WAM ACTIVE LIMITED

A.B.N. 49 126 420 719

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ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2010

COMPANY PARTICULARS

WAM ACTIVE LIMITED A.B.N. 49 126 420 719

WAM Active Limited is a Listed Investment Company and is a reporting entity. It is an investor in equities and similar securities on the stock market primarily in Australia.

DIRECTORS:

G. Wilson (Chairman) M. Kidman J. Abernethy C. Cuffe R. Walker K. Thorley

SECRETARY: INVESTMENT MANAGER:

INVESTMENT MANAGER: MAM Pty Limited Level 11, 139 Macquarie Street Sydney NSW 2000 AUDITORS: Moore Stephens Sydney COUNTRY OF INCORPORATION: Australia REGISTERED OFFICE: Level 11, 139 Macquarie Street Sydney NSW 2000 CONTACT DETAILS: Postal Address: GPO Box 4658 Sydney NSW 2001 Telephone: (02) 9247 6755 Fax: (02) 9247 6855 Email: [email protected] Website: www.wilsonassetmanagement.com.au SHARE REGISTRAR: Registries Limited Level 7, 207 Kent Street Sydney NSW 2000 Telephone: (02) 9290 9600 Fax: (02) 9279 0664 For enquiries relating to shareholdings, dividends (including participation in the Dividend Reinvestment Plan) and related matters, please contact the share registrar. STOCK EXCHANGE: Australian Securities Exchange (ASX) The home exchange is Sydney. ASX code for Ordinary shares: WAA ASX code for Options: WAAO

Chairman’s Letter……………………………………………………………………………	1
Corporate Governance Statement………………………………………………………...	4
Directors’ Report to Shareholders…………………………………………………………	9
Auditor’s Independence Declaration………………………………………………………	18
Statement of Comprehensive Income….………………………………………………...	19
Statement of Financial Position……………………………………………………………	20
Statement of Changes in Equity…………………………………………………………..	21
Statement of Cash Flow…………………………………………………………………….	22
Notes to the Financial Statements………………………………………………………...	23
Directors’ Declaration……………………………………………………………………….	42
Independent Auditor’s Report……………………………………………………………...	43
ASX Additional Information…………………………………………………………………	45
Investments at Market Value……………………………………………………………….	47

WAM ACTIVE LIMITED

A.B.N. 49 126 420 719

CHAIRMAN’S LETTER

Dear Shareholders,

Firstly I would like to thank you for your support during another volatile year for Australian and global equities. Recently two significant events have occurred that I believe will be very positive for WAM Active Limited (WAA) and the Listed Investment Company (LIC) sector in Australia. The first of these events is the recent changes in dividend legislation which allows LIC’s and other listed companies to pay dividends based on the solvency position of the company rather than from reported profits and retained earnings. This will be a great benefit to investors as it will increase the level of fully franked dividends paid to investors and it will enable WAA to always be in a position to pay a dividend. It is estimated there is over $100 billion of franked dividends available for distribution from Australian companies. The second event is the Ripoll Review which proposes the banning of commissions on managed funds from 1 July 2012. This will provide a level playing field between LIC’s and managed funds. Another benefit from this review will be the introduction of a statutory fiduciary duty on financial advisors in relation to their clients. I believe these events will increase the interest in LIC’s as an attractive investment option with financial planners.

These are very exciting times for LIC’s and as such I have been highlighting these events in the press and at the recent ASX LIC Roadshows.

WAA listed on the Australian Securities Exchange in January 2008. It was formed to provide investors with exposure to a very active investment style. This is our third year of operation and as an absolute return fund we are pleased to deliver another strong positive result.

Investment Objectives and Process

The investment objectives of WAA are as follows:

preserve capital over most periods of time;
provide investors with a positive return, after fees, over most periods of time; and
deliver investors a regular income stream in the form of fully franked dividends.

To achieve these objectives the Company aims to take advantage of relative short term arbitrages and mispricings in the Australian equities market, rather than investing in any individual companies or portfolio of companies for a prolonged period of time. The Manager refers to this as its “Market Driven process” where it scours the market for trading opportunities.

WAA has contracted MAM Pty Limited as the Manager to achieve these objectives. The various strategies employed by the Manager to fulfill its mandate include:

participating in initial public offerings, placements, rights issues and underwritings where the immediate valuation upside appears favourable;
participating in block trades which appear to be at below normal market values because of time constraints;
participating in takeovers, mergers, schemes of arrangement and corporate spin-offs which appear favourably priced;
trading oversold positions;
short selling and option trading opportunities;
taking advantage of listed investment company discount arbitrages; and
• trading opportunities which will deliver acceptable risk adjusted returns.

These strategies are undertaken from detailed monitoring of both primary and secondary market activity, in particular monitoring new capital raisings and corporate activity. In addition, the Manager undertakes regular research, meetings and discussions with various companies listed on the Australian Securities Exchange to identify such opportunities.

WAM ACTIVE LIMITED A.B.N. 49 126 420 719

CHAIRMAN’S LETTER

Our investment team has continued to develop and comprises of Matthew Kidman and myself, Portfolio Managers, Chris Stott, Head of Research and Portfolio Manager and Martin Hickson, Analyst who is responsible for the market driven side of our investing. We all spend as much time as possible meeting with the management of investee companies and during the year had over 700 meetings.

Performance

WAA’s profit before tax increased 246% to $2.85m for the year ended 30 June 2010, and increased 231% after tax profit to $2.12m. During the year the gross value of the investment portfolio appreciated by 22.7%, while the S&P/ASX All Ordinaries Accumulation Index was up 13.8%. This was a strong result given an average of 40% of the portfolio was held in cash over the year.

As at 30 June 2010 77.6% of the investment portfolio was held in cash and fixed interest, 22.4% invested in listed equities and 3.7% of the portfolio was sold short. Top contributors to performance for the year included McPherson’s Limited (MCP), Virgin Blue Holdings Limited (VBA) and FKP Property Group (FKP). Stocks that detracted from performance include Clive Peeters Limited (CPR), Macquarie Group Limited (MQG) and Matrix View Limited (MVU).

Dividends

On 21 July 2010 the Board announced a 50% increase in the final dividend of 3.0 cents per share fully franked to be paid on 24 September 2010. The shares will trade ex dividend on 13 September 2010. This brings the full year dividend to 6.0 cents per share fully franked.

The Board is committed to paying an increasing stream of fully franked dividends to shareholders provided the company has sufficient franking credits, and it is within prudent business practices. Dividends are paid on a six-monthly basis. Recently introduced government legislation now enables companies to pay dividends if the company is deemed solvent. Dividend payments will not be reliant on reported profit and retained earnings as was previously the case. Rather, it will be with consideration to cash flow, cash holdings and available franking credits.

The dividend re-investment plan will operate at the weighted average market price of shares sold on the record date and the three trading days prior to the record date. To participate in the dividend re-investment plan, shareholders need to send their election to our share registrar no later than 17 September 2010.

Options

On 8 February 2010 the Board announced a 1 for 1 option issue for its shareholders. The options, which trade on the Australian Securities Exchange, have an exercise price of $1.15 per option and can be exercised any time up until the expiry date of 30 April 2011.

The reason behind the option issue is the Board’s vision to grow the market capitalisation of WAA to at least $100m over the next 5 years while continuing to generate strong investment results.

Outlook

The Australian share market stumbled across the line to post a 14% gain for the financial year to 30 June 2010. This was a disappointing result given the market was up as much as 30% by April 2010. The sharp drop towards the end of the year was inspired by government debt concerns in Europe, sluggish world economic growth and concerns over a proposed resources tax.

WAM ACTIVE LIMITED A.B.N. 49 126 420 719

CHAIRMAN’S LETTER

We would expect share markets around the world to head lower in the current financial year. Consumers in western countries continue to moderate spending in a bid to lower their debt levels. Even historically low interest rates have failed to stimulate consumer activity. In addition, governments in the world’s biggest economies of US, Japan and Western Europe all have to drastically reduce spending and/or increase revenue. The measures taken by these governments will stymie global growth. We believe this will weigh heavily on equity prices around the globe including Australia.

Shareholder Communication

We take an active approach to keeping shareholders informed about the Company’s activities and performance including monthly investment updates and NTA announcements, yearly and half yearly profit announcements, semi-annual shareholder briefings and access to all relevant information on our website. Also included on our website are regular audio casts to discuss important market issues and address common questions. These audio casts are posted on our website: www.wilsonassetmanagement.com.au/audio

During the year we continued the successful and well attended shareholder briefings, with seminars held in Sydney, Melbourne, Adelaide, Brisbane and Canberra. The team enjoys the opportunity to meet with you and are committed that shareholder briefings remain a semi-annual event.

In the coming week shareholders will be sent the latest edition of the Investor Newsletter. This newsletter will now be circulated on a six-monthly basis. We hope you enjoyed the content and would encourage feedback on how we can improve this newsletter and our overall communication with our shareholders.

Thank you for your continuing support.

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Geoff Wilson Chairman

WAM ACTIVE LIMITED

A.B.N. 49 126 420 719

CORPORATE GOVERNANCE STATEMENT

To ensure the Company operates effectively and in the best interests of shareholders, the Board has followed the principles and best practice recommendations established by the ASX Corporate Governance Council having regard to the nature of the Company’s activities and its size. The Company has adopted the ASX Corporate Governance Principles and Recommendations (2[nd] Edition, August 2007) for the 2010 financial year.

Role of the Board (Recommendations 1.1 to 1.3)

The Company has a Board but no full time employees. Subject at all times to any written guidelines issued by the Board of Directors of WAM Active Limited, the day-to-day management and investment of funds is carried out by MAM Pty Limited (the Manager) pursuant to a management agreement. Consequently, there is no need for a process to evaluate the performance of senior executives under recommendations 1.2 and 1.3.

The role of the Board is to set strategic direction, approve capital management initiatives and to be responsible for the overall corporate governance of the Company which includes:

To oversee and monitor the performance of the Manager’s compliance with the management agreement and to ensure that the Manager is monitoring the performance of other external service providers;
Ensuring adequate internal controls exist and are appropriately monitored for compliance;
Ensuring significant business risks are identified and appropriately managed;
Approving the interim and final financial statements and related reports and other communications to the ASX and shareholders;
Responsibility for managing and progressing the profitable operation and development of the Company; and
Setting appropriate business standards and code for ethical behavior.

The Board aims to ensure that all Directors and the Manager act with the utmost integrity and objectivity and endeavour to enhance the reputation of the Company. The Board should act in a manner designed to create and build sustainable value for shareholders.

Composition & Operation of the Board (Recommendations 2.1 to 2.6)

The skills, experience and expertise relevant to the position of each Director who is in office at the date of the annual report and their term in office are detailed in the Directors’ report.

The Board has two independent Directors and two non independent Directors. The names of the Directors considered to be independent are:

John Abernethy
Christopher Cuffe

These Directors are considered independent as per the criteria outlined in the Board of Directors Charter which includes the Company’s criteria for independence of Directors, and can be found in the Corporate Governance section of the Company’s website at www.wilsonassetmanagement.com.au. The criteria are in accordance with ASX Corporate Governance Council’s principles.

Whilst the Company agrees with the benefits of a majority of independent Directors, under Recommendation 2.1, it believes that it can better achieve the results of the Company with the current Boards’ level of expertise.

WAM ACTIVE LIMITED A.B.N. 49 126 420 719

CORPORATE GOVERNANCE STATEMENT

The Chairman is not an independent Director. The Company believes that an independent Chairman, under recommendation 2.2, does not necessarily improve the function of the Board. The Company believes that when the Chairman is a significant driver behind the business and is a sizeable shareholder, as is the case with the Company, it adds value to the Company for all shareholders.

