WAM ACTIVE LIMITED - Share Issue/Capital Change 2010

WAM Active Limited ACN 126 420 719

Prospectus

1 for 1 bonus issue of approximately 15,489,219 Options to acquire fully paid ordinary shares exercisable at $1.15 per Option on or before 30 April 2011

Important Information

This Prospectus contains important information for you as a Shareholder or prospective investor and requires your immediate attention.

It should be read in its entirety. If you have any questions as to its contents or the course you should follow, please consult your stockbroker, accountant, solicitor or other professional adviser immediately.

No application monies are payable for the grant of Options.

Important Notice

This Prospectus is dated 10 February 2010 and was lodged with ASIC on that date. None of ASIC, the ASX and their respective officers take responsibility for the contents of this Prospectus.

In making statements in this Prospectus, regard has been had to the fact that WAM Active Limited ( Company ) is a “disclosing entity” as defined in the Corporations Act and that certain matters may reasonably be expected to be known to investors and professional advisers whom potential investors may consult.

Summary of Important dates

Summary of Important dates
Lodgement of Prospectus	10 February 2010
Shares trade ex-bonus entitlements	19 February 2010
Record date to determine entitlements under the Issue	25 February 2010
Entry of Options on the register, Prospectus sent out to Shareholders and despatch of new holding statements	12 March 2010
Normal trading in Options commences on ASX	15 March 2010
Options Expire	30 April 2011

The above dates are subject to change and are indicative only. The Company reserves the right to amend this indicative timetable subject to the Corporations Act and the Listing Rules.

For any enquiries concerning the Issue, please contact Geoff Wilson, Matthew Kidman or Kate Thorley on (02) 9247 6755.

Intermediary Authorisation

The Company does not hold an Australian Financial Services Licence ( AFSL ) under the Corporations Act. Accordingly the Issue is being made pursuant to an intermediary authorisation in accordance with Section 911A(2)(b) of the Act. Wilson Asset Management (International) Pty Limited manages the Issue on behalf of the Company.

1.	Overview of the Issue .................................................................................................. 2
2.	Terms of the Issue ...................................................................................................... 6
3.	Financial Position of the Company .............................................................................. 8
4.	Use of Proceeds and Effect of the Issue ................................................................... 10
5.	Risk Factors .............................................................................................................. 12
6.	WAM Active Limited and its Directors ....................................................................... 14
7.	Additional Information ............................................................................................... 15
8.	Definitions And Interpretations .................................................................................. 20

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Dear Shareholder,

The Directors of WAM Active Limited ( Company ) are pleased to announce a 1 for 1 bonus issue of Options to the Company’s Shareholders. The Options are being issued to Shareholders at no cost.

The Company’s Board is focused on growing the Company and creating Shareholder value. We believe this bonus Option issue will promote this endeavour and reward Shareholders for their loyalty and support for the Company.

The Options will have an exercise price of $1.15 per Option. This exercise price was determined having regard to the Company’s recent market price and net asset value per Share. Once issued, Optionholders can exercise the Options at any time until 30 April 2011.

No funds will be raised by the grant of Options.

It is intended that money raised from the exercise of Options (up to approximately $17,812,602 if all Options are exercised) will be used for further investment in accordance with the Company’s investment criteria.

This Prospectus provides details of the Issue and an overview of the business and activities of the Company. Each Option issued gives Shareholders the opportunity, but not the obligation, to subscribe for an additional Share at any time before 30 April 2011 at $1.15 per Share.

The Board recommends that you read this Prospectus in its entirety.

On behalf of the Board of Directors, I would like to thank all Shareholders for their ongoing support.

Yours faithfully

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Geoff Wilson Chairman

Corporate Directory

Corporate Directory
Directors of WAM Active Limited	Geoffrey Wilson (Chairman)
	Matthew Kidman
	John Abernethy
	Christopher Cuffe
	Ronald Walker
Manager of WAM Active Limited	MAM Pty Limited
	Level 11
	139 Macquarie Street
	Sydney NSW 2000
	Ph: (02) 9247 6755
	Fax: (02) 9247 6855
Registered Office	Level 11
	139 Macquarie Street
	Sydney NSW 2000
	Ph: (02) 9247 6755
	Fax: (02) 9247 6855
Auditors of the Company	Moore Stephens Sydney
	Level 7
	20 Hunter Street
	Sydney NSW 2000
	Ph: (02) 8236 7700
	Fax: (02) 9233 4636
Registry	Registries Limited
	Level 7, 207 Kent Street
	Sydney NSW 2000
	Ph: (02) 9290 9600
	Fax: (02) 9279 0664
Company Secretary	Katherine Thorley
Stock Exchange Listing	Australian Stock Exchange Limited
	Listing Code: WAA

1. Overview of the Issue

1.1 Proceeds

The Issue is a bonus issue of Options and therefore no funds will be raised until the Options are exercised. Options can be exercised at any time after quotation until expiry. The money raised on exercise of the Options will be used by the Company for further investment consistent with the Company’s investment strategies. These are set out in detail in Sections 1.3 – 1.5 below.

1.2 Overview of WAM Active Limited

The Company’s Portfolio is managed by MAM Pty Limited ( Manager ), an AFSL holder. The Company provides investors with the opportunity to invest in a company with an actively managed portfolio of investments assembled through the application of a defined investment process and using the experience of the Manager’s funds management team.

The Company predominantly invests in ASX listed securities and, where appropriate investments cannot be identified, cash. The Company focuses on absolute performance with respect to its investments. See Sections 1.5 to 1.6 for details.

The Company manages its Portfolio with a focus on absolute returns. This may involve owning anywhere from 10 to 100 stocks. See Section 1.4 for an overview of the absolute return approach.

