Investment Philosophy

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

• The Company will seek to provide positive returns in all market conditions. It will look to do this by taking advantage of opportunities created by corporate transactions including takeovers, demergers, preference share conversions, IPOs, placements and sell downs or other trading and arbitrage opportunities.

• The universe of potential investments for the Company will be all securities quoted on the ASX or other exchanges, bills of exchange, other negotiable investments, debentures and other permitted investments identified in Section 2.7 of the Prospectus.

• 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 will not be required to maintain this level of diversification. Rather the focus will be 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 will revert 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 may seek 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 may invest 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.

About the Fund

WAM Active provides investors with exposure to an active trading style with the aim of achieving a sound return with a low correlation to traditional markets. WAM Active's investment objectives are to deliver a regular income stream via fully franked dividends, provide a positive return with low volatility, after fees, over most periods of time, and to preserve capital.

The investment objectives of the Company are to:

• Derive an absolute return over the long term.

• Deliver investors an income stream in the form of fully franked dividends.

• Preserve the capital of the Company.

How we invest your money

There will be no single investment strategy adopted for the Company. Rather the Manager will employ a combination of strategies to achieve the objectives of the Company.

Relevant strategies may 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.

• 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 will involve the detailed monitoring of both primary and secondary market activity with particular emphasis on new capital raisings and corporate activity.

Investments will be predominantly short term.

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 proposes to invest in the following investments:

• 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;

• listed securities on any global stock market where the security is also listed on the ASX;

• 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;

• 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;

• 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;

• units or other interests in cash management trusts; and

• any other financial products with which the Manager may use in the management of the Portfolio in accordance with its Australian Financial Services Licence.

Under the Management Agreement, the Manager may only undertake investments in accordance with the above criteria.