Australian Small and MicroCap companies ASX Investor Hour- Melbourne - - PowerPoint PPT Presentation

SLIDE 1

Contang’o (-ngg-) n. (pl. ~s) implies that prices will be higher in the future than today. [orig. unkn.] The market is said to be in contango when the forward price is higher than the spot price.

Australian Small and MicroCap companies ASX Investor Hour- Melbourne

SLIDE 2

Lessons

• A clear case for holding MicroCap stocks
• Yes you can do this yourself
• You do not have the information fund managers have

– Apart from a few shares you may know “very well”

• Managers provide diversification
• Know your structure
• LICs at a discount

– Vs Unit Trusts fund redemptions & shared tax allocation

• Shareholders in CTN receive quality information

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SLIDE 3

Contango MicroCap Limited

(ASX: CTN)

3

Contango is a company listed on the ASX:

A diversified portfolio of 60-100 Listed Australian Microcap companies with a targeted market capitalization between $10m & $350m. There are over 1,000 stocks in this universe with a total market cap. of approx $70 billion.

Investment Objective:

To outperform the S&P/ASX Small Ordinaries Accumulation Index by greater than 5%pa over rolling five year periods before taking into account fund fees and expenses.

Investment Style:

Style Neutral: We manage the portfolio on the basis of sensitivity to economic and market factors as well as stock specific considerations. At some stages of the cycle we have a growth bias while in periods of economic weakness we typically have a bias to value/defensive stocks

SLIDE 4

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Slide to identify some features you can find on a fund managers web site- in this instance www.contango.com.au

SLIDE 5

About the Portfolio Manager

• Contango Asset Management Ltd
• Established in 1998 by ex-HSBC senior executives
• Senior staff own 50.1% of the company

– passive investor owns remaining equity

• Large team of experienced investment professionals
• Proven investment process
• Approx $1b managed
• Specialist boutique Australian equity manager

– Small and MicroCap experts

• Web: www.contango.com.au

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SLIDE 6

6 * own equity

SLIDE 7

Contango Asset Management Ltd Investment Team

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DAVID STEVENS B.Ec [32 Yrs Experience / 12 with CAML]

• Chairman Contango MicroCap Limited
• Chairman Strategy Committee
• Portfolio Manager Large Caps
• Banks

BILL LAISTER B.Ec (29/ 11)

• Portfolio Manager Micro Caps
• Metals & Mining (inc Steel ex Gold)
• Energy (inc Coal ex Oil
• Chemicals

ANDREW MOUCHACCA PhD, B.Eng (Chem), SA Fin (12 / 11)

• Portfolio Manager Small Caps
• Energy (ex Coal)
• Capital Goods

CAROL AUSTIN B.Ec (Hons), B.Sc (30 / 11)

• Chairman Economics Committee
• Global & Domestic Economics

NAHEED RAHMAN B.Com, BIS (5 / 2)

• Software & Services
• Semiconductors & Equipment
• Commercial & Professional

Services

• Consumer Services
• Paper/ Forest
• Containers and Packaging
• Media

LUKE FEATHERSTONE B.Com (Hons) 30 / 1)

• Sector Analysis
• Domestic Economics

ALISTAIR FRANCIS B.Ec, CA, F Fin (25 / 11)

• Insurance
• Diversified Financials
• Transportation/Infrastructure
• Healthcare Equipment & Services
• Pharmaceuticals, Biotech & Life

PAUL DAVOREN B.Sc (Hons), F Fin (15 / 6)

• Consumer Durables & Supplies
• Telecommunication Services
• Food & Staples Retailing
• Food Beverage and Tobacco
• Gold
• Retailing

CRAIG ALLEN B.Com, B.Sc (7 / 4)

• Real Estate ex REITS
• Construction Materials
• Property Trusts
• Quantitative Analyst

Organised on sector lines

• Senior members of the team each have more than 25 years experience
• Long, successful track record at Contango
• Investment team supported by experienced professionals in back office, compliance & administration

SLIDE 8

Contango at a glance

8

• Experienced and high-quality team of 9 professionals
• Generate unique insights from external &internal research
• Team is organised on sector lines
• High quality back office, compliance & administration systems
• Well established, profitable business

Investment Team Performance Record Investment Style Business Structure

• Track record of delivering strong out performance with

solid risk management across all markets

• Sector, style and cap size rotation
• Multiple sources of added value including
• macro, industry and stock

SLIDE 9

Long term outperformance has come through

1. Contango is a top down manager 2. In-house economists provide our Macro & Sector forecasts 3. These factors are built into Sector and Stock valuations 4. Core strength is our market cycle awareness and stock valuations 5. All portfolios are built on a bottom-up basis

I. Stock decisions are based on internal valuations- earnings driven II. Investments are made on a relative-value basis III. No minimum or maximum sector rules IV. We do not manage to a benchmark- no tracking error targets

6. Sector and Stock weights are monitored for risk management Macro calls Stock Selection

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SLIDE 10

Map of S&P/ASX Indices

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SLIDE 11

11

Most MicroCap companies in Materials This green square Mkt. Cap was $300m

MicroCaps in Context

~2100 shares on the ASX

SLIDE 12

2000 companies: How many would it take?

