Microcaps Teleconference 21 October 2009

Melbourne based boutique investment manager established in 1998

First investment manager to exclusively target the Australian microcap sector

Largest specialist microcap investor in the Australian market

Has been investing in the Australian microcap sector for over 9 years

Track record of consistent long term performance

Joint venture partner of Australian Unity

Who is Acorn Capital?

We are stock pickers for the microcap sector

We are investors, not traders

We follow a research driven investment process

The analyst’s job is to select the best microcap stocks within their sector

Each analyst is fully responsible for his stock decisions, effectively a mini

portfolio manager

What do we do?

All stocks outside the largest 250 by market capitalisation

Has total market capitalisation of $91B (1 Oct 2009)

Has over 1,700 companies

Largest company $423M

Average company size $54M

* Data as at 1 October 2009

What is the Microcap sector?

Provide exposure to different sectors of the general economy

More companies at early stage of corporate development (R&D and

exploration type companies)

Smaller exposure to banks, insurance and media companies

Larger exposure to industrials, IT, healthcare & biotech and resource sectors

Higher volatility

Reduced liquidity

Source of stars (and almost all failures)

Less than 1% under-performance vs AllOrds over 35 years

Microcap sector vs general market

Capturing alpha by exploiting market inefficiencies

Under-researched

Poor information flow

Lack of liquidity

Large number of stocks

Can add significant alpha by finding future stars

Why invest in the Microcap sector?

Large number of stocks to choose from

Higher volatility

Reduced liquidity and higher transaction costs (crossing bid-ask spread)

Large % of developing companies

Source of almost all failures

Treacherous place for uninformed investors

General risks of investing in the Microcap sector

Diversified portfolio (of up to 80 stocks) across all sectors

Long term investment horizon to ride out volatility, diversified portfolio

Low turnover of diversified long-term portfolio (averaged low 20%), very active in primary market, large active broker network and patient anonymous dealing

Style neutral – allow investments in developing companies; long term investment horizon to allow companies to develop/mature; and diversified portfolio to capture potential stars

Sector neutral, style neutral, diversified portfolio, maximum investment 5%, maximum holding 7.5% and a research driven stock selection process - to minimize impact of failures

Research driven investment process by large dedicated in-house research team

How does Acorn Capital mitigate the risk?

Proprietary database enabling customised quant ranking

Conventional analytical framework, no black box

- The company’s business

- Competitive position

- Business strategy

-Management assessment

-Strength of balance sheet and cash flow

-Historical financial analysis

-Scope for improving return on funds and margins

-Earnings and cash flow estimates

Report on each company

Final ranking, selection for approved list, preferred portfolio and stock weights

On-going review of relative valuation

Acorn Capital’s stock selection criteria

For investors looking for long-term investments in the microcap sector,

Acorn Capital

Has a proven investment strategy that takes into account the specific

characteristics/risks of the microcap sector

Has a proven research driven investment process that works

Has a 9-year track record of consistent long-term outperformance against

the Microcap Benchmark1

Which was tried and tested over bull and bear markets.

1. Over 9 years to Sep 2009, Acorn Capital Composite (pre-fees) returned 15.77% p.a., vs 8.85% p.a. for the Microcap Accumulation Index, 7.80% p.a. for the Small Ords

Accumulation Index, and 8.59% p.a. for the All Ords Accumulation Index

Why Acorn Capital?

1. Acorn Capital’s investment strategy was validated

i.e. fully invested, style and sector neutral

2. Acorn Capital’s investment process proved robust

i.e. the singular importance of good management, good corporate governance

and good disclosure to small/microcap companies

Companies with a good track record are more resilient in difficult times

3. Acorn Capital’s clients were supportive and didn’t panic

i.e. they understand that microcaps are more volatile than large caps and thus

offer potentially superior returns over the long term

Lessons drawn from the GFC and its aftermath

FY2008/09 was a tale of two halves, with big turnaround in performance in Microcap sector in 2nd half

Characterised by a rebound in the small to microcap end of the market after being significantly oversold

The Acorn Capital Microcap Trust underperformed the AllOrds index by 20.4% in the 1st half

But in 2nd half, it outperformed the AllOrds index by 32.3%, a significant turnaround

Portfolio Performance

1. Source: S&P/ASX Indices, Australian Graduate School of Management & Acorn Capital.

Period 1st Half 2008/09

2nd Half 2008/09

% %

All Ordinaries (29.69) 10.72

S&P/ASX Small Ords (42.04) 23.22

Microcap Index (46.52) 37.80

Acorn Capital Microcap Trust (50.08) 42.98

Value Added vs Microcaps (3.57) 5.18

Value Added vs Small Ordinaries (8.04) 19.76

Value Added vs All Ordinaries (20.40) 32.25

The Acorn Capital Microcap Trust (wholesale) has returned 16.09% p.a. (post-fees) since inception (8 years & 7 months)

1. Source: S&P/ASX Indices, Australian Graduate School of Management & Acorn Capital.

2. Acorn Capital Microcap Trust (Wholesale) Inception: 28 February 2001 – Returns are calculated after fees and expenses

Portfolio Performance

Periods to 30 Sep 2009 1 1

Year %

2 Years % p.a.

3 Years % p.a.

5 Years % p.a.

Since Inception

2 % p.a.

All Ords 7.40 (11.21) 1.74 9.74 8.77

S&P/ASX Small Ords 6.26 (16.58) (1.65) 7.62 8.46

Microcap Index 26.83 (13.83) 1.02 7.17 10.12

Acorn Capital Microcap Trust 2 15.96 (14.21) 3.71 10.83 16.09

Value Added vs Microcaps (10.87) (0.38) 2.69 3.66 5.97

Value Added vs Small Ordinaries 9.70 2.37 5.36 3.21 7.63

Value Added vs All Ordinaries 8.56 (3.00) 1.97 1.09 7.32

Important information

Applications for investments in these products may only proceed on the respective application attached to or accompanying the current Product Disclosure Statement (PDS). A PDS containing full details should be obtained before making any investment decision. A Product Disclosure Statement (PDS) for these products is available at www.australianunityinvestments.com.au or by calling us on 1800 649 033. You should consider the PDS in deciding whether to acquire, or continue to hold the product.  This information has been prepared as general information for use by financial advisers only. It does not take into account your circumstances. While every care has been taken in the preparation of this information, we cannot warranty its accuracy or completence and we reserve the right to make corrections. Information can change over time.

Past performance is not a reliable indicator of future performance.