAP2 shareholders.

Associated Advisory Practices (No 2) Ltd Independent Expert’s Report & Financial Services Guide 6 September 2013

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Other matters

This Independent Expert’s Report constitutes general financial product advice only and has been prepared without taking into consideration the individual circumstances of shareholders. The decision of whether or not to accept the Scheme is a matter for each AAP2 shareholder to decide based on their own views of the value of AAP2 and CAF and expectations about future market conditions, AAP2 and CAF’s performance, risk profile and investment strategy.

The Directors and Management of AAP2 have prepared the Scheme Booklet and Supplementary Scheme Booklet (collectively the “Scheme Booklets”) in relation to this Scheme and as such AAP2 shareholders should have regard to these when considering the Scheme. Shareholders should also consider the taxation implications in relation to the Scheme as the Scheme Booklets contains only general information in relation to the taxation implications of the Scheme. If AAP2 shareholders are in doubt about the action they should take in relation to the Proposed Scheme, they should seek their own professional advice.

This Report has been prepared exclusively for AAP2 shareholders and therefore neither WMS nor any member, employee or consultant thereof undertakes any responsibility to any person, other than AAP2 shareholders, in respect of this Independent Expert’s Report, including any errors or omissions however caused.

WMS has prepared a Financial Services Guide (“FSG”) in accordance with the Corporations Act as set out in Section 10.

The opinion expressed in this letter reflects circumstances and conditions as at the date of this letter and must be read in conjunction with the full Independent Expert’s Report as attached.

Yours faithfully WMS Corporate Services Pty Ltd

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Aaron Lavell Director

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David Hayes Director

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1		The Scheme ..................................................................................................................................................................................... 9
	1.1	Background .............................................................................................................................................................................. 9
	1.2	Structure .................................................................................................................................................................................... 9
	1.3	Conditions Precedent ............................................................................................................................................................. 9
2		Purpose and scope ...................................................................................................................................................................... 10
	2.1	Purpose .................................................................................................................................................................................... 10
	2.2	Basis of Evaluation .................................................................................................................................................................. 10
	2.3	Control Transactions .............................................................................................................................................................. 11
	2.4	Qualifications .......................................................................................................................................................................... 11
	2.5	Limitations and reliance on information ............................................................................................................................. 12
	2.6	Consents .................................................................................................................................................................................. 13
3		Industry Overview.......................................................................................................................................................................... 14
	3.1	Financial Planning and Investment Advice in Australia .................................................................................................. 14
	3.2	Funds Management Services in Australia .......................................................................................................................... 18
	3.3	Future of Financial Advice (“FoFA”) ................................................................................................................................... 21
4		Profile of AAP2 ............................................................................................................................................................................... 24
	4.1	Background ............................................................................................................................................................................ 24
	4.2	Capital Structure .................................................................................................................................................................... 24
	4.3	Operations .............................................................................................................................................................................. 25
	4.4	Management and Personnel ............................................................................................................................................... 26
	4.5	Financial Performance .......................................................................................................................................................... 27
	4.6	Financial Position .................................................................................................................................................................... 29
5		Profile of CAF ................................................................................................................................................................................. 30
	5.1	Background ............................................................................................................................................................................ 30
	5.2	Capital Structure .................................................................................................................................................................... 31
	5.3	Directors and Executive Team ............................................................................................................................................. 32
	5.4	Share Trading .......................................................................................................................................................................... 32
	5.5	Profile of Insurance Premium Funding Division .................................................................................................................. 33
	5.6	Profile of Centrepoint Wealth Division ................................................................................................................................ 34
	5.7	Financial Performance .......................................................................................................................................................... 36
	5.8	Financial Position .................................................................................................................................................................... 39
6		Valuation methodology............................................................................................................................................................... 41
	6.1	Definition of market value .................................................................................................................................................... 41
	6.2	Common valuation methodologies ................................................................................................................................... 41
7		Our selected valuation approach – AAP2 ............................................................................................................................... 44
	7.1	Valuation approach – All AAP2 Equity ............................................................................................................................... 44
	7.2	Valuation – All AAP2 Equity .................................................................................................................................................. 45
	7.3	Surplus assets and liabilities ................................................................................................................................................... 50
	7.4	Summary of Value – All AAP2 Equity ................................................................................................................................... 51
	7.5	Allocation of Value to Redeemable Preference Shares ................................................................................................. 51
	7.6	Valuation cross check ........................................................................................................................................................... 53
8		Valuation of Merged Entity ......................................................................................................................................................... 54

Associated Advisory Practices (No 2) Ltd

Independent Expert’s Report & Financial Services Guide 6 September 2013

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	8.1	Approach ................................................................................................................................................................................ 54
	8.2	Future Maintainable Earnings (combined) ........................................................................................................................ 54
	8.3	Earnings multiples ................................................................................................................................................................... 55
	8.4	Surplus assets and liabilities of CAF ..................................................................................................................................... 56
	8.5	Summary of valuation analysis of CAF (inclusive of AAP and AAP2) ............................................................................ 58
	8.6	Valuation Crosscheck - ASX quoted price valuation....................................................................................................... 59
9		Evaluation of the Scheme ........................................................................................................................................................... 62
	9.1	Approach ................................................................................................................................................................................ 62
	9.2	Conclusion of valuation analysis ......................................................................................................................................... 62
	9.3	Qualitative factors (Advantages and Disadvantages) ................................................................................................... 62
	9.4	Other considerations ............................................................................................................................................................. 64
	9.5	Conclusion .............................................................................................................................................................................. 64
10		Financial services guide ............................................................................................................................................................... 66
11		Appendix 1 – Potentially Comparable Companies and Transactions ................................................................................. 69
	11.1	Potentially Comparable Companies.................................................................................................................................. 69
	11.2	Potentially Comparable Transactions ................................................................................................................................ 69
	11.3	Background ............................................................................................................................................................................ 70

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Glossary

AAP	Associated Advisory Practices Ltd
AAP2	Associated Advisory Practices (No 2) Ltd
AASB	Australian Accounting Standards
A-IFRS	Australian Equivalent to International Financial Reporting Standards
AFS Licence	Australian Financial Services Licence
ALCo	Australian Loan Company Pty Ltd
ASIC	Australian Securities and Investment Commission
ASX	Australian Stock Exchange
ATO	Australian Tax Office
CAF	Centrepoint Alliance Limited
CAGR	Compound Annual Growth Rate
CAPF	Centrepoint Alliance Premium Funding Pty Ltd
Corporations Act	Corporations Act 2001 (Cth).
CPW	Centrepoint Wealth Pty Ltd
DCF	Discounted cash flow
EBIT	Earnings Before Interest and Tax
EBITDA	Earnings Before Interest, Tax, Depreciation and Amortisation
FME	Future maintainable earnings
FPA	Financial Planning Association
FUA	Funds Under Advice
FUM	Funds Under Management
FY09a	Financial Year Ended 30 June 2009 – Audited
FY10a	Financial Year Ended 30 June 2010 – Audited
FY11a	Financial Year Ended 30 June 2011 – Audited
FY12a	Financial Year Ended 30 June 2012 - Audited
FY13a	Financial Year Ended 30 June 2013 – Audited
FY14f	Financial Year Ending 30 June 2014 – Unaudited Forecast
GFC	Global Financial Crisis

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IDL	Investment Diversity Ltd
IPF	Insurance Premium Funding
Mentor	Mentor Investment Services Limited
MID	Merger Implementation Deed
NAB	National Australia Bank
NCS	NAB Custodian Services
NPAT	Net Profit After Tax
NPBT	Net Profit Before Tax
PIS	Professional Investment Services Pty Ltd
RPS	Redeemable Preference Share
Scheme Share	Redeemable Preference Share in AAP2
the Company	Associated Advisory Practices (No 2) Ltd
the Scheme	Scheme of Arrangement
Ventura	Ventura Investment Management Ltd
WMS	WMS Corporate Services Pty Ltd t/as WMS Corporate Finance
$	Australian Dollar

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1 The Scheme

1.1 Background

Associated Advisory Practices (No 2) Ltd (“AAP2” or “the Company”) is an Australian unlisted public company which is primarily engaged in the provision of wholesale support services to Australian Financial Services licensees.

On 20 June 2013, AAP2 and CAF announced they had signed a Merger Implementation Deed (“MID”) to effect the acquisition of AAP2 Redeemable Preference Shares (“RPS”) under a scheme of arrangement (“the Scheme”) . CAF through a related body corporate already owns 100% of other share classes in AAP2.

1.2 Structure

CAF will acquire 100% of the RPS in AAP2 under the Scheme in consideration for the issue of 1.16 CAF Shares for each Scheme Share held at the Record Date. If the Scheme is implemented, on the Implementation Date, CAF will issue AAP shareholders 1.16 CAF shares for each AAP share which they hold.

CAF shares issued under this Scheme are subject to the following escrow periods:

50% restricted for 18 months; and
50% restricted for two years.

1.3 Conditions Precedent

Section 3.1 of the MID outlines a number of conditions that are required to be satisfied (or waived by one or other, or both together, of AAP2 and CAF), including:

This Independent Expert’s Report concludes that the Scheme is fair and reasonable and therefore in the best interests of AAP2 shareholders and this opinion does not change or withdraw prior to the scheme meetings;
No material adverse change to AAP2 or CAF;
The Court approves the Scheme in accordance with Section 411 (4)(b) of the Corporations Act ;
No prescribed occurrences occur in relation to AAP2 or CAF;
AAP2 Redeemable Preference Shareholder Approval;
All Regulatory Approvals being obtained;
AAP2 and CAF warranties being true and correct; and
AAP2’s Board does not change its recommendation in relation to the Scheme.

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The Scheme is conditional on the lodgement with ASIC of court orders approving the Scheme. Additionally, it is noted that a similar transaction involving CAF and Associated Advisory Practices Ltd (“AAP”) is running in parallel with this transaction. This second scheme of arrangement is interdependent with the Scheme before AAP2 shareholders. For clarity, one scheme cannot proceed in the absence of the other scheme also proceeding.

Full disclosure of all conditions precedent to the Scheme is included in the Scheme Booklets.

2 Purpose and scope

2.1 Purpose

The Directors of AAP2 have requested WMS Corporate Services Pty Ltd t/as WMS Corporate Finance (“WMS”) to prepare this Report pursuant to Section 411 of the Corporations Act and Part 3 of Schedule 8 of the Corporations Regulations .

2.2 Basis of Evaluation

RG 111 defines the term ‘fair and reasonable’ and draws a distinction between the meaning of the terms “fair” and “reasonable”. An offer is “fair” if the value of the consideration is equal to, or greater than, the value of the securities subject to the offer. The comparison must be made assuming 100% ownership of AAP2, irrespective of the percentage holding of the bidder or its associates.

RG 111 considers an offer to be reasonable if:

The offer is “fair”; or
Despite not being fair, the expert believes that there are sufficient reasons for security holders to accept the offer in the absence of any higher offer.

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RG 111 sets out some of the factors that an expert might consider in assessing the reasonableness of a proposal, including:

Whether the vendor is to receive a premium for control;
Whether the proposal offers a better long-term profit outlook (such as the incoming shareholder offering superior management skills);
Whether there are further transactions planned for the entity and if any are contemplated, whether those transactions are arm’s length transactions; and
Whether any proposed acquisition by way of sale, if approved, might deter the making of a takeover bid for the entity.

2.3 Control Transactions

This comparison reflects the fact that:

CAF is obtaining or increasing control of AAP2; and
AAP2 shareholders will be receiving scrip constituting minority interests in the combined entity.

On the basis of the above, we consider this Scheme to be a control transaction.

As this is a control transaction, when deriving the value of individual AAP2 shares and comparing it with the Scheme Consideration, we have included a premium for control in our valuation of AAP2.

2.4 Qualifications

WMS Corporate Services Pty Ltd holds an AFS Licence under the Corporations Act 2001 and is duly licensed to prepare a report of this nature. WMS provides a full range of Corporate Advisory Services and has advised on numerous corporate valuations, acquisitions, and restructures. Prior to accepting this engagement, WMS considered its independence with respect to AAP2 with reference to the RG 112 Independence of Expert.

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2.5 Limitations and reliance on information

The WMS report and opinion is based on economic, market and other conditions prevailing at the date of this report. Such conditions can change significantly over relatively short periods of time.

WMS has prepared this report on the basis of financial and other information provided by AAP2 and publicly available information. WMS has considered and relied upon this information. WMS has no reason to believe that any information supplied was false or that any material information has been withheld. WMS has evaluated the information provided to it by AAP2 and other experts through inquiry, analysis and review, and nothing has come to our attention to indicate the information provided was materially misstated or would not afford reasonable grounds upon which to base our report. Nothing in this report should be taken to imply that WMS has audited any information supplied to us, or has in any way carried out an audit on the books of accounts or other records of AAP2 or CAF.

The company has indemnified WMS, its affiliated companies and their respective officers and employees, who may be involved in or in any way associated with the performance of services contemplated by AAP2’s engagement letter dated 12 June 2013, against any and all losses, claims, damages and liabilities arising out of or related to the performance of those services whether by reason of their negligence or otherwise, excepting gross negligence and wilful misconduct, and which arise from reliance on information provided by AAP2, which AAP2 knew or should have known to be false and/or reliance on information, which was material information AAP2 had in its possession and which AAP2 knew or should have known to be material and which AAP2 did not provide to WMS. AAP2 will reimburse any indemnified party for all expenses (including without limitation, legal expenses) on a full indemnity basis as they are incurred.

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WMS does not have, at the date of this report, and has not had within the previous two years, any relationship with AAP2 that could reasonably be regarded as capable of affecting its ability to provide an independent and unbiased opinion in relation to the proposed acquisition. WMS is entitled to receive a fee based on commercial rates and including reimbursement of out of pocket expenses for the preparation of this report. Except for this fee, WMS will not be entitled to any other pecuniary or other benefit, whether direct or indirect, in connection with the making of this report. The payment of this fee is in no way contingent upon the success or failure of the Scheme.