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SLIDE 13

13

• MarketCap. of

# of Companies

BHP Billiton $ 153,104,369,600 1 All ASX Companies Ex-ASX200 $ 146,297,941,695 1683 5 Largest ASX-listed companies $ 412,167,435,660 5 All Companies Ex-ASX50 $ 414,388,708,680 1833 15 Largest ASX-listed companies $ 694,552,354,914 15 Every other ASX-listed company $ 691,865,942,518 1868 All ASX-listed companies $ 1,386,418,297,432 1883 All Companies Ex-ASX100 $ 261,766,603,829 1783 All Companies Ex-ASX200 $ 146,297,941,695 1683

All Companies Ex-ASX300 $ 95,198,077,886 1583

All Companies Ex-ASX500 $ 47,095,450,060 1383

…….lopsided

Source: Contango- as at 31.12.2010

SLIDE 14

Is bigger better?

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SLIDE 15

Not always

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1 Year 3 Year 5 Year 10 Year

S&P/ASX 100 0.8%

• 4.8%

4.3% 8.40% S&P/ASX 300 1.9%

• 5.0%

4.4% 8.50% S&P/ASX SMALL ORDINARIES 13.1%

• 5.9%

5.5%

9.30%

ALL ORDINARIES 3.3%

• 4.9%

4.9% 8.70% S&P/ASX Emerging Co's Index

25.8%

• 1.8%

11.7%

n/a

(Total Return)

Performance (p.a)

Source: Contango- as at 31.12.2010

SLIDE 16

Micros are not “top heavy”

16

Number of Companies Market Cap ($b) Top 10 as total %

S&P/ASX 100 100 1,042 $ 55.5% S&P/ASX 300 295 1,152 $ 50.2% S&P/ASX SMALL ORDINARIES 195 110 $ 14.6% ALL ORDINARIES 489 1,346 $ 43.6% S&P/ASX Emerging Co's Index 154 28 $ 20.9% All ASX-listed companies 1883 1,386 $ irrelevant

Source: Contango- as at 31.12.10

SLIDE 17

The significance of MicroCap Companies

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• Continue to play an important role
• The importance of the sector cannot be ignored
• Particularly to jobs growth and innovation in industry
• ~1500 ASX-listed companies with a Market Cap < $500m
• Data provided by just over half of these identifies they alone

directly employ more than 120,000 Australians

• A combined market cap of ~$70b
• Total assets exceeding $111b
• Sitting on over $11b in cash
• Reported NPAT over $5.5b

All data as at 26 August 2010. Source: Morningstar.

SLIDE 18

Why portfolios need a Small Companies Allocation

Diversification

• Of ~2100 listed companies- most funds generally only invest “as deep” as ASX300
• Many fund managers hold the same 60-80 ASX100 stocks
• Reduces the “Blue-Chip” risk factor of being over-exposed to ASX100 companies

Opportunity

• MicroCaps are often the fastest growing companies on the sharemarket
• There is very little research undertaken on MicroCap companies
• Those specialising in MicroCaps can find growing companies and invest in them

Performance

• MicroCap companies offer some of the best opportunities for investors
• Increases in revenue often have great impact on profit for MicroCap companies
• The S&P/ ASX Emerging Companies Index has outperformed the broader market1

18

1 vs All Ords Accum and Small Ords Accum Over 1,3 & 5 years to 31 December 2010

SLIDE 19

19

0.00 5.00 10.00 15.00 20.00

Cross Sectional Volatility ( Smoothed)

ASX200 Fifty Ldrs 100x50 200x100 300x200

Stock selection is critical

Source: Contango-

SLIDE 20

Intra Sector stock behaviour- it is still down to the stock

20

+ %

• %

Micro Cap Small Cap Large Cap

Not an empirical chart- used simply to illustrate that the smaller the company the more share price volatility it may experience

More usual share price range

SLIDE 21

MicroCaps can be Good

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Name Code Sector MTD 1 Month Rolling Quarter Rolling Year Rolling

Hawkley Oil & Gas Limited HOG Energy

• 4.6
• 5.7
• 20.2

5087.5 Audio Pixels Hldgs Limited AKP Real Estate 37.8 55.0 35.7 3344.4 Resource & Investment NL RNI Metals & Mining 10.1 20.2 10.6 2876.0 Bathurst Resources Limited BTU Metals & Mining

• 12.1

0.0 12.4 1449.4 Medical Corporation Ltd MOD Health Care 42.5 46.2 83.9 1325.0 Northern Star Res Ltd NST Metals & Mining 15.5 18.8 18.8 1222.6 Northern Minerals Limited NTU Energy 80.0 92.2 65.0 799.5 Equatorial Resources Ltd EQX Oil & Gas

