WAM ACTIVE LIMITED — Annual Report 2011

Aug 1, 2011

WAM ACTIVE LIMITED

A.B.N. 49 126 420 719

==> picture [144 x 102] intentionally omitted <==

APPENDIX 4E PRELIMINARY FINAL REPORT FOR THE YEAR ENDED 30 JUNE 2011

RESULTS FOR ANNOUNCEMENT TO THE MARKET All comparisons to the year ended 30 June 2010

	$	Up/Down	% mvmt
Revenue from ordinary activities	2,166,325	Down	-49.3%
Profit from ordinary activities before income tax
expense attributable to members	1,143,352	Down	-60.0%
Net profit after income tax expense for the year
attributable to members	1,205,441	Down	-43.2%
Net profit for the period attributable to members	1,205,441	Down	-43.2%
		Franked
	Cents per	amount per	Tax rate for
Dividend Information	share	share	franking
Interim dividend cents per share	4.0	4.0	30%
Final dividend cents per share	4.0	4.0	30%
Final dividend dates
Ex dividend date			19 Sept 2011
Record date			23 Sept 2011
Payment date			30 Sept 2011
The Dividend Reinvestment Plan is in operation and the recommended fully franked final dividend of 4.0
cents per share qualified. Participating shareholders will	be entitled to be allotted the number of shares
(rounded to the nearest whole number) which the cash	dividend would purchase at the relevant issue
price. The relevant issue price will be at no discount to the price (calculated as the weighted average
market price of shares sold on the ASX on the books	closing date (i.e. record date) for the relevant
dividend and the 3 trading days preceding that date). To participate in		the dividend re-investment plan,
shareholders must return DRP election forms to our share	registrar no later than record date.

	30 June 11	30 June 10
Net tangible asset backing (centsper share)	112.67c	112.14c
This report is based on the Financial Report which is in the process of being audited. All the documents
comprise the information required by Listing Rule 4.3A.

1

WAM ACTIVE LIMITED

A.B.N. 49 126 420 719

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2011

Note s Proceeds from sale of investments Cost of investments sold Realised gains on financial assets Unrealised loss on financial assets Other revenue 2 Performance fees Management fees Directors fees Custody fees ASX listing and chess fees Share registry fees Brokerage expense on share purchases Other expenses from ordinary activities Profit before income tax Income tax benefit/(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	2011 $ 58,504,927 (58,107,167) 397,760 (253,391) 2,021,956 (298,859) (191,674) (92,000) (69,765) (30,069) (26,972) (169,287) (144,347) 1,143,352 62,089 1,205,441 - 1,205,441 7.52 cents 7.52 cents	2010 $ 69,785,105 (64,691,462)
		5,093,643 (1,649,829) 826,649 (666,412) (202,712) (92,000) (64,281) (53,893) (30,479) (177,252) (128,583)
		2,854,851 (733,391)
		2,121,460
		- 2,121,460
		13.66 cents
		13.66 cents

The accompanying notes form part of these financial statements.

2

WAM ACTIVE LIMITED

A.B.N. 49 126 420 719

STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2011

Note s 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 12 Total Equity	2011 $ 10,732,711 1,087,172 7,271,171 83,701 19,174,755 162,104 764,696 - 116,658 1,043,458 18,131,297 15,948,854 - 2,182,443 18,131,297	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

The accompanying notes form part of these financial statements.

3

WAM ACTIVE LIMITED

A.B.N. 49 126 420 719

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2011

Note s 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	2011 $ 17,519,848 1,205,441 182,420 329,236 - (1,105,648) 18,131,297	2010 $ 15,967,655 2,121,460 202,335 2,875 (1,798) (772,679)
		17,519,848

The accompanying notes form part of these financial statements.

4

WAM ACTIVE LIMITED

A.B.N. 49 126 420 719

STATEMENT OF CASH FLOW FOR THE YEAR ENDED 30 JUNE 2011

Cash flows from Operating Activities Dividends and trust distributions received Interest received Other Income Investment management fees (inclusive of GST) Performance fees (inclusive of GST) Brokerage expense on share purchases (inclusive of GST) Payments for administration expenses (inclusive of GST) GST on share sales Net GST payments to the ATO Income tax paid Net cash provided/(used in) operating activities 14 Cash flows from Investing Activities Proceeds from sale of investments Payments for purchase of investments Net cash (used in)/provided by investing activities Cash Flows from Financing Activities Proceeds from option exercise Payments for float costs (GST adjustment) Dividends paid – net of reinvestment Net cash used in financing activities Net 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	2011 $ 1,415,834 557,819 74,960 (206,063) (715,175) (181,674) (406,721) (13,090) 99,381 (546,113) 79,158 60,349,009 (61,481,015) (1,132,006) 329,236 - (923,228) (593,992) (1,646,840) 12,379,551 10,732,711	2010 $ 465,481 248,627 45,771 (255,808) (234,290) (190,222) (384,846) (18,641) 65,930 (249,057)
		(507,055)
		67,622,067 (58,565,822)
		9,056,245
		2,875 (1,798) (570,344)
		(569,267)
		7,979,923 4,399,628
		12,379,551

The accompanying notes form part of these financial statements.

