7/31/2019 Microequities Deep Value Microcap Fund May 2012 update

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MICROEQUITIES ASSET MANAGEMENT |AFSL 287526 |Suite 702, 109 Pitt Street, Sydney NSW 2000

Office: +61 2 9231 6169 Fax: +61 2 9475 1156 invest@microequities.com.au

MAY 2012 FUND UPDATE by Chief Investment Officer Carlos Gil

MARKETS AND ECONOMY

Financial markets renewed their focus on Europes sovereign debt issues. There are structural challenges facing

European leaders, clearly there is going to be some painful decisions that will necessitate solidifying the balance sheets

of some nations and in some countries, private banks. This will mean that creditors and debtor nations will need to

carve out an agreement to alleviate the financial markets demanding unsustainable risk premiums on some sovereigns.

Not an easy agreement to carve out in a region where political consensus is seldom achieved expeditiously. However,

we are comforted by the fact that the choice is rather simple, or as I like to put it, binomial in nature; if Europe wants

the EC to continue, and clearly they do, they will need to bring forward financial support packages (i.e. cash) to solidify

the region, if not the system will implode. Like the decision the Fed faced on whether to support its US banks after the

Lehman collapse, the consequences of inaction are much more unpalatable than the unsavory medicine required to

save the patient. As tediously slow as the Europeans are at bringing consensus resolute actions, they are not irrational

people, and reason says they will save Europes banking system and that other malfunctioning organization called the

EC. Just to dont ask them to do it quickly.

Microequities Deep Value Microcap Fund returned a negative -4.67% versus the All Ordinaries Accumulation Index

negative -6.90% in May; this brings the total return net of fees to 129.25% for the Fund compared to 51.66% for the

All Ords Accumulation since inception in March 2009.

Over the last 12 months our Deep Value Microcap Fund has provided a net return to investors of +13.28% versus the

All Ordinaries Accumulation Index return of -9.49%, that is an outperformance of +22.77%. We have outperformed in

a falling market, which is often associated with worse returns for our asset class. No positions were exited during the

month and we continued to purchase into two businesses in the Diversified Financials sector, businesses within our

sphere of competence.

*Deep Value Microcap Portfolio as of 31st

of May 2012

2.4%

35.6%

7.1%

4.9%12.9%

11.4%

9.8%3.8%4.2%

8.0%

Cash

Software & Services

Telecommunications

Capital Goods

Media

Commercial Services &

Supplies

Health Care Equipment &

Services

Diversfied Financials

Utilities

Hotels & Restaurants

Latest Unit Price

$2.0224Latest Fund Performance as at May 31, 2012

FUND AOAI* OP*

1 Month -4.67% -6.90% +2.23%

3 Month +0.53% -4.79% +5.33%

6 Month +12.34% +0.98% +11.35%

12 Month +13.28% -9.49% +22.77%

2 yrs comp pa +11.67% +0.65% +11.02%

3 yrs comp pa +25.96% +7.14% +18.82%

Inception +129.25% +51.66% +77.59%

(Returns are calculated after all fees and expenses and reinvestment of

distributions. Inception of Fund March 2009) *AOAI: All Ordinaries

Accumulation Index. *OP: Out-performance.

Past performance is not indicative of future performance.

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