• 12.6

4.4

• 31.9

748.4 Ausgold Limited AUC Metals & Mining 16.0 36.3 1.3 721.6 Sierra Mining Limited SRM Metals & Mining 5.5 3.6

• 24.7

651.9 Promesa Limited PRA Energy

• 4.8
• 10.4

14.3 650.0 African Energy Resources AFR Oil & Gas 8.4

• 1.9

6.9 638.1 Newland Resources Limited NRL Metals & Mining

• 15.2

97.2 159.3 636.8 Waratah Gold Limited WGO Metals & Mining 24.6 8.6 76.7 623.8 Wavenet International Ltd WAL Tech H/ware & Equip

• 19.0

0.8 29.2 588.9 Base Resources Limited BSE Metals & Mining 0.9 16.2 33.7 576.5

Source: Contango- as at 31.03.2011. Sample of stock performance. Stocks shown may or may not be in our portfolio at any time. Errors & omissions may be replicated in this table. Refer official ASX price tables for actual performance

SLIDE 22

MicroCaps can be Ugly

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Name Code Sector MTD 1 Month Rolling Quarter Rolling Year Rolling

Photon Group Limited

PGA

Media

5.8 4.3

• 14.1
• 93.8

Hastie Group Limited

HST

Building Products

• 71.9
• 71.9
• 74.8
• 80.5

Cougar Energy Limited

CXY

Energy

• 33.3

75.0

• 40.4
• 79.3

Centro Properties Group

CNP

REITs

• 1.7

5.6

• 63.2
• 75.7

Isoft Group Limited

ISF

Health Care Technology

188.5 354.5 102.7

• 74.1

Norseman Gold PLC

NGX

Metals & Mining

• 63.0
• 62.5
• 70.7
• 71.9

Port Bouvard Limited

PBD

Real Estate

0.0

• 4.8
• 20.2
• 68.4

Kairiki Energy Limited

KIK

Energy

20.0 6.7 13.1

• 67.0

North Aust Diamonds Ltd

NAD

Metals & Mining

• 14.3
• 21.1
• 46.4
• 65.1

Energy Resources Aust.

ERA

Oil & Gas

• 22.9
• 23.4
• 50.5
• 64.5

Murchison Metals Ltd

MMX

Metals & Mining

3.0

• 16.7
• 29.1
• 64.0

Avexa Limited

AVX

Pharma & Biotechnology

• 2.0

25.6 8.9

• 63.7

AED Oil Limited

AED

Oil & Gas

• 7.8
• 11.3
• 46.6
• 62.1

Strike Resources Limited

SRK

Metals & Mining

• 5.4
• 12.5
• 20.5
• 62.0

Infigen Energy

IFN

Power Prods Egy Traders

14.9 19.7

• 15.0
• 61.3

Crescent Gold Limited

CRE

Metals & Mining

22.4 53.8

• 47.8
• 61.2

Source: Contango- as at 31.03.2011. Sample of stock performance. Stocks shown may or may not be in our portfolio at any time. Errors & omissions may be replicated in this table. Refer official ASX price tables for actual performance

SLIDE 23

Small/ Micro’s are an Asset Allocation Decision

 Opportunity

• MicroCap are an essential part of investment portfolios

Desires MicroCaps Needs a Portfolio Your chosen manager

 Diversification  Risk Management  Expert Manager  Performance  Dividend

SLIDE 24

Benefits of using a portfolio manager

• Do not clog your time researching these shares
• Are not wasting your time trading small shares all day long
• Are utilising a diversified exposure to MicroCaps, and
• Dividend: Build certainty of yield on NTA p/share into portfolios (where offered)

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SLIDE 25

Look inside

25

(A bin or a target?)

SLIDE 26

Drivers of performance

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Source: Contango. As at 31.12.10

Value style: look for stocks that seem to be underpriced when analysing a company's fundamentals, including price-to-earnings or price-to-book ratios, Growth style: look for companies that show signs of above-average growth, even if their share price appears expensive

1 Year 3 Year 5 Year 10 Year

S&P/ASX SmallCap Growth 13.6%

• 3.0%

7.7% 12.2% S&P/ASX SmallCap Value 9.6%

• 9.7%
• 0.6%

10.8% S&P/ASX Large Mid Cap Growth 1.9%

• 3.7%

6.2% 9.0% S&P/ASX Large Mid Cap Value 0.2%

• 5.0%

3.5% 7.8% Performance (p.a)

SLIDE 27

A tail of many countries

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SLIDE 28

A 2-speed economy?

28

1 Year 3 Year 5 Year 10 Year

S&P/ ASX Small Industrials 2.2%

• 11.2%
• 0.9%

5.2% S&P/ ASX Small Resources 30.7% 4.0% 21.4% 21.3% Performance (p.a)

Globalisation, in particular increasing wealth in India and China- has impacted the Australian economy. Source Contango” As at 31.12.10

SLIDE 29

Small companies: typical characteristics:

• Shorter operating track record than their large-cap counterparts,
• They offer new products or services, using new business models,

distributing through new channels or owning reserves that can be converted into profitable projects,

• A simple operation and usually within a single geographical location,
• The lack of analyst coverage can increase the likelihood of

information asymmetry,

• Their securities can be thinly traded and hence investors demand a

higher return to hold these stocks should they need to liquidate their investment quickly.