Given the size of the Board a nomination committee has not been formed under recommendation 2.4. The Board as a whole considers the composition of the Board and appointment of new Directors. The Board identifies suitable candidates to fill vacancies as they arise. Under the Board of Directors Charter, the performance of each Director is reviewed by the Chairman annually and the Board undertakes an annual review of the performance of the Chairman to ensure the Board’s activities continue to be efficiently organised and conducted. At every Annual General Meeting one third of the Directors must retire from office and be eligible for re-election. Shareholder approval is required on the composition of the Board.

Each Director has the right to access all relevant information and subject to prior consultation with the Chairman, may seek independent professional advice at the entity’s expense. A copy of advice received by the Director is made available to all other members of the Board.

Code of Conduct (Recommendations 3.1 and 3.3)

The Company has established a Directors Code of Conduct which sets out the Company’s key values and how they should be applied within the workplace and in dealings with those outside of the Company. The Directors Code of Conduct can be found in the Corporate Governance section of the Company’s website at www.wilsonassetmanagement.com.au.

Board’s Policy on Dealing in Shares (Recommendations 3.2 and 3.3)

Directors are not required to hold a minimum number of shares pursuant to the Company’s Constitution. However, their current relevant interests in the Company’s shares are shown in the Directors’ Report.

Subject to them not being in possession of undisclosed price sensitive information, Directors may deal in shares of the Company whenever they wish. The Securities Dealing Policy can be found in the Corporate Governance section of the Company’s website at www.wilsonassetmanagement.com.au.

Audit & Risk Committee (Recommendation 4.1 to 4.4)

The company has formed an Audit & Risk Committee consisting of three non-executive Directors of whom two are independent as defined by the ASX Corporate Governance Council’s principles. This is considered adequate given the size of the Board (5 members) and the nature of the company. The members of the Audit & Risk Committee are:

John Abernethy Chairman, independent
- Julian Gosse Non-Executive Director, independent - Matthew Kidman Non-Executive Director, non-independent

The Committee’s responsibilities are to:

Oversee the existence and maintenance of internal controls and procedures to ensure compliance with all applicable regulatory obligations;
Oversee the financial reporting process;
Review the annual and half-year financial reports and recommend them for approval by the Board of Directors;
Nominate external auditors; and
Review the existing external audit arrangements.

WAM ACTIVE LIMITED

A.B.N. 49 126 420 719

CORPORATE GOVERNANCE STATEMENT

The Audit & Risk Committee Charter can be found in the Corporate Governance section of the Company’s website at www.wilsonassetmanagement.com.au.

The Committee formally reports to the Board after each of its meetings. Details of the number of meetings of the Audit & Risk Committee during the 2010 financial year are set out in the Directors Report.

The external audit firm partner responsible for the Company audit attends meetings of the Board and Audit & Risk Committee by invitation.

The Company’s external audit is undertaken by Moore Stephens Sydney and the audit engagement partner is required to be changed at regular intervals. Jenelle Webster, a partner of Moore Stephens Sydney, is the partner responsible for the external audit of the Company for the 2010 financial year.

ASX Listing Rule Compliance (Recommendation 5.1 and 5.2)

The Company has established a Continuous Disclosure Policy to ensure compliance with the continuous disclosure obligations under the ASX Listing Rules and the Corporations Act 2001 and to ensure all investors have equal and timely access to material information concerning the Company and that Company announcements are factual and presented in a clear and balanced way.

The Continuous Disclosure Policy can be found in the Corporate Governance section of the Company’s website at www.wilsonassetmanagement.com.au.

In addition, the Company has established a related Conflict of Interest Policy, in accordance with the Corporations Act 2001 . Under this Policy, the Directors must keep the Board advised, on an ongoing basis, of any interests that could potentially conflict with those of the Company. Where the Board believes that a significant conflict exists, the Director concerned does not receive the relevant board papers and is not present at the meeting whilst the item is considered.

Shareholder Rights and Communication (Recommendation 6.1 and 6.2)

The Board aims to ensure that the shareholders are informed of all major developments affecting the Company’s state of affairs.

The Company Secretary is primarily responsible for coordinating the disclosure of information to shareholders and regulators under the direction of the Board.

Information is communicated to shareholders through the:

Website;
ASX Company Announcements platform;
Annual Report;
Investor Newsletters;
Monthly Investment Updates and NTA releases; and
Other correspondence regarding matters impacting on shareholders as required.

Monthly NTA releases and bi-annual Investor Newsletters contain additional information concerning the underlying investment portfolio of the Company in an effort to give investors a better understanding of the Company.

The Board encourages full participation of shareholders at the Annual General Meeting to ensure a high level of accountability and identification with the Company’s strategy and goals.

WAM ACTIVE LIMITED A.B.N. 49 126 420 719

CORPORATE GOVERNANCE STATEMENT

Shareholder information sessions are also held twice a year in May/June and November following the AGM. These provide an informal forum where shareholders are given the opportunity to raise questions and participate in general discussion about the Company.

The Communications Policy can be found in the Corporate Governance section of the Company’s website at www.wilsonassetmanagement.com.au.

Risk Management (Recommendation 7.1 to 7.4)

The Company has an established enterprise risk management program that during the 2010 financial year was upgraded in accordance with the new International Risk Standard AS/NZS ISO 31000:2009. It also has an established internal control program based upon the principles set out in the Australian Compliance Standard AS 3806:2006.

The Company’s enterprise risk management program addresses its material business risks. Each identified risk is individually assessed in terms of the likelihood of the risk event occurring and the potential consequences in the event that the risk event was to occur. The CompliSpace Assurance software has been implemented through which material business risks are linked to mitigating controls. This software gives the Company and the Manager the ability to monitor the performance of its enterprise risk and compliance programs in real time. It also ensures transparency of data and ease of reporting to the Board.

The Manager has provided to the Board a report as to the overall effectiveness of the company’s management of its material business risks.

The Board has received assurance from the CFO and Director of the Manager that in their view:

the declaration provided in accordance with section 295A of the Corporations Act 2001 is founded on a sound system of risk management and internal control; and
the system of risk management and internal control is operating effectively in all material respects in relation to financial reporting risks.

The Board has delegated responsibility for reviewing the risk profile and reporting on the operation of the internal control system to the Audit & Risk Committee. The Audit & Risk Committee requires the Manager to report annually on the operation of internal controls, reviews the external audit of internal controls and conducts any other investigations it requires in order to report to the Board on the effectiveness of the internal control system. In respect of the current financial year all necessary declarations have been submitted to the Board.

There are two main areas of risk that have been identified:

Market risk
Operational risk

Market risk

The Board is primarily responsible for recognising and managing market related risk. By its nature, as a listed investment company that invests in tradeable securities, the Company will always be subject to market risk as it invests its capital in securities which are not risk free as the market price of these securities can fluctuate. However, the Company seeks to reduce and manage market risk by not being overly exposed to one investee company or one particular sector of the market. The Manager reviews the relative weightings of individual securities and the relevant market sectors regularly. The Company does not have set parameters as to a minimum or maximum amount of the portfolio that can be invested in a single company or sector.

MAM Pty Limited, the Manager is required to act in accordance with the Board approved investment management agreement and reports to the Board regularly on the Fund’s performance and any material actions that have occurred in the period.

WAM ACTIVE LIMITED A.B.N. 49 126 420 719

CORPORATE GOVERNANCE STATEMENT

Operational risk

The Board is primarily responsible for recognising and managing operational risk issues such as legal and regulatory risk, systems and process risk and third party risk. The company outsources its operational functions to service providers: MAM Pty Limited (investment management, accounting and compliance), RBC Dexia Investor Services (custody) and Registries Limited (share registrar) and accordingly risk issues associated with these activities are handled in accordance with the service provider’s policies and procedures.

MAM Pty Limited, the Manager provides a declaration to the Board twice a year, to certify that the Company’s financial statements and notes present a true and fair view, in all material respects, of the Company’s financial condition and operational results and that they have been prepared and maintained in accordance with relevant Accounting Standards and the Corporations Act 2001 .

Remuneration of Directors (Recommendation 8.1 to 8.3)

Given the number of Directors (5), a remuneration committee has not been formed as it is believed that such a committee would not serve to protect or enhance the interests of the shareholder. As such, the Board deals with the issue of remuneration as a whole.

The maximum total remuneration of the Directors of the company has been set at $110,000 per annum to be divided in such proportions as they agree. The scope of the Company’s operations, and the frequency of Board meetings are principal determinants of the fee level. Further detail is provided in the Directors’ Report.

The Board has made no distinction between the remuneration of non-executive directors from executive directors under recommendations 8.2 and 8.3.

Entities associated with the Chairman, Geoff Wilson, and Director, Matthew Kidman of WAM Active Limited hold 80% and 20% respectively of the issued shares of the manager, MAM Pty Limited. Further detail is provided in the Directors’ Report.

WAM ACTIVE LIMITED

A.B.N. 49 126 420 719

DIRECTORS’ REPORT TO SHAREHOLDERS FOR THE YEAR ENDED 30 JUNE 2010

The Directors present their report together with the financial report of WAM Active Limited (“the Company”) for the financial year ended 30 June 2010.

Principal Activity

The principal activity of the Company is making investments in listed and unlisted companies. No change in this activity took place during the year or is likely in the future.

Operating and Financial Review

Investment operations over the year resulted in an operating profit before tax of $2,854,851 (2009: $825,647) and an operating profit after tax of $2,121,460 (2009: $641,196).

Asset backing for each ordinary share as at 30 June 2010 (calculated on market value less realisation costs and all applicable taxes and before provision for dividend) amounted to 112.14 cents per share (2009: 103.37 cents). The equivalent asset backing before tax was 116.14 cents per share (2009: 104.27 cents).

Further information on the operating and financial review of the company is contained in the Chairman’s Letter on pages 1 to 3 of the Annual Report.

Financial Position

The net asset value of the company for the current financial year was $17,519,848 (2009: $15,967,655).

Significant changes in State of Affairs

There was no significant change in the state of affairs of the Company during the year ended 30 June 2010.

Dividends Paid or Recommended

Dividends paid or declared are as follows:

$ Fully franked dividend of 2.0 cents per share was paid on 20 July 2009 308,002 Fully franked 2010 interim dividend of 3.0 cents per share was paid on 26 February 2010 464,677

Since year end the Directors have declared a final dividend of 3.0 cents per share fully franked to be paid on 24 September 2010.

WAM ACTIVE LIMITED

A.B.N. 49 126 420 719

DIRECTORS’ REPORT TO SHAREHOLDERS FOR THE YEAR ENDED 30 JUNE 2010

Options

On 12 March 2010 the Company issued 15,489,219 options to shareholders to acquire fully paid ordinary shares exercisable at $1.15 per option. The options began trading on the Australian Securities Exchange on 15 March 2010 (ASX Code: WAAO) and on 30 June 2010, 2,500 of these had been exercised. The remaining options remain unexercised and are due to expire on 30 April 2011.

Directors

The following persons were Directors of the Company during the whole of the financial year and up to the date of this report:

G.J. Wilson M.J. Kidman J.B. Abernethy C.E. Cuffe R.J. Walker

Information on Directors

Geoffrey Wilson (Chairman – Non-independent)

Experience and expertise

Geoffrey Wilson has had 30 years experience in the Australian and international securities industry. He holds a Bachelor of Science Degree and a Graduate Management Qualification. He is also a Fellow of the Institute of Company Directors and a Fellow of the Securities Institute of Australia.

Geoffrey Wilson has been Chairman of the Company since July 2007.

