Acorn Micro Opportunities Fund

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acorn micro opportunities fund

A diversified portfolio of Australian microcap companies

key benefits

Investors in the Acorn Micro Opportunities Fund (Fund) receive the following:

A diversified portfolio of Australian microcap companies:

Acorn Capital (Acorn) constructs microcap portfolios from the full universe of ASX sectors, the full range of company development stages, and both listed and unlisted IPO opportunities.

Investment management by Australia’s most experienced microcap fund manager:

Acorn is the pioneer of Microcap company (Microcap) investing and is Australia’s longest running specialist microcap fund manager.

Strong fee alignment and capacity management:

▪ A performance fee will only be paid if the fund’s returns are above both the benchmark and 0%
▪ Acorn will hard close the fund at $150m, thereby preserving and optimizing return potential for existing investors

OVERVIEW

AN INVESTMENT STRATEGY DESIGNED TO CAPTURE THE INVESTMENT RETURNS ASSOCIATED WITH INVESTING IN EMERGING COMPANIES

WHAT ARE MICROCAPS

Microcaps are amongst the most dynamic companies listed on the Australian stock exchange (ASX). They have a market capitalisation of less than $500 million. Compared to larger capitalisation (Large Cap) companies, Microcaps are typically younger, faster growing, and more innovative. Such companies often report greater increases in sales, profitability, and productivity than older, larger and less innovative companies. Further, they are often require capital to fund higher growth and the fund is positioned to provide growth capital.

WHY MICROCAPS

Microcap investing provides exposure to earlier stages of a company’s development, with the majority of microcap businesses being in (or about to enter) the growth or expansion stages of their lifecycle. Microcaps also provide exposure to different investment themes than Large Cap. For example, the ASX microcap segment has greater industry diversity and is less concentrated in Financial and Resources companies than the Large Cap segment.

INVESTMENT OBJECTIVES

The fund aims to:

Outperform the S&P ASX Emerging Companies Accumulation Index (the benchmark) over rolling 3 year periods
Generate its returns with lower volatility than the benchmark

INVESTMENT STRATEGY

Acorn seeks companies displaying sustainable competitive advantages and investment risks that are commensurate with their return potential. These advantages are usually underpinned by innovation and come in many forms: a technology, a drug, a business process, intellectual property, a brand, or being first to market. Investment risks vary considerably by both industry and by stage of company development: Start Up, Early, Expansion, or Mature Growth stage.

Acorn also seek portfolio diversity, believing opportunity can be found in all industries and at all stages of company development. To capture this return, and to manage portfolio risk through diversification, Acorn’s large team of industry-experienced analysts scour the full investment universe. This include sectors and stages of company development that many other managers find too difficult to assess, such as Biotech, Resources, and Early stage companies. The resulting short list of best ideas then undergoes an extensive due diligence process, with research to establish each company’s true sustainable competitive advantage, and its upside potential and downside risk. Ultimately, a well diversified portfolio of 50 – 70 stocks is constructed taking into account each stock’s potential return and risk, its sector and stage of development, and each analyst’s level of conviction in that stock relative to all other investment opportunities.

The fund can invest up to 10% of net assets in Australian unlisted companies where a liquidity event, such as an IPO or trade sale, is likely within 6-12 months. Further, where insufficient opportunities meet or exceed Acorn’s return for risk hurdles the fund will hold cash (up to 20%) until suitable opportunities can be found. The fund may also invest up to 20% of net assets in gold stocks.

SUITABLE INVESTORS

The fund is suitable for wholesale* investors seeking:

Capital growth through a diversified exposure to Australian Microcaps
An active investment approach
A long term (5+ year) investment
A SIV compliant investment

*As defined by the Corporations Act

KEY FUND TERMS

Type Unregistered Unit Trust.

Objectives¹ Exceed the returns of the benchmark over rolling 3 years periods.

Objectives² Lower volatility than the benchmark.

Benchmark S&P/ASX Emerging Companies Accumulation Index

Investment Universe Australian Equities^1,2,5 80-100%, Unlisted investments^3,4 0-10%, Cash 0-20%.

Stocks # 50-70.

Liquidity Daily.

Investment timeframe 3-5 years.

Management fee⁶ 0.90%

Performance fee 20% of returns in excess of the benchmark^7,8,9,10

Sector limits Minimum of 5 sectors¹¹ Maximum of 20% of the fund’s net assets allowable in any one sector

Lifecycle stage risk guidelines Seed/startup 0-5%, Early 0-40%, Expansion 40-70%, Mature 10-20%

Borrowing The fund is permitted to borrow up to 5% of NAV to apply to redemptions. Borrowings may not be used to leverage or gear the fund.

Shorting The fund is long only. The fund is not permitted to short sell securities.

Trustee Acorn Capital Limited.

ACORN CAPITAL’S TRACK RECORD OF SUCCESS AND INVESTMENT EDGE

The Fund’s strategy will allow it to access differentiated investment opportunities as compared to the ASX250.

Acorn has significant experience investing in emerging growth companies.

ABOUT ACORN CAPITAL

STRONG &
DIVERSE DEAL FLOW

Powerful networks, industry access, team experience and limited competition.

LEADING
TEAM

Acorn has a large team with a strong investment track record. In house technical capability. A team that has been together for multiple years.

CAPABILITY
& FOCUS

Public & private market experience. Ability to access and assess investment metrics across listed and unlisted companies to identify opportunities and determine value.

Acorn Capital was established in 1998 as a specialist investment manager in emerging Australian companies. Acorn Capital distinguishes itself through its relatively large research and investment team with expertise across all industries, as well as its provision of expansion capital to developing companies.

Acorn employs the largest microcap / emerging companies investment team in Australia. The team comprises 10 investment management professionals with combined industry experience of 160 years. Two of Acorn’s most senior investors, Paul Palumbo and Robert Bruce, are co-Portfolio Managers of the Acorn Micro Opportunities Fund.

CORE INVESTMENT TEAM

IMPORTANT NOTICE

This document is prepared, issued and furnished on a confidential basis to a limited number of sophisticated investors who are wholesale clients (as defined in section 761G of the Corporations Act). The information contained herein should be treated in a confidential manner and may not be reproduced or used in whole or in part for any other purpose, nor may it be disclosed without the prior written consent of the Acorn Capital Ltd. This document is being provided for preliminary discussion purposes only, in relation to certain prospective investment opportunities. It is not intended to be complete or definitive. Any information provided in this document is subject to and superseded by definitive documentation. Whilst the information contained in this document is believed to be reliable, its accuracy or completeness cannot be guaranteed, and no responsibility for the accuracy or completeness of such information is assumed by Acorn Capital Ltd or any other person furnishing this document. Past performance is not necessarily indicative of future results. There can be no guarantee that targets or objectives set out in this document will be met. Any financial product advice provided in this document is general financial product advice only, and does not take account of the objectives, financial situation or needs of any person.