All amounts in this report are expressed in Australian dollars ($) unless otherwise stated.

2.6 Consents

WMS consents to the issuing of this report in the form and context in which it is included in the Scheme Booklets to be sent to the shareholders of AAP2. Neither the whole nor part of this report nor any reference thereto may be included in or with or attached to any other document, resolution, letter or statement without the prior written consent of WMS as to the form and content in which it appears.

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3 Industry Overview

Both AAP2 and CAF operate within the Australian wealth management market. WMS have considered IBISWorld Industry Research Report K6419b (“Financial Planning and Investment Advice in Australia) and K6419a (“Funds Management Services in Australia”). Where relevant to our analysis, we have reproduced elements of the reports in the following subsections. Inclusion of these excerpts does not constitute an opinion on the proposed Scheme by IBISWorld or the reports authors.

3.1 Financial Planning and Investment Advice in Australia[1]

3.1.1 Executive Summary

3.1.2 Key External Drivers

Consumer sentiment index - As consumer sentiment rises, investors are more willing to seek the advice of a financial advisor in order to select the best asset for investment.

Real household disposable income - Low income levels subsequent to the financial downturn have proven a threat to industry participants.

1 IBISWorld Industry Research Report K6419b Financial Planning and Investment Advice in Australia August 2013 by Tim Stephen.

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3.1.3 Fee for service

Fee-for-service can be based on a fixed or hourly rate per session, or a value may be placed on the provision of the Statement of Advice (SOA). The fee may be paid upfront or an arrangement can be made for it to be paid off over a predetermined length of time. This model avoids the imposition of ongoing annual fees embedded in the cost of particular products. In the case of fees based on the value of assets under advice, there may still be the potential for conflict of interest as revenue is based on the amount a client invests in financial products.

3.1.4 Industry Outlook

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Products and services segmentation (2013-14)
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3.1.5 Opportunities and threats

3.1.6 Demand Determinants

3.1.7 Key Success Factors

Ability to effectively communicate and negotiate - The ability to effectively communicate with clients and negotiate a better fee structure with financial product suppliers is crucial.

Must have licence - Compliance with ASIC licence requirements is necessary.

Having a loyal customer base - For retail advisers, a strong referral client base is necessary to build up a strong client base for return on investments.

Having a good reputation - Having a good reputation will attract potential investors.

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Market research and understanding - Research support from the head office must be strong and reputable for the investment advisers to rely on.

Qualified work force - Strong qualifications, in-depth experience, good product knowledge, access to a strong research base and strong marketing skills are invaluable.

3.1.8 Barriers to Entry

Barriers to entry in the industry relate predominantly to licensing conditions and achieving scale to be able to compete.

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3.2 Funds Management Services in Australia[2]

3.2.1 Executive Summary

3.2.2 Key External Drivers

National savings ratio – The government has introduced a raft of superannuation legislation, which has provided a high and steady inflow of superannuation money into the industry.

All Ordinaries Index – The performance of stock markets will affect the value of funds under management by changing the value of equity securities held in trusts and funds.

10-year bond rate – The movement of interest rates will affect the investment mix, which will also affect this industry’s revenue and demand for industry services.

3.2.3 Current Performance

Like most of the financial services industries, the Funds Management Services industry’s revenue took a huge hit during the financial crisis.

3.2.4 Industry Outlook

A number of factors have underpinned the appeal of the industry to Australia’s investors, including the ageing of the population, growing wealth, new and evolving investment products and the inflow of funds due to superannuation legislation. These longstanding features of the Australian Funds Management Services industry will continue to underpin industry growth over the next five years. Following the financial crisis-induced downturn in the industry, there will be a recovery over the next five years as investment performance improves and the level of FUM grows. Industry revenue is forecast to grow at a compound annual rate of 4.7% over the five years through 2018-19, to $7,6 billion. Industry revenue is forecast to rise by 12.3% in 2014-15.

2 IBISWorld Industry Research Report K6419a Funds Management Services in Australia July 2013 by Andrej Ivanov.

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3.2.5 Products & Services

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3.2.6 Demand Determinants

A very important feature of demand in the industry is the amount of money flowing from superannuation.

3.2.7 Market Share Concentration

3.2.8 Barriers to Entry

3.2.9 Regulation & Policy

The Managed Investments Act introduced in 1998 regulates the industry. Operators must also hold an Australian Financial Services (AFS) Licence. This requirement was introduced in 2004.

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3.3 Future of Financial Advice (“FoFA”)[3]

A prospective ban on conflicted remuneration structures;
A duty requiring advisers to act in the best interests of their clients when giving personal advice; and
A requirement for advisers to obtain client agreement to ongoing advice fees.

Additional details were released a year later in the Future of Financial Advice 2011 Information Pack. New elements include:

A prospective ban on up-front and trailing commissions and like payments for both individual and group risk within superannuation from 1 July 2013;
A prospective requirement for advisers to get clients to opt-in (or renew) their advice agreement every two years from 1 July 2012;
A prospective ban on any form of payment relating to volume or sales targets from any financial services business to dealer groups, authorised representatives or advisers, including volume rebates from platform providers to dealer groups;
A prospective ban on soft dollar benefits, where a benefit is $300 or more (per benefit) from 1 July 2012. The ban does not apply to any benefit provided for the purposes of professional developments and administrative IT services if set criteria are met; and
Expanding a new form of limited advice called scaled advice, which can be provided by a range of advice providers, including superannuation trustees, financial planners and potentially accountants, creating a level playing field for people who provide advice. Scaled advice is advice about one area of an investor’s needs, such as insurance, or about a limited range of issues.

3.3.1 Ban on Volume Payments

3 Australian Government, Future of Financial Advice, Information Pack 28 April 2011.

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3.3.2 Equity Arrangements

We have regard to ASIC Regulatory Guide 246, Conflicted Remuneration (issued March 2013). Conflicted Remuneration provisions aim to bring many of the benefits given to those persons who provide financial products advice to retail clients. Specific to the AAP2 business model, we highlight ASIC guidance in relation to equity arrangements.

How direct the link is between the value of the equity arrangement and the value or number of financial products recommended or acquired based on the advice of the representative. For example, a benefit is less likely to be conflicted remuneration if it is not dependent on the type of financial products acquired by retail clients or the type of financial product advice given;
The remuneration a representative is eligible to receive from the equity arrangements (e.g. dividends);
The potential value of the equity interest;
The portion of the AFS licensee’s business that involves, or is dependent on, remuneration generated from providing financial product advice to clients’ and
The criteria a representative needs to satisfy to be eligible for an equity interest in the AFS licensee’s business. For example, a benefit is more likely to be conflicted remuneration if eligibility is based on meeting financial product sales targets.

3.3.3 Grandfathering of Conflicted Remuneration[4]

4 Australian Government, Exposure Draft – FOFA Regulations on Grandfathering.

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4 Profile of AAP2

4.1 Background

AAP2 was established in 2007 and provides services and support for AFS Licence holders.

AAP2 has 114 independently owned boutique licensees. At 3 June 2013, AAP2 affiliated dealers had $1,462m in FUA.

4.2 Capital Structure

As at 30 June 2013, the AAP2 shares on issue are depicted in the following table:

Shareholder	Redeemable Preference Shares	A Class Shares	Ordinary Share	Z Class Share	TOTAL	Percentage	# Shareholders




Dealer Groups	1,782,019	0	0	0	1,782,019	45%	82
CPW	0	2,178,021	1	1	2,178,023	55%	1
Total	1,782,019	2,178,021	1	1	3,960,042	100%	83

According to the Company’s share register, CAF owned 55% of AAP2’s equity via its subsidiary Centrepoint Wealth Pty Ltd (“CPW”) . It is important for the reader of this report to understand the various rights attaching to each share class.

4.2.1 Redeemable Preference Share (“RPS”):

The holder of an RPS has the right:
To a return of capital in proportion to the amount of the total issue price paid or credited as being paid on the share on a winding up of the Company, pari passu with ordinary shares and;
To participate in a preferential non-cumulative dividend as declared by the Board from time to time;
To a distribution of surplus assets on a winding up of the Company, pari passu with ordinary shares;
To vote at general meetings of the Company on the basis of one vote for each share held.

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4.2.2 Ordinary Share and A Class Share Rights:

4.2.3 Z Class Share Rights:

4.3 Operations

4.3.1 Funds

AAP provides support services to 114 AFS Licence holders. The Company aggregates the product placement of advisor practices and is remunerated directly from the product providers.

The types of services that AAP2 extends to its practice clients include:

Practice Development and Management;
Professional Standards;
Human Resources, Marketing and Communications Support;
Research;
Technical; and
Training.

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4.3.2 Fee structure

Revenue is derived from two broad classes being:

Investment Product Provider Placement Rebates; and
Insurance Provider Placement Rebates.

All revenue received by AAP2 is volume based in nature and is a reflection of the advice given by AFS dealers in the group and the subsequent execution of investment decisions and insurance policies written on behalf of retail clients.

4.3.3 Administration

AAP2’s company administration is outsourced to CPW (a subsidiary of CAF). Under an informal service agreement, CAF is required to provide administrative and support services including staff, office space and computer access. From discussion with CAF and AAP2 management, we understand that fees payable by AAP2 approximate the commercial cost of providing these services. The management fee is calculated as 40% of net revenue.

We are advised that a further amount is incurred by CAF in relation to senior management time and compliance undertakings. No amount is paid by AAP2 in lieu of these costs.

AAP2 Dealer groups are furnished with a services agreement. Amongst other things, this agreement authorises AAP2 to negotiate directly with relevant Fund Managers and Insurers.

4.4 Management and Personnel

AAP2’s Board of Directors as at the date of this report were as follows:

4.4.1 Directors

•	Jason Cutrupi	Non Executive Director	Appointed 17 September 2012
•	John Barry Smith	Non Executive Director	Appointed 1 November 2007
•	Craig William Hargraves	Non Executive Director	Appointed 22 April 2010
•	Soula Cargakis	Executive Director	Appointed 17 September 2012
•	John de Zwart	Executive Director	Appointed 19 April 2013

Mr de Zwart is also a Director of CAF and we are advised that Ms Cargakis is also not an independent director of AAP2 in respect of this Scheme.

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4.4.2 Competitors

We are advised that the key competitors to AAP2 are:

Jigsaw (AMP Owned);
Pathways (Netwealth Owned); and
Licensee Select (Westfinance Bank Owned).

4.4.3 FoFA and Other Sensitivities

Further, as described at Section 3.3.2 and in accordance with legal advice described by management, no dividends can be paid to the holders of the RPS from 1 July 2014.

4.5 Financial Performance

4.5.1 Reported financial performance

The income statements of AAP2 are set out in the table below. The periods FY11a to FY13a are subject to audit.

$'000	FY11a FY12a FY13f
Net asset fees and product margins Ov errides commissions receiv ed Product margins paid Net asset fees and product margins Directors fees Management fee Other expenses Professional fee Profit from operating activities Interest Income Total financing income	1,861 2,140 2,729 (278) (293) (328)
	1,583 1,847 2,401 (8) (8) (8) (633) (739) (1,994) (2) (1) (5) (12) (13) (159) 928 1,086 235 18 25 11
	18 25 11
Net profit before tax (NPBT)	946 1,111 246
Income tax	(253) (334) (74)
Net profit after tax (NPAT)	693 777 172

Rev enue Variance % NPBT Variance % NPBT Margin % NPAT Variance % NPAT Margin % Management Fee %	n/a 16.7% 30.0% n/a 17.4% -77.9% 59.8% 60.2% 10.2% n/a 12.1% -77.9% 43.8% 42.1% 7.2% 40.0% 40.0% 83.0%

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We note the following in regards to the income statements of AAP2:

Revenue has increased year on year across the review period. This is consistent with commencement of new dealers during this time;
Average FUA of associated dealers was $1.034m in FY12 compared with $1,325m in FY13a;
Management fees are levied to CAF on the basis of 40% of net revenue. In return for this management fee, CAF provides administrative and technical support; and
In 1H13, it was agreed to restructure the operations of AAP2. CAF have forgone the entitlement to receive dividends on ordinary and A Class Shares in lieu of a 55% management fee derived from Net Profit before Tax. The 55% fee represents the equity holding percentage attributable to CAF ownership. We note that although we are instructed by management there is commercial basis for this management fee, in our opinion it is specific to the existing ownership and management provided by CAF and would not be replicated by a hypothetical purchaser.

4.5.2 Normalised Financial Performance

Outlined in the following table are the restated financial statements subsequent to the application of normalisation adjustments as presented by the Directors of AAP2. This exercise has been conducted on FY12a and FY13a results only.

$'000	FY12a	FY13a
Net asset fees and product margins	1,847	2,401
Directors fees	(8)	(8)
Management fee	(750)	(1,116)
Other expenses	(1)	(5)
Professional fee	(13)	(16)
Normalised Profit from operating activities	1,075	1,256
Interest Income	25	11
Normalised Net profit before tax (NPBT)	1,100	1,267
Net profit after tax (NPAT)	(330)	(380)
Normalised Net profit before tax (NPBT)	770	887

The following table details each of the normalisation adjustments made with respect to AAP2. As a starting point, we have adopted the NPBT from continuing operations.

$'000	FY12a	FY13a
Reported NPBT	1,111	246
Management fee paid	739	1,994
Direct Costs incurred by CPW	(676)	(1,027)
Equity Model / Scheme Transaction Costs	-	143
Corporate Ov erhead Allocation	(74)	(89)
Income Tax (30%)	(330)	(380)
Normalised Net profit after tax (NPAT)	770	887

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We note that a number of ‘one-off’ or ‘non-recurring’ items have been determined by the Directors of CAF and identified as normalisation adjustments. We have discussed the adjustments below:

We have added back the management fees paid to CAF and will separately assess same on the basis of the actual costs incurred in providing such support;
We have deducted amounts representative of the direct costs incurred by CAF in providing management services to AAP2. These costs have been allocated to AAP and AAP2 based on the respective proportion of revenues derived;
We have deducted further amounts representative of the corporate overheads incurred by CAF and not previously quantified which relate to AAP2. These costs have been allocated to AAP and AAP2 based on the respective proportion of revenues derived;
Non-recurring costs associated with professional fees incurred exploring suitability of the Equity Model of AAP2 and the likely impacts of FoFA introduction have been added back. Included in this figure are fees incurred in connection with the proposed acquisition of AAP2 by CAF; and
Income tax has been assessed at the corporate tax rate in Australia being 30%.