1.3 Investment Objectives

The investment objectives of the Company 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.

1.4 The Absolute Return Approach and Traditional Investment Strategies

The absolute return focus of the Company can be considered an “alternative” investment approach and may be contrasted with traditional asset management.

"Traditional" asset classes include shares, property, fixed interest and cash. Investment outside the traditional asset classes are often referred to as forming part of the "alternative" asset class (which also includes private equity and “fund of funds”). They are referred to as "alternative" as the structure of portfolios and management techniques employed are significantly different from traditional practices.

As many traditional equity fund managers are not permitted or choose not to short sell securities, their funds' performance will be strongly influenced by the direction of the equity and bond markets. An investment in a “traditional” managed equity fund will therefore typically increase in value when the relevant equity market is performing strongly and result in a loss of capital if that market is performing poorly.

By contrast, an absolute return approach aims to deliver positive returns in a rising market as well as preserving capital in a falling market over the long term. A number of methods may be employed to achieve this objective including:

Taking positions in a broader range of investments.
Taking advantage of market arbitrage opportunities presented by corporate transactions from time to time.
Short selling, which involves selling assets which are not owned but where the fund manager believes that it will be able to purchase at a lower price as the price is expected to fall.
Obtaining leverage, which involves borrowing against assets that a fund owns and increasing exposure to a stock or financial market which the fund manager believes is rising.
Resorting to significant cash holdings in falling markets or where appropriate investment opportunities cannot be identified.

The philosophy and principles applied by such an approach are outside that of the traditional investment principles where a fund's performance is judged relative to its movement against a particular benchmark or index such as the S&P/ASX 200 Index.

Returns of absolute return funds typically tend to have a low correlation to market indices and benchmarks that represent other asset classes such as shares, property or fixed interest. This low correlation means that movements in those variables are relatively independent of each other. Investment in absolute return-focused investment entities may therefore assist investors to diversify and reduce the overall volatility of their portfolios over the long term.

The generation of returns by an absolute return fund is reliant on the skill of the manager, whereas traditional strategies may primarily reflect the return of an underlying asset class.

The investment objectives of the Company include the objective of preserving capital. Nevertheless, the Company will be exposed to adverse market conditions and returns for the Company may still be adversely affected in declining markets.

1.5 Investment Philosophy

The investment philosophy of the Company is exemplified by the following broad principles:

The Company seeks to provide positive returns in all market conditions. It looks to do this by taking advantage of opportunities created by corporate transactions including takeovers, demergers, preference share conversions, IPO’s, placements and sell downs or other trading and arbitrage opportunities.
The universe of potential investments for the Company is all securities quoted on the ASX or other exchanges, bills of exchange, other negotiable investments, debentures and other permitted investments identified in Section 1.8.
The Company’s philosophy is to invest wherever opportunities are identified irrespective of whether a “micro-cap” or a “large-cap” investment is involved.
The Company’s preference is to invest in entities where the securities are being issued or sold below the current market price or the Manager’s valuation or are the subject of a corporate event.

The Company has flexibility to take significant positions in individual securities. This may reduce the diversity of the Portfolio and therefore increase the exposure to abnormal falls in the market price of any single investment.
While the Company believes it may achieve acceptable diversification by owning securities in 20 different entities, the Manager is not required to maintain this level of diversification. Rather the focus is on absolute return for the Portfolio which may be achieved by investing in a significantly lower number of securities.
Capital preservation is a key investment objective for the Company. Accordingly, the Company reverts to holding cash once an investment has matured and if other opportunities cannot be identified. This could lead to the Company holding up to 100% of the Portfolio in cash.
The Company seeks to manage investment risk by taking short selling positions against its long positions or holding significant levels of cash. Short selling may be paired against a long position or may be employed when the Manager believes an entity is overvalued with deteriorating fundamentals.
The Company invests in securities quoted on a securities exchange located outside Australia if both the Manager and the Board considers that the reporting obligations and trading procedures applicable to that exchange are no less rigorous than those of the ASX.

The Directors consider that the investment philosophy outlined above is shared by the Manager.

1.6 Investment Strategies and Process

There is no single investment strategy adopted for the Company. Rather the Manager employs a combination of strategies to achieve the objectives of the Company.

Relevant strategies include the following:

Participating in initial public offerings, placements, block trades and rights issues.
Participating in hybrid issues and convertible note issues as well as more traditional share investments.
Focusing on merger transactions (such as takeovers, mergers, schemes of arrangements, corporate spin-offs and restructuring). By way of example, the Manager may buy securities of a target company and short sell securities of the acquiring company in an expected or announced takeover situation.
Focusing on other corporate transactions to identify arbitrage opportunities. This may include participation in share buybacks.
Taking advantage of arbitrage opportunities involving hybrid securities including preference shares and convertible notes.
Buying securities in listed investment companies (LIC), where they trade at a significant discount to underlying net assets. This is known as LIC discount arbitrage.

Relative value arbitrage (or pair trades) which combines long positions in securities with offsetting short positions to obtain returns that are independent of market movements.
Short selling securities where permitted by applicable law and market regulations.
The use of leverage where appropriate.

As the Manager will be seeking to identify trading opportunities in the market, the Manager has termed this investment process the “Market Driven” process. This involves the detailed monitoring of both primary and secondary market activity with particular emphasis on new capital raisings and corporate activity.

Investments are predominantly short term.

If an investment involves the issue or sale of securities at a discount to the current market price, no further information may be required. Other investments may require further analysis. This may involve the Manager meeting and having discussions with the potential investee’s management, discussing at length the various dynamics of the business and if necessary the corporate transaction.

