A strong reporting season, but not rewarded for it

PDF

Every reporting season we keep a scorecard for the Global Funds focused on two areas:

• How many companies beat, met or missed the market’s earnings expectations.
• How many raised, held or cut earnings guidance.

The table below shows August 2026 – the month when most of our companies reported their June quarter numbers. It also includes the previous dozen quarterly reporting seasons.

The August 2026 numbers are as good as any we have recently recorded:

• 88% of our companies beat earnings expectations, equal to our best season over this period, and only 3% missed.
• 73% raised guidance, the highest of the 13 seasons we have tracked here, and just 1% downgraded.

That is a portfolio of businesses in good health.

And yet the Fund outperformance line at the bottom of the table for August reads just +0.5% for the Global Opportunities Fund and +0.3% for the Global High Conviction Fund.

Great results, not much reward.

If that sounds familiar, it should, because we saw the same pattern – share prices lagging great earnings results – in February and March this year. Back then, the outbreak of the Iran conflict stole the market’s attention during reporting season. But the following month, April, share prices caught up with earnings.

This time in August, the market’s attention was on the TMT momentum explosion and a surge in gold prices, and our companies’ results were largely lost in the noise. (We look at that explosion, and how our risk management kept us out of the blast radius, in this month’s Letter to Investors.)

We can’t promise, nor are we counting on, a repeat of April. But companies that beat and raise do tend to get rewarded eventually. So if the market bounces we think we have companies well placed to benefit from that bounce. Conversely, if higher rates continue to weigh on market sentiment, we are happy we have a portfolio full of companies that just reported strong fundamentals.

Three key themes

1. Selling the winners

August’s defining feature was profit-taking on the AI trade. Companies that had run hard into their results were sold on good news, and more than US$1 trillion came off the value of US semiconductor stocks in the back half of the month.

Our own portfolio gave us the cleanest example, and we cover it in detail below. Silicon Motion grew revenue 127%, printed a record gross margin and guided the September quarter to another sequential record – and fell around 25% across July and August. Nothing in the result explains the share price. The flows do.

Nvidia is the exception that proves the rule. It reported after the close on 26 August with revenue of US$96.2 billion, more than double a year earlier and about $4 billion ahead of consensus. It guided the current quarter $4 billion above the street. Then it forecast roughly 70% revenue growth for the following financial year, close to double what analysts had pencilled in. The stock rose 8.7% the next day.

But look at what it took. Nvidia had beaten consensus in each of the previous five quarters and its shares had fallen after four of them, with the stock roughly flat since October despite an unbroken record of beats.

The lesson isn’t that good results don’t matter. It’s that positioning does, and there were clearly very crowded parts of the market where a beat and raise isn’t necessarily enough.

2. Where the money went

Money leaving the AI trade had to go somewhere, and August showed where.

In February we published SaaSpocalypse Now?, arguing that the dispersion between semiconductors and software would keep widening – infrastructure had earnings visibility, while the application layer had an existential question hanging over seat-based pricing in a world of AI agents. The S&P 500 Software & Services index fell more than a third from its October 2025 peak to April, and names like HubSpot, Atlassian and Figma fell 70–80% from their highs. That was right for several months, but the relative trade has found a floor, at least for now.

We still don’t think the debate is settled, but August earnings season was the opportunity for some of those beaten-up software names to demonstrate how they were managing or avoiding the impact of the AI disruption fears.

And that’s ultimately where the incremental dollar started to flow. It meant that across the month the US software basket rose +17.5% – its best August since records began in 1990 – against +0.8% for semiconductors.

Software wasn’t the only beneficiary, as the rotation away from the AI trade was also directed towards healthcare – a sector under pressure for much of the year as negative sentiment led investors to use it to fund the AI trade.

The debate has genuinely shifted. Six months ago software had to prove AI would not destroy its economics; in August several of the largest platforms started proving AI can improve them. We would not declare it over – one earnings-driven squeeze can look like a regime change and then fade, and the sector is no longer cheap. But the burden of proof has moved.

It is also the best argument we know for not making heroic thematic calls. We sat close to index weight in both software and semiconductors through this period, not because we predicted the reversal but because we were honest that we had no edge on the big AI questions. When the pair unwound, most of the blast went past us.

3. Where the money isn’t going

The one place the money did not rotate was the early-cycle trade.

Earlier this year, housing-exposed names, building products, industrial distributors and freight had been among the biggest beneficiaries of the market broadening out. Investors were positioning for a rate-cutting cycle that would pull those end markets off historically low levels of activity.