Other current directorships

Geoffrey Wilson is currently Chairman of WAM Capital Limited (appointed March 1999), Wilson Investment Fund Limited (appointed June 2003), Australian Stockbrokers Foundation and Ascham Foundation Limited. He is a Director of Australian Leaders Fund Limited (appointed October 2003), Clime Capital Limited (appointed November 2003), Cadence Capital Limited (appointed February 2005), Vietnam Fund Limited (appointed October 2007), Incubator Capital Limited (appointed February 2000), the Sporting Chance Cancer Foundation, Australian Fund Managers Foundation and Odyssey House McGrath Foundation. He is also a Director of investment management companies Wilson Asset Management (International) Pty Limited, MAM Pty Limited and Boutique Asset Management Pty Limited.

Former directorships in the last 3 years

Geoffrey Wilson has not held any other directorships of listed companies within the last three years.

Special responsibilities

Chairman of the Board.

Interests in shares and options of the Company

Details of Geoffrey Wilson’s interests in shares and options of the Company are included later in this report.

Interests in contracts

Details of Geoffrey Wilson’s interests in contracts of the Company are included later in this report.

WAM ACTIVE LIMITED

A.B.N. 49 126 420 719

DIRECTORS’ REPORT TO SHAREHOLDERS FOR THE YEAR ENDED 30 JUNE 2010

Matthew Kidman (Non-Executive Director – Non-independent)

Experience and expertise

Matthew Kidman worked as a finance reporter for the Sydney Morning Herald between 1994 and 1998. In 1997 he was appointed Investment Editor of that newspaper and was charged with the responsibility of company coverage for the newspaper. He has degrees in Economics and Law and a Graduate Diploma in Applied Finance. He is a Portfolio Manager of Wilson Asset Management (International) Pty Limited and has been instrumental in establishing the company’s valuation methodology of rating companies.

Matthew Kidman has been a Director of the Company since July 2007.

Other current directorships

Matthew Kidman is a Director of WAM Capital Limited (appointed March 1999), Wilson Investment Fund Limited (appointed May 2002) and Incubator Capital Limited (appointed February 2000). He is also a Director of the investment management companies MAM Pty Limited and Boutique Asset Management Pty Limited.

Former directorships in the last 3 years

Matthew Kidman is a former Director of Australian Leaders Fund Limited (formerly known as Wilson Leaders Fund Limited) (October 2003 to January 2010).

Special responsibilities

Member of the Audit & Risk Committee.

Interests in shares and options of the Company

Details of Matthew Kidman’s interests in shares and options of the Company are included later in this report.

Interests in contracts

Details of Matthew Kidman’s interests in contracts of the Company are included later in this report.

John Abernethy (Non-Executive Director – Independent)

Experience and expertise

John Abernethy has over 25 years experience in funds management and corporate advisory. He spent ten years at NRMA Investments as Head of Equities managing portfolios of approximately $2 billion. In 1994 he joined Poynton Corporate Limited as an Executive Director before forming Clime Investment Management Limited (formerly known as Loftus Capital Partners) in 1996. John was also appointed Chairman of Clime Capital Limited in July 2009. He has a Bachelor of Law and Commerce from University of NSW.

John Abernethy has been a Director of the Company since November 2007.

Other current directorships

John Abernethy is Chairman of Clime Capital Limited (appointed July 2009). He is Director of Clime Investment Management Limited (formerly known as Loftus Capital Partners Limited) (appointed July 2005). He is a Director of Wilson Investment Fund Limited (appointed May 2002), Australian Leaders Fund Limited (formerly known as Wilson Leaders Limited) (appointed November 2003) and Jasco Holdings Limited.

Former directorships in the last 3 years

John Abernethy has not held any other directorships of listed companies within the last three years.

Special responsibilities

Chairman of the Audit & Risk Committee.

WAM ACTIVE LIMITED

A.B.N. 49 126 420 719

DIRECTORS’ REPORT TO SHAREHOLDERS FOR THE YEAR ENDED 30 JUNE 2010

Interests in shares of the Company

Details of John Abernethy’s interests in shares and options of the Company are included later in the report.

Interests in contracts

John Abernethy has no interests in contracts of the Company.

Christopher Cuffe (Non-Executive Director – Independent)

Experience and expertise

Following a five year period with chartered accountants KPMG, Chris Cuffe entered the funds management industry in 1985. In 1988 he joined Colonial First State where he was CEO from 1990 until 2003. Chris took the company from a start up operation to Australia’s largest investment manager. Chris joined Challenger Financial Services Group Limited in early 2003 as Chief Executive Officer and subsequently as Chief Executive of Challenger’s Wealth Management business. In 2006, Chris joined non-profit organisation Social Ventures Australia (SVA) as an Executive Director, a position he held until May 2009 when he became Chairman of the SVA Future Trust. Chris is now involved in a portfolio of activities including a number of directorships, managing public and private investments and in various roles assisting the non-profit sector.

Chris holds a Bachelor of Commerce in Accounting, Finance and Systems with merit from the University of New South Wales as well as a Diploma from the Securities Institute of Australia (now the Financial Services Institute of Australasia). He is also a Fellow of the Institute of Chartered Accountants in Australia, a Fellow of the Financial Services Institute of Australasia and a Fellow of the Institute of Company Directors.

Christopher Cuffe has been a Director of the Company since November 2007.

Other current directorships

Christopher Cuffe is a Director of UniSuper Limited (appointed April 2007), Third Link Investment Managers Pty Limited (appointed December 2007), Centric Wealth Limited (appointed July 2009) and Arkx Investment Management Limited (appointed July 2008).

Former directorships in the last 3 years

Christopher Cuffe has no former directorships in the last three years.

Special responsibilities

Member of the Audit & Risk Committee.

Interests in shares of the Company

Details of Christopher Cuffe’s interests in shares and options of the Company are included later in this report.

Interests in contracts

Christopher Cuffe has no interests in contracts of the Company.

WAM ACTIVE LIMITED

A.B.N. 49 126 420 719

DIRECTORS’ REPORT TO SHAREHOLDERS FOR THE YEAR ENDED 30 JUNE 2010

Ronald J. Walker (Non-Executive Director – Non-Independent)

Experience and expertise

Ronald J Walker AC CBE has been prominent in public life for more than forty years. He was founder and Chairman of one of Australia’s largest private chemicals companies between 1963 and 1976, and was cofounder and major shareholder of Hudson Conway Limited, and was co-founder and major shareholder of Crown Casino Limited. He served two terms as Lord Mayor of Melbourne from 1974 to 1976.

He is Chairman of Australian Grand Prix Corporation; and Chairman of Evolve Development Pty Ltd. He is a Director, Football Federation Australia; Chairman, O’Brien Foundation and O’Brien Institute at St Vincent’s Hospital; Director, Australian Tissue Engineering Centre at St Vincent’s Hospital, and also a Member of the International Formula One Commission.

He has served Australia in many capacities over many years in public life including: Chairman, Cancer Institute; Chairman, Heart Foundation Appeal; Chairman, Save the Children Fund; Chairman, Aborigines Advancement League; Chairman, Australian Ballet Foundation; Chairman, Australia Business Arts Foundation; Commissioner, Melbourne 1996 Olympic Games Bid; Member, Sydney 2000 Olympic Bid; Trustee, National Gallery of Victoria for nine years; Founding Chairman, Victorian Major Events Company for ten years; and Chairman, Melbourne 2006 Commonwealth Games Corporation.

In 1977, Mr Walker was made a Commander of the Order of the British Empire (CBE) for service to the Commonwealth. He became an Officer of the Order for Australia (AO) for service to the community 1987, and was made a Companion of the Order of Australia (AC) in 2003 for services to business, arts, tourism and the community.

Ronald Walker has been a Director of the Company since March 2008.

Other current directorships

Ronald Walker is Director of Football Federation Australia Limited.

Former directorships in the last 3 years

Ronald Walker was formerly Chairman of Fairfax Media Limited from 2005 to 2009, a Director of Buka Minerals Limited from February 2004 to March 2008 and Scarborough Minerals PLC from April 2006 to July 2007.

Interests in shares of the Company

Details of Ronald Walker’s interests in shares and options of the Company are included later in this report.

Interests in contracts

Ronald Walker has no interests in contracts of the Company.

The Directors of the Company are also the key management personnel.

Company Secretary

The following person held the position of Company Secretary at the end of the financial year:

Katherine Thorley – Bachelor of Commerce, CPA and CSA Certificate in Governance Practice and Administration. Katherine has worked in the funds management industry the past 5½ years with the Wilson Asset Management group initially as a Financial Accountant and more recently as CFO. Katherine Thorley was appointed Company Secretary on 6 November 2007.

WAM ACTIVE LIMITED

A.B.N. 49 126 420 719

DIRECTORS’ REPORT TO SHAREHOLDERS FOR THE YEAR ENDED 30 JUNE 2010

Remuneration Report

This report details the nature and amount of remuneration for each Director of WAM Active Limited.

a) Remuneration of Directors

The Board from time to time determines remuneration of Non-Executive Directors within the maximum amount approved by the shareholders. Non-Executive Directors are not entitled to any other remuneration.

Fees and payments to Non-Executive Directors reflect the demands that are made on, and the responsibilities of, the directors and are reviewed annually by the Board. The Company determines the remuneration levels and ensures they are competitively set to attract and retain appropriately qualified and experienced Directors.

Directors’ base fees are presently set at a maximum of $110,000 per annum. Non-Executive Directors do not receive bonuses nor are they issued options on securities as part of their remuneration. Directors’ fees cover all main Board activities and membership of committees.

Directors’ remuneration received for the year ended 30 June 2010:

Director G.J. Wilson M.J. Kidman J. B. Abernethy C.E. Cuffe R.J. Walker	Directors’ Fees $ Post-employment Superannuation $ Total $ - 1,000 1,000 - 1,000 1,000 27,523 2,477 30,000 30,000 - 30,000 27,523 2,477 30,000
	85,046 6,954 92,000

The following table compares the Company performance and Non-Executive Directors’ remuneration since inception

	2010	2009	2008
Operating profit after tax ($)	2,121,460	641,196	92,673
Dividends (cents per share)	6.0	2.0	-
Net tangible asset (cents per share)	112.14	103.37	99.42
Total Directors’ remuneration ($)	92,000	110,000	48,489

b) Director Related Entities Remuneration

All transactions with related entities were made on normal commercial terms and conditions.

WAM ACTIVE LIMITED

A.B.N. 49 126 420 719

DIRECTORS’ REPORT TO SHAREHOLDERS FOR THE YEAR ENDED 30 JUNE 2010

of information necessary for the maintenance of financial accounts of the Company to be completed. In its capacity as Manager, MAM Pty Limited was paid a management fee of 1%p.a (plus GST) of gross assets amounting to $217,545 inclusive of GST (2009: $157,970). As at 30 June 2010, the balance payable to the Manager was $17,324 (2009: $55,587).

In addition, MAM Pty Limited is to be paid, annually in arrears, a performance fee being 20% of the increase in the gross value of the portfolio above the high water mark:

The high water mark is the greater of the:

The highest gross value of the portfolio as at the last day of the last performance period for which a performance fee was last paid or payable; and
the gross proceeds raised from the issue of shares pursuant to the original prospectus.

If the gross value of the portfolio falls below a previous high water mark then no further performance fees can be accrued or paid until the loss has been fully recovered. As at 30 June 2010, a performance fee of $715,174 inclusive of GST is payable to MAM Pty Limited (2009: $234,289).

c) Contracts

Since the end of the previous financial year, no Director has received or become entitled to receive a benefit (other than those detailed above) by reason of a contract made by the Company or a related Company with the Director or with a firm of which he is a member or with a Company in which he has substantial financial interest.

d) Remuneration of Executives

There are no executives that are paid by the Company. MAM Pty Limited, the Manager of the Company, provides day to day management of the Company and is remunerated as outlined above.

e) Equity Instruments Disclosures of Directors and Related Parties

As at the date of this report, the Company’s Directors and their related parties held the following interests in the Company:

Directors	Ordinary Shares	Options
G.J. Wilson	2,144,793	2,064,861
M.J. Kidman	260,065	253,414
J.B. Abernethy	60,000	60,000
C.E. Cuffe	100,000	100,000
R.J. Walker	1,642,300	1,642,300

Directors and director related entities disposed of and acquired ordinary shares and options in the Company on the same terms and conditions available to other shareholders.

