THORNEY OPPORTUNITIES LTD — AGM Information 2016

Nov 24, 2016

THORNEY OPPORTUNITIES LTD ACN 080 167 264

ASX Announcement: 25 November 2016

ASX Code: TOP

2016 ANNUAL GENERAL MEETING CHAIRMAN’s ADDRESS

In accordance with ASX Listing Rule 3.13.3., please find attached a copy of the Chairman’s Address.

Please note that the Chairman’s address and presentations from the three guest CEO presenters are to be recorded. As soon as practicable following the closure of the meeting the videos will be available at http://thorneyopportunities.com.au/agm/.

Please direct enquiries to: Craig Smith Company Secretary

Level 39, 55 Collins Street, Melbourne Vic 3000 Telephone + 61 3 9921 7116 Facsimile + 61 3 9921 7100

Chairman’s address

Ladies and gentlemen, we began the 2016 financial year faced with an economic and financial markets environment which had many challenges. The Thorney Opportunities (TOP) investment portfolio had been positioned in a manner with sufficient cash, ready for deployment once appropriate opportunities emerged. This cautious approach was vindicated as we proceeded to deploy that capital and witnessed a strengthening in global equity markets. As you know our focus at TOP remains on producing absolute returns over the medium to long term through the careful selection of investments at prices that represent value and have the potential to outperform over time, especially when we can play an active role.

Looking ahead, one cannot ignore mentioning the global political environment. In the last six months, we have witnessed two political outcomes which have, arguably, surprised the financial markets, the Brexit vote in Britain and the result which sees Donald J Trump as the President-elect of the United States of America. What this leads me to conclude is that the changing global political landscape when combined with the declining number of monetary policy levers held by central banks, is likely to lead to a period of sustained volatility in financial markets and Australia will not be immune from this. We accordingly need to be both prudent and cautious but ready to act and take advantage of different scenarios.

As we look back on the twelve months to 30 June 2016, TOP generated a profit after tax of $16.6 million, an increase of 77.5% over 2015. Net tangible assets (NTA) per share increased by 16.7% to close at 60.8 cents per share on 30 June 2016.

Following the inaugural dividend paid by TOP for FY 2015, a total of 1.15 cents per share fully franked was paid to shareholders relating to the 2016 financial year. Pleasingly, since 30 June, the NTA has continued to increase, closing on 31 October at 71.3 cents per share, an increase of 17.3% for the first four months of the 2017 financial year.

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3 YEAR PERFORMANCE
TOP NTA (after fees and costs) v
All Ords and Small Ords Accumulation Indices All
Ords
70% Accum.
60% Index
50%
40%
Small
30% Ords
20% Accum.
Index
10%
0%
-10%
NTA
-20% (after
fees &
costs)
Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Oct-16
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Thorney Opportunities Ltd 2016 Annual General Meeting

Chairman’s address continued

I would like to at this point congratulate the Thorney Management Team for their successful investment performance and I am happy that the investment community has recognised this ongoing achievement which is reflected in the fact that the historical discount between the TOP share price and the reported NTA has narrowed.

TOP NTA v Share Price

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75
70
65
TOP
NTA
60
55
TOP
50
Closing
Share
45
Price
40
There were a number of factors generally or specifically, within our investee companies which
contributed to TOP’s performance and growth in NTA in 2016. I will mention a few now:
Jun-14 Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Oct-16
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• the re-rating by equity markets;

• prudent crystallisation of profits;

• merger and acquisition activity leading to the requirement for additional growth capital;

• effect of shareholder activism;

• announced takeover bids; and

• recapitalisations.

This next chart shows the breakdown of our current portfolio as at 31 October 2016.

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3% TOP Assets Under Management
5%
7% 24%
7%
7%
9% 21%
17%
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Money3 Corporation Ltd (Bonds, loans, equities) Service Stream Ltd

AMA Group Ltd

Fairfax Media Ltd OneVue Holdings Ltd

TPI Enterprises Ltd

Austin Engineering Ltd Other investments Cash + other assets

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Thorney Opportunities Ltd 2016 Annual General Meeting

Chairman’s address continued

The major new addition to our portfolio since last year’s AGM is an investment in OneVue Holdings Limited (OVH). This position materialised as consideration for TOP’s investment in Diversa Limited, a company which you may recall presented at the 2015 TOP AGM. In June 2015, TOP anchored a capital raising in Diversa Limited, at the time taking a shareholding of approximately 11% and ultimately through market transactions reached 19%. In June of this year, OneVue and Diversa announced a merger transaction with consideration in the form of OneVue scrip. Shortly, we will hear from the Chief Executive Officer of OneVue so I won’t go into too much detail however, TOP and its associates have an interest of approximately 11% in the merged entity and are excited about the journey ahead.

The major positions in the TOP investment portfolio are AMA Group, Money3 Corporation, Service Stream and Fairfax Media. Each of these positions has seen a material uplift in value during 2016 and continue to be core positions for TOP.

In addition to the publicly declared stocks we also hold a number of trading positions which combined make up less than 6% of our total assets under management. We have a policy of not revealing or discussing these positions in case they are simply short term trades or we decide we want to accumulate more without alerting the wider market to our intentions.

Ladies and gentlemen, we have communicated regularly with you over the last twelve months via my Chairman’s Updates so I don't propose to go into detail again about every one of our holdings.

However, I would like to mention one investment in particular, mining services company, Austin Engineering Limited. You may recall me stating at various times in the past that TOP’s investment in Austin Engineering Limited was one which was we entered too early. Despite some initial difficulties, it is fair to say that the company is beginning to show the signs of a slow and steady recovery. TOP and its associates anchored capital raisings during both 2015 and 2016 which served to place the company on a stable and well-capitalised footing. In addition, TOP has played a key role in influencing a positive change environment with the Board and senior management. Whilst there is some way to go, it is clear that there are signs that sentiment towards mining services companies is changing for the better and there are green shoots emerging for those which are well-managed. I remain optimistic in the outlook for Austin Engineering Limited.

We continue to hold a position in Fairfax. Our view continues to be that the Domain business within Fairfax is formidable, growing despite historical low listings volumes, gaining market share on REA Group, its largest competitor, has an excellent management team, and EBITDA of $120 million in 2016 which I hope could be $200 million per annum over the next few years. We think Domain alone is worth in excess of the entire market capitalisation of Fairfax today. In fact you might argue that the Company should drop the anachronistic Fairfax name and reimage itself around its future dominant division being Domain.

We urge the Board of Fairfax to realise the value of the other divisions, which we think the share market price reflects no value for, and to take advantage of its strong Balance Sheet at the current share price to buy back 10% of its shares on issue.

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Thorney Opportunities Ltd 2016 Annual General Meeting

Chairman’s address continued

I also want to express my appreciation to our entire investment management team and to our support staff for all their efforts.

Thanks also to all shareholders for your support. I look forward to continuing this journey with you.

Alex Waislitz Chairman Thorney Opportunities Ltd 25 November 2016

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Thorney Opportunities Ltd 2016 Annual General Meeting