WAM ACTIVE LIMITED — Investor Presentation 2011

Nov 15, 2011

WAM Active Limited (WAA)

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Unchartered Waters

• The European debt crisis continues to create uncertainty

• Widespread sovereign and bank vulnerability in Europe

• Some European Governments unable to access capital markets

• European stability funds not large enough

• Emergence of so called “Zombie Banks” in Europe

• China appears unwilling to use their $3 trillion of Euro reserves

• The political resolve of the Europe Union members is being tested

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Current State of Play

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• Governments in the developed world have to implement austerity measures

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• The US economy appears to be recovering slowly

• Over 25% of US homeowners still having negative equity in their homes

• China remains strong with inflation appearing to be under control

• Ireland and Portugal re-financing in 2012

• Australian consumer sentiment is still poor

Our Funds

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WAM
Capital
(WAM)
WAM WAM
Active Research
(WAA) (WAX)
Market Research
Driven Driven
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Investment Process

“ Market Driven”

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We scour the market for trading opportunities:

• Initial public offerings

• Capital raisings

• Block trades at discount

• Takeovers

• Listed Investment Companies (LIC) discount to NTA

• Earnings momentum / surprise

• Short selling

• Discount to NTA

• Market themes and trends

Our Business Model

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Investment Focus ‐
Growth Companies
LIC
Structure + Experienced
team
benefits
Investment + Flexible + Tight cost
Process Mandate control
Superior long term
=
performance record
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Performance at 31 October 2011

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Annualised Performance	WAM Active (WAA)	S&P/ASX All Ordinaries Accum. Index	Outperformance
1 year	+7.0%	-4.0%	+11.0%
2 years	+4.3%	+0.9%	+3.4%
Since inception	+12.3%	-5.6%	+17.9%

Top 10 Stocks as at 31 October 2011

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Company	Company	% Gross Assets
HUN	Hunnu Coal Limited	11.9%
CNA	Coal & Allied Industries Limited	10.3%
SGI	Signature Capital Limited	7.2%
CCQ	Contango Capital Partners Limited	3.0%
NHC	New Hope Corporation Limited	2.5%
SOE	Souls Private Equity Limited	2.4%
VBA	Virgin Blue Holdings Limited	2.2%
SDG	Sunland Group Limited	2.2%
FGL	Foster’s Group Limited	2.1%
DJS	David Jones Limited	2.0%

Hunnu Coal Limited (HUN)

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• Purchased stock when de-risked (FIRB approval, bidding company held 34%)

• Believed 90% acceptance condition would be waived

• Expect proceeds mid November 2011. Takeover price $1.80.

Type of Stock	Annualised Return	Annualised Return	Days Held
Pre-unconditional stock	25%		26
Un-conditional stock – no risk	11%		21

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Sunland Group Limited (SDG)

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• Australian based property developer

• • Catalysts: On market share buyback, narrow discount to NTA

• Forecast NTA: $1.83 per share as at 30 June 2012

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• Strong balance sheet

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Financial Year to Date Return as at 31 October 2011

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Gross Portfolio		+1.7%
Pre-tax NTA per share growth plus dividends		+0.3%
Share price growth plus dividends		+4.6%
S&P/ASX All Ordinaries Accumulation Index		-4.9%

Performance since Inception

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WAA +12.3% p.a. – outperformed by 17.9% p.a. over 3.8 years

80.00 60.00 40.00 20.00 ‐

‐20.00 ‐40.00

‐60.00

S&P/ASX All Ordinaries Accumulation Index

WAM Active Ltd ‐ Gross Portfolio before all expenses, fees, taxes and dividends

Dividends

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cents per share

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9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
2008/09 2009/10 2010/11
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Fully franked dividends
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WAA has franking credits which allows it to pay a dividend equivalent to 10 cents per share as at 31 October 2011

Equity Position

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Equity Exposure

• Average equity position since Jan 2008: 55.0%

• Maximum equity level: 79.9% (Jul 2009)

• Minimum equity level: 12.3%

(Jan 2008)

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100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
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0%
Jan‐08 Jul‐08 Jan‐09 Jul‐09 Jan‐10 Jul‐10 Jan‐11 Jul‐11
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Cash Position

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• All other excess cash is put on term deposit (TD) with a variety of major Australian banks generally staggered up to a maximum maturity of 6 months.

• A ladder of TD’s is generally created to ensure one TD is maturing on a bi-weekly basis to provide liquidity if required.

• TD’s can also be broken at a cost if required for trading purposes but this is avoided where possible.

Current Issues

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• Executive remuneration reports

• Interest rates

• House prices

• US economy

• Australian dollar

Australian Housing Market

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Looking Ahead

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•
Global deleveraging to continue
•
Interest rate cuts positive for equity
markets
•
Industrial stocks cheap on a
historical basis
•
Expect continued merger and
acquisition activity in Australia with
balance sheets in good shape
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Looking Ahead

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Looking Ahead

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1970’s bear market vs Today

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1970’s

Today

Analyst EPS Forecast

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Forecast EPS growth Earnings revisions
for year shown (%) FY1 (x)
25
Profile of
2.5
EPSg FY04 FY12
20
forecasts
(LHS)
15 2.0
FY05
10
FY13
1.5
FY03
5
FY07
FY06
FY11
0 1.0
FY10
FY08
-5
0.5
-10
FY09
Profile of FY1 earnings revisions (RHS)
-15 0.0
Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11
Monthly
S M i S iti
<1= Net downgrades >1= Net
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Conclusion!

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Shareholder Communications

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• Website – wamfunds.com.au

• Media – Sky Business, Switzer, CNBC, Newspapers

• Research Reports – Bell Potter, Patersons & Independent Research Reports

• Audio casts – Monthly

• Subscribe for weekly emails – includes market wrap

• Bi-annual presentations

Disclaimer

This presentation has been prepared for use in conjunction with a verbal presentation and should be read in that context.

Information for the graphs, charts and quoted indices contained in this presentation has been sourced from IRESS Market Technology, Macquarie Securities, Veritas Securities, Credit Suisse Strategy, RP Data, WAM Capital Ltd, WAM Research Ltd and WAM Active Ltd unless otherwise stated.

The information in this presentation is only intended for Australian residents.

The presentation purpose is only to provide information and does not purport to give investment advice. We strongly suggest that investors consult a financial adviser prior to making any investment decision.

The presentation does not take into account the investment objectives, financial situation or particular needs of any person and should not be used as the basis for making investment, financial or other decisions. The information is selective and may not be complete or accurate for your particular purposes and should not be construed as a recommendation to invest in any particular investment or security, or Fund offered by Wilson Asset Management.

The information provided in the presentation is given in good faith and is believed to be accurate at the time of compilation. Neither Wilson Asset Management, WAM Capital Ltd, WAM Research Ltd and WAM Active Ltd nor its directors or employees make any representation or warranty as to the accuracy, reliability, timeliness or completeness of the information. To the extent permissible by law, Wilson Asset Management, WAM Capital Ltd, WAM Research Ltd and WAM Active Ltd and its director and employees disclaim all liability (whether arising in contract, tort, negligence or otherwise) for any error, omission, loss or damage (whether direct, indirect, consequential or otherwise).

Performance figures quoted in the report are past performance. Past performance is not an indicator of future performance. Neither Wilson Asset Management, WAM Capital Ltd, WAM Research Ltd and WAM Active Ltd nor its directors or employees guarantee or make any representation as to the performance of the Funds, the maintenance or repayment of capital, the price at which shares may trade or any particular rate of return.