1.7 Leverage

Leverage in the form of debt may be used from time to time to increase exposure to investments.

Leverage through borrowings can magnify gains in the Portfolio, but will also magnify losses. With a view to managing this risk, total debt of the Company will not exceed 50% of the gross value of the Portfolio.

1.8 Permitted Investments

Under the management agreement, the Manager is permitted to undertake investments on behalf of the Company without Board approval. However, if the proposed investment is not in accordance with the investment strategies as outlined in this Section, as amended by the Board from time to time, Board approval for the investment is required.

The Company invests in the following investments:

(a) listed securities, being any security quoted on the ASX and other markets including, shares, units or notes which are redeemable, preference or deferred, fully or partly paid, with or without any right, title or interest thereto or therein (including a right to subscribe for or convert to any such security whether listed on the ASX or not), and any security of whatsoever nature which the Manager expects will be quoted on the ASX within an 18 month period from the date of investment;
(b) listed securities on any global stock market where the security is also listed on the ASX;
(c) listed securities on any global stock market where the Manager and the Board are comfortable that the reporting standards are at least equivalent to the ASX;
(d) discount or purchase of bills of exchange, promissory notes or other negotiable instruments accepted, drawn or endorsed by any bank, or by any corporation of at least an investment grade credit rating granted by a recognised credit rating agency in Australia;

(e) debentures, unsecured notes and bonds of a corporation of at least an investment grade credit rating granted by a recognised credit rating agency in Australia;
(f) units or other interests in cash management trusts; and
(g) any other financial products with which the Manager may use in the management of the Portfolio in accordance with its AFSL.

Under the management agreement, the Manager may only undertake investments in accordance with the above criteria.

1.9 Dividend Policy

The Company pays dividends from the profit, dividend and interest income it receives from its investments to the extent permitted by law and prudent business practices. Dividends are franked to the extent that available imputation credits permit.

1.10 Foreign Shareholders

This Issue is made only to Shareholders with a registered address in Australia or New Zealand or such other place in which, or to any person to whom, it would be lawful to make such an offer.

The Company is of the view that it is unreasonable to make the Issue to other overseas Shareholders ( Foreign Shareholders ) having regard to:

(a) the number of Foreign Shareholders;
(b) the number of Options that would be offered to Foreign Shareholders; and
(c) the cost of complying with overseas legal requirements.

This Issue does not constitute an offer in any place in which, or to any person to whom, it would not be lawful to make such an offer. The Company is not required to make offers under this Issue to Foreign Shareholders. Where this Issue has been despatched to Shareholders domiciled outside Australia or New Zealand and where the country's securities code and/or legislation prohibits or restricts in any way the making of the offers contemplated by this Issue, this Issue is provided for information purposes only.

Shareholders resident in Australia or New Zealand holding Shares on behalf of persons who are resident overseas are responsible for ensuring that taking up entitlements under the Issue does not breach regulations in the relevant overseas jurisdiction.

The offer of Options in accordance with this Prospectus to Shareholders with registered addresses in New Zealand is made in reliance on the Security Act (Overseas Companies) Exemption Notice 2002 (New Zealand).

2. Terms of the Issue

2.1 The Issue

The Issue is a bonus 1 for 1 issue of Options exercisable at $1.15 per Option.

No funds will be raised by the grant of the Options. If all Options issued under this Prospectus are subsequently exercised, the Options issued would raise approximately $17,812,602. The Issue is made to all Shareholders registered at 5.00pm EST on 25

February 2010 ( Record Date ). The total number of Options which may be issued is approximately 15,489,219.

Shareholders issued new Shares under the dividend re-investment plan for the dividend announced on 27 January 2010 will not be issued Options in respect of these new Shares in accordance with the terms of this Prospectus because they will be issued under the dividend reinvestment plan after the Record Date for the Issue.

2.2 How to apply

Each Shareholder as at the Record Date, will receive 1 bonus Option for every Share held.

The number of Options which you have been issued with is shown on the Option holding statement which is enclosed with this Prospectus.

You do not need to take any action to receive the Options.

2.3 Rights attaching to Options

On exercise the Options will be converted to fully paid ordinary shares in the Company. There will be no liability on the part of Shareholders for any calls. Detailed provisions relating to the rights attaching to Options and Shares are set out in the terms of issue of the Options, the Company’s Constitution and the Corporations Act. A copy of the Company’s Constitution can be inspected during office hours at the registered office of the Company.

See Section 7.3 for a summary of the rights attaching to the Options and Section 7.4 for the rights attaching to Shares.

2.4 ASX quotation of the Options

Within 7 days after the date of this Prospectus application will be made to the ASX for the Options to be quoted on the ASX.

If the ASX does not give permission for quotation of the Options within 3 months after the date of this Prospectus (or a later date permitted by ASIC), none of the Options will be issued and if any have been issued, the issue will be void, unless ASIC grants an exemption permitting the issue.

2.5 Issue and allotment of Options

No Options or other securities will be issued on the basis of this Prospectus later than the expiry date of this Prospectus being the date 13 months after the date of this Prospectus.

It is expected the issue of the Options will all occur on the same day. It is currently anticipated that this issue will occur on or before 12 March 2010. Holding statements in relation to the Options will be despatched as soon as practicable after the issue of the Options together with this Prospectus.

It is the responsibility of Shareholders to determine their allocation prior to trading in Options. Shareholders who sell any Options before they receive their holding statements will do so at their own risk.

2.6 Taxation

The Directors do not consider that it is appropriate to give Shareholders advice regarding the taxation consequences of being granted Options under this Prospectus as it is not possible

to provide a comprehensive summary of the possible taxation positions of all Shareholders. The Company, its advisers and officers, do not accept any responsibility or liability for any taxation consequences to Shareholders in respect of the Issue. Shareholders should consult their own professional tax adviser in connection with the taxation implications of the Issue.

