TRANSCRIPTION OF FINANCE NEWS NETWORK INTERVIEW WITH AUSBIL DEXIA LIMITED (S&P/ASX 300) PORTFOLIO MANAGER, MICRO CAPS, TONY WATERS Emma Pearson: Hello Emma Pearson reporting for the Finance News Network. Joining me today from Fund Manager, Ausbil Dexia for a look at the mid to small cap segment of the market, is Tony Waters. Tony welcome to FNN. Now you manager the Ausbil MicroCap Fund, how have stocks outside the S&P/ASX 200 performed this year? Tony Waters: Yeah well against the Index that we track against, which is the ASX S&P Emerging Companies Index, that Index has outperformed the ASX 200 by over 7% this year. Emma Pearson: Now mid to small cap stocks often get by-passed by investors for a variety of reasons, ranging from their perceived riskiness to poor liquidity or simply a lack of awareness. Are these concerns justified or are the markets in these stocks much more robust these days? Tony Waters: The risk that we look at more is liquidity. We certainly think we can find some very strong and robust business model in the ex-(S&P/ASX)200 space. So certainly the ebbs and flows of liquidity in the small cap space is more pronounced than the larger cap blue chips and for us, it’s important that we manage the Fund around that and take advantage of substantial opportunities, when the liquidity dries up in the ex-(S&P/ASX)200 space. Emma Pearson: Turning to the Ausbil MicroCap Fund, would you characterise the Fund as value, growth or something in between? Tony Waters: We’re described as ‘core’, which means neither value nor growth. What we’re trying to do is add value for our unit holders throughout the full cycle. Emma Pearson: And Tony how long has it been going and what’s its performance year-to-date? Tony Waters: Yeah we started in February this year and so far our performance at a gross level is over 20%, and that’s against our index which is 1%. Emma Pearson: What are your top three holdings and is the Fund broadly diversified? Tony Waters: Yeah we’re very diversified across the different industries. Our biggest holding is Matrix Composite. This is industrial business that is exposed to the energy sector; it manufactures buoyancy systems for deep sea offshore oil rigs. Our second largest holding is a US Oil Shale play called Aurora. The thing we like about that is the consistency of their well, results is extremely good. So we’re not having to take a high risk proposition in terms of reinvestment on an exploration play. We’re looking at what’s going to be very consistent cash flow coming out of the business in the next few years, which on that basis we see a significant undervalue. And the third business we have is a company called CSG which is an IT and Print Services Company - very high annuity cash flow stream and very strong earnings growth this year, versus the year just gone. Our business which we think is still very cheap given the earnings growth prospects. Emma Pearson: Tony thanks for bringing this section of the market to our attention. Tony Waters: Thank you very much Emma.