5

A.B.N. 49 126 420 719

WAM ACTIVE LIMITED

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

1. Statement of Significant Accounting Policies

Basis of Preparation

The financial statements are general purpose financial statements that have 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 .

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

Australian Accounting Standards set out accounting policies that the Australian Accounting Standards Board has concluded would result in a financial statements containing relevant and reliable information about transactions, events and conditions. 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 these financial statements are presented below. They have been consistently applied unless otherwise stated.

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

a) Financial Instruments

• i. Initial Recognition and Measurement

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.

Financial instruments are initially measured at fair value. Transaction costs related to instruments classified “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.

6

WAM ACTIVE LIMITED

A.B.N. 49 126 420 719

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

1. Statement of Significant Accounting Policies (cont’d) a) Financial Instruments (cont’d)

• 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 the 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 the 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.

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.

.

7

WAM ACTIVE LIMITED

A.B.N. 49 126 420 719

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

1. Statement of Significant Accounting Policies (cont’d)

b) Income Tax (cont’d)

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.

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 asset’s carrying value. Any excess of the asset’s 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.

.

8

WAM ACTIVE LIMITED

A.B.N. 49 126 420 719

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

1. Statement of Significant Accounting Policies (cont’d)

j) Critical Accounting Estimates and Judgements

The Directors evaluate estimates and judgements incorporated into the financial report based on historical knowledge and 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 2011.

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 (Loss)/gain from options trading	2011 $ 545,909 1,402,016 - 74,065 17,217 (17,251) 2,021,956	2010 $ 313,095 388,659 14,127 60,995 41,728 8,045
		826,649

3. Taxation

a) Income Tax (Benefit)/Expense

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

Prima facie tax payable on profit from ordinary activities before income tax at 30% (2010: 30%) Imputation credit gross up Franking credit offset Other non-assessable items Over provision in prior year Total income tax (benefit)/expense results in a: Current tax asset Deferred tax liability Deferred tax asset Over provision in prior year	2011 $ 343,005 177,875 (592,917) 9,948 - (62,089) (59,983) (15,445) 13,339 - (62,089)	2010 $ 856,456 45,091 (150,304) (3,198) (14,654)
		733,391
		1,198,019 (462,065) 12,091 (14,654)
		733,391

.

9

WAM ACTIVE LIMITED

A.B.N. 49 126 420 719

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

3. Taxation (cont’d)

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 year Current year income tax (benefit)/expense on operating profit Net income tax paid Income tax refund due Transfer tax losses to/from deferred tax asset At reporting date d) Deferred Tax liabilities Fair value adjustments Income provisions Movement in deferred tax liabilities Balance at the beginning of the year Credited to the Statement of Comprehensive Income Over provision in prior year At reporting date	2011 $ 59,983 7,920 14,313 1,485 83,701 37,057 59,983 (13,339) - 83,701 2011 $ 528,415 (59,983) (546,113) 17,698 59,983 - 2011 $ 98,347 18,311 116,658 132,103 (15,445) - 116,658	2010 $ 7,260 28,626 1,171
		37,057
		466,592 (420,547) (12,091) 3,103
		37,057
		2010 $ - 1,198,019 (249,057) - (420,547)
		528,415
		2010 $ 108,097 24,006
		132,103
		605,719 (462,065) (11,551)
		132,103

.

10

WAM ACTIVE LIMITED

A.B.N. 49 126 420 719

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

4. Dividends

a) Ordinary Dividends Paid during the Year Final Dividend FY2010: 3.0 cents per share fully franked at 30% tax rate paid 24 September 2010 (2010: 2.0 cents) Interim Dividend FY2011: 4.0 cents per share fully franked at 30% tax rate paid 31 March 2011 (2010: 3.0 cents) 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 2011 of 4.0 cents per share fully franked at 30% tax rate payable 30 September 2011. 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:	2011 $ 468,281 637,367 1,105,648 642,666 840,152 (275,428) 564,724	2010 $ 308,002 464,677
		772,679
		468,144
		703,386 (200,633)
		502,753

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 $116,658 (2010: $132,103).

.