3. Financial Position of the Company

3.1 Net Tangible Asset Backing per Share

The net tangible asset backing per Share ( NTA ) as reported by the Company to the ASX in accordance with Listing Rule 4.12 in the 2 months before the date of this Prospectus is set out below:

	30 November 2009	31 December 2009
NTA before all taxes	127.01 cents	127.87 cents
NTA after tax and before tax on unrealised gains	124.95 cents	125.14 cents
NTA after all taxes	119.23 cents	119.83 cents

3.2 Overview of Operations and Results

The Company announced a profit before tax for the 6 months to 31 December 2009 of $3,972,915 and an after tax profit of $2,868,002. The total dividend declared for the period was 3.0 cents per Share fully franked. As at 31 December 2009, the Company’s NTA aftertax and before tax on unrealised gains was 125.14 cents per Share. The gross value of the Portfolio appreciated by 29.4% during the 6 months to 31 December 2009, a sound result given the S&P/ASX All Ordinaries Accumulation Index increased 26.1% over the same period.

The Company listed on the Australian Stock Exchange on 11 January 2008 with an NTA of 98.7 cents a Share. Since then, the Company has progressively invested the funds in a broad range of listed companies.

The table below sets out the Company’s performance since listing on the ASX through to 31 December 2009.

Returns to 31 December 2009

	Notes	Since listing (11 January 2008)	12 months to 31 December 2009	6 months to 31 December 2009	3 months to 31 December 2009
WAM Active Ltd	1	+44.9% -16.8% +61.7%	+60.2% +39.6% +20.6%	+29.4% +26.1% +3.3%	+3.5% +3.7% -0.2%
S&P/ASX All Ords Accum Index	2
Outperformance	3

Notes

The performance table for the relevant periods has been calculated on the basis of the following assumptions:

The row entitled “WAM Active Ltd” sets out the performance of the Company only.
(a) The Company's performance set out above reflects the percentage changes in the value of the Company's Portfolio over the relevant period, calculated by reference to the last sale price on the ASX for each investment on the last trading day of each month and the amount of cash maintained by the Company as at that date.
(b) Dividends, interest and other distributions received are included on an accruals basis.
(c) The performance of the Company has been calculated before the payment of all fees (including brokerage, management and performance fees and custodian fees).
(d) The performance of the Company has been calculated before income tax expense. It is believed that the inclusion of performance of the Company before income tax allows the performance to be compared to similar funds and the S&P/ASX All Ordinaries Accumulation Index.
(e) The source data has been drawn from audited financial statements of the Company for the period from incorporation, being 11 January 2008 to 30 June 2009 and subsequent financial period to 31 December 2009 which has been subject to an independent review by the auditors and unaudited management information.
(f) The Company's performance has been presented as a percentage in order to compare it with the S&P/ASX All Ordinaries Accumulation Index.
(g) The Company's performance does not take into account any value derived from imputation credits.
(h) The Company's performance has been calculated in accordance with the Australian Accounting Standards applicable at 31 December 2009.
The row entitled “S&P/ASX All Ords Accum” represents the change in the S&P/ASX All Ordinaries Accumulation Index over the relevant period. This data has been obtained from IRESS. IRESS has not provided its consent to the inclusion of trading data attributed to it in this Prospectus.
The row entitled “Outperformance” represents the difference in percentage between the preceding 2 rows.

Past performance of the Company managed by the Manager is not indicative of the future performance of the Company.

3.3 Investments at Market Value as at 31 December 2009

As at 31 December 2009 the total value of the Company’s Portfolio of investments in ASX listed securities was $12.15 million. These values were determined on the basis of the last sale price on ASX at close of trading on 31 December 2009 for ASX quoted securities.

The Company’s Portfolio of securities as at close of trading of ASX on 31 December 2009 and the market value of those securities (based on the closing price on that date) is set out below.

		Market Value $				Market Value $
AAD ACK AET AIQ AKF AMX ANZ AVJ BAU BLY CAH CCP CCQ CDA CDI CFE CKT CPR CSV CUS DWS DYE EDS EFG EFT ELK EPS EQN FBU FLT FRI FXJ FXL	Ardent Leisure Group Austock Group Ltd Ausmelt Ltd Alternative Investment Trust Ask Funding Ltd Ampella Mining Ltd ANZ Banking Group Ltd AVJennings Ltd Bauxite Resources Ltd Boart Longyear Ltd Catalpa Resources Ltd Credit Corp Group Ltd Contango Capital Partners Ltd Codan Ltd Challenger Diversified Property Group Cape Lambert Iron Ore Ltd Challenger Kenedix Japan Trust Clive Peeters Ltd CSG Ltd Customers Ltd DWS Advanced Business Solutions Ltd Dyesol Ltd Every Day Mine Services Ltd Everest Financial Group Ltd EFTel Ltd ELK Petroleum Ltd Epsilon Energy Ltd Equinox Minerals Ltd Fletcher Building Ltd Flight Centre Ltd Finbar Group Ltd Fairfax Media Ltd Flexigroup Ltd	357,848 20,494 68,850 102,799 53,025 5,132 91,589 61,286 100,691 241,400 92,573 287,432 127,654 18,762 126,139 278,839 3,349 185,343 7,326 351,002 157,755 179,254 44,625 267,877 32,130 46,125 54,036 184,875 350,336 313,103 112,774 354,960 465,016		HAP HFA Accelerator Plus Ltd HBSHA Heritage Building Society Ltd HVN Harvey Norman Holdings Ltd INQ Investorfirst Ltd LGP Lion Selection Ltd MCP McPherson's Ltd MGX Mount Gibson Iron Ltd MSF Maryborough Sugar Factory Ltd (The) MTS Metcash Ltd MVU MatrixView Ltd NKP Nkwe Platinum Ltd NKPO Nkwe Platinum Ltd Options NVT Navitas Ltd NWT Newsat Ltd PGCO A Paragon Care Ltd Options PNA PanAust Ltd QAN Qantas Airways Ltd RDS Redstone Resources Ltd RED Red 5 Ltd RHG RHG Ltd SFH Specialty Fashion Group Ltd SGN STW Communications Group Ltd SIV Silver Chef Ltd SRX Sirtex Medical Ltd TEN Ten Network Holdings Ltd TLS Telstra Corporation Ltd TOL Toll Holdings Ltd TPM SP Telemedia Ltd VBA Virgin Blue Holdings Ltd WDC Westfield Group WES Wesfarmers Ltd WPL Woodside Petroleum Ltd WYL Wattyl Ltd TOTAL LONG PORTFOLIO TOTALSHORT PORTFOLIO		59,412 4,305 71,740 46,750 28,638 964,811 179,520 39,824 379,950 9,617 88,853 22,667 192,655 98,339 6,800 43,223 406,640 42,393 159,032 401,656 100,807 255,000 12,825 224,009 387,940 361,899 520,030 226,440 523,053 319,770 451,852 32,096 341,668 12,148,611 576,303