4.6 Financial Position

The balance sheets of AAP2 as at 30 June 2012a (audited) and 30 June 2013 (audited) are set out in the table below:

$'000	FY12a FY13a
Assets Cash and cash equiv alents Trade and other receiv ables Income tax receiv able Total current assets Deferred tax assets Total non-current assets Total assets Liabilities Trade and other payables Income tax payable Total current liabilities Total liabilities	485 223 866 961 89 1,351 1,273 1 32
	1 32
	1,352 1,305
	307 735 252 -
	559 735
	559 735
Net assets	793 570

We note the following in relation to the financial position of AAP2:

The net cash balance at 30 June 2013 is significantly less than the prior two corresponding periods. This is consistent with the implementation of additional management fees as described at Section 4.5.1. Additionally, dividends totaling $203k were paid in June 2013.

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5 Profile of CAF

5.1 Background[5]

On 30 September 2005, Centrepoint Alliance Limited merged with the Centrepoint Finance Pty Ltd Group, of which Rick Nelson was a co-founder.

5 Centrepoint Alliance Limited

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----- Start of picture text -----

CAF
WEALTH FUNDING
FINANCIAL PREMIUM
ADVICE PRODUCTS FUNDING
AAP & INVESTMENT
PIS PLATFORM
AAP2 PRODUCT
----- End of picture text -----

We have individually discussed in detail each of these business segments in sections 5.5 and 5.6 of this Report.

5.2 Capital Structure

The table which follows details CAF substantial shareholdings as at 21 August 2013:

Shareholder	Number of CAF Shares	Percentage held
TIGA Trading Pty Ltd	20,669,589	22.11%
River Capital Pty Ltd	5,593,777	5.98%
Wilson Asset Management Group	5,182,174	5.54%

6 Centrepoint Alliance Limited Investor Presentation, 6 Month to December 31 2012

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5.3 Directors and Executive Team

The CAF Directors who have been in office from 1 July 2012 until the date of this Report are as below:

Rick Nelson (Chairman)
• John de Zwart (Managing Director) • Tony Robinson (Managing Director)
Noel Griffin (Non Executive Director)
Stephen Maitland (Non Executive Director)
Matthew Kidman (Non Executive Director)
• Christopher Castles (Non Executive Director)

Appointed 15 April 2013 Resigned 30 April 2013 Resigned 30 January 2013

Mr de Zwart is also a Director of AAP.

5.4 Share Trading

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The price of CAF shares in the 12 months to 19 June 2013 has ranged from an intra-day high of $0.61 on 8 February 2013 to a low of $0.14 on 17 July 2012.

We make the following comments in relation to the trading of CAF shares on the ASX over this 12 month period:

There were 70 days in which no trading in CAF shares occurred. This is one indicator that CAF shares are illiquid;
The median closing share price for the period of $0.40
The Volume Weighted Average Price across the last year is 32.9 cents which is not dissimilar to the closing price of 30 cents as at 19 June 2013; and
Recent share trading has been in the range of 22.5 cents to 33.0 cents which is below the observed ranges prior to the market announcement. This is discussed further at Section 8.6.3.

Further detailed analysis of the trading of CAF shares on the ASX is included in section 8.6 of this Report.

5.5 Profile of Insurance Premium Funding Division

5.5.1 Overview

CAPF sources its business from insurance brokers and their authorised representatives and agencies. The broker is paid a commission as a percentage of the amount funded.

5.5.2 Operations

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Any non–interest income is largely derived from fees associated with the preparation of documents etc. related to the underlying insurance funding facility.

5.5.3 NAB Bank Facilities

CAPF holds a multi option facility, including a receivables finance facility with the NAB. These facilities enable CAPF to provide funding to IPF clients.

Improved trading performances have resulted in improved lending margins and reduced covenant obligations. Latest guidance affirms the supportive relationship with the NAB. On 4 July 2013, a revised bank facility agreement has been executed that provides a facility limit of $145m and is valid until January 2015.

5.6 Profile of Centrepoint Wealth Division

5.6.1 Overview

The Centrepoint Wealth Pty Ltd (“CPW”) division (formally Professional Investment Holdings Ltd) provides two distinct service types being advice services and investment products and services.

PIS’s core operations are the provision of financial advice and the distribution of financial and risk products to the wealth management sector.

PIS work with its adviser network by providing services, support and education to assist in financial planning for clients.

PIS was formed in Australia by a group of five financial advisers and seven accountants. PIS obtained a Dealer's Licence on 6 August 1996, and it’s AFS Licence on 8 December 2003.

5.6.2 Operations - PIS

PIS is one of Australia’s leading independent providers of financial advice and product solutions, which are distributed through one of the largest financial advice networks in Australia.

The principal services provided to clients include financial planning services, risk insurance services and distribution of financial products through the PIS network of advisors and accountants.

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PIS provide the following financial planning and distribution services:

Financial advice, risk insurance advice and distribution of financial products from product manufacturers to the investing public through the CPW group’s distribution network;
Tools and techniques to facilitate referral relationships between accounting practices and other professional services firms and financial advisers; and
A broad range of financial and business development services, backed by ongoing support and expertise to its financial advisers.

5.6.3 ASIC Surveillance - PIS

5.6.4 Clients Claims - PIS

5.6.5 Operations – Other Investment Products and Services

This business unit incorporates funds management and investment platforms.

Recent transactions within this business unit include:

The acquisition of the remaining 83% interest in Ventura Investment Management Ltd (16 August 2011); and
The acquisition of the remaining 63% interest in Mentor Investment Services Ltd (30 December 2011).

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5.6.6 Mortgage broking and commercial lending through Australian Loan Company Pty Ltd (“ALCo”)

ALCo is an aggregator that operates nationally within the broking industry, and provides fullservice business support throughout Australia. ALCo provides residential and business finance services.

5.6.7 Support services to financial planners and other licensed dealers through AAP and AAP2

AAP and AAP2 fall within the advisory arms of CPW. The activities undertaken are separately described at section 4.

5.7 Financial Performance

The income statements of CAF are set out in the table which follows. All periods displayed are subject to audit.

$'000	FY11a FY12a FY13a
Net asset fees and product margins Other income Borrowing expenses Employee benefit expenses Professional fees Client claims Insurances Property costs Impairment of intangible assets Other general and administration expenses Profit from operating activities Interest Income Total financing income	43,260 45,285 35,328 5,983 2,604 3,095 (4,718) (5,451) (5,015) (23,471) (24,753) (22,550) (6,522) (9,206) (4,313) (11,936) (16,736) (9,980) (3,697) (3,124) (2,066) (5,121) (4,216) (3,689) (4,345) (1,635) (993) (10,789) (11,494) (10,656) (21,356) (28,726) (20,839) 9,075 14,201 14,207
	9,075 14,201 14,207
Net profit before tax (NPBT)	(12,281) (14,525) (6,632)
Income tax	(844) (2,774) (571)
Net profit after tax (NPAT)	(13,125) (17,299) (7,203)
Loss from Discontinued Operations (after tax) Foreign Currency Translation Change in Fair Value of Inv estments	- - (85) (587) 16 1,456 457 - -
Comprehensive Profit/(Loss) for the Period	(13,255) (17,283) (5,832)
Non-Controlling Interests	(653) (592) (493)
Comprehensive Profit/(Loss) of Parent	(13,908) (17,875) (6,325)

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We note the following in regards to the financial performance of CAF:

Full year revenue for the period ending 30 June 2013 is significantly lower than FY11 and FY12 and is the result of unusually high advisor attrition;
The Directors have commented in the FY13 Director’s Report that the underlying operations of CAF traded profitably (pre tax) during the period, with the principle difference being attributable to increased provisions for client claims;
Loss making international operations have been divested and are reported as discontinued operations in the FY13 results; and
The NPAT results prior to the minority interests disclosure represents 100% aggregation of the AAP and AAP2 trading results on consolidation.

5.7.1 Normalised Financial Performance

$'000	FY12a FY13a
Net asset fees and product margins Other income Borrowing expenses Employee benefit expenses Professional fees Client Claims Insurances Property costs Impairment of intangible assets Other general and administration expenses Normalised Profit from operating activities Interest Income Total financing income	45,285 35,328 2,453 2,474 (5,451) (5,015) (23,771) (22,124) (3,612) (3,103) (720) (720) (3,124) (2,066) (4,216) (3,689) (1,286) (389) (11,266) (8,831) (5,708) (8,135) 14,201 14,207
	14,201 14,207
Normalised Net profit before tax (NPBT)	8,493 6,072
Income tax	(2,548) (1,822)

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$'000	FY12a	FY13a
Reported NPBT	(14,525)	(6,632)
Net Claims Expense for the period	16,736	9,980
Assessed Recurring Prov ision for Claims	(720)	(720)
External Professional Fees (Claim Resolution)	1,931	-
Enforceable Undertaking Professional Fees	3,663	594
Restructure Sav ings	-	1,825
Costs associated with FoFA Implementation	-	329
International Business Loss (Discontinued)	124	-
Gain on sale of inv estments	(151)	(621)
Staff Redundancies	982	426
Impairment of intangible assets	349	604
Non-Controlling Interests	104	-
AAP & AAP2 Equity Model / Scheme Transaction Costs	-	287
Income Tax (30%)	(2,548)	(1,822)
Normalised Net profit after tax (NPAT)	5,945	4,250

We note that a number of ‘one-off’ or ‘non-recurring’ items have been determined by the Directors of CAF and identified as normalisation adjustments. We have discussed the adjustments below:

We have added back the provision made for reported and unreported client claims on the basis that the expense is abnormally large and is incurred to address legacy advisor issues and is not representative of the ongoing trading performance. The provision is treated as surplus liability (see Section 8.4.5);
CAF may be subject to legal claims in the ordinary course of business, primarily relating to client claims. We have deducted an amount for claims in recognition that the occurrence of same has a recurring element. We have determined that a monthly accrual of $60k (that is, $720k per year) is prudent and we have adopted same in our analysis. We note that management have indicated that recent claim amounts have settled for materially less than this sum. If future claims relating to post June 2010 advice are materially more than $720k per annum, then our assessed share value would be overstated;
In FY12 an abnormally large expense was recognised for professional fees. These fees were incurred to resolve legacy client claims and are non-recurring in nature. In FY13, the claims provision includes amounts for professional fees;
Enforceable undertaking costs incurred as part of the ASIC surveillance program have been added back on the basis that such costs are outside the ordinary course of business and are non-recurring in nature. The provision is treated as a surplus liability;
We have included savings identified by management as a result of an internal restructuring program. These savings principally reflect ongoing payroll and occupancy savings;
Non-recurring costs associated with FoFA regulatory reforms and readiness programs have been added back. We note ongoing FoFA compliance costs are included in the trading results;

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For comparability, the loss incurred by the international business units have been added back in FY12 on the basis that these operations were discontinued in FY13;
Gains derived from the sale of investments have been deducted due to their non-recurring nature;
Although staff redundancies occur in the normal course of business, management have identified non-recurring expenses incurred as part of the internal restructure program. The add back relates to two senior roles which no longer exist and can easily be quantified;
Impairment expenses in relation to advisor network intangibles have been added back. Impairment write-downs have been assessed based on earnings and therefore the inclusion of same represents double counting from a valuation perspective;
The loss incurred from equity accounted investments has been added back as these amounts are not reflective of core business operations. These investments are separately valued and included as surplus assets of CAF; and
Income tax has been assessed at the corporate tax rate in Australia being 30%.

5.8 Financial Position

The net assets of CAF as at 30 June 2012 (audited) and 30 June 2013 (audited) are set out in the following table:

$'000	FY12a FY13a
Assets Cash and cash equiv alents	14,621 9,352
Trade & Interest Bearing Receiv ables	119,194 121,352
Current tax asset Other assets Total current assets	- 225 4,155 2,760 137,970 133,689
Trade and other receiv ables	1,606 649
Other assets Property, plant and equipment Intangible assets and goodwill Deferred tax assets Total non-current assets Total assets Liabilities Trade and other payables Interest bearing liabilities Prov isions Current tax liability Total current liabilities Trade and other payables Interest bearing liabilities Prov isions Total non-current liabilities Total liabilities	1,950 1,119 1,593 1,193 8,232 6,521 7,297 7,052
	20,678 16,534
	158,648 150,223
	40,866 37,544 64,990 71,656 7,422 10,250 247 121
	113,525 119,571
	328 - 253 90 17,380 13,324
	17,961 13,414
	131,486 132,985
Net assets	27,162 17,238

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We note the following in regards to the financial position of CAF:

The majority of interest bearing receivables and interest bearing debt relates to the Insurance Premium Funding business segment;
Historically the recoverability of deferred tax assets recognised has been supported by projections prepared by management which indicate that the deferred tax assets will be recouped from earnings to be achieved over a period of approximately 4 years. In the event that the projected earnings are not achieved, an amount of the deferred tax asset may require write-off in future financial years; and
Provisions (current and non-current) includes amounts for employee entitlements, however, each balance is principally comprised of amounts relating to adviser client claims.

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6 Valuation methodology

6.1 Definition of market value

“Fair market value” is virtually universally accepted as the price that a willing but not anxious buyer, acting at arm's length, with adequate information, would be prepared to pay to a willing but not anxious seller for the shares, units or assets in question; and
The fair market value concept assumes continued operations by the business in the industry in which it is presently engaged.

These principles were established by the High Court of Australia in Spencer v The Commonwealth of Australia (1907).

