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ASX:MWSASX Member Participant
MDS Financial (“MDS”) & Sequoia Financial Group (“SFG”)
Acquisition Transaction SummaryDecember 2014
© 2014 MDS Financial Group Pty Ltd Commercial in Confidence
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Disclaimer
This information is for general information purposes only and is not intended to be relied upon for the purpose ofmaking an investment decision. The information does not constitute an offer of any financial product or an invitation orsolicitation to buy or sell financial products including securities to any person. Potential investors should seekindependent financial and taxation advice before making any investment decisions.
The information provided within the document is not intended to be a complete description of matters described, andshould not be relied upon for any purpose. If you require further information about any of the matters described onthis website, please contact us.
MDS Financial Group Limited ("company"), its directors, officers and employees do not warrant the accuracy, reliabilityor completeness of information contained in the website. To the extent permitted by law, the company, its directors,officers and employees disclaim all responsibility for any loss or damage arising in any way from any representation orany error or omission in the information or from any resulting loss or damage (whether direct or indirect) suffered as aresult of the use of this material by any person.
Except to the extent permitted by law, the materials contained may not be reproduced, distributed or transmitted orincorporated into any other document or material, without the express written permission of the company. MDSFinancial Group Limited has made every effort to ensure the reliability of the views and recommendations expressed inthis material. The information presented is based upon information known to us or information obtained from sourcesexternal to the company, which we believed to be accurate and reliable at the time of publication but we do notwarrant its completeness or accuracy, or warrant any results from the use of the information. Past performance is not aguaranteed indicator of future performance.
This information is prepared for the general information of traders and investors. The information does not take intoconsideration the specific needs, investment objectives or financial situations of any person. Any individual reading thisshould discuss, with their financial planner or advisor, the merits of any recommendation or offer presented in thismaterial for their own specific circumstances and realise that not all investments are appropriate for every individual.
Financial Services are provided by D2MX Pty Ltd (AFSL 297950), Trader Dealer Online Pty Ltd (AFSL 333297) andSequoia Asset Management Pty Ltd (AFSL 341506).
© 2014 MDS Financial Group Pty Ltd Commercial in Confidence
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Index
© 2014 MDS Financial Group Pty Ltd Commercial in Confidence
Item Page
Acquisition summary and combined businesses 4-7
Key Business Entities & Structure 8-10
Industry growth drivers 11
Key risks 12
Leadership team& Major Shareholders 13-14
Growth strategy 15
Strategic objectives 16
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SFG Acquisition Summary
Binding share sale agreement to acquire 100% of Sequoia Financial Group (“SFG”) signedOctober 14th 2014 – transaction approved by shareholders today
ASX and ASIC Approval obtained
Independent experts report concluded that the proposed Acquisition is both fair and reasonable
Scott Beeton & Marcel Collignon to join the board of MDS
Combined business has seven lines all business – significant cross sell potential
MDS emerges today as a vertically integrated financial services company
© 2014 MDS Financial Group Pty Ltd Commercial in Confidence
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MDS Business Post Transaction
© 2014 MDS Financial Group Pty Ltd Commercial in Confidence
$1.26BN Funds Under Advice ($FUA) across all platforms
~ 15,000 active clients
~ $27 million in combined annual revenues
Over 150 Financial Advisors using platform services
Over $5M in capital raisings completed YTD
Over 600 SMSFs under active administration – 27.8% growth YTD
2,000 + clients and advisers using proprietary data software products
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MDS Key Business EntitiesPost Transaction
© 2014 MDS Financial Group Pty Ltd Commercial in Confidence
Trader Dealer
(Online Broking)
Sequoia Superannuation
(SS)
Sequoia Asset Management (SAM)
Sequoia Specialist Investments (SSI)
Market Data & Software Platforms
(Services through D2MX)
Corporate Advisory Services
(D2MX)
D2MX
Wholesale Broking
Combined Entity‘MDS’
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Key Benefits of Acquisition
© 2014 MDS Financial Group Pty Ltd Commercial in Confidence
• Sequoia Financial Group adds significant scale to MDS Financial
• Substantial cost savings/synergies in the first 12 months
• A stronger balance sheet brought by Sequoia across the combined entity
• As separate businesses, both MDS Financial and Sequoia Financial Group are aimed at ‘self-directed’ investors and act as complementary ‘enablers’ to the combined operation
• The combined entity becomes a more complete, vertically integrated financial services company
• Attractively placed to benefit from large forecasted growth in SMSF sector & self directed investors
• Significant opportunity created to cross sell products across the combined groups clients and distribution channels, in particular in the areas of SMSF administration and trade execution
• Operational cost synergies:– Shared Services
– Joint technology spend
– Cost savings
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MDS Key Business Units
© 2014 MDS Financial Group Pty Ltd Commercial in Confidence
Online, direct to the public trading services are offered to the market under the Trader Dealer brand, which offers low cost on-line and telephone execution services
• Aimed at the self directed investor
• Over 1,400 active clients and 500 advisor clients
• Order placement through the proprietary d2mxIRESS charting and information platform
• ASX execution through wholly owned ASX execution and member firm d2mx
• Contracts for Difference (CFDs) scheduled to be added to platform in 2015
D2MX Pty Ltd is an ASX Member participant providing direct to market execution services for Institutional and shadow broker dealer groups
1.4% total market share for options, 0.1% Equities for the period 1 October 13 – 30 Sept 2014
Largest trader of ETO’s by value traded during October 2014
Over 20 shadow brokers already utilising benefits of service
White labelled solution including, but not limited to the trading platform, client login , forms and reporting functions
‘Back office’, scalable solution for small to medium brokers and Financial Planners
Corporate advisory desk specialising in mid-market transactions across a range of market sectors.