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SLIDE 30

Compelling reasons for investing in small companies

• Growth potential– most of today’s large and successful companies

started small.

• Easy to understand business models and financial reports.
• Operating in a single jurisdiction or having only a few products or

services makes it easier for investors to understand individual companies without the need to have sophisticated business or financial backgrounds.

• Ability to grow rapidly. Factors such as high business risks, thinly

traded or lack of analyst coverage can be viewed as a disadvantage, but for some investors, these factors can actually present an

• pportunity.

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SLIDE 31

Winning with Small & MicroCap stocks

• Alpha is predomiately through stock selection
• Extremely limited research is produced- that is reliable
• Requires a large and experienced team
• You cannot rely on benchmarks

– Too much dispersion within Sectors – Any position you hold is overweight- there are no active underweights

• Requires constant vigilance- volatility can be extreme

31

SLIDE 32

And next years winner is...

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S&P/ASX SMALL ORDINARIES PRICE RETURNS BY SECTOR

1 Year 3 Year 5 Year

Energy

• 0.2%

6.2% 21.3% Materials 40.5%

• 4.1%

11.6% Industrials 1.7%

• 15.4%
• 4.5%

Cons Disc

• 4.7%
• 13.3%
• 0.2%

Cons Staples

• 4.7%
• 21.7%
• 10.7%

Health Care 3.6% 0.6%

• 0.3%

Financials 0.6%

• 24.7%
• 13.7%

Info Tech

• 9.5%
• 8.5%
• 0.8%

Telecom Svc

• 36.0%
• 45.8%
• 31.1%

Utilities

• 8.6%
• 18.8%
• 10.4%

Past performance cannot be used to predict future performance. Neither may a contrarian strategy be effective Source Contango: As at 31.12.10

SLIDE 33

Diversification

33

March was used as it was the most recent month and had an event which caused volatility. All factors rebased to 1.00 at March 1 for ease in comparison. Past performance cannot be used to predict future performance.

SLIDE 34

Understand investor psychology and sentiment

“Share price” may not reflect “value”

34

Source Contango. Note there are no assurances of future share price, portfolio or market performance. Chart used to explain a point

SLIDE 35

35

Source Contango. Data to 31.04.11. Performance identified is of the underlying securities held in the portfolio and before fees, taxes and expenses. Past performance is not necessarily indicative of future performance. Other measures of performance to consider include NTA Value of the investment portfolio and Share Price performance. Use of CTN or any investment portfolio will not assure that Points 1, 2 or 3 are avoided.

Using a diversified portfolio can help with regards to

• 1. Managing investment volatility
• 2. Avoid being margin called on a stock
• 3. Avoid hitting stop losses on a stock
• 8.0%
• 6.0%
• 4.0%
• 2.0%

0.0% 2.0% 4.0% 6.0% 8.0% 10.0%

Apr-04 Jul-04 Oct-04 Jan-05 Apr-05 Jul-05 Oct-05 Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11

Excess performance of the CTN portfolio as to the ASX All Ords Index on a monthly basis.

SLIDE 36

MicroCaps require continual vigilance

36

Contango Investment Universe: ~1800 ASX-listed companies Contango number of Holdings: ~100 Site visits: > 200 pa 1-on-1 with Management: > 300 pa Countries visited 30 Regions visited Africa, China, India, Asia, North America, Middle East Expert oversight Multiple consultants are engaged Process Reviews External consultants reviews

 Structured  Methodical  Transparent  Replicable process

SLIDE 37

Australian mining companies have significant global presence

• Australia has some of the world’s largest mining companies
• 40% of listed mining companies (ASX 300 Resources) have assets offshore

37

AWE HIG HZN CNX AUT ADU DML AMX GRY AQG GXY

Contango site visit in last 2 years Australian company location of assets

Australian Mining Company Assets and Contango visits

AQP PLA BDR BKY BTU CFE CPL CVN IAU EAU EQN EXT PDN IRN NDO OGC KAR MBN KCN KRM SRQ WEC MDL TGZ MML MNC MRU NFE OSH PNA PRU NBL RSG SDL TRY WOR

SLIDE 38

Possible allocations to Smalls/ Micros

38

Conservative Balanced Growth

Large Cap 80% 70% 60% Smalls & Micro's 20% 30% 40%

Sample allocation- consult financial advice to determine what is suitable for your particular investment requirements and risk tolerance

SLIDE 39

Sample investment options

39

Companies referred to are for illustrative performances only

SLIDE 40

LICs by type

Small Cap Concentrated/ Active Private Equity

Mirabooka

Clime Capital ING Private Equity

Ozgrowth

Djerriwarrh Souls Private Equity

WAM Capital

Fat Prophets

Westoz

Strategy MicroCap Specialist

Aberdeen Leaders (Geared)

Contango MicroCap Limited

Adelaide Managed Australian Leaders (Long Short) AMCIL Credit Suisse GP100 (Geared) Global Mining Global Resources Masters LinQ Resources