6.2 Common valuation methodologies

ASIC RG111.69 considers that it is generally appropriate for an independent expert to consider using the following methodologies when assessing the value of the target entity:

The discounted cash flow method (“DCF”) and the estimated realisable value of any surplus assets;
The application of earnings multiples to the estimated future maintainable earnings (“FME”) or cash flows of the entity, added to the estimated realisable value of any surplus assets;
The amount that would be available for distribution to security holders on an orderly realisation of assets (“Net Assets”) ;
The quoted price for listed securities , when there is a liquid and active market; and
Any recent genuine offers received by the target for the entire business, or any business units or assets as a basis for valuation of those business units or assets.

6.2.1 Discounted cash flow (“DCF”)

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Due to the DCF’s sound theoretical base, this methodology is the most technically accurate for all valuations, assuming that sufficient reliable data is available.

The DCF methodology is particularly appealing in valuing:

Start-up businesses as there is no history of earnings;
Businesses or assets in high growth phase; and
Finite assets or projects with a limited life (e.g. property development and mining).

6.2.2 Capitalisation of FME

This methodology requires consideration of the following factors:

To estimate an FME, consideration must be given to historical performance, the current position and future expectations. In order to ascertain an appropriate level of future earnings, the historical earnings of the business (as disclosed in financial statements) are typically adjusted for amounts which are abnormal, non-recurring or not representative of the expected future operations of the business;
To determine an appropriate earnings multiple rate, factors such as risk, growth prospects, current returns, competition and the industry as a whole need to be considered; and
An assessment of any surplus assets and liabilities, being those which are not essential to the generation of the future maintainable earnings.

6.2.3 Net Assets

In the absence of distressed transactions, there are two common methods of applying an asset based approach being:

Orderly Realisation of Assets; and
Net assets on a going concern basis.

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Additionally, each methodology is appropriate where there are surplus non-operational assets included in an entity.

6.2.4 Market based

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7 Our selected valuation approach – AAP2

The valuation of RPS in AAP2 on a controlling basis is a two step process. We value AAP2 as a whole and in a subsequent procedure allocate value among classes of issued securities having regard to the financial risk, voting rights and distribution rights.

7.1 Valuation approach – All AAP2 Equity

Subsequent to our analysis of AAP2’s financial results and operations as at the date of this report and with reference to generally accepted valuation methodologies in addition to the direction provided by RG111 above, we consider it appropriate to value the AAP2 shares by applying a ‘dual basis’ methodology. That is, by adopting a Capitalisation of FME method to value the business operations of the AAP2 and the Net Assets approach to value the assets and liabilities that are surplus to the core trading operations.

In forming our opinion as to the most appropriate valuation methodology to apply to AAP2, we have considered and dismissed a number of acceptable valuation methodologies as outlined below:

Due to the lack of suitable forecast financial information, the use of the DCF methodology is inappropriate in this instance;
As AAP2 has a history of trading at a profit, any value determined using an asset based approach is merely a representation of the value in the underlying business assets at a point in time. Such techniques fail to ascribe value to the recurring nature of a return on the assets employed in the Company and result in an understating of the assessed value. Accordingly, we think the use of asset based methodologies are inappropriate in this instance; and
AAP2 shares are not listed on a public exchange. Additionally, we are advised that there have been no recent genuine offers received for the sale of AAP2 business operations or underlying share capital. Accordingly we think the use of market based methodologies are inappropriate in this instance.

We think the capitalisation of FME methodology is the most appropriate valuation technique in this instance having regard to the following:

AAP2 has a history of profitable trading and this is forecast to continue;
The principal value of AAP2 results from the continued operations rather than the divestment of business assets; and
Information from comparable listed companies is readily available.

7.1.1 Control premium

We have based our value of a share in AAP2 on a control basis and as such have included a premium for control. The inclusion of this premium is in accordance with regulatory guidance (RG 111.11) for transactions involving a change or increase in control.

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7.2 Valuation – All AAP2 Equity

We have selected the Capitalisation of FME as our primary valuation methodology to value AAP. When applying this methodology, we have considered the following:

When estimating the FME of AAP2 we have had regard to the net profit after tax (NPAT) as the most appropriate earnings base for our analysis;
We have assessed an appropriate range of earnings multiples to apply to AAP2’s FME having regard to potentially comparable listed companies, potentially relevant transactions along with other factors specific to AAP2; and
We have considered other assets, liabilities and contingent liabilities of AAP2 that may be deemed surplus and therefore are not reflected in the core business earnings of the Company.

7.2.1 Future Maintainable Earnings

The correct determination of FME is to assess the level of profits that AAP2 can expect to derive from future periods notwithstanding the fluctuations of the business cycle.

We have utilised NPAT as the earnings base for our primary methodology after considering a number of factors specific to the operations of companies within the funds management industry, including:

Price earnings multiples as generally adopted to assess entities within the financial services and funds management sectors;
Generally, parties in these industries do not have high gearing;
Businesses in the wealth management industry typically do not require a high level of depreciable assets to operate their businesses;
Businesses in the wealth management industry generally do not have high amortisation charges and thus there is not likely to be a material difference in the amortisation charges between companies; and
The earnings of businesses are affected by variation of funds under advice (“FUA”) values, which in turn are influenced by movements in underlying asset classes, such as equities.

7 Kaplan Higher Education, Applied Valuation, 2011.

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Outlined in the table below are the normalised earnings for FY12a and FY13a:

$'000	FY12a	FY13a
Net asset fees and product margins	1,847	2,401
Directors fees	(8)	(8)
Management fee	(750)	(1,116)
Other expenses	(1)	(5)
Professional fee	(13)	(16)
Normalised Profit from operating activities	1,075	1,256
Interest Income	25	11
Normalised Net profit before tax (NPBT)	1,100	1,267
Net profit after tax (NPAT)	(330)	(380)
Normalised Net profit before tax (NPBT)	770	887

It is our opinion the FME for AAP2 that best represents the risk profile and future prospects of AAP2 is approximately $0.9m .

7.2.2 FoFA

Our assessment on the likely impact that FoFA will have on the earnings of AAP2 has regard to industry research and discussions with senior management. In forming our view, we are mindful of the key drivers in revenue of AAP2 namely FUM.

Broadly, AAP2 derives income from two revenue stream being payments for:

Product placement rebates; and
Insurance premium placement rebates.

The volume based revenue derived by APP2 may be subject to the FoFA reforms. The application of the reforms may not contemplate advisory businesses such as AAP2 for the following reasons:

AAP2 is not an Australian Financial Services Licensee and as such is not contemplated in the draft legislation; and
AAP2 does not provide investment advice to retail customers.

Based on discussions with Management, legal advice received by AAP2 issued by a national legal firm and our analysis of the FoFA Guidance, as at the date of this report, we believe it is likely that AAP2 will continue to derive revenue on the basis that it is not conflicted revenue.

Grandfathering provisions will enable a continuation of reseller margins post 1 July 2013. This status is preserved by increases in existing investments and may also be preserved where investments are merely ‘switched’ between like investment products;
We are unable to source information which will reliably enable us to model likely investment changes which will trigger a change in grandfathering classification but note that such changes would result in reduced earnings for AAP2 should platform operators consider AAP2 revenue as conflicted.

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Offsetting these decreases are the likely increases to be received from growth in FUA and additional inflows (to existing investments). Macquarie Bank research contemplates a compounding annual growth rate (“CAGR”) of 5.1% in FUM through to 2017 after allowing for the regulatory impacts such as FoFA.
An additional positive for the industry is the increase in compulsory superannuation guarantee from 9% to 9.25% from 1 July 2013 with further increases to occur in subsequent years. As above, these additional inflows into exiting investments will not alter the entitlement for AAP2 to receive reseller margins on a larger base.

One way
Impact	Factor
	Growth in value of FUA in grandfathered products
	Additional inflows into grandfathered products
	Lost clients
	Investment changes which trigger loss of grandfathered status

Taking the above factors into consideration and discussions with management, we think it is inappropriate to adjust the FME of AAP2 (either up or down) due to the lack of certainty surrounding the legislation with respect to its application to the AAP2 business model.

7.2.3 Earnings multiples

In determining an appropriate earnings multiple by which to capitalise AAP2’s estimated FME, we have considered rates of return that an investor would require from a business with a similar risk profile.

Factors we have considered include:

Rates being achieved from practically risk free investments;
The current economic climate;
The growth and direction of the Business;
Historical performance;
The nature of the Business and the market;
Business relationships and management expertise; and
Trading structure.

AAP2 operates in the financial planning and advisory sector within the financial services market of Australia. In selecting an appropriate range of earnings multiples to apply to the FME of AAP2, we have had regard to potentially comparable listed companies in Australia within this sector with similar operations. We also have regard to transactions involving potentially comparable companies.

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We note that these multiples are reflective of trading in a post GFC environment and are inclusive of market expectations in relation to FoFA reforms.

It is evident the selected comparable companies contain significant differences to AAP2’s business in both composition and market focus, as well as underlying performance. Notwithstanding this, we think there is sufficient commonality with respect to the key drivers of these wealth management participants to permit meaningful comparison.

7.2.3.1 Trading multiples

In forming a view on an appropriate range of multiples with which to value AAP2, we have had regard to the multiples implicit in the share prices of a number of potentially comparable listed companies across the wealth management sector in which AAP2 operates.

7.2.3.2 Transaction multiples

We have also considered multiples implied by transactions involving potentially comparable companies in Australia in the wealth and fund management sector. Again these are outlined at Appendix 1.

From our analysis we have been unable to find any transactions that would be deemed sufficiently comparable to AAP2 to permit meaningful comparison. This assessment is made having regard to AAP2’s size and lack of operating diversification.

7.2.4 Selected multiple

In determining an appropriate range of earnings multiples to apply to AAP2, we have placed no reliance on transaction multiples (See Section 7.2.3.2) however we do consider the trading multiples as discussed in section 7.2.3.1 to be meaningful. We consider a multiple range of 9.0 to 9.5 times to be appropriate in this instance. In forming this opinion, we have regard to the diversified nature of the business activities undertaken by the comparable companies. The observed diversification provides greater protection against material earnings variances. Accordingly, we think the earnings multiple for AAP2 should be at the lower end of the observed results in recognition of same.

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We have applied further adjustments to our assessed earnings multiple as depicted in the following table and described to the subsequent paragraphs.

The table below outlines each discount factor applied to the listed comparable sector average:

	Premium/(Discount)	NPAT Multiple
Premium or Discount factor		Low	High
Comparable Trading Multiples (WMS Assessed)		9.00	9.50
Premium for Control	10%	0.90	0.95
Controlling Interest		9.90	10.45
Unlisted Company Discount	(55%)	(5.45)	(5.75)
Selected Multiple AAP		4.46	4.70
say		4.50	4.70

7.2.5 Premium for control

As the proposed acquisition by CAF constitutes a control transaction, we have regard to regulatory guidance specifying that the AAP2 valuation analysis is to be undertaken on a control basis.

Having regard to the subject transaction, we note the following:

AAP2 is consolidated by CAF for accounting purposes in recognition of the majority equity ownership; and
All administrative, finance and financial support is currently provided by CAF.

Accordingly, we consider material synergies available to CAF (and other like potential acquirers) are reflected in the normalised earnings of AAP2. To avoid double accounting, we have adjusted our assessed control premium downward.

We conclude that an appropriate premium for pure control of AAP2 would be lower than the range observed in the takeover studies. We consider an appropriate premium for control to be 10% in this instance.

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7.2.6 Unlisted Company Discount

Our assessment of the unlisted company discount has two components. Each factor is outlined below:

The size of AAP2 relative to the size of comparable companies is a key factor when determining the appropriate multiple with which to value the Company. It is generally accepted larger more complex businesses will be valued using higher multiples than smaller businesses within a similar industry. Smaller companies such as AAP2 generally have greater inherent risks in the business, such as reliance on key personnel and suppliers and limited access to funding;
Liquidity of shares – a minority interest in an unlisted company will generally trade at a lower multiple than the equivalent interest in a listed company. The reason for this difference is that the minority interest in an unlisted company is less liquid than the equivalent in a listed company; and
An additional discount is appropriate given the AAP2 constitution is highly restrictive with respect to share transfers.

Based on AAP2’s relative earnings and risk profile, we have applied an earnings multiple range of 4.5 to 4.7 times. In our opinion, this multiple range appropriately reflects AAP2’s unlisted status, financial position and forecast growth while allowing for the risks relating to a business that is exposed to the Australian financial services industry. This multiple is on a controlling basis.

7.3 Surplus assets and liabilities

We have taken into consideration the following surplus assets and liabilities for valuation purposes.

7.3.1 Cash

We have had regard to the cash balance as at 30 June 2013. As there is a positive level of working capital, we think it is appropriate to include cash as a surplus asset in this instance.

7.3.2 Costs associated with the scheme

We have had regard to costs associated with this transaction which would be payable by AAP2 and which are not contingent on whether the transaction is implemented. Such costs would impact the value of AAP2 on a stand alone basis, irrespective of whether the Scheme is completed or not. We have been advised by AAP2 management that such non-contingent costs are estimated to be $128k.

Costs which are only payable on successful completion of the transaction have not been considered.

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7.3.3 Summary

We are advised by AAP2 management that there are no further known material surplus assets or liabilities. On the basis of the above disclosures, we summarise below the various surplus assets and liabilities of AAP2:

$'000
Cash	223
Transaction Costs	(128)
Surplus Assets/(Liabilities)	95

7.4 Summary of Value – All AAP2 Equity

On the basis of the above analysis, we summarise below our calculation of the equity value of AAP2 on a controlling basis:

$'000	Low High
Future Maintainable Earnings Earnings Multiple Implied Equity Value (on a control basis)	887 887 4.50 4.70
	3,992 4,169
Surplus Assets/(Liabilities)	95 95
Equity Value (on a control basis)	4,086 4,264

7.5 Allocation of Value to Redeemable Preference Shares

We allocate value among classes of issued securities having regard to the financial risk, voting rights and distribution rights.