August turned that on its head. At Jackson Hole, Fed Chair Kevin Warsh left the door open to a rate rise, and Cleveland Fed President Beth Hammack was more direct still, arguing that with inflation near 3% “now is the time to act”. A September rate hike is now priced as a near certainty following strong payrolls data and a largely in-line CPI print that didn’t do enough to ease concerns.

You could see it in the results. Cyclically-exposed companies that reported perfectly good June quarters were marked down on second-half commentary that would have been rewarded three months earlier, because the market has stopped paying for a recovery that now needs lower rates to arrive.

Our response has been to add incrementally to size and liquidity as the market approaches an important decision point and potential regime shift.

Two results case studies (a winner and a loser)

Below we take a closer look at one winner and one loser from the recent results season.

The Winner – Avient (NYSE: AVNT)

Avient is a Cleveland-based specialty materials business – custom colours, additives and inks in one segment, engineered polymer formulations and composites in the other. It sells small volumes of high-value formulations into a long tail of customers, after the better part of a decade divesting commodity volume and buying specialty IP.

The idea came out of a trip to Cleveland earlier this year to test the breadth trade. We wanted to know whether the market’s broadening beyond AI was underpinned by real end-market demand or was simply money rotating out of crowded positions – so we sat down with a long list of industrial and materials companies in one of the densest manufacturing corridors in the US and drilled them on volumes, pricing and order books.

The response was mixed, which was itself the answer. Volumes were not recovering. But pricing was holding, and the businesses with genuine structural growth inside them were compounding regardless. Avient was the cleanest expression of that. We followed up with an onsite CFO meeting and calls with the CEO, and initiated a position in June.

The thesis needed no cyclical recovery. Roughly 20% of the business – healthcare, defence, electrification and non-PFAS packaging – was growing at double digits, and on our numbers those segments alone delivered the revenue growth consensus was expecting. Margins had upside from pricing and reformulation rather than volume. And at 8x EBITDA, a business that sold its low-margin distribution arm three years ago and hasn’t seen an up-market since had never had the chance to re-rate toward the mid-teens multiples its higher-quality peers command.

Do we still own it?

Yes.

Following a strong result the stock popped to a mid-$40s share price, but has given back some of that bounce since the result. It remains well inside the valuation range we think it can support and still at a discount to the specialty peers it now more closely resembles. Leverage will continue to reduce, which provides additional optionality for management. We don’t believe we’re paying anything for a cyclical recovery, and if volumes do recover, this becomes a high-single-digit earnings grower rather than a mid-single-digit one.

The Loser – Silicon Motion (NASDAQ: SIMO)

Silicon Motion is a fabless designer of NAND flash controllers – the small processors that manage how data is stored, retrieved and protected inside smartphones and the solid-state drives (SSDs) that are critical to AI infrastructure.

Why we owned it

We bought it in June 2025 and wrote it up as our storage exposure in SaaSpocalypse Now? in February. The thesis was deliberately simple: as AI capex ballooned, memory and storage were becoming the bottleneck, and we wanted exposure to the picks-and-shovels layer at a reasonable multiple rather than a view on every turn of the AI cycle. It worked. Revenue more than doubled in the March quarter, the stock went from around $70 to a peak above $330, and it was one of our two standout contributors for FY26.

What went wrong (it wasn’t the result)

The June quarter result was the best in the company’s history. Revenue of $451 million, up 127% year-on-year and 32% sequentially, against the company’s own guidance of up to $411 million, with record gross margins. Management guided the September quarter to $519–541 million, implying another 15%-plus sequential step-up.

But the stock fell anyway, from a mid-July peak of around $320 to trade around $250 for much of August as the market rotated away from momentum and AI winners from earlier in the year.

Do we still own it?

Yes – but at a lower weight.

We had been consistently taking profits while holding Silicon Motion and trimmed further in the June quarter, on the view that when a thematic call works the discipline is not to let the sector exposure keep compounding. Had we run the position at full weight into July and August, the two months would have looked very different for the Funds.

The business itself has not changed. Management expects NAND scarcity to persist to around 2028, and their higher-value products – PCIe Gen5 controllers, enterprise boot drives, automotive Ferri solutions – are now close to 30% of revenue and growing fastest. But we are not going to pretend we saw the last two months coming. In a crowded thematic, the stock and the company can move independently for longer than is comfortable – and trimming a winner on the way up is what buys you the patience to hold it on the way down.

Delayed gratification

Two stocks, two directions, and in both cases the share price told you more about positioning than about earnings.