Absolute Return International Diversified

Alternative Investment AMP China AFIC Australian Enhanced Income Asian Masters Argo Blue Capital Global Masters Australian Governance Cadence Capital Hunter Hall Australian United Equities & Freehold India Equities BKI Investments Hastings High Yield Magellan Flagship Carlton Signature Capital Peters Macgregor Century Katana Capital Platinum Capital Choiseul Macquarie Winton Global Templeton Growth Diversified United Trojan Equity Milton Corporation van Eyk Blueprint Sylvastate Whitefield Wilson Investment Fund

This list is not exhaustive and companies may not be properly classified- use as a general guide only

SLIDE 41

One possible way to allocate

41

• 1. 1 x Unit Trust @ 40%
• 2. 1 x LIC @ 40%
• 3. 4 x Direct shares @ 5% ea

Consult professional financial advice to determine what is suitable for your investment needs

SLIDE 42

Performance and CTN Portfolio Update

Bill Laister Lead Portfolio Manager- Australian Micro Caps Contango Asset Management Limited

SLIDE 43

43

1 CTN performance is of the underlying portfolio before fees.

Past performance is not necessarily indicative of future performance. Share Price performance and NTA performance must also be considered. All data to 31.03.11

Portfolio Performance

Performance of underlying portfolio

(to 31.03.11)

1m % 3m % 6m % 1Yr % 2 Yrs %pa 3 Yrs %pa 5 Yrs %pa Since Inception1 %pa

CTN Investment Portfolio1

0.6 6.8 24.8 34.1 49.8 9.3 17.0 26.3

ASX All Ords Accum. Index

0.6 2.9 8.4 4.8 22.9 1.2 3.6 9.9

SLIDE 44

Placements & Floats go to fund managers

(Sample: Oct-Dec 2010)

44

Code Company Price

NFE Northern Iron Limited $1.58 CCC Continental Coal Limited $0.06 RHM Richmond Mining Limited $0.38 TAP Tap Oil Limited $0.81 AUT Aurora Oil & Gas Limited $1.25 APK Australian Power and Gas Company Limited $0.45 AUQ Alara Resources Limited $0.23 FAR FAR Limited $0.06 NXS Nexus Energy Limited $0.44 HGO Hillgrove Resources Limited $0.25 KGL Kentor Gold Limited $0.16 RES Resource Generation Limited $0.50 BCI BC Iron Limited $2.30 AUT Aurora Oil & Gas $1.60 AZX Auzex Resources $0.55 BSE Base Res Limited $0.30 IAU Intrepid Mines $1.78 PIR Papillon Res Ltd $0.55 RQL Resource Equip Ltd $0.49 AKI Sterling Minerals $0.30 WPG WPG Res Ltd $0.68

Floats

AZT Aston Resources Limited $5.96 CTD Corporate Travel Management Limited $1.00 MLD MACA Limited $1.00

SLIDE 45

Sector Weights

45

Sector Weightings Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Energy 7.8% 4.3% 7.4% 18.1% 19.3% 18.8% 16.9% 12.3% 12.5% 17.3% 17.1% Materials 17.7% 5.6% 11.9% 28.0% 29.4% 29.4% 34.3% 30.9% 34.7% 38.7% 40.8% Industrials 22.5% 3.8% 4.3% 11.6% 20.7% 22.3% 22.1% 24.3% 26.5% 23.4% 24.7%

• Cons. Discret.

7.1% 6.6% 8.6% 10.3% 11.2% 10.8% 10.4% 11.6% 9.0% 6.1% 6.2% Consumer Staples 0.5% 0.6% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Health Care 0.4% 0.7% 1.5% 1.6% 2.4% 2.5% 1.7% 1.1% 1.0% 1.0% 0.9% Financials 3.5% 3.9% 4.0% 5.2% 7.8% 8.0% 8.0% 8.0% 7.2% 5.9% 5.4% I.T 1.7% 0.4% 0.5% 1.2% 2.1% 3.5% 4.6% 7.2% 4.1% 3.4% 1.2%

• Telco. Services

1.4% 1.6% 2.1% 2.7% 2.6% 1.9% 0.6% 0.0% 0.6% 0.6% 1.6% Utilities 0.0% 0.0% 0.0% 0.0% 0.3% 0.2% 0.0% 0.0% 0.0% 0.5% 0.4% SPI Futures 14.1% 48.2% 50.4% 19.6% 2.4% 0.9% 0.3% 0.0% 1.1% 11.9% 11.3% Cash 23.2% 24.3% 9.4% 1.9% 1.8% 1.8% 1.1% 4.6% 2.5%

• 8.9%
• 9.7%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Energy Materials Industrials

• Cons. Discret.