Revenue – Receipt of Dividends; and
Capital – The ability to divest for profit.

We address each of these considerations separately.

7.5.1 Revenue

Our assessment of the AAP2 business model and specifically the dividend policy considers ASIC Regulatory Guide 246 as discussed at Section 3.3.2. We have also held discussions with Management and reviewed a legal opinion provided to AAP2. These discussions leave us to conclude that dividends paid by AAP2 to its AFS licensees would constitute conflicted remuneration and cannot continue beyond 1 July 2014.

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Accordingly, we have calculated the likely dividends which may be received by RPS holders should the Scheme not proceed. Our basis for this calculation is set out in the following table:

	Indicative
$'000	FY14
Net product margins	2,401
Directors fees	(8)
Management fee (40% of Net Rev enue)	(960)
Other expenses	(5)
Professional fee	(16)
Financing Income	11
Transaction Costs	(30)
Management Fee (55% of NPBT)	(766)
Income Tax (30%)	(188)
Net profit after tax (NPAT)	439
Number of Scheme Shares	1,782
Indicative Maximum Dividend (Nominal)	0.25
Indicative Maximum Dividend (Discounted)	0.23

Our assessment of likely dividends assumes payment of an interim and final dividend in equal proportion. We have applied a discount factor to capture the delay until receipt of the dividend occurs. Our present value of the maximum future dividends available is $0.23. Should the board in its discretion elect not to declare dividends in this year, the value would be $nil.

7.5.2 Capital

Having regard to the AAP2 constitution, we note that there is currently no mechanism for the transfer of RPS. Additionally, we note the commentary in the AAP2 Information Memorandum provided to prospective dealers which states that:

“The Directors take the view that an investment in AAP is more likely to generate income than capital returns.”[8]

On this basis, we assess the value of RPS attributable to be capital to be $nil in this instance.

7.5.3 Conclusion

Having regard to the likely implications to RPS holders should the Scheme not proceed, we consider the maximum value that may be assigned to a Scheme share to be $0.23. As RPS holders may be redeemed for nil consideration and this redemption remains at the absolute discretion of the board, we think the minimum value attributable to RPS is $nil.

Accordingly, it is our opinion that the value of a Scheme share is in the range of $0.00 to $0.23 as at the date of this Report.

8 Associated Advisory Practices (No 2) Ltd, Information Memorandum 19 December 2012

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7.6 Valuation cross check

We have considered a number of valuation methodologies in attempting to validate our assessment of a Scheme Share including:

Income – noting the inability of RPS holders to participate in dividends beyond 1 July 2014, we consider the use of DCF and Capitalisation of earnings methodologies to be inappropriate in this instance;
Asset – we have regard to the AAP2 constitution and note that there is no mechanism for RPS holders to participate in a distribution upon winding up; and
Market – there is no mechanism for RPS to be exchanged for a capital sum.

Accordingly, we are unable to validate our assessment of a Scheme Share using an alternative valuation methodology given the particulars of this transaction.

Based on the above, we conclude that the underlying value of a Scheme Share is in the range of $0.00 to $0.23 .

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8 Valuation of Merged Entity

8.1 Approach

To determine the estimated fair market value of the Merged Entity we have regard to the CAF reported results which include the combined contributions of AAP and AAP2 on consolidation. AAP results are also included given the interdependency between this Scheme and the Scheme before AAP RPS holders.

Due to the lack of suitable forecast financial information, the use of the DCF methodology is inappropriate in this instance;
As each of the business units within CAF have positive underlying earnings, any value determined using an asset based approach is merely a representation of the value in the underlying business assets at a point in time. Such techniques fail to ascribe value to the recurring nature of a return on the assets employed in the Company and result in an understating of the assessed value. Accordingly, we think the use of asset based methodologies are inappropriate in this instance; and
We think the capitalisation of FME methodology is the most appropriate valuation technique in this instance having regard to the following:
Profitable underlying trading performance which is forecast to continue; and
The principal value of the merged entity results from the continued operations rather than the divestment of business assets; and
Information from comparable listed companies is readily available.

In order to value the combined business segments of CAF, AAP and AAP2 (on a minority basis) we consider the Capitalisation of FME method as the most appropriate in this circumstance.

The value of the combined business (on a minority basis) is based on the Capitalisation of FME method as outlined in section 6.2; and
The value of CAF non-controlled entities is based on a Net Assets approach as outlined in section 6.2.

8.2 Future Maintainable Earnings (combined)

When determining an appropriate FME for CAF, and to be consistent with the methodology adopted for AAP, we have adopted the NPAT for FY13.

As noted previously, AAP2 is reliant on CAF to provide administrative and technical support services. In our opinion, there are no additional material synergies or dis-synergies as a result of the Scheme.

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8.2.1 CAF normalised NPAT

Outlined in the table below are the normalised earnings for each of the periods being FY12, and FY13:

$'000	FY12a FY13a
Net asset fees and product margins Other income Borrowing expenses Employee benefit expenses Professional fees Client Claims Insurances Property costs Impairment of intangible assets Other general and administration expenses Normalised Profit from operating activities Interest Income Total financing income	45,285 35,328 2,453 2,474 (5,451) (5,015) (23,771) (22,124) (3,612) (3,103) (720) (720) (3,124) (2,066) (4,216) (3,689) (1,286) (389) (11,266) (8,831) (5,708) (8,135) 14,201 14,207
	14,201 14,207
Normalised Net profit before tax (NPBT)	8,493 6,072
Income tax	(2,548) (1,822)
Normalised Net profit after tax (NPAT)	5,945 4,250

In forming our assessment of FME, we have regard to the normalised results for FY12 and FY13. Management have previously prepared a budget for the FY14 period. A reforecasting exercise is undertaken following the release of FY13 results, however, this information is not available as at the date of this report. Accordingly, we place little reliance on the FY14f budget information.

Each of the above normalisation adjustments have been discussed in detail in section 5.7.1 of the Report.

Taking the above factors into consideration, it is our opinion the FME for CAF that best represents the risk profile and future prospects of the merged entity is approximately $4.3m.

8.3 Earnings multiples

We have also performed an analysis of multiples implied in potentially comparable transactions. We note that the earnings as reported include a 100% contribution from AAP. We think this is appropriate as this second scheme is intrinsically linked to the Scheme before AAP shareholders. We understand that one cannot proceed without the other.

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8.3.1 Transaction Multiples

	Premium/(Discount)	NPAT Multiple
Premium or Discount factor		Low	High
Comparable Transaction Multiples (WMS Assessed)		13.50	14.00
Discount for Minority Interest	(17%)	(2.25)	(2.33)
Selected Multiple (Portfolio Basis)		11.25	11.67
say		11.30	11.70

In addition to the factors assessed in section 7.2.3, we have considered the following in relation to the combined operations of CAF, AAP and AAP2:

The elimination of any control premium so as to reflect the value of the combined operation on a minority basis; and
The size and complexity of the CAF combined business segments compared to potentially comparable companies.

8.4 Surplus assets and liabilities of CAF

We have taken into consideration the following surplus assets and liabilities for valuation purposes:

8.4.1 Cash

As at 30 April 2013 CAF held cash and cash equivalents of $9.3m. To derive a surplus cash figure we have made the following adjustments:

To determine the number of CAF shares in existence on a fully diluted basis, we have assumed that options are exercised in full. Accordingly, we treat as a surplus asset the cash proceeds required to exercise these shares being 400,000 shares at 40 cents ($160k). We note that the options are currently “out of the money”. We have also performed our calculations on the basis that the options are excluded and note that in our opinion the impact is immaterial; and

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In August 2013, the Company granted a 4,100,000 performance rights, which are rights to acquire shares at nil cost. The rights will vest either partially or in full in September 2016 if certain profit targets are met. At this time, we cannot reliably predict whether any or all of these rights will vest. Accordingly, we have excluded these rights when determining the number of CAF shares on a fully diluted basis.

The resultant cash position is outlined in the table below:

$'000
Cash Add: Cash on Exercise of Options Surplus Cash	9,352 160
	9,512

The resultant pro forma cash position of approximately $9.5m may be considered surplus as it is in excess of the operational requirements of CAF.

8.4.2 Costs associated with the scheme

Costs which are only payable on successful completion of the transaction have not been considered.

8.4.3 Investments

CAF holds an investment in GPS IP Pty Ltd. We understand that this business is loss making. Accordingly, we ascribe $Nil value to this investment at this time.

8.4.4 Deferred tax assets

As at 30 June 2012, CAF had carried forward revenue tax losses of $39.5m.

8.4.5 Provision for claims

As we have normalised the non-recurring addition to claim provisions in accordance with actuarial support, it is appropriate for this liability as quantified to be classified as a surplus liability.

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8.4.6 Summary

$'000
Cash Add: Cash on Exercise of Options Surplus Cash Claims Prov ision Enforceable Undertaking Transaction Costs Non-controlled Inv estments Deferred Tax Asset	9,352 160
	9,512 (20,768) (594) (261) - 7,244
Surplus Assets/(Liabilities)	(4,867)

8.5 Summary of valuation analysis of CAF (inclusive of AAP and AAP2)

On the basis of the above analysis, we summarise below our calculation of the underlying value of the combined business segments of CAF on a minority basis:

$'000	Low High
Future Maintainable Earnings Earnings Multiple Implied Equity Value (on a control basis)	4,250 4,250 10.00 11.00
	42,500 46,750
Surplus Assets/(Liabilities)	(4,867) (4,867)
Equity Value (on a portfolio basis)	37,633 41,883
Number of CAF Ordinary Shares Options Shares Issued Under Scheme (AAP1 & AAP2)	93,466 93,466 400 400 6,069 6,069
	99,935 99,935
Value of a Scheme Share	0.38 0.42

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8.6 Valuation Crosscheck - ASX quoted price valuation

8.6.1 ASX trading

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The price of CAF shares in the 12 months to 19 June 2013 has ranged from an intra-day high of $0.61 on 8 February 2013 to a low of $0.14 on 17 July 2012.

We make the following comments in relation to the trading of CAF shares on the ASX over the past 12 months:

There were 70 days in which no trading in CAF shares occurred. This is one indicator that CAF shares are illiquid;
The median closing share price for the period of $0.40;
The Volume Weighted Average Price across the last year is 32.9 cents which is not dissimilar to the closing price of 30 cents as at 19 June 2013; and
Recent share trading has been in the range of 22.5 cents to 33.0 cents which is below the observed ranges prior to the market announcement. This is discussed further at Section 8.6.3.

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Period	Volume	Value	VWAP	Average Shares On Issue	Turnover
1 Week 1 Month 3 Months 6 Months 12 Months	99,437 358,935 1,508,282 4,855,223 14,786,434	34,256 137,520 619,009 2,342,190 4,859,395	0.344 0.383 0.410 0.482 0.329	93,465,646 93,465,646 93,465,646 94,952,508 98,086,882	0.11% 0.38% 1.61% 5.11% 15.07%

8.6.2 Liquidity

Consistent trading in a company’s securities;
Approximately 1% of a company’s free float shares are traded on a weekly basis;
The spread of a company’s shares must not be so great that a single minority trade can significantly affect the market capitalisation of a company; and
No significant but unexplained movements in share price.

Shares on Issue as at 19 June 2013			93,465,646
Shares subject to Escrow (released 20 June 2013)			(13,696,459)
Free Float			79,769,187
	1 Week	1 Month	3 Months
Volume of Shares Traded in Period	99,437	358,935	1,508,282
% of Free Float Traded	0.12%	0.45%	1.89%

In our assessment of CAF’s free float shares, we have excluded shares held in escrow, as these shares are not considered to be available for trade.

Having regard to the criteria for a deep market described previously, we make the following observations in relation to CAF shares:

Share trading is not consistent. There have been 70 days during the last year in which no trades were executed with respect to CAF shares. There were three days in the week ended 19 June 2013 in which trading of CAF shares did not occur; and
CAF shares traded as a percentage of the free float in the month to 19 June 2013 represents just 0.45%. This is less than half the level required on a weekly basis to support the existence of a deep market.

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8.6.3 Liquidity – Post Market Announcement

There were nine days (17%) in which no trading in CAF shares occurred;
The share price has traded within a range of 22.5 cents and 33.0 cents; and
The average closing share price during this period was 28.5 cents.

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9 Evaluation of the Scheme

9.1 Approach

When considering whether in our opinion the terms of the Scheme as outlined in the body of this Report are fair and reasonable and therefore in the best interests of the AAP2 RPS holders we have considered:

Whether the value of a Scheme Share is higher or lower than the value of the consideration being offered by CAF under the Scheme;
Other qualitative factors which we believe represent either advantages or disadvantages to AAP2 RPS holders;
The likelihood of an alternative superior offer being made to AAP2 RPS holders; and
The alternatives available to AAP2 RPS holders.

9.2 Conclusion of valuation analysis

The results of our analysis are summarised in the following table:

$	Low High
Value of Merged Entity Share Conv ersion ratio Value of Scheme Consideration	0.38 0.42 1.16 1.16
	0.44 0.49
Value of a Scheme Share	- 0.23

As illustrated in the above table, we conclude that the value of the consideration offered by CAF is above the value of a Scheme Share. Consequently, WMS considers that the Scheme is fair to AAP2 RPS holders in accordance with prescription set out in RG111.

9.3 Qualitative factors (Advantages and Disadvantages)

These commercial and qualitative factors are summarised below. We note that individual shareholders may interpret these factors differently depending on their individual circumstances.

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9.3.1 Liquidity – AAP2 shareholders will receive shares in a listed entity

The Scheme represents an opportunity for the AAP2 RPS holders to receive shares in CAF being a listed entity. That is, the shares are capable of being divested in an open exchange. We note that trading in CAF does not constitute a deep market (see Section 8.6.2) however, for portfolio interests such as those extended to individual AAP2 RPS holders under this Scheme, on a weekly basis, there is sufficient market depth to facilitate transactions.