Advisory services in a range of areas including:• ASX listing’s and
capital raises• Corporate strategy
formulation• Joint Ventures, • Mergers &
Acquisitions• Seed Capital• Initial Public Offering’s
(IPO)
Bourse Data has been a respected leading supplier of financial market data, tools and services for private and professional investors and traders in Australia since 1992
d2mxIRESS – Proprietary trading platform with real time access to ASX shares, options and warrants. Advanced Charting package
Market Analyser including back testing trade ideas (i.e. if this happens) and contingent orders
Weekly newsletter distributed to over 12,000 subscribers
Bourse Data and Market Analyser are related entities and Corporate Authorised Representatives of D2MX
CORPORATE ADVISORY MARKET DATA & PLATFORMS
ONLINE BROKING THIRD PARTY BROKING
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SFG Key Business Units
© 2014 MDS Financial Group Pty Ltd Commercial in Confidence
Sequoia Superannuation (‘SS’) is a specialist self-managed superannuation funds (“SMSF”) administration services firm
Provides clients with an end to end SMSF solution from establishment, administration, compliance and audit.
Available as a white labelled product to financial planners, stock brokers, mortgage brokers, tax advisers and accounting firms
Approximately 600 SMSFs under administration
28.4% growth YTD (Sept 30th 14) Over 100 new accounts in process
of establishment Does not provide financial advice
Sequoia Asset Management (‘SAM’) is an Australian Financial Services Licenced (AFSL) Investment services firm
General advice provided mainly in the areas of portfolio management, SMSFs, direct shares, superannuation, structured products, options trading, personal insurance, margin lending and cash solutions
Database of 80,000 retail investors
4,000 active clients
Sequoia Specialist Investments (‘SSI’) was established in 2010
Provider of structured products to retail and sophisticated investors
Investment products provided by Specialist Investments are produced and issued by Investments banks, where SSI acts as an intermediary and sells these products to its own clients
Current $FUM of $110M 9 new series launched since
October 13’ Approximately 1,000 investors
across series Products sold with accompanying
Product Disclosure Statements
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MDS Corporate StructurePost Transaction
© 2014 MDS Financial Group Pty Ltd Commercial in Confidence
‘MDS Financial’
MDS Financial/Sequoia Financial Group
Trader Dealer
(AFSL 333297)
D2MX
(AFSL 297950)
Corporate Advisory
Finance News Network
(Major Shareholder)
Sequoia Financial
Group
Sequoia Superannuation
Sequoia Asset Management
(AFSL 341506)
Goldfields Money [ASX:GMY]
(Major Shareholder)
Noble Oak
(Major Shareholder)
Sequoia Specialist Investments
Market Data & Software Platforms
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Key drivers of Industry growth
© 2014 MDS Financial Group Pty Ltd Commercial in Confidence
SMSF growth
Macroeconomic conditions
Ageing population
Superannuation legislation
• The growth in SMSFs will support demand for financial advice, investment management, administration and Structured Investment Products (SIPs).
• The financial complexity of SIPs is suited to SMSF owners likely to be more financially literate and have a better understanding of SIPs.
• A significant proportion of superannuation assets are invested in Australian and foreign equity markets. The performance of the domestic and global markets has an impact on investor confidence and investment returns.
• The All Ordinaries and MSCI World Index are forecast to achieve strong growth over the next five years.
• Forecast growth in the number of SMSFs is supported by the growing ageing population in Australia.• SMSFs are generally held by people above 45 years of age.• The total number of people > 50 years is expected to reach 7.5m in 2013 compared to 2.9m 10
years ago• At an older age, individuals generally have a larger asset pool and higher income that can justify
operating a SMSF.
• The Australian Government has introduced superannuation legislation which has provided for compulsory superannuation contributions, ensuring a high and steady inflow of superannuation funds into the industry.
• The Superannuation Guarantee is set to increase from 9.5% to 12% by 2020 which will support growth in the industry.