Consumer Staples Health Care Financials I.T

• Telco. Services

Utilities

CTN investment portfolio is used to illustrate how portfolios can evolve and adapt over time

SLIDE 46

Lets talk companies

CTN: Top 20 Holdings

46

As at 31.03.11. The top 20 stock holdings represent 38% of the portfolio. Portfolio weights are based on expected returns (adjusted for liquidity) rather than index weights. Portfolio held 98 ASX-listed securities at 31.03.11

Largest 20 stock holdings and weights

Code Stock

Weight % Code

Stock Weight %

IAU Intrepid Mines Limited 3.27% ASL Ausdrill Limited 1.70% AUT Aurora Oil & Gas Limited 3.19% ORE Orocobre Limited 1.62% NWH NRW Holdings Limited 2.45% SAR Saracen Min. Hldgs Ltd 1.61% FGE Forge Group Limited 2.43% TFC TFS Corporation 1.61% DCG Decmil Group Limited 2.36% AZT Aston Resources Limited 1.59% ANG Austin Engineering Limited 2.09% MLD MACA Limited 1.57% MMS MacMillan Shakespeare 1.93% HZN Horizon Oil Limited 1.35% EHL Emeco Holdings Limited 1.93% SGH Slater & Gordan Ltd 1.32% IDM Industrial Minerals Ltd 1.75% WPG WPG Resources Ltd 1.30% MIN Mineral Resources Limited 1.73% TRY Troy Resources Ltd 1.28%

SLIDE 47

Best and Worst holdings – raw performance

3m to 31.03.11

47

3 Month

Code Return %

3 Month

Code Contribution % Samson Oil & Gas Ltd SSN 167.1% Uraniumsa Ltd USA

• 42.0%

Gulf Industrials Ltd GLF 142.6% Indophil Resources NL IRN

• 38.8%

Alkane Resources Ltd ALK 80.7% Diploma Group Ltd DGX

• 36.9%

Resource Gen Ltd RES 79.0% Berkeley Resources Ltd BKY

• 35.3%

Base Resources Ltd BSE 73.2% Global Geoscience Ltd GSC

• 30.6%

Industrial Minerals Ltd IDM 66.6% Carnarvon Petroleum Ldt CVN

• 28.4%

FAR Ltd FAR 46.3% Terramin Australia Ltd TZN

• 27.2%

MACA Ltd MLD 44.4% Swick Mining Services Ltd SWK

• 26.1%

Forge Group Ltd FGE 36.8% Kentor Gold Ltd KGL

• 25.0%

Aurora Oil & Gas Ltd AUT 36.6% Orocobre Ltd ORE

• 22.4%

SLIDE 48

Spread your positions

Top 10 best & worst to 31.03.11

48

3 Month

Code Contribution %

3 Month

Code Contribution %

Aurora Oil & Gas Limited AUT 1.54% Diploma Group Limited DGX

• 0.15%

Samson Oil & Gas Limited SSN 1.27% Grange Resources Limited GRR

• 0.15%

Industrial Minerals Corp Ltd IDM 1.16% Saracen Mineral Holdings Ltd SAR

• 0.16%

Forge Group Limited FGE 0.93% Swick Mining Services Ltd SWK

• 0.17%

NRW Holdings Limited NWH 0.73% Uraniumsa Limited USA

• 0.17%

Resource Generation Ltd RES 0.63% Carnarvon Petroleum Limited CVN

• 0.17%

Decmil Group Limited DCG 0.56% Sedgman Limited SDM

• 0.17%

Base Resources Limited BSE 0.56% Indophil Resources NL IRN

• 0.34%

MACA Limited MLD 0.51% Orocobre Limited ORE

• 0.36%

Alkane Resources Limited ALK 0.47% Berkeley Resources Limited BKY

• 0.39%

Diversification: Up to 120 microcap stocks Risk Control: Contribution is derived from multiple positions

12 Month

Code Contribution %

12 Month

Code Contribution %

Intrepid Mines Limited IAU 2.89%

Clough Limited CLO

• 0.33%

Aurora Oil & Gas Limited AUT 2.54%

Red Fork Energy Limited RFE

• 0.34%

Forge Group Limited FGE 1.70%

Customers Limited CUS

• 0.38%

Decmil Group Limited DCG 1.65%

Navitas Limited NVT

• 0.39%

Emeco Holdings Limited EHL 1.49%

Terramin Australia Limited TZN

• 0.42%

NRW Holdings Limited NWH 1.37%

Carnarvon Petroleum Limited CVN

• 0.43%

McMillan Shakespeare Ltd MMS 1.31%

Red 5 Limited RED

• 0.51%

Andean Resources Limited AND 1.25%

CSG Limited CSV

• 0.63%

Mineral Resources Limited MIN 1.11%

Antares Energy Limited AZZ

• 0.71%

Saracen Mineral Holdings Ltd SAR 1.06%

Diploma Group Limited DGX

• 0.73%

3 month

SLIDE 49

Sample Portfolio X-Ray

49

• As at 31.03.2010 except Portfolio Fundamentals as at 31.01.11
• Includes various stocks that were taken over/ inherited plus also stocks held for long period that have grown- not yet disposed

Market Cap* # of stocks % of portfolio $1b+ 5 11% $350m- $1b 21 29% $100m-$350m 51 47% $10m - $100m 20 11% Cash 2% Position Weight # of stocks % of portfolio > 2% 6 16% 1% - 2% 37 48% 0.5% - 1% 35 27% < 0.5% 19 7%

