Benefits of investing in the OC Micro-Cap Fund

Significant benefits include:

• The Fund allows access to investment opportunities and diversification that individual investors usually cannot achieve.

• Access to our highly experienced investment team focussed on generating strong returns.

• A proven bottom-up approach to active investment management where the research effort is internally driven and focussed on company visits and industry analysis.

• An emphasis on risk management where we screen out complex or speculative businesses from our investment process.

• Flexible cash weightings of up to 20%.

• Strong alignment of interests with clients, the managers are owners of the business and investors in the Fund, providing strong investment performance incentive.

• A limit on the total amount of funds under management to avoid compromising investment performance by lack of transactional flexibility.

Risk level

High

Investor suitability

1. Investors seeking capital growth through a diversified exposure to micro-cap companies
2. Those looking to complement their direct large-cap Australian equity holdings or large-cap Australian equity managed funds
3. Investors seeking an active investment approach
4. Those with an investment horizon of five years or more

About the Fund

The OC Micro-Cap Fund is a long-only, benchmark-unaware managed investment scheme with a target investment universe of securities listed, or about to list, on the Australian Securities Exchange (ASX) or the New Zealand Stock Exchange (NZX).

OC's Micro-Cap portfolio is designed for investors seeking portfolio diversification and strong capital growth over the long term. In seeking to achieve this, the team invests in micro-cap Australian companies with sustainable business models and attractive investment qualities.

Dynamic yet under-researched, the micro-cap stock universe can offer compelling investment opportunities with exposure to Australian and New Zealand companies that are listed or unlisted (expected to be listed within six months).

Investment objective

1. The Fund aims to provide investors with strong long-term capital growth by investing in micro-capitalisation (micro-cap) companies with sustainable business models and attractive investment qualities. Micro-cap companies, for the purposes of the Fund, are defined as companies with a market capitalisation of less than $350m at the time of the initial acquisition.
2. The Fund aims to provide a total return (after fees and expenses) of 5% plus in excess of the S&P/ASX Emerging Companies Accumulation Index over a rolling five-year period.

How we invest your money

The Fund's investment universe is focussed on companies outside of the S&P/ASX 300 Index, which are often under the radar of professional investors and analysts and therefore under-researched. This can lead to mispricing opportunities, which the Fund is seeking to exploit.

OC undertakes detailed fundamental analysis to allow the team to identify securities trading below their intrinsic value and that have sound investment fundamentals providing the potential for strong long-term investment returns. OC will also invest in a small number of quality concept stocks, which have robust business models and a pathway to profitability within five years.

The investment strategy will follow a similar investment philosophy and process to that used in the OC Premium Small Companies Fund and the OC Dynamic Equity Fund with small adjustments to account for the different characteristics of micro-cap stocks (i.e. higher risk/ return profiles).

Strategic asset allocation

The Fund typically invests within the following guidelines:

• Australian listed securities: 70 - 100% (including hybrid securities such as convertible notes, redeemable preference shares and partly paid shares)

• Cash: 0-20%

• S&P/ASX 300 Index: 0-20%

• Unlisted securities*: 0-10%

• New Zealand listed securities: 0-10%

• Derivatives: 0%

• Maximum ownership of any company: 7.5%

• Maximum absolute stock position: 8%

*Must have a pathway to IPO within six months.