March 2019

Investment Update

$\overline{\mathbf{W}}$ $\overline{\mathbf{A}}$ $\overline{\mathbf{M}}$ Capital $\overline{\mathbf{W}}$ $\overline{\mathbf{A}}$ $\overline{\mathbf{M}}$ Research

$\mathbf{W}$ $\mathbf{A}$ $\mathbf{M}$ Leaders $W | A | M$ Global $\mathbf{W}|\mathbf{A}|\mathbf{M}$ Microcap $\mathbf{W} | \mathbf{A} | \mathbf{M}$ Active

Dear Fellow Shareholders,

Macro-economic factors were again mixed during the month. Results from the March German purchasing managers' index (PMI) survey showed that manufacturers' expectations were at their worst level in sixand-a-half years.

On 22 March, the United States (US) 10year Treasury bond yield fell below the three-month yield for the first time in over a decade. On average, the US yield curve inverts 14 months prior to the onset of a US recession. The inversion in March was driven in part by the flow of funds from German Bunds into US Treasuries, which may offset its predictive nature.

In positive news, China's PMI data recorded the largest monthly gain since 2012, providing some hope that China's stimulus program may bear fruit, to the benefit of the global economy.

WAM Global Lead Portfolio Manager Catriona Burns explored investment opportunities in China and Japan throughout March.

Catriona observed that the Chinese economy is likely to regain its momentum in the second half of the year when the Government's tax cuts and stimulus take effect. Sentiment on the ground has improved markedly since late last year.

In contrast, the Japanese business community was cautious in its outlook. The well-known demographic headwinds have been compounded by an uneasy dependence on China, given the export nature of the Japanese economy.

In a similar vein, WAM Leaders Lead Portfolio Manager Matthew Haupt's column in the Australian Financial Review. highlighted the Australian economy's reliance on China to avoid a recession.

The MSCI World Index (AUD) increased 1.5% and the S&P/ASX All Ordinaries Accumulation Index rose by 0.7% during the month.

Investor conference call

Thank you to all who joined our investor conference call on 19 March. If you missed it, you can access the recording and presentation slides here and read the coverage in the Australian Financial Review.

May 2019 Shareholder Presentations

We are looking forward to seeing you all at our semi-annual Shareholder Presentations. Feel free to bring quests who have an interest in hearing our views on the Australian and global equity markets, how we invest and how we make a difference for shareholders and the community.

You can register for the Shareholder Presentations here.

Future Generation Investment Forum in Sydney

Eight of Australia's best fund managers will present their high conviction stock picks at the Future Generation Investment Forum on Thursday, 23 May 2019. In addition, Hamish Douglass, Chairman and Chief Investment Officer of Magellan will be interviewed by Australian Financial Review's Chanticleer columnist Tony Boyd.

Claim your free tickets to the Forum now.

Our listed investment companies are trading ex-dividend

Yesterday, our listed investment companies (LICs) commenced trading ex-dividend, which means they are now priced without the recently announced interim dividends. A buyer of the stock on or after this date will not be entitled to the declared dividend.

The following LICs will pay out fully franked dividends on Friday, 26 April:

WAM Capital: 7.75 cents per share WAM Leaders: 2.65 cents per share WAM Research: 4.85 cents per share WAM Active: 2.95 cents per share WAM Microcap: 2.25 cents per share Good luck investing,

Geoff Wilson AO Chairman & Chief Investment Officer

$W | A | M$ Capital

Focus: small to mid-cap Australian companies (ASX: WAM)

Portfolio update

The WAM Capital investment portfolio increased 0.4% in March.

Research-driven portion of the investment portfolio:

A key contributor to the portfolio performance included AMA Group (ASX: AMA). AMA specialises in the vehicle aftercare and accessories market. offering services in panel repair, workshop and performance products. vehicle protection devices and commercial vehicle accessories. Following an unsuccessful takeover bid for AMA in 2018, we invested into the business due to our belief that AMA's new management team would refocus the business on organic growth and earnings accretive acquisitions to continue to boost market share in the highly fragmented panel-beating sector. The business posted a strong first-half result and with the recent storms in Sydney, we see a strong pipeline of work. AMA closed up 16.0% for the month

Market-driven portion of the investment portfolio:

A contributor for the month was Australian financial technology company Afterpay Touch Group (ASX: APT), which closed up 13.6%. APT operates in Australia and New Zealand with a rapidly expanding business in the United States. The catalyst to invest in APT came from the strong momentum the business has in signing new clients in the United States, with a number of large retailers such as Steve Madden and Urban Outfitters publically endorsing APT in their recent results briefings.