9.3.2 Board view

9.3.3 Escrow

We understand that the Scheme shares will be subject to the following escrow restrictions:

50% restricted for 18 months; and
50% restricted for two years.

Despite the escrow periods described above, we note that there is currently no exit mechanism for a capital sum available to RPS holders.

9.3.4 Transaction Costs

The Directors of AAP2 have estimated that transaction costs associated with the Scheme will be approximately $128k. These transaction costs include the preparation of the Scheme Booklet, professional fees and costs associated with preparation and dispatch of documents. These costs will be borne by shareholders regardless of whether the Scheme proceeds.

9.3.5 No alternative offers received

As at the date of our Report, we are not aware of any alternative offers that may be forthcoming despite the considerable time which has lapsed since the offer was announced. Additionally, having regard to the controlling stake already held by CAF and the administrative and technical support afforded to AAP2, we consider there to be material impediments to the receipt of an alternative offer.

9.3.6 AAP RPS holders’ position if the Scheme is not approved

1) There is no mechanism to exchange these shares for a capital sum. As such, the value of the shares can only be attributed to the future dividends which may be received;
2) FoFA reforms will prevent equity arrangement where there is a nexus between the payment of dividends and underlying business profits. Accordingly, AAP2 dealer’s will no longer be entitled to dividends from 1 July 2014; and

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3) There remains absolute discretion for the shareholding to be redeemed by CAF for $nil consideration.

9.3.7 Benefits of having 100% ownership

CAF believe the benefits of having 100% ownership of AAP2 and the associated total revenue stream is reflected in the consideration it is providing. This consideration has regard to the equity value of AAP2 as determined at Section 7.4.

9.3.8 The interests of AAP2 RPS holders will be materially diluted

The interests of AAP2 RPS holders will be diluted down and represent approximately 2.1% of the CAF issued capital should the Scheme proceed as contemplated. Accordingly, they will collectively have significantly less influence and control over the future direction of the Company.

9.3.9 Dividends

9.3.10 Tax

Tax consequences specific to individual shareholders need to be regarded by each AAP2 RPS holder in considering the implications of the Scheme. The specific tax consequences of the Scheme will vary depending on the circumstances of each individual AAP2 RPS holder.

9.4 Other considerations

This Independent Expert’s Report constitutes general financial product advice only and has been prepared without taking into consideration the individual circumstances of shareholders. The decision of whether or not to accept the Scheme is a matter for each AAP2 RPS holder to decide based on their own views of value of AAP2 and CAF and expectations about future market conditions, AAP2 and CAF’s performance, risk profile and investment strategy.

The Directors and Management of AAP2 have prepared the Scheme Booklets in relation to this Scheme and as such AAP RPS holders should have regard to this when considering the Scheme. Shareholders should personally consider the taxation implications in relation to the Scheme as the Scheme Booklets contains only general information in relation to same. If AAP2 RPS holders are in doubt about the action they should take in relation to the Proposed Scheme, they should seek their own professional advice.

This Report is prepared exclusively for AAP2 RPS holders and therefore neither WMS nor any member, employee or consultant thereof undertakes any responsibility to any person, other than AAP2 RPS holders, in respect of this Independent Expert’s Report, including any errors or omissions howsoever caused.

9.5 Conclusion

WMS has considered the terms of the Scheme as outlined in the body of this Report and has concluded that the Scheme is fair and reasonable and therefore in the best interests of the AAP2 RPS holders as a whole, notwithstanding the costs, disadvantages and risks.

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In deriving our opinion we have considered:

Whether the value of a Scheme Share is higher or lower than the value of the consideration being offered by the Scheme;
Other qualitative factors which we believe represent either advantages or disadvantages to AAP2 RPS holders;
The likelihood of an alternative superior offer being made to AAP2 RPS holders; and
The alternatives available to AAP2 RPS holders.

We have considered the likely advantages and disadvantages of the Scheme for the AAP2 RPS holders, and the advantages and disadvantages for the same shareholders if the Scheme does not proceed. It is WMS’ opinion that the benefits that are likely to accrue to the shareholders as a result of the Scheme outweigh the disadvantages and the other considerations if the Scheme does not proceed.

In forming our assessment, we have considered the dilutionary effect to AAP2 RPS holders should the similar scheme involving AAP RPS holders also proceed.

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when it counts

10 Financial services guide

FINANCIAL SERVICES GUIDE

The FSG includes information about:

Who we are and how we can be contacted;
The services we are authorised to provide under AFSL/Licence No: 418958;
Remuneration that we and/or our staff and any associates receive in connection with the general financial product advice;
Any relevant associations or relationships we have; and
Our complaints handling procedures and how you may access them.

FINANCIAL SERVICES WE ARE LICENSED TO PROVIDE

WMS holds an AFSL which authorises the licensee to provide general financial product advice to retail and wholesale clients on securities and interests in managed investment schemes.

Any report we provide is provided on our own behalf as a financial services licensee authorised to provide the financial product advice contained in the report.

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GENERAL FINANCIAL PRODUCT ADVICE

FEES, COMMISSIONS AND OTHER BENEFITS THAT WE MAY RECEIVE

REMUNERATION OR OTHER BENEFITS RECEIVED BY OUR EMPLOYEES

All our employees receive a salary. Our employees are eligible for bonuses based on overall productivity but not directly in connection with any engagement for the provision of a report.

REFERRALS

We do not pay commissions or provide any other benefits to any person for referring customers to us in connection with the reports that we are licensed to provide.

INDEPENDENCE

COMPLAINTS RESOLUTION

INTERNAL COMPLAINTS RESOLUTION PROCESS

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REFERRAL TO EXTERNAL DISPUTE RESOLUTION SCHEME

David Hayes is a member of FOS (Member Number 30725). Further details about FOS are available at the FOS website www.fos.org.au or by contacting them directly via the details set out below:

Financial Ombudsman Service Limited GPO Box 3 MELBOURNE VIC 3001 Toll free: 1300 78 08 08 Facsimile: (03) 9613 6399 Email: [email protected]

CONTACT DETAILS

You may contact us using the details set out at the top of our letterhead of this FSG.

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11 Appendix 1 – Potentially Comparable Companies and Transactions

11.1 Potentially Comparable Companies

	Latest	Market Cap	NPAT	PE Multiple	NPAT	PE Multiple
Company	Financials	$m	FY12	FY12	FY13	FY13
Funds Management
Platinum Asset Management	FY13	3,093	126.4	17.0	129.1	19.3
Perpetual Limited	FY13	1,614	65.4	14.4	75.9	18.1
Tower Limited	Sep-12	303	36.0	9.6
BT Inv estment Management Limited	Sep-12	1,029	41.5	13.3
K2 Asset Management Limited	FY13	128	(1.7)	n/a	13.2	7.8
Magellan Financial Group Limited	FY13	1,612	13.7	18.5	48.5	18.7
Mean				14.6		16.0
Median				14.4		18.4
Financial Planning & Advisory Services
Challenger Limited	FY13	2,760	297.3	7.5	308.5	6.2
IOOF Holdings Limited	FY13	1,973	96.4	13.9	108.8	15.4
Equity Trustee Limited	FY12	138	8.4	13.4
ClearView Wealth Limited	FY13	272	26.6	7.3	16.0	15.2
Prime Financial Group Ltd	FY12	21	2.8	7.4
SFG Australia Limited	FY13	529	24.3	10.7	27.3	16.0
Yellow Brick Road Holdings Limited	FY12	113	(6.8)	n/a
Mean				10.0		13.2
Median				9.1		15.3

M o rning st ar research & W M S analysis - M arket C ap it alisat io n as at 2 Sep t emb er 2 0 13

11.2 Potentially Comparable Transactions

			Equity Value	PE multiple
Company	Acquirer	Date	$m	Historical
Financial Planning & Advisory Services
Plan B Group Holdings Limited*	IOOF Holdings Limited	13/07/12	49	12.3
Count Financial Limited	Commonwealth Bank of Australia	9/12/11	367	15.9
DKN Financial Group Limited	IOOF Holdings Ltd	4/10/11	115	15.2
Shadforth Financial Group	Snowball Group Ltd	14/07/11	210	12.5
Mean (Excluding Outliers)				14.0
Median (Excluding Outliers)				13.9
Funds Management
AXA Asia Pacific Holdings Ltd	AMP Limited	30/03/11	13,740	22.1
Tyndall IM and Tyndall IM NZ	Nikko Asset Management Co. Ltd		94	9.2
Mean (Excluding Outliers)				9.2
Median (Excluding Outliers)				9.2

M o rning st ar R esearch, Pub lic Inf o rmat io n and W M S A nalysis Shad ed result s have b een exclud ed f ro m M ean & M ed ian calculat io ns

*PE M ult ip le b ased o n earning s g uid ance p ro vid ed t o market

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11.3 Background

BT Investment Management Limited (“BTT”) is an investment manager responsible for the management of the BTT wholesale and retail funds, as well as managing mandates on behalf of Westpac.

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Plan B Group Holdings Limited (“PLB”) is an Australian based wealth management company.

Count Financial Limited provides financial advice services and is based in Australia.

Shadforth Financial Group Holdings Limited is a privately owned financial advisory firm.

AXA Asia Pacific Holdings Limited was an insurance and fund management group, and a subsidiary of AXA SA, the listed French financial services group.

Tyndall Investment Management Australia Ltd and Tyndall Investment Management New Zealand Ltd, are both investment management companies.

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Annexure B

Revised Scheme

25524839v2 | Supplementary scheme booklet

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Scheme of arrangement

Associated Advisory Practices (No 2) Ltd ACN 126 371 346

Scheme Shareholders

Level 11 Central Plaza Two 66 Eagle Street Brisbane QLD 4000 GPO Box 1855 Brisbane QLD 4001 Australia ABN 42 721 345 951 Telephone 07 3233 8888 Fax 07 3229 9949

Offices Brisbane Newcastle Sydney

www.mccullough.com.au

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Parties	--------------------------------------------------------------------------------------------------------	--------------------------------------------------------------------------------------------------------	--------------------------------------------------------------------------------------------------------	1
Agreed	terms	------------------------------------------------------------------------------------------------		1
1	Definitions and interpretation ---------------------------------------------------------------------			1
	1.1	Definitions		1
	1.2	Interpretation		4
2	Preliminary -----------------------------------------------------------------------------------------		~~5~~ ~~4~~
	2.1	Target	~~5~~ ~~4~~
	2.2	Target securities		5
	2.3	Bidder		5
	2.4	Bidder Securities		5
	2.5	Effect of Scheme		5
	2.6	Merger Implementation Deed		6
	2.7	Deed Poll		6
3	Conditions precedent -------------------------------------------------------------------------------			6
	3.1	Conditions precedent to Scheme		6
	3.2	Certificate in relation to conditions precedent		6
	3.3	Termination of Merger Implementation Deed	~~7~~ ~~6~~
	3.4	Sunset Date		7
4	Implementation of Scheme ------------------------------------------------------------------------			7
	4.1	Lodgement of Court order		7
	4.2	Transfer of Scheme Shares		7
	4.3	Entitlement to Scheme Consideration		7
	4.4	Fractional entitlements	~~8~~ ~~7~~
	4.5	Shareholding splitting or division		8
5	Provision of Scheme Consideration ---------------------------------------------------------------			8
	5.1	Scheme Consideration		8
	5.2	Obligations to provide the Scheme Consideration		8
	5.3	General		8
	5.4	Binding instruction or notification	~~9~~ ~~8~~
	5.5	Joint holders		9
6	Quotation of Bidder Shares ------------------------------------------------------------------------			9
7	Dealings in Scheme Shares ------------------------------------------------------------------------			9

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	7.1	Determination of Scheme Shareholders		9
	7.2	Maintenance of Target Register	1~~0~~ ~~9~~
	7.3	Effect of certificates and holding statements		10
	7.4	Information to be made available to Bidder		10
8	Dealing in Bidder Shares -------------------------------------------------------------------------- 10
	8.1	Holding lock during Escrow Period		10
	8.2	Release of holding lock		10
	8.3	Restrictions during Escrow Period	1~~1~~ ~~10~~
	8.4	Takeovers		11
	8.5	Schemes of arrangement		11
	8.6	Application of Listing Rules		11
	8.7	Other permitted Dealings		11
	8.8	Release by the Bidder board	1~~2~~ ~~11~~
9	General Scheme provisions ----------------------------------------------------------------------- 12
	9.1	Appointment of Target as agent and attorney		12
	9.2	Scheme Shareholders' consent		12
	9.3	Agreement by Scheme Shareholders		12
	9.4	Warranty by Scheme Shareholders		12
	9.5	Title to Scheme Shares		12
	9.6	Appointment of Bidder as sole proxy	1~~3~~ ~~12~~
	9.7	Scheme alterations and conditions		13
	9.8	Effect of Scheme		13
	9.9	Enforcement of Deed Poll		13
	9.10	No liability when acting in good faith		13
	9.11	Notices		13
	9.12	Further assurances	1~~4~~ ~~13~~
	9.13	Costs and stamp duty	1~~4~~ ~~13~~
10	Governing law and jurisdiction ------------------------------------------------------------------- 14

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Scheme of arrangement

Dated

Parties

Target

Associated Advisory Practices (No 2) Ltd ACN 126 371 346

of Level 16, Corporate Centre One, Corner Bundall Road & Slatyer Avenue, Bundall, Queensland 4217

Scheme Shareholders

Agreed terms

1 Definitions and interpretation

1.1 Definitions

In this document:

	Term	Definition
	A Class Share ASIC ASX ASX Settlement ASX Settlement Operating Rules Bidder Bidder Register Bidder Share Bidder Share Registry Business Day CHESS Corporations Act	means an A class redeemable preference share in the capital of Target. means the Australian Securities and Investments Commission. means ASX Limited ACN 008 624 691 or the securities exchange operated by it (as the case requires). means ASX Settlement Pty Ltd ACN 008 504 532. means the operating rules of ASX Settlement. means Centrepoint Alliance Limited ACN 052 507 507. means the register of members of Bidder maintained by or on behalf of Bidder in accordance with section 168(1) Corporations Act. means a fully paid ordinary share in Bidder. means Computershare Investor Services Pty Limited. means a day that is not a Saturday, Sunday or a public holiday or bank holiday in Brisbane, Queensland. means Clearing House Electronic Subregister System, operated by ASX Settlement. means the Corporations Act 2001 (Cth).