The Directors have not, during or since the end financial year, been granted options over unissued shares or interests in shares of the Company as part of their remuneration.

WAM ACTIVE LIMITED A.B.N. 49 126 420 719

DIRECTORS’ REPORT TO SHAREHOLDERS FOR THE YEAR ENDED 30 JUNE 2010

Directors’ Meetings

Director	No. eligible to attend	Attended
G.J. Wilson	8	8
M.J. Kidman	8	8
J.B. Abernethy	8	7
C.E. Cuffe	8	8
R.J. Walker	8	7

Audit & Risk Committee Meetings

The main responsibilities of the Audit & Risk Committee are set out in the Corporate Governance Statement on pages 4 - 8 of the Annual Report.

Director	No. eligible to attend	Attended
M.J. Kidman	2	2
P.D.K. Jensen	2	2
C.E. Cuffe	2	2

After Balance Date Events

Since year end the Directors have declared a final dividend of 3.0 cents per share fully franked to be paid on 24 September 2010.

No other matters or circumstances have arisen since the end of the financial year which significantly affect or may significantly affect the operations of the economic entity, the results of those operations, or the state of affairs of the economic entity in subsequent financial years.

Future Developments

The Company will continue to pursue its policy of investment during the next financial year, investing its current fixed interest and cash holdings into the equity market as opportunities arise.

Environmental Issues

The Company’s operations are not regulated by any environmental regulation under a law of the Commonwealth or of a State or Territory.

Indemnification and Insurance of Officers or Auditors

During the financial year the Company paid a premium in respect of a contract insuring the Directors of the Company, the Company Secretary and any related body corporate against liability incurred as such by a Director or Secretary to the extent permitted by the Corporations Act 2001 . The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium.

No indemnities have been given or insurance premiums paid during or since the end of the financial year, for any person who is or has been an auditor of the Company.

WAM ACTIVE LIMITED

A.B.N. 49 126 420 719

DIRECTORS’ REPORT TO SHAREHOLDERS FOR THE YEAR ENDED 30 JUNE 2010

Proceedings on behalf of the Company

No person has applied for leave of Court to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings.

The Company was not a party to any such proceedings during the year.

Non-Audit Services

During the year Moore Stephens Sydney, the Company’s auditor, did not perform any other services in addition to their statutory duties for the Company. Moore Stephens Sydney Pty Limited, a related party of the Company’s auditor, performed taxation services for the Company. Details of the amounts paid to the auditors and their related parties are disclosed in Note 5 to the financial statements.

The Board of Directors, in accordance with advice from the Audit & Risk Committee, is satisfied that the provisions of non-audit services during the year is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001 . The Directors are satisfied that the services disclosed in Note 5 did not compromise the external auditor’s independence for the following reasons:

all non-audit services are reviewed and approved by the Audit & Risk Committee prior to commencement to ensure they do not adversely affect the integrity and objectivity of the auditor; and
the nature of the services provided do not compromise the general principles relating to auditory independence in accordance with the APES 110: Code of Ethics for Professional Accountants set by the Accounting Professional and Ethical Standards Board.

Auditor’s Independence Declaration

A copy of the Auditor’s Independence Declaration as required under Section 307C of the Corporations Act 2001 is set out on page 18 of this Annual Report.

Signed in accordance with a resolution of the Board of Directors.

==> picture [100 x 64] intentionally omitted <==

G.J. Wilson Chairman

Dated at Sydney this 6th day of September 2010

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AUDITOR’S INDEPENDENCE DECLARATION TO THE DIRECTORS OF WAM ACTIVE LIMITED

In accordance with the requirements of section 307C of the Corporations Act 2001 , as lead auditor for the audit of WAM Active Limited for the year ended 30 June 2010, I declare that, to the best of my knowledge and belief, there have been:

a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
b) no contraventions of any applicable code of professional conduct in relation to the audit.

==> picture [182 x 38] intentionally omitted <==

Moore Stephens Sydney Chartered Accountants

==> picture [110 x 37] intentionally omitted <==

Jenelle Webster Partner

Dated in Sydney, this 6[th] day of September 2010

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13 1

WAM ACTIVE LIMITED

A.B.N 49 126 420 719

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2010

Notes Proceeds from sale of investments Cost of investments sold Realised gains/(losses) on financial assets Unrealised (loss)/gain on financial assets Other revenue 2 Performance fee Management fees Directors fees Brokerage expense on share purchases Other expenses from ordinary activities Profit before income tax Income tax expense 3(a) Profit attributable to members of the Company 12 Other comprehensive income Other comprehensive income for the year, net of tax Total comprehensive income for the year Basic earnings per share 15 Diluted earnings per share 15	2010 $ 69,785,105 (64,691,462) 5,093,643 (1,649,829) 826,649 (666,412) (202,712) (92,000) (177,252) (277,236) 2,854,851 (733,391) 2,121,460 - 2,121,460 13.66 cents 13.66 cents	2009 $ 40,736,899 (41,660,564)
		(923,665) 1,785,732 787,860 (218,315) (147,200) (108,977) (147,931) (201,857)
		825,647 (184,451)
		641,196
		- 641,196
		4.16 cents
		4.16 cents

The accompanying notes form part of these financial statements.

WAM ACTIVE LIMITED

A.B.N. 49 126 420 719

STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2010

Notes Assets Cash and cash equivalents 13 Trade and other receivables 6 Financial assets 7 Deferred tax assets 3b) Total Assets Liabilities Financial Liabilities 8 Trade and other payables 9 Current tax liability 3c) Deferred tax liabilities 3d) Total Liabilities Net Assets Equity Issued capital 10 Reserve 11 Retained earnings/(Accumulated losses) 12 Total Equity	2010 $ 12,379,551 2,968,212 4,385,351 37,057 19,770,171 666,238 923,567 528,415 132,103 2,250,323 17,519,848 15,437,198 - 2,082,650 17,519,848	2009 $ 4,399,628 710,844 11,766,412 466,592
		17,343,476
		98,442 671,660 - 605,719
		1,375,821
		15,967,655
		15,233,786 1,043,109 (309,240)
		15,967,655

The accompanying notes form part of these financial statements.

WAM ACTIVE LIMITED

A.B.N. 49 126 420 719

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2010

FOR THE YEAR ENDED 30	JUNE 2010
Notes Total Equity as at 1 July Profit for the year attributable to members of the Company 12 Shares issued via DRP during the year 10b) Shares issued via exercise of options during the year 10b) GST adjustment to float costs 10b) Dividends paid 4a) Total equity as at 30 June attributable to members of the Company	2010 $ 15,967,655 2,121,460 202,335 2,875 (1,798) (772,679) 17,519,848	2009 $ 15,326,459 641,196 - - - -
		15,967,655

The accompanying notes form part of these financial statements.

WAM ACTIVE LIMITED A.B.N. 49 126 420 719

STATEMENT OF CASH FLOW FOR THE YEAR ENDED 30 JUNE 2010

Cash flows from Operating Activities Dividends and trust distributions received Interest received Underwriting fees Investment management fees Performance fees Brokerage expense on share purchases Payments for administration expenses Income tax paid Net cash (used in)/provided by operating activities 14 Cash flows from Investing Activities Proceeds from sale of investments Payments for purchase of investments Net cash provided by/(used in) investing activities Cash Flows from Financing Activities Proceeds from option exercise Payments for float costs (GST adjustment) Dividends paid Net cash used in financing activities Net increase/(decrease) in cash and cash equivalents held Cash and cash equivalents at beginning of financial year Cash and cash equivalents at end of financial year 13	2010 $ 465,482 248,627 37,520 (238,366) (218,315) (177,252) (375,181) (249,057) (506,542) 67,622,066 (58,566,334) 9,055,732 2,875 (1,798) (570,344) (569,267) 7,979,923 4,399,628 12,379,551	2009 $ 297,682 506,309 6,008 (122,207) - (147,931) (276,853) -
		263,008
		42,543,648 (48,400,055)
		(5,856,407)
		- - -
		-
		(5,593,399) 9,993,027
		4,399,628

The accompanying notes form part of these financial statements.

WAM ACTIVE LIMITED

A.B.N. 49 126 420 719

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

1. Statement of Significant Accounting Policies

Basis of Preparation

The financial report is a general purpose financial statement that has been prepared in accordance with Australian Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001 .

The financial report was authorised for issue on 6[th] September 2010 by the Board of Directors.

WAM Active Limited is a listed public company, incorporated and domiciled in Australia.

Australian Accounting Standards set out in accounting policies that the Australian Accounting Standards Board has concluded would result in a financial report containing relevant and reliable information about transactions, events and conditions to which they apply. Compliance with Australian Accounting Standards ensures the financial statements and notes also comply with International Financial Reporting Standards. Material accounting policies adopted in the preparation of this financial report are presented below. They have been consistently applied unless otherwise stated.

The financial report has been prepared on an accruals basis and is based on historical costs with the exception of financial assets and certain other financial assets and liabilities which have been measured at fair value.

Accounting Standards not previously applied

The Company has adopted the following new and revised Australian Accounting Standard issued by the Australian Accounting and Standards Board which is mandatory to apply for the current year. Disclosures required by this Standard that are deemed material have been included in this financial report on this basis that they represent a significant change in information from that previously made available.

Presentation of Financial Statements

AASB 101 prescribes the contents and structure of the financial statements. Changes reflected in this financial report include:

the replacement of income statement with statement of comprehensive income. Items of income and expense not recognised in profit or loss are now disclosed as components of “other comprehensive income”. In this regard, such items are no longer reflected as equity movements in the statement of changes in equity;
the adoption of the single statement approach to the presentation of the statement of comprehensive income;
other financial statements are renamed in accordance with the Standard; and
presentation of a third statement of financial position as at the beginning of a comparative financial year where relevant amounts have been affected by a retrospective change in accounting policy or material reclassification of items.

a) Financial Instruments

i. Recognition and Initial Measurement

Financial instruments, incorporating financial assets and financial liabilities, are recognised when the entity becomes a party to the contractual provisions of the instrument. Trade date accounting is adopted for financial assets that are delivered within timeframes established by market convention. Trade date is the date on which the Company commits to purchase or sell the assets.

WAM ACTIVE LIMITED

A.B.N. 49 126 420 719

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

1. Statement of Significant Accounting Policies (continued)

a) Financial Instruments (continued)

Financial instruments are initially measured at fair value. Transaction costs related to instruments classified as at fair value through profit or loss are expensed to the Statement of Comprehensive Income immediately. Financial instruments are classified and measured as set out below.

ii. Classification and Subsequent Measurement Investments consist of shares in publicly listed and unlisted companies, exchange traded call and put options and investments in fixed interest securities.

It is considered that the information needs of shareholders in a company of this type are better met by stating investments at fair value rather than historical cost and by presenting the Statement of Financial Position on a liquidity basis.