Net tangible asset (NTA) figures

The below NTA figures are before the 7.75 cents per share fully franked interim dividend due to be paid on 26 April 2019. The shares traded ex-dividend on Wednesday, 10 April 2019. Since inception, WAM Capital has paid \$2.23 per share in fully franked dividends to shareholders.

The NTA before tax is after the payment of \$5.3m (074 cents per share) in tax during the month. "Includes 0.55 cents per share of tax assets resulting from the acquisition of unlisted investment companies.

Based on the 29 March 2019 share price of \$2.23 per share and the annualised FY2019 fully franked interim dividend of 15.5 cents per share.

Pre-tax net tangible assets

\$1.85

Gross assets

Fully franked dividend vield^{^}

$$1,322.2m$ 7.0%

Performance $(p.a. since August 1999)$

16.6%

Investment performance and Index returns are before expenses, fees and taxes

Fully franked dividends since inception

$W|A|M$ Leaders

Focus: large-cap Australian companies (ASX: WLE)

Portfolio update

The WAM Leaders portfolio increased 1.0% in March, with the contribution predominately driven by iron-ore and defensive yield-sensitive positions. The strongest contributors included Fortescue Metals Group (ASX: FMG). Rio Tinto (ASX: RIO) and BHP Group (ASX: BHP). The iron-ore price has spiked since the Vale Brumadinho tailings dam disaster on 25 January 2019, which was a catalyst for the closure of an additional 56 Brazilian dams for safety concerns. Brazilian iron-ore exports in March fell to their lowest levels for more than a decade.

On the demand side, the Chinese Government has stepped up measures to stimulate its economy with a large injection of funds to reinvigorate total social financing (TSF), a measure of credit and liquidity in the economy. Chinese Premier Li Kegiang also announced further tax cuts aimed at offsetting deteriorating economic data to maintain the country's strong growth rate. The feedback from our on-the-ground research in China, paints a bullish picture for steel demand in China. FMG, RIO and BHP closed up 17.3%, 1.8% and 3.4% for the month.

Net tangible asset (NTA) figures

The below NTA figures are before the fully franked interim dividend of 2.65 cents per share due to be paid on 26 April 2019. The shares traded ex-dividend on Wednesday, 10 April 2019. Since inception, WAM Leaders has paid 8.0 cents per share in fully franked dividends to shareholders.

'The NTA before tax is after the payment of \$44k (0.006 cents per share) in tax during the month.

\$1.21

Gross assets

Annualised fully franked interim dividend

(p.a. since May 2016)

\$950.7m | 5.3c

$11.1%$

Performance

Materials: 26.4%

Financials: 23.6%

Industrials: 6.1% Energy: 6.0% Health Care: 5.8% Real Estate: 2.2%

Utilities: 2.0%

$\mathsf{Sm}$

$0.0$

94.3

\$950.7m

\$876.7m^*

782.756.039

856.4

Consumer Staples: 7.0% Consumer Discretionary: 6.8%

Information Technology: 2.1%

Cash and Fixed Interest: 9.9%

March 2019

Telecommunication Services: 2.1%

$\%$

901

$0.0$

9.9

100.0

Investment performance and Index returns are before expenses, fees and taxes.

Portfolio composition by sector

Investment type

Fixed interest & cash

Market capitalisation

Total shares on issue

Listed equities

Short portfolio

Gross assets

February 2019

$\mathsf{Sm}$

764.1

$0.0$

84.6

\$848.7m

\$795.7m

704,135,905

$\%$

90.0

$0.0₁$

10.0

100.0

"During the month, 78,620,134 shares were issued following the completion of the Scheme of Arrangement with Century Austral

$W | A | M$ Global

Focus: small to mid-cap international companies (ASX: WGB)

Portfolio update

The MSCI World Index (AUD) increased 1.5% in March whilst the S&P Global Mid Small Index in AUD terms fell 0.2%.

The best performing global sectors were information technology, consumer staples and real estate while industrials and financials lagged. Most major equity markets rallied in local terms: the US S&P 500 Index by 1.8%, the Euro Stoxx 50 Index by 1.6%. the UK FTSE 100 Index by 2.9%. China's CSI 300 Index by 5.5% and Australia's S&P/ASX All Ordinaries Accumulation Index by 0.7% Japan's TOPIX fell by 1.0% during the month

Contributors to the investment portfolio performance during the month included Bandai Namco (TYO: 7832), Thermo Fisher Scientific (NYSE: TMO) and Worldpay (NYSE: WP).