The above table does not reflect the current Portfolio of investments as the Company has continued to actively trade in securities since 31 December 2009.

4. Use of Proceeds and Effect of the Issue

4.1 Use of Funds and Effect of the Issue

No funds will be raised by the grant of Options.

The Directors intend to apply the funds raised on the exercise of the Options for further investment consistent with the investment objectives and investment strategies set out in Sections 1.3 and 1.4.

If all of the Options were exercised by the expiry date, the effect on the Company would be as follows (based on the number of Shares on issue as at the date of this Prospectus):

The current number of Shares on issue should increase by 15,489,219 Shares to approximately 30,978,438 Shares; and
The cash reserves of the Company would increase by approximately $17,812,602. These cash reserves would be utilised in pursuing the investment objectives of the Company.

The Directors and the Manager do not guarantee that any Options will be exercised or that those funds will be raised.

The capital structure of the Company as at the date of this Prospectus, and assuming completion of the Issue, is set out below:

	Date of	Completion of
	Prospectus	Issue
Shares	15,489,219	15,489,219
Options	Nil	15,489,219
Fully diluted capital	15,489,219	30,978,438

Please note that the above is an example based on the number of Shares on issue at the date of this Prospectus. The exact number of Options which will be issued under the Issue will be equal to the number of Shares on issue at 5.00pm EST on the Record Date.

4.2 Pro Forma Balance Sheet

The Pro Forma Balance Sheet set out below represents the Balance Sheet of the Company as at 31 December 2009 adjusted for completion of the Issue and exercise of all Options. This Balance Sheet has been subject to a review by the auditors. It is intended to be illustrative only and it neither reflects the actual position of the Company as at the date of this Prospectus nor at the conclusion of the Issue. In particular, it does not reflect actual expenditure of funds since 31 December 2009.

WAM Active Limited Pro Forma Balance Sheet

ASSETS Cash and cash equivalents Trade and other receivables Financial assets Deferred tax assets TOTAL ASSETS LIABILITIES Trade and other payables Financial liabilities Current tax liabilities Deferred tax liabilities TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Reserves Retained earnings TOTAL EQUITY	Actual 31 December 2009 Pro Forma 31 December 2009 (adjusted for Issue and exercise of Options) $ $ 8,983,720 26,761,322 706,965 706,965 12,148,611 12,148,611 39,742 39,742
	21,879,038 39,656,640
	1,418,232 1,418,232 576,303 576,303 462,149 462,149 821,632 821,632
	3,278,316 3,278,316
	18,600,722 36,378,324
	15,306,853 33,119,455 1,582,308 1,582,308 1,711,561 1,676,561
	18,600,722 36,378,324

The above table headed “Pro forma 31 December 2009” assumes that:

All Options offered under this Prospectus are granted;
Issue expenses of $35,000 were paid on 31 December 2009;
All Options issued under this Prospectus were exercised at 31 December 2009; and
An interim dividend of $0.03 has been declared but remains unpaid.

4.3 Income Statement

There will be no immediate effect on the Company’s Income Statement as a result of the issue of Options pursuant to this Prospectus. The investment of any funds raised from the exercise of those Options will ultimately affect the Company’s Income Statement as a result of the performance of the investment. This is not a matter which is presently capable of being quantified by the Manager or the Directors.

5. Risk Factors

5.1 General Risk Factors

Intending investors should be aware that receiving and exercising Options involves various risks. There are general risks associated with owning securities in publicly listed companies.

The price of securities can go down as well as up due to factors outside the control of the Company. These factors include Australian and worldwide economic and political stability, natural disaster, performance of the Australian stock market as a whole, the Australian interest rate, foreign exchange, taxation and labour relations environments.