The Company may short sell securities in anticipation of a decline in the market value of that security, or it may short sell securities for various arbitrage transactions. Short sales or borrowed stock are classified as a financial liability and are revalued to fair value through the Statement of Comprehensive Income.

iii. Financial assets at fair value through profit or loss

Financial assets are classified at fair value through the Statement of Comprehensive Income when they are held for trading for the purpose of short term profit taking. Realised and unrealised gains and losses arising from changes in fair value are included in Statement of Comprehensive Income in the year in which they arise. Unrealised gains and losses are then transferred to an asset revaluation reserve, net of the potential tax charges that may arise from the future sale of the investments, where they are above cost.

iv. Financial Liabilities

Financial liabilities are classified at fair value through Statement of Comprehensive Income. Realised and unrealised gains and losses are then transferred to an asset revaluation reserve, net of the potential tax charges that may arise from the future sale of the investments, where they are above cost.

v. Fair Value

Fair value is determined based on current market prices for all quoted investments. Valuation techniques are applied to determine the fair value for all unlisted securities, include recent arm’s length transactions and reference to similar instruments.

vi. Derecognition

Financial assets are derecognised where the contractual rights to receipt of cash flows expires or the asset is transferred to another party whereby the Company no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised where the related obligations are either discharged, cancelled or expire. The difference between the carrying value of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in the Statement of Comprehensive Income.

WAM ACTIVE LIMITED A.B.N. 49 126 420 719

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

1. Statement of Significant Accounting Policies (continued)

b) I ncome Tax

The charge of current income tax expense is based on the profit for the year adjusted for any nonassessable or disallowed items. It is calculated using the tax rates that have been enacted or are substantially enacted by the end of the current financial year. Current tax liabilities (assets) are measured at the amounts expected to be paid to (recovered from) the relevant taxation authority.

Deferred tax is accounted for using the Statement of Financial Position liability method in respect of temporary difference arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements.

No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss.

Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is settled. Deferred tax is credited in the Statement of Comprehensive Income except where it relates to items that may be credited directly to equity, in which case the deferred tax is adjusted directly against equity.

Deferred tax assets relating to temporary differences and unused tax losses are recognised, to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised.

Current tax assets and liabilities are offset only where a legally enforceable right of set-off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are only offset where a legally enforceable right of set-off exists, the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled.

c) Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, at call deposits with banks or financial institutions and other fixed interest securities maturing within three months or less.

d) Revenue and Other Income

Interest revenue is recognised using the effective interest rate method, which, for floating rate financial assets, is the rate inherent in the instrument. Dividend revenue is recognised when the right to receive a dividend has been established. All revenue is stated net of the amount of goods and services tax (GST).

e) Trade and Other Receivables Trade and other receivables are non-derivative financial assets and are initially recognised at fair value. They are subsequently stated at their amortised cost less the provision for impairment losses [refer Note 1(g)].

f) Trade and Other Payables

Trade and other payables are non-derivative financial liabilities and are stated at their amortised cost.

WAM ACTIVE LIMITED A.B.N. 49 126 420 719

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

1. Statement of Significant Accounting Policies (continued)

g) Impairment of Assets

At each reporting date, the Company reviews the carrying values of its tangible assets to determine whether there is any indication that those assets may be impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the assets’ carrying value. Any excess of the assets’ carrying value over its recoverable amount is expensed to the Statement of Comprehensive Income.

h) Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of GST, except where the amount of the GST incurred is not recoverable from the Australian Taxation Office (ATO). In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense.

Receivables and payables are stated inclusive of GST. The net amount of GST recoverable from, or payable to, the ATO is included as an asset or liability in the Statement of Financial Position.

Cash flows are presented in the Statement of Cash Flows on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows.

i) Comparative Figures

When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year.

j) Critical Accounting Estimates and Judgements

The Directors evaluate estimates and judgements incorporated into the financial report based on historical knowledge the best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data.

There are no estimates or judgements that have a material impact on the financial results of the Company for the year ended 30 June 2010.

k) New Standards and Interpretations not yet Adopted

The Australian Accounting Standards Board has issued a new accounting standard AASB 9: Financial Instruments and AASB 2009-11: Amendments to Australian Accounting Standards arising from AASB 9 that has a mandatory application date for future reporting periods. The Company has decided against early adoption of this standard. This standard does not materially impact the Company.

2. Other Revenue

2. Other Revenue Interest Australian sourced dividends Foreign sourced dividends Trust distributions Underwriting fees Revenue from options written	2010 $ 313,095 388,659 14,127 60,995 41,728 8,045 826,649	2009 $ 472,072 251,253 21,109 29,808 6,008 7,610
		787,860

WAM ACTIVE LIMITED A.B.N. 49 126 420 719

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

3. Taxation

a) Income Tax Expense

The prima facie tax on profit from ordinary activities before income tax is reconciled to the income tax expense as follows:

Prima facie tax payable on profit from ordinary activities before income tax at 30% (2009: 30%) Imputation credit gross up Franking credit offset Other non-assessable items Over provision in prior year Total income tax expense results in a: Current tax asset Deferred tax liability Deferred tax asset Over provision in prior year b) Deferred Tax Assets Tax losses Provisions Capitalised float costs Capitalised legal fees Movement in deferred tax assets Balance at the beginning of the year Transfer tax losses from current tax liability Credited to the Statement of Comprehensive Income Under provision in prior period At reporting date c) Current Tax liabilities Balance at the beginning of the period Current year income tax expense on operating profit Income tax paid Transfer tax losses from deferred tax asset At reporting date	2010 $ 856,456 45,091 (150,304) (3,198) (14,654) 733,391 1,198,019 (462,065) 12,091 (14,654) 733,391 - 7,260 28,626 1,171 37,057 466,592 (420,547) (12,091) 3,103 37,057 - 1,198,019 (249,057) (420,547) 528,415	2009 $ 247,694 33,214 (110,712) 14,255 -
		184,451
		- 547,734 (363,283) -
		184,451
		417,444 6,210 42,938 -
		466,592
		105,677 - 363,283 (2,368)
		466,592
		- - - -
		-

WAM ACTIVE LIMITED

A.B.N. 49 126 420 719

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

3. Taxation (continued) d) Deferred Tax liabilities Fair value adjustments Income provisions Movement in deferred tax liabilities Balance at the beginning of the year (Credited)/Charged to the Statement of Comprehensive Income Over provision in prior year At reporting date 4. Dividends a) Ordinary Dividends Paid during the Year Dividend: 2.0 cents per share fully franked at 30% tax rate paid 20 July 2009 (2009: no final dividend) Dividend 3.0 cents per share fully franked at 30% tax rate paid 26 February 2010 (2009: no interim dividend) Dividends paid by the Company b) Dividends not recognised at Year End In addition to the above dividends, since the end of the year, the Directors have declared the following dividend which has not been recognised as a liability at the end of the financial year: Final dividend for the year ended 30 June 2010 of 3.0 cents per share fully franked at 30% tax rate payable 24 September 2010. (Final dividend for the year ended 30 June 2009 of 2.0 cents per share fully franked at 30% tax rate paid 20 July 2009) c) Dividend Franking Account Balance of franking account at year end adjusted for franking credits, arising from payment of provision for income tax and dividends recognised as receivables and franking credits that may be prevented from distribution in subsequent financial years. Subsequent to the reporting period, the franking account would be reduced by the proposed dividend disclosed in b) above as follows:	2010 $ 108,097 24,006 132,103 605,719 (462,065) (11,551) 132,103 308,002 464,677 772,679 468,144 703,386 (200,633) 502,753	2009 $ 592,030 13,689
		605,719
		60,352 547,734 (2,367)
		605,719
		- -
		-
		308,002
		109,252 (132,001)
		(22,749)

WAM ACTIVE LIMITED

A.B.N. 49 126 420 719

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

4. Dividends (continued)

The Company’s ability to continue to pay franked dividends is dependent upon the receipt of franked dividends from investments and the Company paying tax.

The balance of the franking account does not include the tax to be paid on unrealised investment gains and accrued income currently recognised as a deferred tax liability of $132,103 (2009: $605,719).

5. Auditors remuneration

Remuneration of the auditor of the Company for: Auditing or reviewing the financial report Non-audit services Other services provided by a related practice of the auditor: Taxation Services	2010 $ 28,571 - 8,400 36,971	2009 $ 29,028 - 7,179
		36,207

The Company’s Audit & Risk Committee oversees the relationship with the Company’s external auditors. The Audit & Risk Committee reviews the scope of the audit and review and the proposed fee. It also reviews the cost and scope of other audit-related tax compliance services provided by a related entity of the audit firm, to ensure that they do not compromise independence.

6. Trade and Other Receivables

Outstanding settlements Prepayments Income receivable GST receivable	2010 $ 2,770,206 - 133,392 64,614 2,968,212	2009 $ 607,168 8,762 66,416 28,498
		710,844

Outstanding settlements are on the terms of operating in the securities industry. These are non-interest bearing and require the settlement within three days of the date of a transaction. Income receivable relates to accrued income and is non-interest bearing and unsecured.

7. Financial Assets

Listed investments at fair value Unlisted investments at cost Exchange traded options at fair value	2010 $ 4,281,314 87,717 16,320 4,385,351	2009 $ 11,232,482 518,860 15,070
		11,766,412

WAM ACTIVE LIMITED

A.B.N. 49 126 420 719

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

8. Financial Liabilities

Borrowed stock

2010	2009
$	$
666,238	98,442

Borrowed stock is carried at fair value. The Company provides cash collateral backing of 105% of the fair value of the borrowed stock to the stock lender. The level of borrowed stock plus other borrowings cannot exceed 50% of the gross value of the Portfolio of the Company as outlined in the Company’s Management Agreement.

9. Trade and Other Payables

9. Trade and Other Payables
Outstanding settlements Management fee payable Performance fee payable Sundry payables	2010 $ 102,949 17,324 715,174 88,120 923,567	2009 $ 284,893 55,587 234,290 96,890
		671,660

Outstanding settlements are on the terms operating in the securities industry. These do not incur interest and require settlement within three days of the date of the transaction. Sundry creditors are settled within the terms of payment offered. No interest is applicable on these accounts.

10. Issued Capital

a) Paid-up Capital 15,604,808 ordinary shares fully paid (2009: 15,400,101) b) Ordinary Shares Balance at the beginning of the year 2,500 ordinary shares issued from the exercise of options allotted 26 May 2010 exercise price $1.15 113,089 ordinary shares issued on 26 February 2010 under a dividend reinvestment plan 89,118 ordinary shares issued on 20 July 2009 under a dividend reinvestment plan GST adjustment to float costs At reporting date	2010 $ 15,437,198 15,233,786 2,875 129,268 73,067 (1,798) 15,437,198	2009 $ 15,233,786
		15,233,786 - - -
		15,233,786

Holders of ordinary shares are entitled to receive dividends as declared from time to time, and are entitled to one vote per share at shareholder meetings; otherwise each member present at a meeting or by proxy has one vote on a show of hands. In the event of the winding up of the Company, ordinary shareholders rank after creditors and share in any proceeds on winding up in proportion to the number of shares held.

WAM ACTIVE LIMITED A.B.N. 49 126 420 719

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

c) Options

The Company issued 15,489,219 options to acquire fully paid ordinary shares exercisable at $1.15 per option. The options were allotted on the 12 March 2010 and are listed on the Australian Securities Exchange (ASX Code: WAAO). As at the 30 June 2010 2,500 options had been exercised. The remaining unexercised options are due to expire in 30 April 2011.

d) Capital Management

The Board manages the Company’s capital by regularly reviewing the most efficient manner by which the company employs its capital. At the core of this management is the belief that shareholder value should be preserved. Shareholder value will be preserved through the management of the level of distributions to shareholders, share and options issues as well as the use of share buy-backs. These capital management initiatives will be used when deemed appropriate by the Board.

11. Reserve

11. Reserve
Balance at the beginning of the year Transfer (from)/to retained earnings At reporting date	2010 $ 1,043,109 (1,043,109) -	2009 $ - 1,043,109
		1,043,109

This reserve is used to record increments and decrements on the revaluation of the investments, net of potential tax as described in accounting policy Note 1a) iii).