Bandai Namco specialises in gaming, entertainment and toy manufacturing. As the owner of a large catalogue of intellectual property content has future revenue opportunities through the growth of the Mobile and Chinese gaming industries. Although Bandai Namco operates within a hit-driven industry, where games can fall in and out of popularity in a short period of time, the business has a conservative management team, who have a track record of delivering consistent earnings growth over time

TMO is a US-listed global medical technology business focused on producing analytical instruments, accelerating life sciences research, improving patient diagnostics and increasing laboratory productivity. During the month, TMO announced the acquisition of privately held Brammer Bio for \$1.7 billion in cash. The acquisition will expand TMO's contract development and manufacturing organisation capabilities and add to its already strong position in the gene and cell therapy manufacturing market. TMO estimates this market is worth approximately \$1.0 billion (c. 60% outsourced) and growing at 25% annually.

WP is a global leader in e-commerce and payments. On 18 March, they announced they were entering into a definitive merger agreement with Fidelity National Information Services (NYSE: FIS), who are a global leader in financial services technology. The combination enhances FIS acquiring and payments offerings and increases WP's distribution footprint, speeding up entry into new geographies.

Brexit negotiations dominated global news headlines during March without resolution and trade war negotiations between China and the US continued in the background. We met with over 80 companies in Japan and China during the month and there is no doubt that trade wars have significantly impacted both economies. The uncertainty has hindered corporate boards and management teams in their strategic decisionmaking with regards to hiring, expansion and capital investment. In both countries, businesses involved in automotive supply chain, the semiconductor industry and electronics components saw a significant decrease in demand since the second half of last vear.

With a trade war resolution appearing closer and China having announced significant stimulatory measures, sentiment has risen and is likely to translate into a more significant resumption in demand as the year continues. China released its March purchasing managers' index (PMI) survey, exceeding expectations to record the greatest monthly gain since 2012, supporting this thesis.

Catriona Burns BCom MApp Fin CFA Lead Portfolio Manager

Portfolio composition by geographical exposure

"Gross assets exclude the \$5.5m offer costs receivable balance associated with the Initial Public Offer (repayable by the Investment Manager).

Net tangible asset (NTA) figures

Pre-tax net tangible assets

S2.17

Gross assets

\$454.2m

Cash currency exposure (17.6%)

$W | A | M$ Research

Focus: small to mid-cap Australian companies (ASX: WAX)

Portfolio update

The WAM Research investment portfolio increased 1.3% in March.

Contributors to the portfolio performance included Myer Holdings (ASX: MYR) and AMA Group (ASX: AMA). MYR exceeded market expectations when the retailer reported its 2019 half year results in March. MYR announced earnings before interest, taxes, depreciation and amortisation of \$113.6 million and net profit after tax of \$41.3 million, up 4.9% and 3.1% on the prior corresponding period respectively. We see the potential for cost savings across Myer's store footprint and believe that Myer's management team can improve product and service to drive top line sales growth. MYR closed up 61.0% for the month.

AMA specialises in the vehicle aftercare and accessories market, offering services in panel repair, workshop and performance products, vehicle protection devices and commercial vehicle accessories. Following an unsuccessful takeover bid for AMA in 2018, we invested into the business due to our belief that AMA's new management team would re-focus the business on organic growth and earnings accretive acquisitions to continue to boost market share in the highly fragmented panel-beating sector. The business posted a strong first-half result and with the recent storms in Sydney, we see a strong pipeline of work. AMA closed up 16.0% for the month.

Net tangible asset (NTA) figures

The below NTA figures are before the fully franked interim dividend of 4.85 cents per share due to be paid on 26 April 2019. The shares traded ex-dividend on Wednesday, 10 April 2019. Since inception, WAM Research has paid 94.6 cents per share in fully franked dividends to shareholders.

Based on the 29 March 2019 share price of \$1.43 per share and the annualised FY2019 fully franked interim dividend of 9.7 cents per share.

Pre-tax net tangible assets

Gross assets

Fully franked dividend yield^{^}

6.8%

\$1.16

15.8%

Performance

$(p.a. since July 2010)$

Investment performance and Index returns are before expenses, fees and taxes.