Avient beat, raised, expanded margins to a record with its biggest region shrinking, and re-rated. Silicon Motion beat by a distance, guided to another record, and fell. The difference was not execution. It was who else owned it.

That is what the whole month looked like. Our companies delivered 88% beats and 73% guidance upgrades – as good a scorecard as we have recorded – and the Funds weren’t rewarded for it.

We have had this happen before, and sometimes you need patience while the gratification is delayed. We would much rather own a portfolio of businesses whose earnings are running ahead of expectations and whose share prices have not yet noticed, than the other way around.

TMT: it’s dynamite

PDF

In this Letter to Investors, we look at:

• Why US earnings are surging as if they were recovering from a recession (despite no recession), and how that is helping the share market defy fears and grind higher.
• The biggest two-month blow-up in technology momentum in history, and who was left holding the fuse.
• How our Global Funds’ risk management allowed us to sidestep the blow-up and even outperform.

A young AC/DC warned us about TNT more than 50 years ago. In August, what blew up was TMT: the technology, media and telecommunications stocks at the centre of the AI trade.

For most of this year, investors had gone long (bought) the AI semiconductor winners and bet against (shorted) the software companies AI was meant to disrupt.

In August, the most crowded position in global markets, and a hedge fund favourite, detonated.

You would not have picked it from the headline indices though:

• The S&P 500 gained +2.7% and the Nasdaq Composite rose +4.6%.
• The ASX 200 added +1.7%.
• Our own patch, small caps, did better again. The ASX Small Ordinaries Accumulation Index jumped +5.2%, helped by gold stocks (the ASX All Ordinaries Gold Index rose +28.9%).
• Global small and mid caps rose +2.1% in US dollar terms, but a stronger Australian dollar took most of that back for unhedged investors. In Australian dollar terms our global benchmark, the MSCI World SMID Cap Index, was up just +0.3%.^[1]

The factor headwinds that hurt us in July did not let up in August, both here and particularly in the US. (We look at these in more detail below.) So we were reasonably pleased that three of our four Funds outperformed and the fourth lagged only a little:

• The Ophir Opportunities Fund returned +6.8% net of fees against +5.2% for its benchmark, an outperformance of +1.6% and a welcome bounce after a tough July. Since inception in August 2012, the Fund has returned +22.6% per annum after fees.
• The Ophir High Conviction Fund returned +4.5% net of fees, -1.0% behind its benchmark’s +5.5%. When resources and gold rip like that, we are never going to keep pace. The ASX-listed units (ASX: OPH) returned -3.9% as the discount to NTA widened again after narrowing in July.
• The Ophir Global Opportunities Fund returned +0.8% net of fees. Its benchmark, the MSCI World SMID Cap Index (NR, AUD), returned +0.3%, an outperformance of +0.5%.
• The Ophir Global High Conviction Fund returned +0.6% net of fees, +0.3% ahead of the same benchmark.

The two Global Funds were the standouts.

Given the TMT detonation, July and August were about as hostile as it gets for any fund holding momentum stocks. That includes our Global Opportunities Fund, which had returned +31.8% for the year to 30 June 2026.

The fact that the Fund got through the two months without giving much back is a testament to our risk management. (More on that below.)

A post-recession earnings explosion, with no recession

Before we get to the TMT fireworks, a word on the fundamentals driving the market higher.

Many investors and commentators remain sceptical that the US market can keep rising. But there is a powerful reason it is continuing higher.

The chart below shows how fast expected earnings for the next twelve months (NTM) are growing for S&P 500 companies, year on year, going back to the late 1990s.

The current growth rate is close to +40%.

It has only been that high twice before: coming out of the GFC in 2010, and in the COVID reopening of 2021.

Both were rebounds out of a recession, so +40% growth off a depressed base was less impressive than the number suggests.

This time there was no crater and no recession. US earnings are accelerating from a base that was already high, a much rarer beast.

The recently completed June quarter US reporting season backed that up. A whopping 86% of S&P 500 companies beat earnings estimates, the highest proportion since the 2021 COVID reopening. Much of this came from the AI capex boom continuing to beat expectations and spreading to the second- and third-order beneficiaries of that investment.

Regular readers know our mantra: over the long term, share prices follow earnings. Right now, earnings growth is underpinning the US share market.

The rub is that an economy this strong can keep inflation sticky.

At Jackson Hole in late August, the new Fed Chair, Kevin Warsh, left the door open to a rate rise. The market’s odds of a September hike went from about one in three to two in three.

Even so, we would rather own small caps in a hot economy with a wary Fed than in a weak economy that needs rate cuts.

