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MAY 2012 PERFORMANCE UPDATE by Carlos Gil, Chief Investment Officer

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 brining 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 High Income Value Microcap Fund returned a negative -3.91% versus the All Ordinaries Accumulation Index negative -6.9% in May. May has proved to be a difficult month from a market pricing perspective. Though we declined we still attained an almost 3% outperformance compared to our benchmark Index. Our asset class tends to do worse in falling markets than rising ones, but we believe our value approach will provide resilience. Certainly from a fundamental perspective the businesses the Fund owns have an intrinsic value far greater than the current market pricing, so given we received strong investment inflow into the fund during the month of May, we will be deploying these funds at very good value points.

Current Forecast Grossed Up Dividend Yield of the Fund*: +12.62%


*Forecast Grossed up Yield is based on internal forecasts and actual results may vary. Investors should note that Gross Dividend Yield is not a forecast distribution as distributions will depend on actual dividend income received and actual number of units on issue at the time a distribution is made.

7.6% 1.0% 5.7% 2.7% 8.5%

Cash Software & Services Consumer Durables & Apparel Capital Goods Media

Latest Unit Price $1.0027


Latest Fund Performance as at May 31, 2012
FUND 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month Inception AOAI* OP*

12.4% 3.9%

-3.91% -1.78% +0.27%

-6.90% +2.99% -5.87% +4.09% -4.79% +5.06%

40.2%

Commercial Services & Supplies Diversfied Financials Retailing Banks

18.0%

+0.27%

-4.79% +5.06%

*High Income Value Microcap Portfolio as of 31 of May 2012

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(Returns are calculated after all fees and expenses and reinvestment of distributions. Inception of Fund March 1, 2012) *AOAI: All Ordinaries Accumulation Index. *OP: Out-performance. Past performance is not indicative of future performance.

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