CLIME CAPITAL LIMITED — Net Asset Value 2011

Dec 6, 2011

Company Announcements Australia Stock Exchange by e-lodgement

7 December 2011

Net Tangible Assets (NTA) Update

NTA $1.15 before tax and $1.13 after tax

The Clime Capital board is pleased to report the NTA of Clime Capital Limited as at 30 November 2011.

Investments	30 September 11	31 October 11	30 November 11
Equities	$51.3m	$53.6m	$51.2m
Cash	$9.8m	$9.2m	$10.5m
Net Assets	$61.1m	$62.8m	$61.7m
NTA beforetax per share	**$1.141 **	**$1.171 **	**$1.151 **

1 Fully Diluted NTA per share incorporates both the fully paid ordinary shares and converting preference shares on issue and bonus entitlements due to be paid on conversion of the preference shares

	3 months	1 year	2 years*	3 years*	4 years*
Clime Capital Limited	0.33%	-0.80%	2.00%	15.54%	2.26%
ASX All Ordinaries Acc.
Index	-3.00%	-6.59%	-1.82%	9.04%	-6.78%
Outperformance	3.34%	5.80%	3.82%	6.50%	9.03%

• Annualised investment performance to 30 November 2011.

Top Ten Portfolio Holdings – 30 November 2011

ASX Code	Company Name	PortfolioWeighting (%)
TLS	Telstra Corporation Limited	9.11
BHP	BHP Billiton Limited	7.83
MMS	McMillan Shakespeare Limited	7.04
AAZPB	Australand ConvertibleNotes 31/12/2049	7.00
EPX	Ethane Pipeline Income Fund	6.26
MXUPA	Multiplex Convertible Note 31/12/2049	5.15
ANZ	Australia & New Zealand BankingGroupLimited	4.83
WOW	Woolworths Limited	4.75
CBA	Commonwealth Bank of Australia	4.49
BKW	Brickworks Limited	4.40

Investment Update

Australia emerged from the GFC largely unscathed for two major reasons: its banking sector was robust (the banks were not infected by the US and European appetite for toxic assets, and the government guaranteed their liabilities after the Lehman collapse); and secondly, Australia benefited enormously from the resilience and continued strong growth of the Chinese economy and its hunger for our resources.

Where to from here?

The Australian economy is in a fundamentally sound position. Government debt levels are moderate; unemployment is relatively low; our terms of trade are exceptionally high (although have likely peaked); and business conditions are reasonable. Fortunately Australia was better prepared than many other countries to cope with the GFC because the Howard government had run fiscal surpluses for several years. The fact that there was no public debt in 2008 allowed the Rudd government to run stimulative fiscal policies without having to worry about a large run-up in the ratio of government debt to GDP. That has been a key positive in permitting a flexible response as the macro-economic threats have emerged. Similarly with our interest rate policy: we are at an attractive starting point with rates at 4.25% (RBA has cut rates 25 basis points at its December meeting), and so able to stimulate if required.

Australia has the ability survive a global recession if one eventuates. Of course, growth will slow and unemployment will rise, but the RBA will respond by cutting rates further.

The fortunes of China's economy now loom as a major risk factor for Australia. If China has a sudden slump, Australia will be caught in the backwash. Were China to stumble, it would reduce demand for our commodity exports, and prices could fall sharply. A return to the average in the RBA Index of Commodity Prices to 2008/9 levels implies a drop of 45%. And that would still leave commodity prices more than double the level of 10 years ago. Declining commodity prices combined with a high currency and rising costs would be a harsh operating environment for Australian resource stocks.

The resources sector makes a massive contribution to corporate tax collections, even before any new Mineral Resource Rent Tax: from 10% of corporate tax revenue a decade ago to 25% today. We expect these trends to continue throughout 2012, with the vast capital expenditure projects of the large miners a significant boost to the overall economy. Although the capex boom is not independent of global economic conditions, and some projects will be cancelled if commodity prices collapse, there is sufficient depth in the capex cycle to “look through” a temporary slowdown, even if it were to last a year or two.

The overwhelming theme which we’ll have to contend with in 2012 will be external: the continuation of the global macro-economic challenges discussed above and the effect this has on market confidence. Europe will experience recession in the next year, the US recovery will be patchy and tentative, the large developing economies such as China will slow, and consumer and business confidence will remain tentative. All this suggests slower growth in 2012 compared with 2011.

On the positive side, global monetary policy will remain very stimulatory, corporate balance sheets remain in healthy condition, particularly compared with previous cycles, and growth in consumer savings will ultimately lead to healthier personal balance sheets, auguring well for future spending once confidence returns.

At Clime, we don’t invest in the indices – we invest in carefully selected companies that fall within our strict value criteria. This has helped us significantly outperform the major Australian share market indices by a significant margin over virtually all time periods over the past 5 years. Volatility in markets creates opportunities for us to buy shares of quality companies on your behalf - at attractive discounts, and sell those which are trading at unsustainable premiums. Despite challenges in the environment, we are confident we can continue to provide attractive medium and long term returns to our investors through adhering to our value-based investment style and philosophy.

Happy holidays!

Kind regards

John Abernethy Chairman

Clime Capital Limited