Momentum in tech: watch it explode

Now to the fireworks.

Momentum investing is simply buying what has been going up and selling (or shorting) what has been going down. It works beautifully for long stretches, right up until everyone tries to flee through a narrow exit at once.

As mentioned, this year the TMT momentum trade has been a pair:

• Long (buying) the AI winners: semiconductors, memory and AI infrastructure.
• Short (selling) software, particularly the SaaS (software-as-a-service) businesses AI is supposedly going to disrupt.

The chart below shows the rolling 60-day drawdown of that pair going back to 1999, when the data starts.

Over July and August, the pair fell -55%.

Nothing in more than 25 years comes close. Not even the dotcom bust.

Split the pair into its two legs and the picture gets clearer.

The long leg (the gold line) had been leaking since late June. But the real damage in August came from the short leg (the red line). The stocks people were short, mostly software, jumped +22.2% in a single month.

The US software basket rose +17.5% in August while the semiconductor basket managed just +0.8%.

More broadly, software had its best August since records began in 1999, and more than US$1 trillion came off the value of US semiconductor stocks in the back half of the month.

What lit the fuse?

Most likely a combination of extremely crowded positioning, a valuation gap between the two camps that had stretched about as far as it could, and a handful of software results suggesting AI might be helping these businesses rather than knocking them off.

Once the short leg started moving, forced covering by hedge funds did the rest.

How our Global Funds used risk management to avoid blowing up too

So how did our Global Funds get through a month like that with a small outperformance rather than a large hole?

We had not made any big thematic calls. We had not bet everything in either direction, overweight semis or short (or underweight) software.

As we have said before, we have no edge on the big AI questions. Will the memory shortage last? Will agentic AI hollow out the software incumbents? What will open-source model providers, in China or at Meta, do to token pricing?

We do not know, and we are not convinced anyone has an edge on those questions, or on whether the market has priced them correctly.

The chart above shows the Ophir Global Opportunities Fund’s (GOF, in yellow) weight in software and in semiconductors against its benchmark.

We sit close to index weight in both. So when the pair blew up, most of the blast went past us.

One big heroic thematic call has never been part of our investment process. Our returns have always come from individual companies with their own idiosyncratic earnings drivers.

Keeping out of the TMT blast radius

July and August were one of the most violent periods for technology momentum in decades. Our Global Funds came through relatively unscathed.

We would love to claim we saw it coming. We did not. We just never went all in.

As always, investing in shares is a long-term endeavour and a month or two tells you very little. Investors in our Funds should have a time horizon of at least five years.

We will keep doing what we do: hunting for idiosyncratic small caps whose earnings the market has not yet found, at a safe distance from the dynamite.

If you would like to chat to us about any of the Funds, please call us on (02) 8188 0397 or email ophir@ophiram.com.

Thank you for entrusting your capital with us.

Kindest regards,

Andrew Mitchell & Steven Ng
Co-Founders & Senior Portfolio Managers
Ophir Asset Management

[1] For investors concerned about further appreciation in the Australian dollar, our Global Opportunities Fund is also available in a currency hedged version [factsheet].

SOX on Sale: Staying disciplined through July’s AI rout

PDF

In this Letter to Investors, we look at:

• The worst month for semiconductor stocks since the GFC, and why the broader US market barely blinked.
• How our Global Funds avoided the fate of momentum-chasing peers during the semis sell-off by successfully implementing downside risk management.
• The stock picking that still added value in a brutal month for our style.
• US business activity surveys hitting their highest level since 2022, and why that is good news for small caps.
• Why we believe the small-cap earnings upgrade cycle may have further to run.

Warren Buffett once quipped: “You only find out who is swimming naked when the tide goes out.”

If all you were riding at the start of this year was the semiconductor and memory AI trade, you looked like a stock-picking genius.

But then, suddenly, in July, the tide went out. And it revealed those who’d forgotten to put on their bathers before hitting the water.

In July, the Philadelphia Semiconductor Index (ticker: SOX) suffered its worst month since the GFC. US semi stocks fell more than 20% and some memory names nearly halved.

Take Sandisk. Yes, the company behind the SD cards and thumb drives you probably have in a drawer, and a big beneficiary of the enormous demand for memory created by AI large language models.

Sandisk was the best-performing small-cap stock globally for the year to June 2026. It grew from about a US$6.5 billion market cap to a $337 billion market cap – cracking 50-bagger status (a more than 50-fold increase in market value) in less than 12 months.

But by late July it was worth just $150 billion – cut by more than half!