The operating results and profitability of the Company are sensitive to a number of factors. The following matters, as well as others described elsewhere in this Prospectus, should be carefully considered in evaluating the Company and its prospects:

(a) the success and profitability of the Company in part depends upon the ability of the Directors and the Manager to invest in well-managed companies which have the ability to increase in value over time;
(b) the future earnings of the Company and the value of the investments of the Company may be affected by the general economic climate, commodity prices, currency movements, changing government policy and other factors beyond the control of the Company. As a result, no guarantee can be given in respect of the future earnings of the Company or the earnings and capital appreciation of the Company’s investments;
(c) variations in legislation and government policies could materially affect operating results;
(d) any variation in the taxation laws of Australia could materially affect the operating results;
(e) any variation in the exchange rates could materially affect the operating results;
(f) any variation in short and long term interest rates could materially affect the operating results;
(g) any variation in commodity prices could materially affect the operating results;
(h) the price of investments that the Company has purchased can fall as well as rise;
(i) the past performance of funds managed by the Manager, and persons associated with the Manager, are not necessarily a guide to future performance of the Company;
(j) the selling or purchasing of an unhedged option or warrant runs the risk of losing the entire investment or of causing significant losses to the Company in a relatively short period of time;
(k) the performance fee may create an incentive for the Manager to make Company investments that are riskier or more speculative than would be the case in the absence of a fee based on the performance of the Company;
(l) the Company’s Portfolio may be less diversified than other listed investment companies;
(m) investors are strongly advised to regard any investment in the Company as a long term proposition and to be aware that, as with any equity investment, substantial fluctuations in the value of their investment may occur; and
(n) the ability of the Manager to continue to manage the Company’s Portfolio in accordance with this Prospectus and the Corporations Act is dependent on the maintenance of the Manager’s AFSL and its continued solvency. Maintenance of the AFSL depends, among other things, on the Manager continuing to comply with the ASIC imposed licence conditions and the Corporations Act.

This list is not exhaustive and potential investors should read this Prospectus in full and, if they require further information on material risks, seek professional advice.

6. WAM Active Limited and its Directors

6.1 Directors

As at the date of this Prospectus the Directors of the Company are:

Geoffrey Wilson Matthew Kidman John Abernethy Christopher Cuffe Ronald Walker

6.2 Interests of Directors in WAM Active

The number of Shares in which Directors and their Associates have a Relevant Interest are as follows:

Director	Ordinary Shares	Options
Geoffrey Wilson	2,044,861	Nil
Matthew Kidman	253,414	Nil
John Abernethy	60,000	Nil
Christopher Cuffe	100,000	Nil
Ronald Walker	1,642,300	Nil

Directors holding Shares will receive Options under the Issue on the same basis as other Shareholders.

6.3 No Other Interests

Except as set out in this Prospectus, there are no interests that exist at the date of this Prospectus and there were no interests that existed within 2 years before the date of this Prospectus that are, or were respectively, interests of a Director, a proposed Director, the Manager, the Issue Manager or a promoter of the Company in the formation or promotion of the Company or in any property acquired or proposed to be acquired by the Company in connection with its formation or promotion or the Issue.

Further, there have been no amounts paid or agreed to be paid to Directors, proposed Directors, the Manager or the Issue Manager in cash or securities or otherwise by any persons either to induce them to become or to qualify him as Directors or otherwise, for services rendered by them in connection with the promotion or formation of the Company or the Issue.

6.4 Directors’ Remuneration

Directors are entitled to receive Directors’ fees of $110,000 per annum to be shared among the Directors. Additional remuneration may be paid in accordance with the Company’s Constitution. The following are the Directors’ remuneration received for the year ended 30 June 2009:

Director	Director’s Fees
Geoffrey Wilson	$10,000
Matthew Kidman	$10,000
John Abernethy	$30,000
Christopher Cuffe	$30,000
Ronald Walker	$30,000

Entities associated with the Chairman, Geoff Wilson, and Director, Matthew Kidman hold 80% and 20% respectively of the issued shares of the Manager. The Manager was paid a management fee of 1% p.a (plus GST) of gross assets amounting to $157,970 (2008: $85,729) for the full year ending 30 June 2009. As at 31 December 2009 the management fees for the half year amounted to $109,369 (Dec 2008: $78,168).

In addition, the Manager 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 IPO Prospectus dated 6 November 2007.

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 2009, a performance fee of $234,289 inclusive of GST is payable to the Manager (2008: nil). As at 31 December 2009 the performance fees for the half year amounted to $964,481 inclusive of GST (Dec 2008: nil).

7. Additional Information

7.1 Capital Structure

As at the date of this Prospectus, the Company had 15,489,219 Shares on issue. On completion of the Issue the number of Options on issue will be 15,489,219 Options. The number of Shares on issue may increase up to approximately 30,978,438 Shares should all Options be exercised.

7.2 Legal Proceedings

The Company is not and has not been, during the 12 months preceding the date of this Prospectus, involved in any legal or arbitration proceedings which have had or may have a significant effect on the financial position on the Company. As far as the Directors are aware, no such proceedings are threatened against the Company.

7.3 Rights Attaching to the Options

The terms and conditions of the Options are as follows:

Register

The Company will maintain a register of holders of Options in accordance with Section 168(1)(b) of the Corporations Act.

Transfer/Transmission

An Option may be transferred or transmitted in any manner approved by the ASX.

Exercise

An Option may be exercised by delivery to the Company of a duly completed notice of exercise of Options, signed by the registered holder of the Option, together with payment to the Company of $1.15 per Option being exercised and the relevant option certificate. A blank notice of exercise of Options will be provided to Optionholders at the same time as Option holding statements are despatched.

An Option may be exercised on any business day from the date of grant to 30 April 2011 (inclusive), but not thereafter.

A notice of exercise of Options is only effective when the Company has received the full amount of the exercise price in cash or cleared funds.

Dividend Entitlement

Options do not carry any dividend entitlement until they are exercised. Shares issued on exercise of Options rank equally with other issued Shares of the Company 7 Business Days after their date of issue and are entitled to dividends declared on and from this date.