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	Term	Definition
	Court Deal Deed Poll Effective Effective Date Escrow Period Escrowed Shares Implementation Date Listing Rules Merger Implementation Deed Ordinary Share Permitted Transferee	means the Federal Court of New South Wales or such other court as the Target and Bidder may agree. means: (a) sell, assign, transfer or otherwise dispose of; (b) agree or offer to sell, assign, transfer or otherwise dispose of; (c) enter into any option which, if exercised (whether such exercise is subject to conditions or otherwise), enables or requires the Scheme Shareholder to sell, assign, transfer or otherwise dispose of; and (d) decrease or agree to decrease an economic interest. means the deed poll executed by Bidder under which Bidder covenants in favour of each Scheme Shareholder to perform its obligations under this Scheme and under the Merger Implementation Deed as regards the implementation of this Scheme. means, when used in relation to this Scheme, the coming into effect, pursuant to section 411(10) Corporations Act, of the Court order made for the purposes of section 411(4)(b) Corporations Act in relation to this Scheme but in any event at no time before an office copy of the order of the Court is lodged with ASIC. means the date on which the Scheme becomes Effective. means: (e) in respect of one half of the Escrowed Shares, the period of time beginning on the Effective Date and ending on the date that is 18 months after the Effective Date; and (f) in respect of the other half of the Escrowed Shares, the period of time beginning on the Effective Date and ending on the date that is 24 months after the Effective Date. means, during the Escrow Period, the Bidder Shares issued by the Bidder as the Scheme Consideration. means thedate no later than the fifth Business Day following the Scheme Record Date. means the listing rules of ASX as amended from time to time. means the merger implementation deed between Target and Bidder dated 20 June 2013. means an ordinary share in the capital of Target. means: (a) on death of the Scheme Shareholder, a personal representative of a Scheme Shareholder or another person the personal representative determines is

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	Term	Definition
	Proper ASTC Transfer Redeemable Preference Share Registered Address Related Body Corporate Scheme Scheme Consideration Scheme Date Scheme Meeting Scheme Record Date Scheme Shareholders Scheme Shares Scheme Share Transfer Second Court Hearing Date	entitled to the Bidder Shares; (b) a person entitled to Bidder Shares because of the bankruptcy of a Scheme Shareholder;~~and~~ (c) a person entitled to shares because of the mental incapacity of a Scheme Shareholder; (d) any spouse or child of the Scheme Shareholder; (e) any company controlled by the Scheme Shareholder; and (f) any trustee of a family trust of which the Scheme Shareholder is a beneficiary. has the meaning given to that term in the Corporations Regulations 2001 (Cth). means a redeemable preference share in the capital of Target. means, in relation to a Scheme Shareholder, the address shown in the Target Register at the Scheme Record Date. has the meaning given to that term by section 9 Corporations Act. means this scheme of arrangement between Target and Scheme Shareholders, under which all the Scheme Shares will be transferred to Bidder under Part 5.1 of the Corporations Act as described in clause 4, in consideration for the Scheme Consideration, subject to any alterations or conditions made or required by the Court pursuant to section 411(6) Corporations Act to the extent they are approved in writing by Target in accordance with clause 9.7. means 1.16 Bidder Shares per Scheme Share. means the date on which the Merger Implementation Deed is executed by all parties to the document. means the meeting of Scheme Shareholders ordered by the Court to be convened pursuant to section 411(1) Corporations Act to consider this Scheme. means 8.00pm on the fifth Business Day after the Effective Date. means each person who is a holder of a Scheme Share at the Scheme Record Date. means all issued fully paid Redeemable Preference Shares, as at the Scheme Record Date. means, for each Scheme Shareholder, a duly completed and executed proper instrument of transfer of the Scheme Shares held by that Scheme Shareholder for the purposes of section 1071B Corporations Act, which may be a master transfer of all Scheme Shares. means the first day on which the application made to the Court for an order approving this Scheme pursuant to

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Term Definition section 411(4)(b) Corporations Act is heard, or if the hearing of the application is adjourned for any reason, the first day of the adjourned hearing. Sunset Date means 8.00pm on ~~30 September3~~ 1 October 2013 or such other date and time agreed in writing between Bidder and Target . Target Register means the register of members of Target maintained by or on behalf of Target in accordance with section 168(1) Corporations Act. Target Shareholder means a person who is the registered holder of one or more shares in the capital of Target. Z Class Share means a Z class redeemable preference share in the capital of Target.

1.2 Interpretation

In this document:

(a) a reference to a clause, schedule, annexure or party is a reference to a clause of, and a schedule, annexure or party to, this document and references to this document include any schedules or annexures;
(b) a reference to a party to this document or any other document or agreement includes the party’s successors, permitted substitutes and permitted assigns;
(c) if a word or phrase is defined, its other grammatical forms have a corresponding meaning;
(d) a reference to a document or agreement (including a reference to this document) is to that document or agreement as amended, supplemented, varied or replaced;
(e)
a reference to this document includes the agreement recorded by this document;
(f) a reference to legislation or to a provision of legislation (including subordinate legislation) is to that legislation as amended, re-enacted or replaced, and includes any subordinate legislation issued under it;
(g) if any day on or by which a person must do something under this document is not a Business Day, then the person must do it on or by the next Business Day;
(h) a reference to a person includes a corporation, trust, partnership, unincorporated body, government and local authority or agency, or other entity whether or not it comprises a separate legal entity; and
(i) a reference to ‘month’ means calendar month.

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2 Preliminary

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2.1 Target

(a) Target is a public company limited by shares, incorporated in Australia and registered in Queensland.
(b) Its registered office is at Level 16, Corporate Centre One, Corner Bundall Road & Slatyer Avenue, Bundall, Queensland 4217.
(c) Target is not listed and Target’s shares are not quoted on any securities exchange.

2.2 Target securities

As at the Scheme Date, Target had the following securities on issue:

(a) 1,782,019 Redeemable Preference Shares;
(b) 2,178,021 A Class Shares;
(c) 1 Ordinary Share; and
(d) 1 Z Class Share.

2.3 Bidder

(a) Bidder is a public company limited by shares, incorporated in Australia and registered in Western Australia.
(b) Its registered office is at Level 2, 6 Thelma Street, West Perth, Western Australia 6005.
(c) Bidder is admitted to the official list of ASX and Bidder Shares are officially quoted on ASX.
(d) Bidder holds all of the shares in Target other than the Redeemable Preference Shares.

2.4 Bidder Securities

As at the Scheme Date, Bidder had 93,465,646 fully paid ordinary shares and 2,250,000 unissued ordinary shares under options.

2.5 Effect of Scheme

If this Scheme becomes Effective,

(a) on the Implementation Date, in consideration of the transfer of all Scheme Shares to Bidder, Bidder will issue to each Scheme Shareholder the Scheme Consideration by Bidder in respect of each Scheme Share held by the Scheme Shareholder and seek quotation on the ASX of the Bidder Shares, in accordance with the terms of this Scheme and the Deed Poll; and
(b) subject to Bidder having complied in full with its obligations in clause 5 and in the Deed Poll:

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(i) all of the Scheme Shares will be transferred to Bidder on the Implementation Date; and
(ii) Target will enter the name and address of Bidder in the Target Register as the holder of all of the Scheme Shares.

2.6 Merger Implementation Deed

Target and Bidder have entered into the Merger Implementation Deed which sets out the terms on which Target and Bidder have agreed to implement this Scheme.

2.7 Deed Poll

Bidder has executed the Deed Poll in favour of each Scheme Shareholder pursuant to which it has covenanted to perform its obligations under this Scheme, including to provide the Scheme Consideration.

3 Conditions precedent

3.1 Conditions precedent to Scheme

This Scheme is conditional on:

(a) as at 8.00am on the Second Court Hearing Date, neither the Merger Implementation Deed nor the Deed Poll having been terminated;
(b) all of the conditions precedent set out in clause 3.1 of the Merger Implementation Deed (other than the condition precedent in clause 3.1(j) of that deed regarding Court approval pursuant to section 411(4)(b) Corporations Act) having been satisfied or waived in accordance with the terms of that deed as at 8.00am on the Second Court Hearing Date;
(c) the Court having approved this Scheme with or without modification, pursuant to section 411(4)(b) Corporations Act, and if applicable, Target having accepted in writing any modification required by the Court; and
(d) Target having lodged with ASIC an office copy of any order made by the Court pursuant to section 411(4)(b) Corporations Act approving the Scheme (as defined in the Merger Implementation Deed),

and the provisions of clauses 4 to 8 (both inclusive) will not come into effect unless and until each of these conditions precedent has been satisfied.

3.2 Certificate in relation to conditions precedent

(a) On the Second Court Hearing Date, Target and Bidder will each provide to the Court a certificate confirming whether or not all of the conditions precedent set out in clause 3.1 of this Scheme (other than the conditions precedent in clauses 3.1(c) and 3.1(d) of this Scheme) have been satisfied or waived as at 8.00am on the Second Court Hearing Date and confirming whether or not the Merger Implementation Deed has been terminated.
(b) The giving of a certificate by each of Target and Bidder under clause 3.2(a) confirming that any conditions precedent set out in clause 3.1 have been satisfied or waived and that the Merger Implementation Deed has not been terminated as at 8.00am on the Second Court Hearing Date will be conclusive evidence of those matters.

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3.3 Termination of Merger Implementation Deed

(a) any further obligation to take steps to implement the Scheme;
(b) any liability with respect to the Scheme; and
(c) in the case of Bidder, any liability under the Deed Poll.

3.4 Sunset Date

This Scheme will lapse and be of no further force or effect if the Effective Date has not occurred on or before the Sunset Date.

4 Implementation of Scheme

4.1 Lodgement of Court order

4.2 Transfer of Scheme Shares

On the Implementation Date, but subject to Bidder having actually provided the Scheme Consideration for the Scheme Shares in the manner contemplated in clause 5.2:

(a) all of the Scheme Shares, together with all rights and entitlements attaching to the Scheme Shares at the Implementation Date, will be transferred to Bidder without the need for any further act by any Scheme Shareholder (other than acts performed by Target as attorney and agent for Scheme Shareholders under clause 9.1) by:
(i) Target delivering to Bidder a duly completed Scheme Share Transfer executed on behalf of the Scheme Shareholders for execution by Bidder; and
(ii) Bidder duly executing the Scheme Share Transfer and delivering it to Target for registration; and
(b) Target will enter the name and address of Bidder in the Target Register as the holder of all of the Scheme Shares as soon as practicable following receipt of the duly executed Scheme Share Transfer from Bidder under clause 4.2(a)(ii).

4.3 Entitlement to Scheme Consideration

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4.4 Fractional entitlements

4.5 Shareholding splitting or division

5 Provision of Scheme Consideration

5.1 Scheme Consideration

5.2 Obligations to provide the Scheme Consideration

The obligation of Bidder to provide the Scheme Consideration to the Scheme Shareholders in respect of each Scheme Share registered in the name of the Scheme Shareholders will be satisfied by Bidder:

(a) on the Implementation Date, passing a resolution of directors and doing all other things necessary to validly issue the Bidder Shares and entering the name and Registered Address of that Scheme Shareholder in the Bidder Register as the holder of the Bidder Shares issued to that Scheme Shareholder;
(b) within five Business Days after the Implementation Date, dispatching or procuring the dispatch to that Scheme Shareholder by pre-paid post to their Registered Address, of an uncertificated holding statement in the name of that Scheme Shareholder representing the Bidder Shares issued to them under the Scheme; and
(c) making an application to ASX for the quotation of the Bidder Shares on ASX in accordance with clause 6.

5.3 General

Each Scheme Shareholder to whom Bidder Shares are to be issued under this Scheme agrees:

(a) to become a member of Bidder for the purposes of section 231 Corporations Act;
(b) to have their name and Registered Address entered in the Bidder Register; and
(c) to be bound by the constitution of Bidder as in force from time to time in respect of the Bidder Shares.

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5.4 Binding instruction or notification

(a) Except for a Scheme Shareholder's tax file number, any binding instruction or notification between a Scheme Shareholder and Target relating to Scheme Shares at the Scheme Record Date (including, without limitation, any instructions relating to payment of dividends or to communications from Target) will from the Scheme Record Date be deemed to be a similarly binding instruction or notification to, and accepted by, Bidder in respect of the Bidder Shares issued to the Scheme Shareholder until that instruction or notification is revoked or amended in writing addressed to Bidder at the Bidder Share Registry.
(b) Any such instructions or notifications accepted by Bidder will apply to and in respect of Bidder Shares issued as part of the Scheme Consideration only to the extent that they are not inconsistent with the other provisions of this Scheme.

5.5 Joint holders

6 Quotation of Bidder Shares

Bidder will use its best endeavours to procure that the Bidder Shares to be issued pursuant to this Scheme will be quoted on ASX:

(a) initially on a deferred settlement basis on and from the Business Day after the Effective Date (or, if Bidder Shares are subject to a trading halt on that day, on the first Business Day after the trading halt has ended); and
(b) on an ordinary settlement basis on and from the Business Day after the Implementation Date.

7 Dealings in Scheme Shares

7.1 Determination of Scheme Shareholders

(a) For the purpose of determining the persons that are Scheme Shareholders, dealings in Scheme Shares will only be recognised if registrable transfers or transmission applications in respect of those dealings are received on or before the Scheme Record Date at Target’s registered office.
(b) Target will register registrable transfers or transmission applications of the kind referred to in clause 7.1(a) by the Scheme Record Date.
(c) Target will not accept for registration, nor recognise for any purpose, any transfer or transmission application in respect of Scheme Shares received after the Scheme Record Date (other than the transfers contemplated by clause 4.2).
(d) If the Scheme becomes Effective, a holder of Scheme Shares (and any person claiming through that holder) must not dispose of or purport to agree to dispose of any Scheme Shares or any interest in them after the Effective Date and any such disposal will be void and of no legal effect whatsoever.