Despite this carnage, the S&P 500 finished the month down just -0.1%. (Trivia for your next dinner party: that was its first negative July since 2014, snapping eleven straight July gains.)

Under the surface, money was moving at pace out of the year’s hottest trade and into almost everything else. Around 59% of S&P 500 companies actually rose in July, and the equal-weight version of the index (where each stock gets the same weight irrespective of market cap) gained about +1.0%.

At home, the ASX 200 added around +2.2% for its fourth straight monthly gain, one of the better results among developed markets.

Small caps, however, had a tougher time. Our Australian benchmark, the S&P/ASX Small Ordinaries Accumulation Index, fell -3.2%; while our global benchmark, the MSCI World SMID Cap Index (in Australian dollar terms), fell -2.4%.

All four of our Funds underperformed their benchmarks in July. We are not, however, overly concerned for two reasons:

• In the Aussie Funds, last year’s big winners simply gave a little back in July, while the local market offered fewer unloved names to recycle capital into than our Global Funds had available.
• And in our Global Funds, July represented one of the stronger months of relative downside resilience we have experienced in years, despite underperformance – below we explain why.

SOX on Sale

First, the scene of the accident.

From January to late June this year, the AI trade went close to vertical.

The Philadelphia Semis Index, the Korea Stock Exchange (home to the big memory manufacturers Samsung and SK Hynix), and US tech momentum stocks were all up roughly +100% or more at their peaks.

In July, as mentioned, a big chunk of those gains disappeared in a matter of weeks.

What caused the savage sell-off? A murderers’ row of suspects:

• Crowded positioning.
• Stretched valuations in the most speculative corners of the AI trade.
• Question marks over whether AI capex will pay off.
• A US Federal Reserve that turned more hawkish on inflation late in the month.

Here is the part we find most interesting. The correlation between US AI stocks and the rest of the market collapsed. In fact, during July it went NEGATIVE for the first time in the decade-plus history of the data: that is, while the rest of the market rose, AI names fell.

To us, that reads as rotation. Investors took profits on the AI trade and spread the proceeds across the rest of the market. After two years of complaints that a handful of AI winners were carrying every index, breadth is finally improving.

For stock pickers in small caps, that is welcome news.

No AI overweight in Global funds, no worries

Regular readers (and webinar watchers) will know our stance on semiconductors and memory: we hold roughly the index weight, around 8-10% in our Global Funds, and no more.

That’s because we have no edge on the big structural question of where the AI capital expenditure cycle lands. Where we do have an edge is in the handful of individual AI-related companies where our research legwork tells us something the market hasn’t priced.

That discipline felt slow in the first half of the year as we watched semis and memory stocks soar. But in July our discipline paid off.

The chart below shows July and year-to-June returns for a selection of the global small- and mid-cap funds available in Australia. As you can see, some funds that shot the lights out in FY26 (year to June 2026 – right chart) were body-slammed in July (left chart). One peer that beat us and returned nearly +80% for the year fell almost -18% in a single month!

Our Global Opportunities Fund was a top performer over the year to June and middle of the pack in July.

When small caps sold off in July, it was particularly pleasing that we kept most of the strong gains we made in the year to June.

It again goes to show we didn’t generate those returns to June by just riding the AI wave and relying on getting that one call right.

How our Global Funds successfully protected FY26’s big gains

Hang on. The Fund underperformed by 1.9% in July and you’re pleased?

Fair question. Here’s our answer.

The Global Opportunities Fund returned +31.8% after fees in FY26 versus +16.0% for its benchmark. A year like that loads a portfolio up with momentum whether you like it or not: your winners keep growing as a share of the fund. We trimmed those winners consistently as we went.

Even with those big winners in the portfolio, the Fund fell just 1.9 percentage points more than its benchmark (-4.3% versus -2.4%) in a month when momentum stocks were sold off harder than at any point in years.

We are proud of the composition of that result.

The drags came from factor exposures: Size (smaller stocks where we shop fell more), growth (which underperformed value as energy, financials and real estate ran), beta, and momentum-related effects that inevitably accompany a portfolio of fast-growing small caps after a big year.

But look at the gold bar. Our Selection Effect – the value added purely by picking the right stocks – was +0.7% in July. Even in a month where the style headwinds were near gale-force, our stock picking still worked.

And industry positioning cost us just -0.2%. If we had carried an overweight to semis, that number, and the month, would have looked far uglier.

Over the past four years we have improved our risk-management framework, and a central focus has been downside protection. Months like July are a test of whether we’ve succeeded, and we think the Funds passed successfully. Indeed, at the time of writing in mid-August, the Global Funds have already recouped almost all of July’s fall and underperformance.