Participating rights

An Optionholder may only participate in new issues of securities to holders of ordinary shares in the Company if the Option has been exercised and Shares allotted in respect of the Option before the record date for determining entitlements to the issue. The Company must give at least 7 business days’ notice to Optionholders of any new issue before the record date for determining entitlements to the issue in accordance with the Listing Rules.

If between the date of issue and the date of exercise of an Option the Company makes one or more rights issues (being a pro rata issue of ordinary shares in the capital of the Company that is not a bonus issue), the exercise price of options on issue will be reduced in respect of each rights issue according to the following formula:

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where:

NE is the new exercise price of the Option;

OE is the old exercise price of the Option;

E is the number of underlying ordinary shares into which one Option is exercisable;

P is the average closing sale price per ordinary share (weighted by reference to volume) recorded on the stock market of the ASX during the 5 trading days ending on the day before the ex rights date or ex entitlements date (excluding special crossings and overnight sales);

S is the subscription price for an ordinary share under the rights issue;

D is the dividend due but not yet paid on each ordinary shares at the relevant time; and

N is the number of ordinary shares that must be held to entitle holders to receive a new ordinary share in the rights issue.

If there is a bonus issue to the holders of ordinary shares in the capital of the Company, the number of ordinary shares over which the Option is exercisable will be increased by the number of ordinary shares which the holder of the Option would have received if the Option had been exercised before the record date for the bonus issue.

Reconstructions and Alteration of Capital

Any adjustment to the number of outstanding Options and the Exercise Price under a reorganisation of the Company’s share capital must be made in accordance with the Listing Rules.

Securities Exchange Listing

The Company must make application for quotation of shares issued on exercise of the Options on the ASX in accordance with the Listing Rules. Shares so issued will rank equally with other issued ordinary shares of the Company.

7.4 Rights Attaching to the Shares

The following information is a summary of the Company Constitution. Shareholders have the right to acquire a copy of the Company Constitution, free of charge, from the Company until the expiry of this Prospectus.

Each Share confers on its holder:

(a) the right to vote at a general meeting of shareholders (whether present in person or by any representative, proxy or attorney) on a show of hands (one vote per shareholder) and on a poll (one vote per Share on which there is no money due and payable) subject to the rights and restrictions on voting which may attach to or be imposed on Shares (at present there are none);
(b)
the right to receive dividends, according to the amount paid up on the Share;
(c) the right to receive, in kind, the whole or any part of the Company’s property in a winding up, subject to priority given to holders of Shares that have not been classified by ASX as “restricted securities” and the rights of a liquidator to distribute surplus assets of the Company with the consent of members by special resolution; and

Subject to the Corporations Act and the Listing Rules, Shares are fully transferable.

The rights attaching to Shares may be varied with the approval of Shareholders in general meeting by special resolution.

7.5 Investor Considerations

Before deciding to exercise your Options, you should consider whether the Shares to be issued and allotted on exercise of the Options are a suitable investment for you. There are general risks associated with any investment in the stock market. The value of shares listed on the ASX may rise or fall depending on a range of factors beyond the control of the Company.

If you are in doubt as to the course you should follow, you should seek advice on the matters contained in this Prospectus from a stockbroker, solicitor, accountant or other professional adviser immediately.

The potential tax effects relating to the Issue will vary between Shareholders. Shareholders are urged to consider the possible tax consequences of participating in the Issue by consulting a professional tax adviser.

7.6 Continuous Disclosure and Documents Available for Inspection

The Company is a disclosing entity for the purposes of Section 111AC(1) of the Corporations Act and as such, is subject to regular reporting and disclosure obligations. Broadly, these obligations require the Company to:

(a) prepare and lodge with the ASIC both yearly and half-yearly financial statements accompanied by a directors’ statement and report and an audit or review report;
(b) within 14 days after the end of each month, tell ASX the net tangible asset backing of its quoted securities as at the end of that month; and
(c) immediately notify the ASX of any information concerning the Company of which it is, or becomes, aware and which a reasonable person would expect to have a material effect on the price or value of securities in the Company, subject to certain limited exceptions related mainly to confidential information.

Copies of documents lodged at the ASIC in relation to the Company may be obtained from or inspected at an office of the ASIC. Copies of documents lodged with the ASX in relation to the Company may be obtained from, or inspected at, an office of the ASX.

This Prospectus is issued pursuant to Section 713 of the Corporations Act. This enables listed disclosing entities to issue a prospectus with more limited disclosure than would be required of a full-form prospectus where the Company has been a listed disclosing entity for a period of at least 12 months.

7.7 Other Documents

The Company will provide a copy of any of the following documents free of charge to any person who requests a copy in relation to this Prospectus:

(a) the financial statements of the Company for the year ended 30 June 2009 being the last financial statements for a financial year lodged with ASIC before the issue of this Prospectus;
(b) the half-year financial report of the Company for the year ended 31 December 2009 being the last financial statements for a financial year lodged with ASIC before the issue of this Prospectus;

(c) any other document or financial statement lodged by the Company with the ASIC or the ASX under the continuous disclosure reporting requirements in the period after lodgement of the 30 June 2009 financial statements referred to above to the date of lodgement of this Prospectus with ASIC being:

