JUNE 2012 FUND UPDATE by Chief Investment Officer Carlos Gil

MARKETS AND ECONOMY If Paul Keating was a current treasurer of one of the EC members, perhaps he would have resorted to This is the crisis we had to have. As we have stated here previously, Europe will not avoid a recession, indeed some of its member states will have to endure a particularly severe one. Yet, the apparatus and institutions that govern the fragile coalition that is today the EC and its monetary system will be solidified and fortified by the prevailing crisis. Greater fiscal alignment at the expense of political sovereignty, bolstered mechanisms of banking supervision, perhaps an expanded mandate for the ECB and other institutional measures some of which are being canvassed and others will shortly be instigated will make the Europe of tomorrow a better structured union with more effective tools for fostering stability and growth of the region. Of course the crisis will endure with us for some time, and upturn in economic growth for the region is not forthcoming; however we look at the events unfolding as a catalyst for a better future for the region. A long term investor needs to not merely see the next turn in the road, but the full road ahead. Microequities Deep Value Microcap Fund returned a negative -3.40% versus the All Ordinaries Accumulation Index positive +0.25% in June; this brings the total return net of fees to 121.45% for the Fund compared to 52.04% for the All Ords Accumulation since inception in March 2009. The month of June was the first time since January that we have posted a relative underperformance. We accept relative underperformance will occur from time to time. It will not however affect the manner by which we manage the Fund. Our approach to investing is based on long term commitments to business partnerships that will deliver beneficial long term outcomes for our investors. I emphasise long term, because we cannot be a long term investor and become infatuated with short term market pricing. A months change in market pricing for our business partnerships does not cause any reactionary changes to our commitments or our view of the intrinsic value of our business partnerships. We look forward to the forthcoming financial reporting season were many of our business partnerships will articulate the underlying strength of their business operations.

8.2% 5.4% 3.4% 10.3%

3.2%

Cash Software & Services Telecommunications Media

Latest Unit Price $1.9536

Latest Fund Performance as at June 29, 2012
FUND 1 Month 3 Month 6 Month 12 Month 2 yrs comp pa 3 yrs comp pa Inception AOAI* OP*

39.7%
Commercial Services & Supplies Health Care Equipment & Services Diversfied Financials

11.0% 11.9% 7.0%

Utilities Hotels & Restaurants

-3.40% -6.53% +7.36% +10.56% +9.51% +23.90% +121.45%

+0.25% -5.64% +2.86% -7.04% +2.11% +5.86% +52.04%

-3.65% -0.90% +4.50% +17.61% +7.40% +18.03% +69.41%

(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 29 of June 2012

th

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