11

WAM ACTIVE LIMITED

A.B.N. 49 126 420 719

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

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	2011 $ 30,849 - 11,539 42,388	2010 $ 28,571 - 8,400
		36,971

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 Income receivable Tax refund GST receivable	2011 $ 926,124 106,735 17,698 36,615 1,087,172	2010 $ 2,770,206 133,392 - 64,614
		2,968,212

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 8. Financial Liabilities Borrowed stock		2011 $ 7,197,804 73,367 - 7,271,171 2011 $ 162,104	2010 $ 4,281,314 87,717 16,320 4,385,351 2010 $ 666,238

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.

.

12

WAM ACTIVE LIMITED

A.B.N. 49 126 420 719

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

9. Trade and Other Payables

9. Trade and Other Payables
Outstanding settlements Management fee payable Performance fee payable Sundry payables	2011 $ 372,447 16,960 320,726 54,563 764,696	2010 $ 102,949 17,324 715,174 88,120
		923,567

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 16,066,653 ordinary shares fully paid (2010: 15,604,808) b) Ordinary Shares Balance at the beginning of the year 286,292 ordinary shares issued from the exercise of options allotted July 2010 to June 2011 exercise price $1.15 73,481 ordinary shares issued on 24 September 2010 under a dividend reinvestment plan 102,072 ordinary shares issued on 31 March 2011 under a dividend reinvestment plan 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	2011 $ 15,948,854 15,437,198 329,236 76,319 106,101 15,948,854	2010 $ 15,437,198
		15,233,786 - - - 2,875 129,268 73,067 (1,798)
		15,437,198

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.

.

13

WAM ACTIVE LIMITED

A.B.N. 49 126 420 719

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

10 . Issued Capital (cont’d)

c) 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.

d) Options

In the prior year the Company issued 15,489,219 options to acquire fully paid ordinary shares exercisable at $1.15 per option. During the year to 30 June 2011 286,292 options were exercised (2010: 2,500). The remaining unexercised options expired worthless on 30 April 2011.

11. Reserve

11. Reserve
Balance at the beginning of the year Transfer to retained earnings At reporting date	2011 $ - - -	2010 $ 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

Balance at the beginning of the year Transfer from asset revaluation reserve Profit for the year attributable to members of the Company Dividends paid (refer Note 4) At reporting date	2011 $ 2,082,650 - 1,205,441 (1,105,648) 2,182,443	2010 $ (309,240) 1,043,109 2,121,460 (772,679)
		2,082,650

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:

items in the Statement of Financial Position as follows:
Cash at bank and on hand Fixed interest securities	2011 $ 1,559,286 9,173,425 10,732,711	2010 $ 554,895 11,824,656
		12,379,551

The weighted average interest rate for cash and fixed interest securities as at 30 June 2011 is 5.90% (2010: 5.47%). The fixed interest securities have an average maturity of 118 days (2010: 85 days). The majority of fixed interest securities are invested with institutions that have a Standard & Poor’s AA rating. The fixed interest securities include the cash collateral for the borrowed stock (refer Note 8).

.

14

WAM ACTIVE LIMITED

A.B.N. 49 126 420 719

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

14. Cash Flow Information

Reconciliation of Operating Profit after Income Tax: Cash Flow from operations after income tax Less items classified as investing/financing activities: Realised loss on sale of investments Revenue from options trading Add non-cash items: Unrealised loss on investments Changes in assets and liabilities: Decrease/(increase) in receivables Decrease in deferred tax assets (Decrease)/increase in payables (Decrease)/Increase in current tax liabilities Decrease in deferred tax liabilities Cash flow from operating activities 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 Weighted average number of ordinary shares outstanding during the year used in calculating diluted earnings per share	2011 $ 1,205,441 (397,760) - 253,391 54,656 13,339 (428,369) (606,096) (15,444) 79,158 2011 $ 1,205,441 No. 16,029,455 16,029,455	2010 $ 2,121,460 (5,093,643) (8,557) 1,649,829 (94,330) 429,535 433,852 528,415 (473,616)
		(507,055)
		2010 $ 2,121,460
		No. 15,526,798
		15,526,798

16. Financial Risk Management

The Company’s financial instruments consist of listed and unlisted investments, trade receivables, trade payables 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.

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.

.

15

WAM ACTIVE LIMITED

A.B.N. 49 126 420 719

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

16 Financial Risk Management (cont’d)

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 four 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 payments 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 receipts 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.

.

16

WAM ACTIVE LIMITED

A.B.N. 49 126 420 719

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

16 . Financial Risk Management (cont’d)

b) Liquidity Risk (cont’d)

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 2011 Financial liabilities Trade and other payables Deferred tax liabilities Total Liabilities 30 June 2010 Financial liabilities Trade and other payables Current tax liability Deferred tax liabilities Total Liabilities	>1 month $ <1 months $ Total $ - 162,104 162,104 - 764,696 764,696 116,658 - 116,658
	116,658 926,800 1,043,458
	>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

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.