Date	Announcement
08/02/2010	Media Release-Half Yearly Report
08/02/2010	Appendix 4D Half Year Report 31 December 2009
08/02/2010	WAA Bonus Option Issue Announcement
03/02/2010	WAM Active Limited-Submission to Treasury
28/01/2010	WAM Active Newsletter Dec 2009
27/01/2010	FY2010 Interim Dividend
12/01/2010	Investment Update and NTA December 2009
21/12/2009	Appendix 3Y Change in Directors Interest-R Walker
18/12/2009	Appendix 3Y Change in Director`s Interest Notice-G Wilson
14/12/2009	Investment Update and NTA November 2009
3/12/2009	Appendix 3Y Change in Director`s Interest Notice
18/11/2009	WAA AGM Proxy Results Nov 2009
18/11/2009	WAA Shareholder presentation Nov 2009
18/11/2009	WAA AGM-Chairman`s address Nov 2009
18/11/2009	Appendix 3Y Change in Directors interest notice-G Wilson
17/11/2009	Appendix 3Y Change in Directors interest-G Wilson
17/11/2009	Appendix 3Y Change of Directors interest-M Kidman
17/11/2009	Appendix 3Y Change in Directors interest-R Walker
13/11/2009	Investment Update and NTA October 2009
5/11/2009	Form 604 Notice of change in substantial holder for EFG
22/10/2009	Form 605-Cease substantial shareholder for CCQ
16/10/2009	Shareholder Presentation Invitation
14/10/2009	Investment Update and NTA September 2009
12/10/2009	Notice of Annual General Meeting and Proxy Form

7.8 Expenses of the Issue

Expenses of the Issue including ASIC and ASX fees, Registry costs, printing costs and legal costs are estimated to be approximately $35,000.

7.9 Minimum Subscription

There is no minimum subscription for the Issue.

7.10 ASIC Class Order

The Issue is made pursuant to ASIC Class Order 00/1092 which exempts the Company from complying with Sections 717 and 723 of the Corporations Act 2001 to the extent that those sections require:

(a) this Prospectus to include or be accompanied by an application form; and
(b) the Company to only issue Options pursuant to this Prospectus to a person who has submitted an application form distributed with this Prospectus.

7.11 Other Information

There is no information relating to the Issue that, because of its confidential or prejudicial nature, has not been notified to the ASX which investors or their professional advisers would reasonably require and reasonably expect to make an informed assessment of the effect of the assets and liabilities, financial position and performance, profits and losses and prospects of the Company and the rights and liabilities attaching to the Options.

7.12 Consents and Responsibility Statements

MAM Pty Limited has given and before lodgement of this Prospectus has not withdrawn its consent to be named in this Prospectus as Manager of the Company in the form and context in which it is named.

Wilson Asset Management (International) Pty Limited has given and before lodgement of this Prospectus has not withdrawn its consent to be named in this Prospectus as Issue Manager of the Company in the form and context in which it is named.

Registries Limited has given and before lodgement of this Prospectus has not withdrawn its consent to be named in the Prospectus as registrar of the Company in the form and context in which it is named.

Moore Stephens Sydney has given and before lodgement of this Prospectus has not withdrawn its consent to be named in this Prospectus as auditor of the Company in the form and context in which it is named.

None of Moore Stephens Sydney, Registries Limited, MAM Pty Limited or Wilson Asset Management (International) Pty Limited:

(a) has authorised or caused the issue of the Prospectus;
(b) has made, or purported to have made, any statement in this Prospectus, except this section; and
(c) assumes responsibility for any part of this Prospectus except for statements in this section.

Each of these entities to the maximum extent permitted by the law, disclaim any responsibility or liability for any part of this Prospectus other than a statement included in this Section.

8. Definitions And Interpretations

8.1 Defined Terms

In this Prospectus:

AFSL means Australian Financial Services License.

ASIC means the Australian Securities & Investments Commission.

Associate has the same meaning as in the Corporations Act.

ASX means the ASX Limited.

Company Constitution means the constitution establishing the Company.

Directors or Board means the directors of the Company.

EST means eastern standard time.

Issue means the issue of approximately 15,489,219 Options offered to Shareholders under this Prospectus.

Issue Manager means Wilson Asset Management (International) Pty Limited (ACN 081 047 118).

Listing Rules means the listing rules of the ASX.

Manager means MAM Pty Limited (ACN 100 276 542).

Option means an option to acquire a Share with an exercise price of $1.15 to be granted pursuant to this Prospectus.

Optionholder means a registered holder of an Option.

Portfolio means the portfolio of investments of the Company from time to time.

Prospectus means this prospectus as modified or varied by any supplementary document issued by the Company and lodged with the ASIC from time to time.

Record Date means 25 February 2010.

Registry means Registries Limited.

Related Body Corporate has the meaning given to that term under Section 50 of the Corporations Act.

Relevant Interest has the meaning set out in the Corporations Act.

Securities means securities as defined in Section 92 of the Corporations Act.

Share means a fully paid ordinary share in the Company.

Shareholder means a registered holder of a Share.

Subsidiary has the same meaning as in the Corporations Act.

WAM Active Limited or the Company means WAM Active Limited (ACN 126 420 719).

8.2 Interpretation

In this Prospectus the following rules of interpretation apply unless the context otherwise requires:

(a) words and phrases not specifically defined in this Prospectus have the same meaning that is given to them in the Corporations Act and a reference to a statutory provision is to the Corporations Act unless otherwise specified.
(b) the singular includes the plural and vice versa.
(c) a reference to an individual or person includes a corporation, partnership, joint venture, association, authority, Company, state or government and vice versa.
(d) a reference to any gender includes both genders.
(e) a reference to clause, section, annexure or paragraph is to a clause, section, annexure or paragraph of or to this Prospectus, unless the context otherwise requires.
(f) a reference to “dollars” or “$” is to Australian currency.
(g) in this document, headings are for ease of reference only and do not affect its interpretation. and
(h) except where specifically defined in the Prospectus, terms defined in the Corporations Act have the same meaning in this Prospectus

8.3 Governing Law

This Prospectus is governed by the laws of New South Wales.

8.4 Approval

This Prospectus has been approved by unanimous resolution of the Directors of WAM Active Limited.

Dated: 10 February 2010

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