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7.2 Maintenance of Target Register

7.3 Effect of certificates and holding statements

7.4 Information to be made available to Bidder

8 Dealing in Bidder Shares

8.1 Holding lock during Escrow Period

8.2 Release of holding lock

Subject to clauses 8.4, 8.5, 8.7 and 8.8, the holding lock placed on the Bidder Shares as described in clause 8.1 will be released on the expiry of the Escrow Period.

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8.3 Restrictions during Escrow Period

Subject to clauses 8.4 and 8.5, Scheme Shareholders will not be permitted, during the Escrow Period, to do any of the following:

(a) Deal, directly or indirectly, in any or all of the Escrowed Shares or Deal, directly or indirectly, in any interest or right in respect of any or all of the Escrowed Shares;

(b) create, or agree to create, a security interest or encumbrance over or affecting any or all of the Escrowed Shares; or

(c) do or omit to do any act which would have the effect of transferring effective ownership or control of any or all of the Escrowed Shares.

8.4 Takeovers

(a) If at any time:

(i) any person makes a takeover bid in respect of all of the ordinary shares of the Bidder under Chapter 6 of the Corporations Act; and

(ii) acceptances of that bid are received from the holders of 50% or more of the ordinary shares of the Bidder,

the Scheme Shareholders may deal in any or all of the Escrowed Shares during the Escrow Period in order to accept the takeover bid.

(b) If the takeover bid does not become unconditional, the escrow obligations in this clause 8 continue to apply to any Bidder Shares.

8.5 Schemes of arrangement

8.6 Application of Listing Rules

To the extent of any inconsistency between this clause 8 and the Listing Rules, the Listing Rules prevail.

8.7 Other permitted Dealings

(a) the transferee of the Escrowed Shares enters into a deed containing terms to the same effect as the provisions of this clause 8, prior to any transfer;

(b) where such a transferee ceases to be a Permitted Transferee, it will immediately notify the Bidder of such event; and

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8.8 Release by the Bidder board

The Bidder board, in its absolute discretion, may release a Scheme Shareholder from all or part of the escrow restriction in clause 8 by written notice to the Scheme Shareholder.

89 General Scheme provisions

8.19 .1 Appointment of Target as agent and attorney

8.29 .2 Scheme Shareholders' consent

8.39 .3 Agreement by Scheme Shareholders

Each Scheme Shareholder agrees to the transfer of all of their Scheme Shares to Bidder in accordance with the terms of this Scheme.

8.49 .4 Warranty by Scheme Shareholders

(a) all of their Scheme Shares (including any rights and entitlements attaching to those shares) transferred to Bidder under this Scheme will, on the date of the transfer, be fully paid and free from all mortgages, charges, liens, encumbrances, pledges, security interests and other interests of third parties of any kind, whether legal or otherwise (but acknowledging that a security interest holder may potentially have an interest in the Scheme Consideration in accordance with the terms of such security interest); and
(b) subject to any restrictions in the terms of issue, they have the full power and capacity to sell and transfer their Scheme Shares (including any rights and entitlements attaching to those shares).

8.59 .5 Title to Scheme Shares

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8.69 .6 Appointment of Bidder as sole proxy

(a) is deemed to have irrevocably appointed the Chairman of Bidder as their sole proxy and, where applicable, corporate representative, to attend shareholders' meetings of Target, exercise the votes attached to the Scheme Shares registered in their name and sign any shareholders' resolutions, whether in person, by proxy or by corporate representative;
(b) must not attend or vote at any shareholders' meetings of Target, or sign any resolutions, whether in person, by proxy or by corporate representative, other than in accordance with this clause 9.6; and
(c) must take all other actions in the capacity of the registered holder of Scheme Shares as Bidder directs.

8.79 .7 Scheme alterations and conditions

8.89 .8 Effect of Scheme

8.99 .9 Enforcement of Deed Poll

Target undertakes in favour of each Scheme Shareholder to enforce the Deed Poll against Bidder on behalf of and as agent and attorney for the Scheme Shareholders.

8.109 .10 No liability when acting in good faith

Neither Target nor Bidder, nor any of their respective officers, will be liable for anything done or omitted to be done in the performance of this Scheme in good faith.

8.119 .11 Notices

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8.129 .12 Further assurances

8.139 .13 Costs and stamp duty

Bidder will pay any stamp duty payable on the transfer by Scheme Shareholders of the Scheme Shares to Bidder.

91 0 Governing law and jurisdiction

(a) This Scheme is governed by the laws of Queensland.
(b) Each party irrevocably and unconditionally:
(i) submits to the non-exclusive jurisdiction of the courts of Queensland; and
(ii) waives, without limitation, any claim or objection based on absence of jurisdiction or inconvenient forum.

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Annexure C

New notice of Scheme Meeting

Notice of Court ordered Scheme Meeting of redeemable preference shareholders of Associated Advisory Practices (No 2) Ltd ACN 126 371 346 (AAP2)

Notice is given that, by an order of the Federal Court of Australia ( Court ), the meeting of redeemable preference shareholders of AAP2 ( Scheme Meeting ) that was to be held on 12 August 2013 will be reconvened at Level 2, Fawkner Centre, 499 St. Kilda Road, Melbourne, Victoria 3004 on 1 October 2013 at the later of 11.00am and 10 minutes after the close of the AAP scheme meeting.

Business

The purpose of the Scheme Meeting is to consider, and if thought fit, to agree to a modification to a scheme of arrangement (with or without modification) ( Scheme ) between AAP2 and the holders of redeemable preference shares in AAP2 ( AAP2 Shares ) as at the Record Date ( AAP2 Shareholders ) under part 5.1 of the Corporations Act 2001 (Cth) ( Corporations Act ) in the manner described in the Supplementary Scheme Booklet accompanying this notice of meeting, and then to consider the revised scheme of arrangement ( Revised Scheme ).

Resolutions

To consider and, if thought fit, to pass the following resolutions:

1 That the scheme of arrangement proposed between Associated Advisory Practices (No 2) Ltd and holders of its fully paid AAP2 Shares, as set out in and more particularly described in the Scheme Booklet dated 19 July 2013 is amended by changing the definition of Implementation Date and Sunset Date, and by including a new clause 8 (and accompanying definitions) dealing with the escrow arrangements to apply to the shares to be issued to AAP2 Shareholders as the scheme consideration, on the terms set out in Annexure B of the Supplementary Scheme Booklet dated 18 September 2013.
2 That, under section 411 of the Corporations Act, the scheme of arrangement proposed to be entered into between Associated Advisory Practices (No 2) Ltd and holders of its fully paid AAP2 Shares, designated the Revised Scheme, is approved and the board of directors of AAP2 is authorised to agree to those modifications or conditions which are thought appropriate by the Court and, subject to approval of the Revised Scheme by the Court, to implement the Revised Scheme with any of those modifications or conditions.

The Revised Scheme is subject to the approval of the Court under section 411(4)(b) of the Corporations Act.

25524839v2 | Supplementary scheme booklet

AAP2 intends to apply to the Court for approval of the Revised Scheme, subject to the above resolutions being passed by the requisite majorities at the Scheme Meeting.

Requisite majority

In accordance with section 411(4)(a)(ii) of the Corporations Act, this resolution must be passed by a majority in numbers of holders of AAP2 Shares present and voting (either in person or by proxy) and representing at least 75% of the votes cast on the resolution (either in person or by proxy). The vote will be conducted by poll.

Court approval

The Revised Scheme (with or without modification) is subject to the approval of the Court.

Dated:

Linda Kaddatz Company Secretary

Notes

Voting entitlement

AAP2 Shares will be taken to be held by the persons who are the registered holders at 11.00am on 29 September 2013. All AAP2 Shareholders at that time are entitled to vote at the Scheme Meeting.

How to vote

AAP2 Shareholders entitled to vote at the Scheme Meeting can vote:

(a) by attending the meeting and voting in person;
(b) by appointing an attorney to attend the meeting and vote on their behalf, or, in the case of corporate shareholders, a corporate representative to attend the meeting and vote on its behalf; or
(c) by appointing a proxy to attend and vote on their behalf in their place, using the proxy form accompanying this notice of Scheme Meeting.

Voting in person (or by attorney or corporate representative)

AAP2 Shareholders or their attorneys who plan to attend the Scheme Meeting should arrive at the venue by 10.00am on 1 October 2013 so that shareholdings may be checked against the register and attendances noted. Attorneys should bring with them the original or a certified copy of the power of attorney under which they have been authorised to attend and vote at the meeting.

To vote in person at the Scheme Meeting, a corporation which is an AAP2 Shareholder may appoint an individual to act as its representative. The appointment must comply with the requirements of section 250D of the Corporations Act. The representative should bring to the meeting evidence of their appointment, including the authority under which it is signed.

25524839v2 | Supplementary scheme booklet

Voting by proxy

1 A proxy form accompanies this notice of Scheme Meeting.
2 An AAP2 Shareholder has a right to appoint a proxy.
3 The proxy need not be an AAP2 Shareholder.
4 An AAP2 Shareholder entitled to cast two or more votes may appoint two proxies to attend and vote for them. If you want to appoint two proxies, an additional proxy form will be supplied by AAP2 on request. Where two proxies are appointed, both forms should be completed with the nominated proportion or number of votes each proxy may exercise. Otherwise each proxy may exercise half of the votes.
5 Proxy forms must be signed by the AAP2 Shareholder or the AAP2 Shareholder’s attorney. If the AAP2 Shareholder is a corporation, the proxy form must be signed by two directors or by a director and a secretary, or if it is a proprietary company that has a sole director who is also the sole secretary, by that director, or under hand of its attorney or duly authorised officer. Otherwise, the relevant authority (e.g. in the case of proxy forms signed by an attorney, the power of attorney) must either have been exhibited previously to AAP2 or be enclosed with the proxy form.
6 The proxy form sent to you with this notice of Scheme Meeting should be used for the Scheme Meeting. To be effective, the proxy form must be sent, delivered or faxed to:

Post or deliver to: Fax to: Email to: by:	Associated Advisory Practices (No 2) Ltd (attention Linda Kaddatz), Level 16, Corporate Centre One, Corner of Bundall Road and Slatyer Avenue, Bundall, Queensland 4217 07 5574 0190 (or if dialling from outside Australia 61-7- 5574 0190) [email protected] 11.00am on 29 September 2013

25524839v2 | Supplementary scheme booklet

Corporate directory

Directors

John Barry Smith Craig William Hargraves Soula Cargakis Jason Anthony Cutrupi John de Zwart

Company Secretary

Linda Kaddatz

Registered Office

Level 16 Corporate Centre One Cnr Bundall Road & Slatyer Avenue Bundall Qld 4217

Lawyers

McCullough Robertson Lawyers

Auditors

Ernst & Young

Web Site

www.aapgroup.com.au

25524839v2 | Supplementary scheme booklet

AI assistant

CENTREPOINT ALLIANCE LIMITED — M&A Activity 2013

64601_rns_2013-09-17_6694e01c-a1ef-49a1-9e14-f3e3dd9a531b.pdf

Announcement to the Market

18 September 2013

Proposed acquisition of Associated Advisory Practices Ltd and Associated Advisory Practices (No 2) Ltd – Supplementary Scheme Booklets

Supplementary Scheme Booklet

Associated Advisory Practices Ltd

Important Note:

Table of contents

Revised key dates for AAP Shareholders

Important notices

This Supplementary Scheme Booklet

Responsibility for information

ASIC involvement

Important Notice associated with Court order under section 411(1) of the Corporations Act

Disclosure about forward looking statements

Foreign selling restrictions

Privacy and personal information

Defined Terms

Date

Queries

Letter from the Non-Executive Directors of AAP

Action you should take

You will need to submit a new proxy form (which accompanies this Supplementary Scheme Booklet) for the Scheme Meeting in order for your vote to be counted. Any proxy previously submitted will not be valid for the Scheme Meeting.

Jason Cutrupi

Craig Hargraves

Barry Smith

Answers to additional key questions

How to vote

Scheme Meeting

What should you do?

Voting in person

Voting by proxy

What happens if you have already submitted a proxy form?

What happens if you have not yet submitted a proxy form?

Intention of Chairman

Supplementary Disclosure

1 Value of Scheme Consideration and Independent Expert’s conclusion

1.1 Independent Expert’s opinion

1.2 Change in value of Scheme Consideration

1.3 Summary of changes to the original Independent Expert’s Report

2 Further information about AAP

2.1 AAP financial information

Share capital during 2013

3 Further information about CAF

3.1 Further information about PIS

3.2 CAF financial information

3.3 CAF condensed consolidated income statement for the financial years ended 30 June 2012 and 30 June 2013

3.4 CAF condensed consolidated balance sheet for the financial years ended 30 June 2012 and 30 June 2013

3.5 CAF capital structure

3.6

Listed disclosing entity

4 Further information about Post Scheme CAF Group

4.1 Post Scheme CAF Group consolidated balance sheet

Basis of preparation

Pro forma balance sheet adjustments

(a) Impact of proposed scheme

(b) Transaction costs associated with the merger

Consolidated Statement of financial position as at 30 June 2013

5 Additional information

5.1 Amendments to Implementation Deed

5.2

Amendments to Scheme

5.3

Deed Poll

5.4

Status of conditions

5.5

Consents to be named

5.6

CAF directors’ intentions

5.7 Lodgement of this Supplementary Scheme Booklet

5.8 No unacceptable circumstances

5.9 CAF share price information

5.10 Other material information

Annexure A

Independent Expert’s Report

Introduction

Summary and opinion

CENTREPOINT ALLIANCE LIMITED M&A Activity 2013