Fully franked dividends since inception

"Annualised interim dividend

$W$ | A | M Active

Focus: market mispricing within the Australian equity market (ASX: WAA)

Portfolio update

The WAM Active portfolio decreased 0.5% in March.

A contributor for the month was Australian financial technology company Afterpay Touch Group (ASX: APT), which closed up 13.6%. APT operates in Australia and New Zealand with a rapidly expanding business in the United States. The catalyst to invest in APT came from the strong momentum the business has in signing new clients in the United States, with a number of large retailers such as Steve Madden and Urban Outfitters publically endorsing APT in their recent results briefings.

A detractor to performance during March was WorleyParsons (ASX: WOR). WOR is an engineering services company that specialises in the resources and energy sectors and complex process industries. With an estimated 75% of revenues coming from the oil and gas industry, we are positive on the outlook for WOR given the record number of contract wins during the last 12 months. WOR closed down 5.0% for the month.

Net tangible asset (NTA) figures

The below NTA figures are before the fully franked interim dividend of 2.95 cents per share due to be paid on 26 April 2019. The shares traded ex-dividend on Wednesday. 10 April 2019. Since inception, WAM Active has paid 62.8 cents per share in fully franked dividends to shareholders.

Based on the 29 March 2019 share price of \$105 per share and the annualised FY2019 fully franked interim dividend of 5.9 cents per share.

1.5%

$-2.4%$

2.0%

$+0.9%$

1.9%

$+8.3%$

Investment performance and Index returns are before expenses, fees and taxes.

$31$

UBS Bank Bill Index (Cash)

Outperformance

Fully franked dividends since inception

$0.2%$

$-0.7%$

1.0%

$-4.7%$

Top 20 holdings in alphabetical order

2.1%

$+7.9%$

$30%$

$+11.3%$

$3.4%$

$+8.5%$

W | A | M Microcap

Focus: micro-cap Australian companies (ASX: WMI)

Portfolio update

The WAM Microcap investment portfolio increased 0.3% in March.

Contributors to the portfolio performance included Johns Lyng Group (ASX: JLG) and Rhipe (ASX: RHP). JLG is a construction company focused on the management and restoration of buildings damaged from natural disasters. The catalyst to buy shares in JLG came from our belief that recent storms in Sydney and floods in Townsville would drive a large pipeline of work. Furthermore, a strong balance sheet gives JLG the ability to make earnings accretive acquisitions. JLG closed up 6.6% in March.

RHP is a software company that specialises in the distribution of cloud computing products in Australia, New Zealand and south-east Asia. Our catalyst to invest in RHP came from its exposure to the high-growth cloud services sector and its leading relationship with Microsoft as one of its key partners across the Australia and New Zealand region. Shares in RHP closed up 13.4% for the month.

Net tangible asset (NTA) figures

The below NTA figures are before the fully franked interim dividend of 2.25 cents per share due to be paid on 26 April 2019. The shares traded ex-dividend on Wednesday, 10 April 2019. Since inception, WAM Microcap has paid 6.0 cents per share in fully franked dividends to shareholders.

S&P/ASX Small Ordinaries Accumulation Index $-0.1%$ $-1.8%$ 5.8% $+0.4%$ $+1.8%$ $-0.1%$ Investment performance and Index returns are before expenses, fees and taxes.

Portfolio composition by sector

Outperformance

Top 20 holdings in alphabetical order

11.5%

$+4.4%$

Investment & management team

Geoff Wilson AOBSc GMQ FFINSIA FAICD

Chairman & Chief Investment Officer

Kate Thorley BCom CA GAICDChief Executive Officer CFA

Catriona BurnsBCom MAppFin FFINSIA Lead Portfolio Manager

Matthew Haupt BCom GradDipAppFin CFALead Portfolio Manager

Martin HicksonBBus BComp MAppFin Lead Portfolio Manager

Oscar Oberg LLB BBus CFALead Portfolio

Manager

BCom CFAPortfolio Manager

Tobias Yao

John Ayoub LLB BA GradCertAppFin

Portfolio Manager

Nick Healy BEng (Hons) MBA Global Equity

Analyst

Sam Koch

BBus

BCom GradDipAppFin

DealerEquity Analyst

Cooper Rogers

Jesse Hamilton BCom CA

Chief Financial Officer

James McNamara BJourn MComn GradDipFin

Head of Corporate Affairs