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.
Cash

8.0%

2.4%

Software & Services Telecommunications

Latest Unit Price $2.0224

Latest Fund Performance as at May 31, 2012
FUND 1 Month 3 Month 6 Month 12 Month 2 yrs comp pa 3 yrs comp pa Inception AOAI* OP*

3.8% 4.2% 9.8%

Capital Goods

35.6%
Media Commercial Services & Supplies Health Care Equipment & Services Diversfied Financials Utilities Hotels & Restaurants

11.4% 7.1% 12.9% 4.9%

-4.67% +0.53% +12.34% +13.28% +11.67% +25.96% +129.25%

-6.90% -4.79% +0.98% -9.49% +0.65% +7.14% +51.66%

+2.23% +5.33% +11.35% +22.77% +11.02% +18.82% +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.

*Deep Value Microcap Portfolio as of 31 of May 2012

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