As a reminder, though: investing in shares is a long-term endeavour, and one month, good or bad, tells you very little. Investors in our Funds should have a minimum time horizon of at least five years.

US business expansion data bodes well for small caps

While the AI trade was wobbling, the US economy was quietly doing something it hadn’t done in years.

The ISM Manufacturing PMI (Purchasing Managers’ Index, a monthly survey of US business conditions) printed 55.6 in July, its highest reading since 2022.

If we average manufacturing and services surveys, US business activity is now clearly back in expansion territory after hovering around the neutral 50 mark for the better part of three years.

If that growth continues and the Federal Reserve eventually cuts interest rates, history suggests that combination provides rocket fuel for the most economically sensitive part of the share market: small caps.

We are not there yet. More rate cuts may be some way off, and the Fed’s recent hawkish tone reminds everyone the path won’t be smooth. But the direction of travel in the real economy is encouraging.

Why we believe small-cap outperformance may continue

Better still, the improvement is showing up where it matters most to us: earnings!

After years of moving sideways, a US small-cap earnings upgrade cycle kicked off in the latter part of last year. Forward earnings expectations for the S&P 600, the main US small-cap index, have now risen by +31% since the start of 2024 – with the uptrend starting late last year. This is capturing investors’ attention.

Famed investor Peter Lynch said a company’s earnings and its share price are 100% correlated over the long term. The same holds for whole segments of the market.

Earnings upgrades have been the fuel behind US small caps outperforming large caps since late last year, and we think that story has further to run.

Why?

The PMIs and US small caps’ earnings are finally lifting because of 1.75% of rate cuts by the US Federal Reserve over the last two years, as well as tax cuts for households and businesses put in place by the Trump Administration last year.

So, absent any big rate hikes (the one 0.25% Fed hike priced by the market over the next year won’t be enough to change the picture) or exogenous shocks like wars, this small-cap tailwind in the US likely has further to go.

The final ingredient in the mix is that, despite US small caps outperforming large caps since late last year, relative valuations (price-to-earnings ratios) still scream great value for US smalls.

Keeping our bathers on

In sum, July was a stinker for momentum, semiconductor and memory stocks. Yet our Global Funds protected most of the value they had gained the previous year. It was a great test of the downside protection we have spent years building into those Funds.

We will keep doing what we always do: working our butts off meeting companies, digging into their ecosystems, and hunting for the earnings surprises the market hasn’t found yet.

And, just as importantly, making sure our bathers are on when swimming in the investing waters!

As always, if you’d like to chat to us about any of the Funds, please feel free to call us on (02) 8188 0397 or email us at ophir@ophiram.com.

Thank you for entrusting us with your capital.

Kindest regards,

Andrew Mitchell & Steven Ng

Co-Founders & Senior Portfolio Managers

Ophir Asset Management

What is a distribution, exactly

A distribution is your share of the income and realised gains the fund earned during the year, paid in proportion to the units you hold. It typically includes:

• Dividends from the companies we own
• Interest on cash holdings
• Net realised capital gains from holdings sold during the year

Realised gains are what vary most year to year, and prior-year losses can offset gains before they reach you.

FY26 final distributions

We are pleased to share the final distributions per unit (DPU) for each fund and unit class, as at 30 June 2026.

For all funds, the ex-distribution date was 30 June 2026 and the record date was 1 July 2026.

Key dates

Payments and statements will be processed by our unit registry, Automic Group, with statements made available in the Automic Investor Portal.

Dates are approximate; we endeavour to make payments and issue statements as soon as possible, however delays can occur.

Important: if you are invested via an investment platform, distribution payments and distribution reinvestments are subject to the platform’s own processing and operations. Please allow additional time for payments, or speak to your platform for more information.

What happens now

No action is required.

Unlisted fund payments will be made within the coming week as cash to your nominated bank account, or as new units under the DRP.

OPH’s payment will follow in mid-August once the buyback completes. Tax statements will be issued approximately 7 business days after distributions.

Distribution Reinvestment Plan (DRP)

If you elected to participate in the DRP, your new units will be issued at the 30 June 2026 ex-distribution price, with no transaction costs or buy/sell spreads.

Your distribution statement will outline the calculation of the new units issued, and the units will appear in the Automic Investor Portal. You can change your DRP election at any time for future distributions.

Ophir High Conviction Fund (ASX: OPH)

OPH is a listed investment trust, so its DRP works differently. Because OPH units trade on the ASX, reinvested distributions are used to buy units on-market through our broker, rather than issuing new units.