• The ‘Stronger Super’ reforms that came into effect on 1 July 2013 are expected to make the industry more transparent and facilitate a structure for the industry which will better serve the interest of superannuation account holders. F
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Key Risks
© 2014 MDS Financial Group Pty Ltd Commercial in Confidence
Human Resources Risk
MDS Financial as a financial service business depends substantially on the continuing key management staff. The Company’s business may be severely disrupted if their services are lost. This issue is mitigated by the fact that key staff will be major shareholders of the merged entity
Government and Regulation
Risk
Given the business is 100% operated in Australia, political risk is expected to be minimal. However, given the Company is in the business of investing and managing investment accounts, SMSFs and superannuation funds on behalf of retail clients, a change to any legislation pertaining to the financial services sector including on investment funds, structured investment products and superannuation funds is likely to have an impact
Economic RiskGiven the company is in the business of investing in Australian and global capital markets and various financial products for its clients, profitability of the investments will be influenced by the global macro-economic climate.
Competition RiskMDS Financial faces competition from various large businesses and brokers as well as mid-sized financial services businesses which compete in providing financial advice, administration services and issuance of financial products and execution services. F
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Leadership team
© 2014 MDS Financial Group Pty Ltd Commercial in Confidence
Currently Managing Director of Sequoia Financial Group and the SAM and SS businesses and co founder of the broader group
Held roles with Colonial First State in Superannuation Technical Services, Challenger Financial Group and Sumitomo Finance
Co Founder of Sequoia Superannuation
Worked within the Taxation area of Deloitte Corporate Advisory area for a number of years
Over 20 years experience in senior financial management positions with companies including Aristocrat Leisure, Recovre Group (Allianz Insurance) and Hoya Lens.
Currently independent director of Richfield International, Longreach Oil & Southern Cross Exploration
Previously Head of Execution for E*TRADE Australia Securities Ltd which was taken over by the ANZ Bank
Holds Responsible Manager (RM) and Responsible Executive (RE) positions on AFS Licences
Current Executive Director of MDS Financial
Prior to joining MDS, Mr Symonwas the CEO of the National Stock Exchange
Co founded and CEO of Sharetrade Australian Stockbroking / Schwab which was taken over by PBL listed subsidiary eCorp
Extensive experience in equities and derivatives trading portfolio management and financial planning
Founder and Managing Director of Sequoia Structured Investments
Head of Investment Solutions –Sequoia Asset Management
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Top Shareholders (MWS)Post Transaction - Indicative
© 2014 MDS Financial Group Pty Ltd Commercial in Confidence
Total Shares on Issue – 3,803,136,340 Shares held by Top 20 Shareholders – 3,557,065,573
Share Price $0.005 $0.007
Market Capitalisation $19,051,681 $26,621,954
Position Shareholder Name Shares held %
1 Beeton Enterprises Pty Ltd 1,090,655,506 28.7%
2 Giddyup Investment Holding Pty Ltd 963,969,252 25.3%
3 Vista Investments (NSW) Pty Ltd 371,469,875 9.8%
4 Pamela Beeton Investment Pty Ltd 342,460,102 9.0%
5 MR PETER STIRLING & MRS ROS STIRLING 210,000,000 5.5%
6 Michael Humphreys 106,611,955 2.8%
7 BRADLEY JOHN MAGUIRE 100,000,000 2.6%
8 MR RICHARD SYMON / GWANDOBAN INVESTMENTS 76,120,006 2.0%
9 BURATU PTY LTD 57,000,000 1.5%
10 John Peter Collignon 36,271,947 1.0%
11 KAITONG INDUSTRY CO LTD 33,333,334 0.9%
12 BARODA HILL INVESTMENTS 23,407,667 0.6%
13 MR PETER HANSEN 22,150,000 0.6%
14 MR ANDREW PHILLIPS 22,120,000 0.6%
15 GLOBAL EQUITY MANAGEMENT PTY 21,422,361 0.6%
16 CITICORP NOMINEES PTY LIMITED 16,950,391 0.4%
17 MRS XIANFENG YIN 16,666,667 0.4%
18 FINICO PTY LIMITED 16,456,510 0.4%
19 MR YIH PEIR JEFFREY HING & 15,000,000 0.4%
20 HSBC CUSTODY NOMINEES 15,000,000 0.4%
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Growth Strategy
© 2014 MDS Financial Group Pty Ltd Commercial in Confidence
MDS Financial Group will pursue an organic and acquisition growth strategy
The overall future growth strategy is designed to provide:
• Diversified and ‘cycle-change-resistant’ income streams;
• Selective vertical integration enabling a number of differentiated value propositions for both B2C and B2B;
• ‘shared services’ scale economies across the combined entity
• Greater distribution through cross-selling and external business development activities across the combined entity;
• Cost structure optimisation
Organic growth of MDS will be supported by strategic alliance and key partnerships in order to expand MDS Financials customer base and distribution capabilities. This will be supported by the continued investment and development of proprietary technology platforms
MDS is pursuing acquisition opportunities where potential businesses present a value proposition and are complementary to MDS’s existing product range
Organic
Acquisition
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Strategic Objectives
© 2014 MDS Financial Group Pty Ltd Commercial in Confidence
Become a complete vertically integrated financial services firm
Streamline and efficiently integrate current brands and services
Leverage balance sheet strength towards further brand acquisitions and organic growth
Develop a recognised market presence as the small brand consolidator
Maintain an efficient low cost operating structure
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