12. Retained Earnings/(Accumulated Losses)

Balance at the beginning of the year Transfer from/(to) asset revaluation reserve Profit for the year attributable to members of the Company Dividends paid (refer Note 4) At reporting date	2010 $ (309,240) 1,043,109 2,121,460 (772,679) 2,082,650	2009 $ 92,673 (1,043,109) 641,196 -
		(309,240)

13. Cash and Cash Equivalents

Cash as at the end of the financial year as shown in the Statement of Cash Flow is reconciled to the related items in the Statement of Financial Position as follows:

Cash at bank and on hand Fixed interest securities	2010 $ 554,895 11,824,656 12,379,551	2009 $ 2,244,128 2,155,500
		4,399,628

The weighted average interest rate for cash and fixed interest securities as at 30 June 2010 is 5.47% (2009: 3.08%). The fixed interest securities have an average maturity of 85 days (2009: 19 days). The fixed interest securities has 94% invested in Standard & Poor’s rated AA and 6% invested in Standard & Poor’s rated A. The fixed interest securities include the cash collateral for the borrowed stock (refer Note 8).

WAM ACTIVE LIMITED A.B.N. 49 126 420 719

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

14. Cash Flow Information

Reconciliation of Operating Profit after Income Tax: Cash Flow from operations after income tax (Less)/Add items classified as investing/financing activities: Realised (gain)/loss on sale of investments Revenue from writing options (Less)/Add non cash items: Unrealised loss/(gain) on investments Changes in assets and liabilities: (Increase)/decrease in receivables Decrease in deferred tax assets Increase in payables Decrease/(increase) in current tax assets/liabilities (Decrease)/increase in deferred tax liabilities Cash flow from operations 15. Earnings Per Share Profit after income tax used in the calculation of basic earnings per share Weighted average number of ordinary shares outstanding during the year used in calculating basic earnings per share Add: Weighted average number of options outstanding Weighted average number of ordinary shares outstanding during the year used in calculating diluted earnings per share	2010 $ 2,121,460 (5,093,642) (8,045) 1,649,829 (94,330) 429,535 433,852 528,415 (473,616) (506,542) 2010 $ 2,121,460 No. 15,526,798 n/a 15,526,798	2009 $ 641,196 923,665 (7,610) (1,785,732) 11,948 12,824 295,090 (373,740) 545,367
		263,008
		2009 $ 641,196
		No. 15,400,101
		n/a 15,400,101

16. Financial Risk Management

The Company’s financial instruments consist of fixed interest securities, short term investments, accounts receivable, accounts payable and borrowed stock.

The terms and conditions including interest rate risk of each class of financial asset, financial liability and equity instrument, both recognised and unrecognised at balance date, are included under the appropriate note for that instrument.

WAM ACTIVE LIMITED A.B.N. 49 126 420 719

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

16. Financial Risk Management (continued)

Under delegation from the Board, the Manager has the responsibility for assessing and monitoring the financial market risk of the Company. The Manager monitors these risks daily. On a formal basis the investment team meet on a weekly basis to monitor and manage the below four risks as appropriate.

a) Credit Risk

The standard defines this is a risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge a contracted obligation. The Manager monitors the credit worthiness of counterparties on an ongoing basis and evaluates the credit quality of all new counterparties before engaging them.

The maximum exposure to credit risk on financial assets, excluding investments, of the Company which have been recognised on the Statement of Financial Position, is the carrying amount net of any provision for impairment of those assets.

The Manager is responsible for ensuring there is appropriate diversification across counterparties and that they are of a sufficient quality rating. The Manager is satisfied that the counterparties are of sufficient quality and diversity to minimise any individual counterparty credit risk. The majority of the Company’s receivables arise from unsettled trades at year end which are settled three days after trade date. Engaging with counterparties via the Australian securities exchange facilitates the Company in both mitigating and managing its credit risk.

The Company is not materially exposed to credit risk on its fixed interest securities as the majority of cash and fixed interest securities are held with Australian banks who have a Standard and Poor’s short rating of A-1 and long term rating of AA. Also the majority of maturities are within three months.

None of the assets exposed to credit risk are overdue or considered to be impaired.

b) Liquidity Risk

Liquidity risk represents the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities.

The Company’s major cash outflows are the purchase of securities and dividends paid to shareholders, the levels of which are managed by the Board and the Manager.

The Company’s cash inflows depend upon the level of sales of securities, dividends and interest received and the exercise of Company options that may be on issue from time to time.

The Manager monitors the Company’s cash-flow requirements daily by reference to known sales and purchases of securities, dividends and interest to be paid or received. Should these decrease by a material amount the Company can alter its cash outflows as appropriate. The Company also holds a portion of its portfolio in cash and fixed interest securities sufficient to ensure that it has cash readily available to meet all payments. Furthermore the assets of the company are largely in the form of tradeable securities which if liquidity is available, can be sold on market if necessary.

WAM ACTIVE LIMITED A.B.N. 49 126 420 719

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

16. Financial Risk Management (continued)

b) Liquidity Risk (continued)

The table following analyses the Company’s liabilities in relevant maturity groupings based on the remaining period to the earliest possible contractual maturity date to the year end date. The amounts in the following table are contractual undiscounted cash flows.

30 June 2010 Financial liabilities Trade and other payables Current tax liability Deferred tax liabilities Total Liabilities 30 June 2009 Financial liabilities Trade and other payables Deferred tax liabilities Total Liabilities	>1 month $ <1 months $ Total $ - 666,238 666,238 - 923,567 923,567 - 528,415 528,415 132,103 - 132,103
	132,103 2,118,220 2,250,323
	>1 month $ <1 months $ Total $ - 98,442 98,442 - 671,660 671,660 605,719 - 605,719
	605,719 770,102 1,375,821

c) Market Risk

Market risk represents the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices.

By its nature, as a listed investment company that invests in tradeable securities, the Company will always be subject to market risk as it invests its capital in securities which are not risk free as the market price of these securities can fluctuate.

The Manager seeks to manage and reduce the market risk of the Company by diversification of the investment portfolio across numerous stocks and multiple industry sectors. The relative weightings of the individual securities and market sectors are reviewed daily and the risk managed on a daily basis. The Company does not have set parameters as to a minimum or maximum amount of the portfolio that can be invested in a single company or sector.

The Company enters into option contracts for the purpose of enhancing returns via the premiums that it earns from the writing of these contracts or for the purpose of providing downside protection. Where the Company sells a call option, it is obligated to deliver securities to an agreed price if the taker exercises the option. As at balance date there were call options outstanding which potentially required the Company if they were exercised to deliver securities to the value of $612,000 (2009: $528,000), however these call options were written against the underlying securities already owned by the Company.

WAM ACTIVE LIMITED A.B.N. 49 126 420 719

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

16 Financial Risk Management (continued)

c) Market Risk (continued)

This exchange traded option was entered into within the constraints and controls imposed by the Australian Securities Exchange Limited. Dealing and administrative (including settlement) functions are separated. The total exposure position is determined daily and the Manager continually reviews the investment and trading transactions of the Company. Shares to the value of $558,720 (2009: $44,880) are held by the Australian Clearing House (ACH) as collateral for sold option positions written by the Company. These shares are held by ACH under the terms of ACH Pty Ltd which require participants in the Exchange Traded Option market to lodge collateral, and are recorded as part of the Company’s investment portfolio.

The Company’s industry sector weighting of the gross assets as at 30 June is as below:

Industry Sector	2010	2009
	%	%
Banks	6.3%	10.5%
Diversified Financials	5.5%	7.9%
Materials	2.5%	9.1%
Real Estate	2.0%	2.7%
Health Care Equipment & Services	1.8%	0.5%
Commercial & Professional Services	1.4%	2.4%
Semiconductors & Semiconductor Equipment	1.1%	-
Pharmaceuticals & Biotechnology	0.6%	-
Capital Goods	0.5%	1.7%
Insurance	0.3%	0.2%
Consumer Services	0.1%	-
Energy	0.1%	2.8%
Exchange Traded Options	0.1%	0.1%
Transportation	-	3.0%
Automobiles & Components	-	0.2%
Consumer Durables & Apparel	-	3.1%
Food Beverage & Tobacco	-	6.8%
Media	-	3.4%
Retailing	-	10.4%
Software & Services	-	3.4%
Utilities	-	1.9%

WAM ACTIVE LIMITED A.B.N. 49 126 420 719

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

16. Financial Risk Management (continued)

c) Market Risk (continued)

Securities representing over 5 per cent of the gross assets at 30 June were:

Company Name	2010 (%)
Nil	-
Company Name	2009 (%)
Lion Nathan Limited (LNN)	7.2

d) Interest Rate Risk

The Company’s interest bearing financial assets expose it to risks associated with the effects of fluctuations in the prevailing level of market interest rates on its financial position and cash flows. The Company however is not materially exposed to interest rate risk as the majority of its fixed interest securities mature within three months.

As at 30 June 2010, the Company’s exposure to interest rate risk and the effective weighted average interest rate is set out in the following table:

30 June 2010 Weighted average interest rate (% pa) Assets Cash and cash equivalents 5.47% Trade and other receivables Financial assets Deferred tax assets Total Liabilities Financial liabilities Trade and other payables Current tax liability Deferred tax liabilities Total	Interest bearing $ Non-interest bearing $ Total $ 12,379,551 - 12,379,551 - 2,968,212 2,968,212 - 4,385,351 4,385,351 - 37,057 37,057
	12,379,551 7,390,620 19,770,171
	- 666,238 666,238 - 923,567 923,567 - 528,415 528,415 - 132,103 132,103
	- 2,250,323 2,250,323

WAM ACTIVE LIMITED

A.B.N. 49 126 420 719

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

16. Financial Risk Management (continued)

d) Interest Rate Risk (continued)

As at 30 June 2009, the company’s exposure to interest rate risk and the effective weighted average interest rate is set out in the following table:

30 June 2009 Weighted average interest rate (% pa) Assets Cash and cash equivalents 3.08% Trade and other receivables Financial assets Deferred tax assets Total Liabilities Financial liabilities Trade and other payables Deferred tax liabilities Total	Interest bearing $ Non-interest bearing $ Total $ $ 4,399,628 - 4,399,628 - 710,844 710,844 - 11,766,412 11,766,412 - 466,592 466,592
	4,399,628 12,943,848 17,343,476
	- 98,442 98,442 - 671,660 671,660 - 605,719 605,719
	- 1,375,821 1,375,821

e) Sensitivity Analysis

Investments represent 22% (2009: 68%) of total assets at year end. A 5% movement in the market value of each of the companies within the portfolio would result in a 1.1% (2009: 3.4%) movement in the net assets after tax. This would result in the net asset backing after tax moving by 1.2 cents per share using the 30 June 2010 numbers (2009: 3.5 cents per share).

f) Financial Instruments Measured at Fair Value

The financial assets and liabilities recognised at fair value in the Statement of Financial Position have been analysed and classified using a fair value hierarchy reflecting the significance of the inputs in making the measurements. The fair value hierarchy consists of the following levels:

Level 1: Quoted prices in active markets for identical assets or liabilities
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability either directly (as prices or indirectly (derived from prices).
Level 3: Inputs for the asset or liability are not based on observable market data (unobservable inputs).

Included within Level 1 of the hierarchy are listed investments. The fair value of these financial assets and liabilities have been based on the closing quoted last sale prices at the end of the reporting period, excluding transaction cost.

In valuing unlisted investments, included in Level 2 of the hierarchy, valuation techniques such as those using comparisons to similar investments for which market observable prices are available or the last sale price have been adopted to determine the fair valued of these investments.