The purchase price is capped at the reported end-of-financial-year NAV per unit. This benefits investors, with OPH currently trading at a discount, DRP units are purchased for less than the value of their underlying assets.

As the on-market purchase takes time to complete and settle, OPH’s distribution and tax statements arrive later than the unlisted funds, typically mid-to-late August. See the ASX announcement and DRP terms and conditions.

Why your unit price falls on 30 June

The unit price drops on the ex-distribution date because the distribution is paid out of it, not because of negative fund performance.

A simplified example: a unit starts the year at $2.50 and rises to $3.00 by 30 June (the cum-price), of which $0.15 per unit must be distributed. The $0.15 is paid out, and the price falls to $2.85 (the ex-price).

That drop isn’t a loss; the $0.15 is now in your pocket. Your total return for the year is still 20% ($0.50 gain ÷ $2.50): $0.35 in the unit price plus the $0.15 distribution.

How to submit an additional application

If you received your distribution in cash and would like to make an additional investment in the fund, please follow the instructions below. Applications must be received by Tuesday 28 July 2026 to be included in the July application cycle.

1. Through the Automic Investor Portal

If you are already registered on the Automic Investor Portal, you can top up your investment through the Top-Up facility:

• A) Log in and locate your Ophir holding on the portfolio screen, where your Market Value and Units are displayed.
• B) Select the Details dropdown to the right of your holding.
• C) Choose $ Top-Up and follow the prompts to complete your additional application.

2. By additional application form

Alternatively, complete the relevant additional application form (linked in Resources below) and return it to ophir@automicgroup.com.au.

Resources

• Update Bank Account Details Form
• Ophir Global Opportunities Fund (Class A) Additional Application Form
• Ophir Global Opportunities Fund (Class H) Additional Application Form
• Ophir Global High Conviction Fund (Class A) Additional Application Form
• Automic Frequently Asked Questions

As always, if you’d like to chat to us about any of the Funds, please feel free to call us on (02) 8188 0397 or email us at ophir@ophiram.com.

Thank you for entrusting your capital with us.

Kindest regards,

Andrew Mitchell & Steven Ng

Co-Founders & Senior Portfolio Managers

Ophir Asset Management

This document has been prepared by Ophir Asset Management Pty Ltd (ABN 88 156 146 717, AFSL 420082) (“Ophir”) and contains information about one or more managed investment schemes managed by Ophir (the “Funds”) as at the date of this document. The Trust Company (RE Services) Limited ABN 45 003 278 831, the responsible entity of, and issuer of units in, the Ophir High Conviction Fund (ASX: OPH), the Ophir Global Opportunities Fund and the Ophir Global High Conviction Fund. Ophir is the trustee and issuer of the Ophir Opportunities Fund.

This is general information only and is not intended to provide you with financial advice and does not consider your investment objectives, financial situation or particular needs.  You should consider your own investment objectives, financial situation and particular needs before acting upon any information provided and consider seeking advice from a financial advisor if necessary. Before making an investment decision, you should read the relevant Product Disclosure Statement (“PDS”) and Target Market Determination (“TMD”) available at www.ophiram.com or by emailing Ophir at ophir@ophiram.com. The PDS does not constitute a direct or indirect offer of securities in the US to any US person as defined in Regulation S under the Securities Act of 1993 as amended (US Securities Act).

All Ophir Funds are deemed high risk within their respective Target Market Determination documentation.  Ophir does not guarantee the performance of the Funds or return of capital.  An investment may achieve a lower than expected return and investors risk losing some or all of their principal investment.  Past performance is not a reliable indicator of future performance.  Any opinions, forecasts, estimates or projections reflect our judgment at the date this was prepared, and are subject to change without notice.  Rates of return cannot be guaranteed and any forecasts, estimates or projections as to future returns should not be relied on, as they are based on assumptions which may or may not ultimately be correct.

Actual returns could differ significantly from any forecasts, estimates or projections provided.

The Trust Company (RE Services) Limited is a part of the Perpetual group of companies. No company in the Perpetual Group (Perpetual Limited ABN 86 000 431 827 and its subsidiaries) guarantees the performance of any fund or the return of an investor’s capital.

Reflections – Winners and a Loser

PDF

A year of getting some right, and getting some wrong

We’ve closed out the financial year. So we thought we’d revisit three holdings we wrote about during the year. Two are standout winners; the other is yet to deliver the returns we were expecting.

The two winners are Marex (NASDAQ: MRX) and Silicon Motion (NASDAQ: SIMO). The loser is Artivion (NYSE: AORT).