CTN

Portfolio Fundamentals CTN Small Ords

PE FY12 11.0x 9.7x EPS growth FY12 53.6% 32.0% Div yield FY12 2.5% 3.3% Beta Portfolio Turnover (annual) ~80% Resources

Portfolio Fundamentals CTN Resources Small Resources

PE FY12 12.3x 7.9x EPS growth FY12 84.6% 86.2% Div yield FY12 0.2% 0.8% Industrials

Portfolio Fundamentals CTN Industrials Small Industrials

PE FY12 9.9x 11.1x EPS growth FY12 22.1% 14.2% Div yield FY12 4.7% 5.0%

SLIDE 50

Understand Fundamental valuations

50

2009/10 2010/11 (e) 2011/12 (e) 2011/12 (e)

P/E (relative to ASX300) S&P/ ASX Small Ordinaries 98.61% 102.14% 93.32% S&P/ ASX Small Industrials 96.14% 103.48% 105.66% S&P/ ASX Small Resources 108.58% 99.22% 76.86% S&P/ASX100 100.12% 99.79% 100.77% EPS GROWTH S&P/ ASX Small Ordinaries 25.59% 34.87% 17.00% S&P/ ASX Small Industrials 10.34% 13.93% 12.01% S&P/ ASX Small Resources 142.09% 103.85% 26.13% S&P/ASX100 23.56% 15.41% 5.64% DIVIDEND YIELD S&P/ ASX Small Ordinaries 2.22% 2.53% 2.97% S&P/ ASX Small Industrials 3.50% 4.08% 4.54% S&P/ ASX Small Resources 0.48% 0.44% 0.85% S&P/ASX100 3.19% 3.37% 3.69%

(e) = market consensus forward estimates As at 30.04.2011

SLIDE 51

Stock: Intrepid Mines - Overweight Sector: Materials - Overweight

51

Key Points

• An advanced explorer in East Java / Indonesia.
• Discovered a large Cu-Au porphyry system with an overlying
• xide Au cap.
• Current JORC compliant resource is 3.3Moz Au Equiv for the
• xide cap and 20Moz Au Equiv for the underlying porphyry

and remains open in all directions.

• A Resource update for the porphyry is expected in April
• volume of the ore body is expected to be more than

double (500mt to 1bt+).

• Two large anomalies adjacent to current mineralisation
• warrant further exploration
• Successfully raised $112m @ $1.78 in November to conduct

this exploration. Events to drive share price

• Porphyry resource upgrade – April 2011
• Scoping study on oxide release
• Drill results from 5 step out holes.

ASX Code IAU Company Intrepid Mines Ltd. Industry Group Materials Price (at 09.02.11) $1.99

Year Ended June

2011 2012 2013 Forecast Forecast Forecast NPAT (M)

• 8.0
• 12.8
• 6.1

EPS (cents)

• 1
• 1.5
• 1.4

EPS Growth PE (x) ASX300 PE (x) 12.4 Net Present Value Target NPV Prem/ Disc 40% Target Price Stock Capital Return 48.0% Dividend Yield 0.0% Total Stock Return 48.0% Market Market Return (e) 11.0% Dividend Yield (e) 4.5% Total Market Return 15.5% EXCESS STOCK RETURN 32.5% $2.10 per share $2.94 per share

Things managers look for

This is NOT a recommendation. Refer disclaimer in Slide 4 noting that Forecasts are predictive in character, based on numerous assumptions including the forecasted outlook for key variables & may be effected by various factors including inaccurate assumptions, risks and unforeseen events. Accordingly, actual results may differ materially from those forecasted.

SLIDE 52

Key Points

• 100% interest in Kwale mineral sands project-

Kenya.

• An advanced project with a completed BFS &

project expenditure of $US70m

• Current resource supports a mine life of +10yrs
• Revised capital cost $US225-$250m
• One of the few advanced projects world wide that

will be in production in two years Events to drive share price

• Completion of EFS
• Start of construction
• Strong fundamentals for both zircon and rutile

Stock: Base Resources - Overweight Sector: Metals & Mining - Overweight

ASX Code BSE Company Base Resources Industry Group Metals &Mining Price (at 14.01.11) $0.47 Year Ended June 2013 2014 2015 Forecast Forecast Forecast NPAT (M) 1.00 47.00 72.00 EPS (cents) 0.00 14.00 22.00 EPS Growth 0.00% 57.14% PE (x) 3.4 2.1 ASX300 2011 PE (x) 12.4 Net Present Value $0.75 per share Target NPV Prem/ Disc 80% Target Price $0.60 per share Stock Capital Return 27.7% Dividend Yield 0.0% Total Stock Return 27.7% Market Market Return (e) 11.0% Dividend Yield (e) 4.5% Total Market Return 15.5% EXCESS STOCK RETURN 12.2% Refer comment accompanying these charts on slide 54. Fund managers create and update their calculations daily. As such, the numeric and qualitative factors are always different and continually evolving. These are thus “old” examples

SLIDE 53

Key Points

• Completed the full funding of Peculiar Knob Iron ore

project in Sth Australia, $85m equity, debt $120m

• Awaiting approval for Port Pirie development from SA

govt, before loan drawdown and start of construction.