WAM ACTIVE LIMITED

A.B.N. 49 126 420 719

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

16. Financial Risk Management (continued)

f) Financial Instruments Measured at Fair Value (continued)

30 June 2010 Financial assets Financial liabilities Total 30 June 2009 Financial assets Financial liabilities Total	Level 1 $ Level 2 $ Level 3 $ Total $ 4,297,634 87,717 - 4,385,351 (666,238) - - (666,238)
	3,631,396 87,717 - 3,719,113
	Level 1 $ Level 2 $ Level 3 $ Total $ 11,247,552 518,860 - 11,766,412 (98,442) - - (98,442)
	11,149,110 518,860 - 11,667,970

17. Events Subsequent to Reporting Date

Since year end the Directors have declared a final dividend of 3.0 cents per share fully franked to be paid on 24 September 2010.

No other matters or circumstances have arisen since the end of the financial year which significantly affect or may significantly affect the operations of the Company, the results of those operations, or the state of affairs of the Company in subsequent financial years.

18. Investment Transactions

The total number of contract notes that were issued for transactions in securities during the financial year was 2,732 (2009: 1,573). Each contract note could involve multiple transactions. The total brokerage paid on these contract notes was $463,622 ($2009: $330,685).

19. Segment Reporting

The Company currently operates only in the investment industry within Australia. It has no reportable business or geographic segments.

20. Capital Commitments

Capital commitments exist for placements $36,519 (2009 $425,314) entered into before year end, which settle after year end in July and August 2010.

21. Contingent Liabilities

There are no outstanding contingent liabilities as at 30 June 2010 (2009: nil).

WAM ACTIVE LIMITED

A.B.N. 49 126 420 719

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

22. Key Management Personnel Compensation

The names and position held of the Company’s key management personnel (including Directors in office at any time during the financial year are:

G.J. Wilson Chairman M.J. Kidman Non-Executive Director J.B. Abernethy Non-Executive Director C.E. Cuffe Non-Executive Director R.J. Walker Non-Executive Director

a) Remuneration

There are no executives that are paid by the Company. MAM Pty Limited, the Manager of the Company, remunerates Geoff Wilson and Matthew Kidman as Directors of MAM Pty Limited. The Manager is also contracted to provide day to day management of the Company and is remunerated as outlined in the Directors’ Report.

Total Directors remuneration paid by the Company for the year ended 30 June 2010 Total Directors remuneration paid by the Company for the year ended 30 June 2009	Directors’ Fees $ Post-employment Superannuation $ Total $ 85,046 6,954 92,000
	104,632 5,368 110,000

b) Share and Option holdings

As at 30 June 2010 the Company’s key management personnel and their related parties held the following interests in the Company:

Ordinary Shares held

Directors G.J. Wilson M.J. Kidman J.B. Abernethy C.E. Cuffe R.J. Walker	Balance at 30 June 2009 Acquisitions Disposals Balance at 30 June 2010 1,893,501 227,313 - 2,120,814 200,000 60,065 - 260,065 60,000 - - 60,000 100,000 - - 100,000 1,542,000 100,300 - 1,642,300
	3,795,501 387,678 - 4,183,179

WAM ACTIVE LIMITED

A.B.N. 49 126 420 719

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

22 Key Management Personnel Compensation (continued)

b) Share and Option holdings (continued)

Options held

Directors G.J. Wilson M.J. Kidman J.B. Abernethy C.E. Cuffe R.J. Walker	Balance at 30 June 2009 Options Granted/ Acquisitions Disposals/ Exercised/ Lapsed Balance at 30 June 2010 - 2,064,861 - 2,064,861 - 253,414 - 253,414 - 60,000 - 60,000 - 100,000 - 100,000 - 1,642,300 - 1,642,300
	- 4,120,575 - 4,120,575

As at 30 June 2009 the Company’s key management personnel and their related parties held the following interests in the Company:

Ordinary Shares held
	Balance at			Balance at
Directors	30 June 2008	Acquisitions	Disposals	30 June 2009
G.J. Wilson	1,893,501	-	-	1,893,501
M.J. Kidman	200,000	-	-	200,000
J.B. Abernethy	60,000	-	-	60,000
C.E. Cuffe	-	100,000	-	100,000
R.J. Walker	1,542,000	-	-	1,542,000
	3,695,501	100,000	-	3,795,501
Options held
			Disposals/
	Balance at	Options Granted/	Exercised/	Balance at
Directors	30 June 2008	Acquisitions	Lapsed	30 June 2009
G.J. Wilson	1,670,500	-	(1,670,500)	-
M.J. Kidman	200,000	-	(200,000)	-
J.B. Abernethy	-	-	-	-
C.E. Cuffe	-	-	-	-
R.J. Walker	1,300,000	-	(1,300,000)	-
	3,170,500	-	(3,170,500)	-

WAM ACTIVE LIMITED A.B.N. 49 126 420 719

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

23. Related Party Transactions

All transactions with related entities were made on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated.

Geoffrey Wilson and Matthew Kidman are Directors of MAM Pty Limited, the entity appointed to manage the investment portfolio of WAM Active Limited and manage the day-to-day operations of the Company. Entities associated with Geoffrey Wilson and Matthew Kidman hold 80% and 20% respectively of the issued shares of MAM Pty Limited. The core duties of the Manager include the provision of financial and administrative support to ensure the maintenance of the corporate and statutory records of the Company; liaison with the ASX with respect to compliance with the ASX Listing Rules; liaison with ASIC with respect to compliance with the Corporations Act; liaison with the share registrar of the Company; and the provision of information necessary for the maintenance of financial accounts of the Company to be completed. In its capacity as Manager, MAM Pty Limited was paid a management fee of 1%p.a (plus GST) of gross assets amounting to $217,545 inclusive of GST (2009: $157,970). As at 30 June 2010, the balance payable to the Manager was $17,324 (2009: $55,587).

In addition, MAM Pty Limited is to be paid, annually in arrears, a performance fee being 20% of the increase in the gross value of the portfolio above the high water mark:

The high water mark is the greater of the:

The highest gross value of the portfolio as at the last day of the last performance period for which a performance fee was last paid or payable; and
the gross proceeds raised from the issue of shares pursuant to the original prospectus.

Wilson Asset Management (International) Pty Limited employ’s accounting personnel to provide accounting services to WAM Active Limited. These services are provided on commercial terms and include a standard charge of $2,500 per month and an additional charge of $5,000 is charged for preparing the half year and full year financial statements. These accounting services total $35,000 for the financial year 2010 (2009: $35,000). Wilson Asset Management (International) Pty Limited is owned by Geoffrey Wilson.

These amounts are in addition to the above Directors’ remuneration.

WAM ACTIVE LIMITED A.B.N. 49 126 420 719

DIRECTOR’S DECLARATION

The Directors of WAM Active Limited declare that:

1) The financial report as set out in pages 19 to 41 and the additional disclosures included in the Directors’ Report designated as “Remuneration Report”, as set out on pages 14 and 15, are in accordance with the Corporations Act 2001 , including:
a) complying with Accounting Standards in Australia and the Corporations Regulations 2001 ; and
b) giving a true and fair view of the financial position of the company as at 30 June 2010 and of its performance, as represented by the results of the operations and the cashflows, for the year ended on that date; and
2) The Director of the Manager, MAM Pty Limited has declared that:
a) the financial records of the company for the financial year have been properly maintained in accordance with the Section 286 of the Corporations Act 2001 ;
b) the financial statements and notes for the financial year comply with the Accounting Standards; and
c) the financial statements and notes for the financial year give a true and fair view.
3) At the date of this declaration, in the Directors’ opinion there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

Signed in accordance with a resolution of the Board of Directors.

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G.J. Wilson, Chairman Dated at Sydney this 6[th] day of September 2010.

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INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF WAM ACTIVE LIMITED

We have audited the accompanying financial report of WAM Active Limited (“the Company”), which comprises the statement of financial position as at 30 June 2010, the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year ended on that date, a summary of significant accounting policies and other explanatory notes and the directors’ declaration.

Directors’ Responsibility for the Financial Report

The Directors of the company are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001 . This responsibility includes establishing and maintaining internal control relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditor’s Responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.

Our procedures include reading the other information in the Annual Report to determine whether it contains any material inconsistencies with the financial report.

Our audit did not involve an analysis of the prudence of business decisions made by directors or management.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Independence

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001 .

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Auditor’s Opinion

In our opinion:

(a) the financial report of WAM Active Limited is in accordance with the Corporations Act 2001 , including:
(i) giving a true and fair view of the company’s financial position as at 30 June 2010 and of its performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001.

Report on the Remuneration Report

We have audited the Remuneration Report included in pages 14 and 15 of the Directors’ Report for the year ended 30 June 2010. The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001 . Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

Auditor’s Opinion

In our opinion the Remuneration Report of WAM Active Limited for the year ended 30 June 2010, complies with section 300A of the Corporations Act 2001.

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Moore Stephens Sydney Chartered Accountants

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Jenelle Webster Partner

Dated in Sydney this 6[th] day of September 2010

WAM ACTIVE LIMITED A.B.N. 49 126 420 719

ASX ADDITIONAL INFORMATION

Additional information required by the Australian Stock Exchange Limited Listing Rules and not disclosed elsewhere in this report.

Shareholdings

Substantial shareholders (as at 31 July 2010)

Mr Geoffrey James Wilson and Associated Entities 13.5% of the issued share capital

Huntingfield Investments Pty Limited (the RJW Super Fund A/C) 10.5% of the issued share capital Clodene Pty Limited 5.5% of the issued share capital

On-market buy back (as at 31 July 2010)

There is no current on-market buy back.

Distribution of shareholders (as at 31 July 2010)

Category 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over	No, of shareholders Ordinary Shares Options 26 24 220 222 135 131 233 205 20 18
	634 600

The number of shareholdings held in less than marketable parcels is 6.

Twenty largest shareholders – Ordinary shares (as at 31 July 2010)

Name Mr Geoffrey James Wilson and Associated Entities Huntingfield Investments Pty Limited (the RJW Super Fund A/C) Clodene Pty Limited VBS Investments Pty Limited Mr Matthew Kidman and Associated Entities Charanda Nominee Company Pty Limited (The Amanchar A/C) Seweta Pty Limited (Trss A/C) Trophy Components Distributors Pty Limited Dr Nicholas and Mrs English Harlow Trading Pty Limited Mr & Mrs Antaw (Petavic Super Fund) Mr & Mrs Horsnell (Tennyson Super Fund A/C) Mr Richard Tooher Mr Andrew Ross Johnston (Andrew Johnston Super A/C) Mr & Mrs Stuer Malcolm Superannuation Pty Limited (The Malcolm Super Fund A/C) Bond Street Custodians Limited (FMACDO –O03084 A/C) Chiatta Pty Limited Mr & Mrs Brown (Bendaro Super Fund A/C) Mr & Mrs Cuffe & CAF Community Fund Limited	Number of ordinary shares held Percentage of issued capital held 2,100,814 13.5 1,642,300 10.5 863,568 5.5 601,649 3.9 260,065 1.7 209,165 1.3 200,000 1.3 200,000 1.3 197,200 1.3 150,000 1.0 146,500 0.9 146,300 0.9 128,862 0.8 125,000 0.8 109,450 0.7 105,128 0.7 102,625 0.7 102,625 0.7 100,000 0.6 100,000 0.6
	7,591,251 48.7

Name
Mr Geoffrey James Wilson and Associated Entities
Huntingfield Investments Pty Limited (the RJW Super Fund A/C)
Clodene Pty Limited
VBS Investments Pty Limited
Mr Matthew Kidman and Associated Entities
Charanda Nominee Company Pty Limited (The Amanchar A/C)
Seweta Pty Limited (Trss A/C)
Trophy Components Distributors Pty Limited
Dr Nicholas and Mrs English
Harlow Trading Pty Limited
Mr & Mrs Antaw (Petavic Super Fund)
Mr & Mrs Horsnell (Tennyson Super Fund A/C)
Mr Richard Tooher
Mr Andrew Ross Johnston (Andrew Johnston Super A/C)
Mr & Mrs Stuer
Malcolm Superannuation Pty Limited (The Malcolm Super Fund A/C)
Bond Street Custodians Limited (FMACDO –O03084 A/C)
Chiatta Pty Limited
Mr & Mrs Brown (Bendaro Super Fund A/C)
Mr & Mrs Cuffe & CAF Community Fund Limited