.

17

WAM ACTIVE LIMITED

A.B.N. 49 126 420 719

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

16. Financial Risk Management (cont’d)

c) Market Risk (cont’d)

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

Industry Sector Financials Consumer Discretionary Health Care Industrials Information Technology Telecommunication Services Materials Consumer Staples Energy	2011 % 2010 % 13.0% 14.6% 6.8% 0.1% 5.6% 2.5% 3.2% 2.0% 2.9% 1.2% 2.9% 0.0% 2.5% 2.6% 2.1% 0.0% 0.4% 0.1%
	36.5% 23.1%

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

Company Name	2011 (%)
Signature Capital Investments Ltd	5.6%
Company Name	2010 (%)
N/A	N/A

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.

.

18

A.B.N. 49 126 420 719

WAM ACTIVE LIMITED

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

16. Financial Risk Management (cont’d)

d) Interest Rate Risk (cont’d)

As at 30 June 2011, the Company’s exposure to interest rate risk and the effective weighted average interest rate is set out in the following table:

30 June 2011 Weighted average interest rate (% pa) Assets Cash and cash equivalents 5.90% 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 $ 10,732,711 - 10,732,711 - 1,087,172 1,087,172 - 7,271,171 7,271,171 - 83,701 83,701
	10,732,711 8,442,044 19,174,755
	- 162,104 162,104 - 764,696 764,696 - 116,658 116,658
	- 1,043,458 1,043,458

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

.

19

WAM ACTIVE LIMITED

A.B.N. 49 126 420 719

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

16. Financial Risk Management (cont’d)

e) Sensitivity Analysis

Investments represent 39% (2010: 22%) of gross assets at year end. A 5% movement in the market value of each of the companies within the portfolio would result in a 1.9% (2010: 1.1%) movement in the net assets after tax. This would result in the net asset backing after tax moving by 2.1 cents per share using the 30 June 2011 numbers (2010: 1.2 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.

30 June 2011 Financial assets Financial liabilities Total 30 June 2010 Financial assets Financial liabilities Total	Level 1 $ Level 2 $ Level 3 $ Total $ 7,197,804 73,367 - 7,271,171 (162,104) - - (162,104)
	7,035,700 73,367 - 7,109,067
	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

17. Events Subsequent to Reporting Date

Since year end the Directors have declared a fully franked final dividend of 4.0 cents per share to be paid on 30 September 2011.

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.

.

20

WAM ACTIVE LIMITED

A.B.N. 49 126 420 719

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

18. Investment Transactions

The total number of contract notes that were issued for transactions in securities during the financial year was 2,955 (2010: 2,732). Each contract note could involve multiple transactions. The total brokerage paid on these contract notes was $343,807 (2010: $463,622).

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

There are no capital commitments as at 30 June 2011. (2010: $36,519).

21. Contingent Liabilities

There are no outstanding contingent liabilities as at 30 June 2011 (2010: nil).

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 note 23.

Total Directors remuneration paid by the Company for the year ended 30 June 2011 Total Directors remuneration paid by the Company for the year ended 30 June 2010	Directors’ Fees $ Post-employment Superannuation $ Total $ 51,284 40,716 92,000
	85,046 6,954 92,000

.

21

WAM ACTIVE LIMITED

A.B.N. 49 126 420 719

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

22 Key Management Personnel Compensation (cont’d)

b) Share and Option holdings

As at 30 June 2011 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 2010 Acquisitions Disposals Balance at 30 June 2011 2,120,814 23,979 - 2,144,793 260,065 17,807 - 277,872 60,000 - - 60,000 100,000 - - 100,000 1,642,300 - - 1,642,300
	4,183,179 41,786 - 4,224,965

Options held

Directors G.J. Wilson M.J. Kidman J.B. Abernethy C.E. Cuffe R.J. Walker	Balance at 30 June 2010 Options Granted Lapsed Balance at 30 June 2011 2,064,861 - 2,604,861 - 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 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

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 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

.

22

WAM ACTIVE LIMITED

A.B.N. 49 126 420 719

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

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 managing the investment portfolio of WAM Active Limited; 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 $205,699 inclusive of GST (2010: $217,545). As at 30 June 2011, the balance payable to the Manager was $16,960 inclusive of GST (2010: $17,324).

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 2011, a performance fee of $320,726 inclusive of GST is payable to MAM Pty Limited (2010: $715,174).

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 $2,750 inclusive of GST per month and an additional charge of $5,500 inclusive of GST is charged for preparing the half year and full year financial statements. These accounting services total $38,500 inclusive of GST for the financial year 2011 (2010: $35,000). Wilson Asset Management (International) Pty Limited is owned by Geoffrey Wilson.

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

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.

.

23