NAC NTA Released for February 2017– NAOS Asset Management

NAC Investment Report & NTA Update February 2017

The NAC Share Purchase Plan (SPP) remains open until 5pm 20 March 2017. This gives all NAC
shareholders who were on the register as at 15 February 2017 the opportunity to acquire up to $15,000 of
NAC shares at a price of $1.12 per share, without paying any brokerage, commissions or other transaction
costs. Shareholders will also be entitled to the fully franked dividend of 2.5 cents per share, which will be
paid on the 28 April 2017 on all shares, including those shares issued under the SPP. For any queries
regarding the SPP please contact the team at enquiries@naos.com.au.

For the month of February, the NAC portfolio fell by -2.53%. February is a busy month for the NAOS team
as it is the period where companies release their half year financial results to December 2016. It is often a
period of increased volatility as results are compared to market expectations and stock prices move
accordingly, often to extremes and this February was no exception. Overall we were pleased with the way
our holdings reported and we include some highlights below.

Smartgroup Corporation Limited (ASX:SIQ) is a company we have owned since early 2015. During that
time management have done an impressive job of delivering on their strategy, making a number of
sensible acquisitions and creating significant value for shareholders. Despite some negative sentiment
towards diminishing returns in the sector, SIQ reported an impressive result with strong cash flow and
solid organic growth. As we look forward into the second half of 2017, we will see a full 12 months of
earnings contribution from the recent acquisitions, as well as the continued pay down of the modest level
of debt SIQ took on to fund those purchases. True to form, we also saw management buy more stock
post the release of their result which is consistent with purchases they have made in the past. SIQ
continues to be a business that fits well with the NAOS investment criteria and one we will continue to
hold in the portfolio.

Billabong International Limited (ASX:BBG) is a relatively recent addition to the portfolio after having been
in a turnaround phase for quite some time. For the first time in 3 years they have provided the market with
solid full year guidance as well as some granularity around cost savings and gross margin improvements.
Billabong is a company very much overlooked by the wider market, however we believe that the ~$1bn
BBG do in sales each year would suggest otherwise. To view the business simplistically, if they can return
to a 10% EBITDA margin, and a similar multiple is applied to those used for other listed retailers, it could
imply significant share price growth from current levels.