• All contracts have now been awarded
• Woomera prohibited area access is still with the

federal govt, looks promising

• Hawkes Nest project could be cleared as well as the

commencement of the magnetite J/V. Events to Drive Share Price

• positive outcome on Woomera
• Construction progressing
• Further exploration drilling

Stock : WPG Resources - Overweight Sector: Metals & Mining - Overweight

ASX Code WPG Company WPG Resources Industry Group Metals &Mining Price (at 14.01.11) $0.89 Year Ended June 2012 2013 2014 Forecast Forecast Forecast NPAT (M) 42 116.5 176.3 EPS (cents) 16.9 46.3 66.2 EPS Growth 173.96% 42.98% PE (x) 1.9 1.3 ASX300 2011 PE (x) 12.4 Net Present Value $1.70 per share Target NPV Prem/ Disc 85% Target Price $1.45 per share Stock Capital Return 62.4% Dividend Yield 0.0% Total Stock Return 62.4% Market Market Return (e) 11.0% Dividend Yield (e) 4.5% Total Market Return 15.5% EXCESS STOCK RETURN 46.9%

SLIDE 54

Key Points

• Civil engineering & construction business based in Western

Australia

• Specialises in civil works, industrial construction & non-process

infrastructure plus remote accommodation facilities construction

• Client base predominantly top tier resource companies
• including BHP,RIO, Chevron and Woodside
• Recently restructured to focus on its remote construction

expertise Events to drive share price:

• Decmil have secured ~$320m of work in 2011 which is ~80% of
• ur forecast revenue of $400m; further contract wins will deliver

confidence in this growth

• Bidding pipeline remains strong
• Potential for scope expansion on existing projects
• Conclusion: We remain confident that the that opportunities

prevailing in Decmil’s target market will deliver strong growth into 2011. This together with a competent management team ensures that profitability will remain robust

54

Capital Return 27.0% Dividend Yield 3.1% Total Stock Return 30.2% Market Return 8.0% Dividend Yield 4.9% Total Market Return 12.9% Excess Stock Return 17.3% ASX CODE: DCG COMPANY: Decmil Group Limited INDUSTRY GROUP: COMMERCIAL SERVICES & SUPPLIES PRICE: $1.60 Year End June 2009 2010 2011 Actual Forecast Forecast NPAT ($M) 13.2 17.9 21.8 EPS (cents) 10.7 14.4 18.0 EPS GROWTH 34% 20% PE (x) - current price n/a 11.1 8.9 ASX 300 PE (x) 14.3 14.0 11.3 PE Relative to ASX 300 n/a 80% 79% Target PE Relative 100.0% Target Price $2.03

Stock: Decmil Group - Overweight Sector: Commercial Services - Overweight

SLIDE 55

Key Points

• G8 Education operates Long Day Care (LDC) centres in Aust & Sing..

215 centres are currently managed under 5 brands: Payce Childcare, Early Learning Services, Local Kids, Kindy Patch Cherie Hearts.

• Industry is extremely positive and supportive:

– Child care market forecast to grow at 5%pa. in rev. over next 5 yrs – ~1.7m children 0-4 years of age in Aust. 379k (22%) of which are in LDC centres. LDCs have grown at 6.8% p.a over last 12 years. – High level of govt support. Currently provides for 44% of G8’s rev. – Unemployment rate improving ie. more demand for childcare.

• Is growing via acquisition. Crucial to monitor that the company doesn’t
• verpay for acquisitions, and that it doesn’t over-gear (like ABC Learning).
• Management led by Chris Scott (MD) and Craig Chapman (CEO) who

were the people behind S8 (travel and accommodation) which delivered 53% p.a. over 6 years to investors. Never missed their guidance numbers, under-promised and over-delivered. Events to drive share price

• Smart acquisitions of childcare centres over the next 12 months which are

cheaply acquired, contributing to the company’s growth in earnings

Stock: G8 Education Ltd

• Overweight

Sector: Consumer Services - Neutral

ASX Code GEM Company G8 Education Ltd Industry Group Consumer Services Price (at 04.02.11) $0.95

Year Ended Dec

2011 2012 2013 Forecast Forecast Forecast NPAT (M) 15.5 21.9 26.3 EPS (cents) 10.3 14.6 17.5 EPS Growth 41.5% 20.0% PE (x) 9.2 6.5 5.4 ASX300 PE (x) 12.4 DCF Value Target Price Stock Capital Return 36.8% Dividend Yield 4.2% Total Stock Return 41.0% Market Market Return (e) 11.0% Dividend Yield (e) 4.5% Total Market Return 15.5% EXCESS STOCK RETURN 25.5% $1.45 $1.30

$0.20 $0.30 $0.40 $0.50 $0.60 $0.70 $0.80 $0.90 $1.00 $1.10