Number of
ordinary
shares held
Percentage of
issued capital
held
2,100,814
13.5
1,642,300
10.5
863,568
5.5
601,649
3.9
260,065
1.7
209,165
1.3
200,000
1.3
200,000
1.3
197,200
1.3
150,000
1.0
146,500
0.9
146,300
0.9
128,862
0.8
125,000
0.8
109,450
0.7
105,128
0.7
102,625
0.7
102,625
0.7
100,000
0.6
100,000
0.6

7,591,251
48.7

Name

WAM ACTIVE LIMITED A.B.N. 49 126 420 719

ASX ADDITIONAL INFORMATION

Twenty largest shareholders – Option holders (as at 31 July 2010)

Name Mr Geoffrey James Wilson and Associated Entities Huntingfield Investments Pty Limited (the RJW Super Fund A/C) CTC Superannuation Pty Limited (CT Coyne Super Fund A/C) VBS Investments Pty Limited Clodene Pty Limited Mr & Mrs Wellby (Roberts Retirement Fund A/C) Mr Matthew Kidman and Associated Entities Charanda Nominee Company Pty Limited (The Amanchar A/C) Mrs Fiona Hilary Henshaw Seweta Pty Limited Trophy Components Distributors Pty Limited Dr Nicholas and Mrs English Mr Robert Spencer McDonald & Ms Margaret Anne Vaughan (McDonald Family S/F A/C) Mr & Mrs Stuer Grail Enterprises Pty Limited Malcolm Superannuation Pty Limited (The Malcolm Super Fund A/C) Bond Street Custodians Limited (FMACDO –O03084 A/C) Chiatta Pty Limited Mr & Mrs Cuffe & CAF Community Fund Limited Harlow Trading Pty Limited (Arragon Pension Fund A/C)	Number of options held Percentage of issued capital held 2,044,860 13.2 1,642,300 10.6 790,632 5.1 601,649 3.9 550,000 3.6 544,301 3.5 253,414 1.6 250,000 1.6 210,014 1.4 200,000 1.3 200,000 1.3 139,200 0.9 112,000 0.7 109,450 0.7 108,700 0.7 102,439 0.7 100,000 0.6 100,000 0.6 100,000 0.6 100,000 0.6
	8,258,959 53.2

Name
Mr Geoffrey James Wilson and Associated Entities
Huntingfield Investments Pty Limited (the RJW Super Fund A/C)
CTC Superannuation Pty Limited (CT Coyne Super Fund A/C)
VBS Investments Pty Limited
Clodene Pty Limited
Mr & Mrs Wellby (Roberts Retirement Fund A/C)
Mr Matthew Kidman and Associated Entities
Charanda Nominee Company Pty Limited (The Amanchar A/C)
Mrs Fiona Hilary Henshaw
Seweta Pty Limited
Trophy Components Distributors Pty Limited
Dr Nicholas and Mrs English
Mr Robert Spencer McDonald & Ms Margaret Anne Vaughan
(McDonald Family S/F A/C)
Mr & Mrs Stuer
Grail Enterprises Pty Limited
Malcolm Superannuation Pty Limited (The Malcolm Super Fund A/C)
Bond Street Custodians Limited (FMACDO –O03084 A/C)
Chiatta Pty Limited
Mr & Mrs Cuffe & CAF Community Fund Limited
Harlow Trading Pty Limited (Arragon Pension Fund A/C)

Number of
options held
Percentage of
issued capital
held
2,044,860
13.2
1,642,300
10.6
790,632
5.1
601,649
3.9
550,000
3.6
544,301
3.5
253,414
1.6
250,000
1.6
210,014
1.4
200,000
1.3
200,000
1.3
139,200
0.9
112,000
0.7
109,450
0.7
108,700
0.7
102,439
0.7
100,000
0.6
100,000
0.6
100,000
0.6
100,000
0.6

8,258,959
53.2

Additional information required by the Australian Stock Exchange Limited Listing Rules and not disclosed elsewhere in this report.

Stock Exchange Listing

Quotation has been granted for all of the ordinary shares and options of the Company on all Member Exchanges of the ASX Limited.

WAM ACTIVE LIMITED A.B.N. 49 126 420 719

INVESTMENTS AT MARKET VALUE As At 30 June 2010

Company Name	Code	Quantity	Market	% of Gross
			Value	Portfolio
			$
Banks
RHG Limited	RHG	1,102,086	683,293	3.6%
National Australia Bank Limited*	NAB	24,000	558,720	3.0%
			1,242,013	6.6%
Capital Goods
Lycopodium Limited	LYL	34,236	107,501	0.6%
			107,501	0.6%
Commercial & Professional Services
Corporate Express Australia Limited	CXP	32,524	184,411	1.0%
Norfolk Group Limited	NFK	112,954	85,845	0.5%
			270,256	1.5%
Consumer Services
Slater & Gordon Limited	SGH	14,619	22,367	0.1%
			22,367	0.1%
Diversified Financials
Van Eyk Three Pillars Limited	VTP	528,871	423,097	2.2%
Clime Investment Management Limited	CIW	77,800	31,898	0.2%
HFA Accelerator Plus Limited	HAP	212,186	72,143	0.4%
Westoz Investment Company Limited	WIC	189,822	186,975	1.0%
Ask Funding Limited	AKF	212,099	51,964	0.3%
Contango Capital Partners Limited	CCQ	155,675	96,519	0.5%
Everest Financial Group Limited	EFG	1,667,376	76,699	0.4%
Keybridge Capital Limited	KBC	549,174	46,131	0.2%
Investorfirst Limited	INQ	771,824	38,591	0.2%
Ozgrowth Limited	OZG	192,500	30,800	0.2%
Contango Microcap Limited	CTN	34,001	24,991	0.1%
			1,079,807	5.7%
Energy
Texon Petroleum Limited	TXN	42,075	15,778	0.1%
ADX Energy Limited Options $0.25 exp 31/03/11	ADXO	62,635	5,324	0.0%
			21,102	0.1%
Health Care Equipment & Services
Healthscope Limited	HSP	68,000	352,920	1.9%
			352,920	1.9%
Insurance
Tower Australia Group Limited	TAL	25,500	51,765	0.3%
			51,765	0.3%
Materials
Paperlinx SPS Trust	PXUPA	5,100	313,395	1.7%
Cape Lambert Resources Limited	CFE	200,000	65,000	0.3%
Citadel Resource Group Limited	CGG	187,000	49,555	0.3%
Ammtec Limited	AEC	9,434	33,113	0.2%
Sylvania Resources Limited	SLV	25,247	19,440	0.1%
Gindalbie Metals Limited	GBG	10,200	10,557	0.1%
			491,061	2.7%
Pharmaceuticals & Biotechnology
Sirtex Medical Limited	SRX	22,851	111,970	0.6%
			111,970	0.6%

WAM ACTIVE LIMITED A.B.N. 49 126 420 719

Company Name	Code	Quantity	Market	% of Gross
			Value	Portfolio
			$
Real Estate
Devine Limited	DVN	508,741	119,554	0.6%
AVJennings Limited	AVJ	213,772	96,197	0.5%
Finbar Group Limited	FRI	74,684	74,684	0.4%
Geo Property Group	GPM	340,000	66,300	0.4%
Port Bouvard Limited	PBD	261,539	34,000	0.2%
			390,735	2.1%
Semiconductors & Semiconductor Equipment
Dyesol Limited	DYE	204,701	213,913	1.1%
			213,913	1.1%
Technology hardware & Equipment
Matrix View Limited	MVU	601,063	9,617	0.1%
			9,617	0.1%
Transportation
Qube Logistics	QUB	5,100	4,004	0.0%
			4,004	0.0%
Exchange Traded Options			16,320	0.1%
			16,320	0.1%
Total Long Portfolio			4,385,351	22.4%
Total Cash, income receivable andnetoutstanding settlements			15,180,201	77.6%
Total Short Portfolio			666,238

∗ Indicates that options were outstanding against the holding.

AI assistant

WAM ACTIVE LIMITED — Annual Report 2010

66032_rns_2010-09-05_0e57d590-29be-488f-af5a-50932a20da71.pdf

WAM ACTIVE LIMITED

ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2010

COMPANY PARTICULARS

WAM ACTIVE LIMITED A.B.N. 49 126 420 719

DIRECTORS:

CONTENTS

WAM ACTIVE LIMITED

CHAIRMAN’S LETTER

Investment Objectives and Process

WAM ACTIVE LIMITED A.B.N. 49 126 420 719

CHAIRMAN’S LETTER

Performance

Dividends

Options

Outlook

WAM ACTIVE LIMITED A.B.N. 49 126 420 719

CHAIRMAN’S LETTER

Shareholder Communication

Geoff Wilson Chairman

WAM ACTIVE LIMITED

CORPORATE GOVERNANCE STATEMENT

Role of the Board (Recommendations 1.1 to 1.3)

Composition & Operation of the Board (Recommendations 2.1 to 2.6)

WAM ACTIVE LIMITED A.B.N. 49 126 420 719

CORPORATE GOVERNANCE STATEMENT

Code of Conduct (Recommendations 3.1 and 3.3)

Board’s Policy on Dealing in Shares (Recommendations 3.2 and 3.3)

Audit & Risk Committee (Recommendation 4.1 to 4.4)

WAM ACTIVE LIMITED

CORPORATE GOVERNANCE STATEMENT

ASX Listing Rule Compliance (Recommendation 5.1 and 5.2)

Shareholder Rights and Communication (Recommendation 6.1 and 6.2)

WAM ACTIVE LIMITED A.B.N. 49 126 420 719

CORPORATE GOVERNANCE STATEMENT

Risk Management (Recommendation 7.1 to 7.4)

Market risk

WAM ACTIVE LIMITED A.B.N. 49 126 420 719

CORPORATE GOVERNANCE STATEMENT

Operational risk

Remuneration of Directors (Recommendation 8.1 to 8.3)

WAM ACTIVE LIMITED

DIRECTORS’ REPORT TO SHAREHOLDERS FOR THE YEAR ENDED 30 JUNE 2010

Principal Activity

Operating and Financial Review

Financial Position

Significant changes in State of Affairs

Dividends Paid or Recommended

WAM ACTIVE LIMITED

DIRECTORS’ REPORT TO SHAREHOLDERS FOR THE YEAR ENDED 30 JUNE 2010

Options

Directors

Information on Directors

Geoffrey Wilson (Chairman – Non-independent)

Experience and expertise

Other current directorships

Former directorships in the last 3 years

Special responsibilities

Interests in shares and options of the Company

Interests in contracts

WAM ACTIVE LIMITED

DIRECTORS’ REPORT TO SHAREHOLDERS FOR THE YEAR ENDED 30 JUNE 2010

Matthew Kidman (Non-Executive Director – Non-independent)

Experience and expertise

Other current directorships

Former directorships in the last 3 years

Special responsibilities

Interests in shares and options of the Company

Interests in contracts

John Abernethy (Non-Executive Director – Independent)

Experience and expertise

Other current directorships

Former directorships in the last 3 years

Special responsibilities

WAM ACTIVE LIMITED

Interests in shares of the Company

Interests in contracts

Christopher Cuffe (Non-Executive Director – Independent)

WAM ACTIVE LIMITED Annual Report 2010