Each has something to teach us.

Marex – When the market gets it structurally wrong

Clearing broker Marex, which we had started buying in October 2025, was our most recent Global stock write-up in May 2026 (link).

In May, the stock was trading at less than 10x earnings. The market was pricing Marex like a lower-PE-rating cyclical commodities broker. The shares had also been hurt by a short report from investigative research company, NINGI Research, that alleged accounting irregularities and off-balance-sheet entities.

We, however, had a different view.

Marex, as one of ~60 Futures Commission Merchants (FCMs) globally, sits in the middle of one of the most protected pieces of financial market infrastructure in the world: soliciting and accepting buy and sell orders for futures and options contracts and holding customer funds to facilitate the trade.

Rather than a questionable commodity, we saw a structurally protected compounder benefiting from three tailwinds, all working in the same direction:

• Growth in exchange-traded volumes, which have been growing at high single digits for years.
• Share gain from banks retreating after international banking regulations Basel III and IV made clearing structurally uneconomic for large bank incumbents.
• Consolidation of the fragmented non-bank tail, which is seeing larger specialists, such as Marex, consolidate the smaller end of the FCM market.

We met with the executive vice chair of one of their biggest peers. He personally explained why this is such an attractive market and why they would benefit. However, what was most instructive was how complimentary he was of Marex as a high quality peer that would also benefit.

This was the key reason why we did more work.

We then went through the short report ourselves and with sell-side analysts. On the day of Marex’s March investor day, we caught the red eye from Denver to New York. We arrived early enough to spend time one-on-one with senior management. From these conversations, we concluded the short thesis lacked substance.

Since we wrote about Marex in May, the stock has increased from around $58 to $63. Since we started buying in October last year, it has roughly doubled.

That’s been helped by strong recent financial results. Marex’s Q1 2026 revenue was up 48%, and adjusted profit before tax was up 59% year-on-year. That’s comfortably ahead of the guidance the company had provided at its investor day just six weeks earlier.

Why we still own it: At 10-11x forward earnings, we continue to see plenty of value in a business generating EBIT growth in the teens, and with a long runway for both organic and inorganic market share growth.

Peers like Interactive Brokers and CME are still trading at 20-30x. StoneX, the closest listed comparable to Marex, now trades at ~19x. The gap between those companies and Marex is closing, but it is still quite wide.

Marex also plays a unique role in our portfolio. It is one of the few positions that actively benefits from periods of elevated market volatility rather than being threatened by it.

What we take from this: Our ability to talk with industry leaders in global markets is a key edge. When the market is punishing a stock for something specific and testable – accounting allegations, a short thesis, a temporary earnings miss – the value in doing the work is high, but having our thesis supported and validated by trustworth and aligned industry leaders often limits our downside and ensures our efforts and energy is well directed. Structural business quality is the anchor. If the anchor is sound, the noise is an opportunity.

Silicon Motion – When conviction is rewarded, and then some

Silicon Motion was a name we highlighted in our SaaSpocalypse Now? strategy note in February 2026 (link).

Our core argument was that the AI dispersion between semiconductor stocks and software stocks was going to keep widening. That is, the market would continue to reward infrastructure stocks because of their earnings visibility. And it would continue to punish application-layer software companies because of the threat AI agents posed to their seat-based (per-user subscription fees) revenue.

We were expressing that view in the storage space by holding Silicon Motion, which we bought in June 2025.

Silicon Motion is a fabless designer of NAND flash controllers – the small processors that manage how data is stored, retrieved, and protected inside smartphones as well as the solid-state drives (SSDs) that are crucial for AI.

Our thesis was straightforward: as AI capex ballooned, memory and storage, of which Silicon Motion provides a vital component, were emerging as the next bottleneck. Nvidia’s Jensen Huang had said just as much at the Consumer Electronics Show (CES) on January 5 this year. Samsung and Micron were pushing through 40-50% price rises because demand was outstripping supply. And TSMC’s capex guidance, a bid to meet this relentless demand, was well above expectations.

We didn’t need to predict every twist in the AI cycle. We just needed exposure to the ‘picks-and-shovels’ (infrastructure layer) end of it, at reasonable multiples, with a business that stood to benefit from the memory upcycle.

Silicon Motion has since delivered.

The company’s Q1 2026 revenue was up 105% year-on-year; EPS beat consensus by nearly 25%; and the stock has been one of the best performers in the storage complex.

It is currently trading around $320, up from about $70 a year ago.

Why we still own it: The company’s underlying earnings growth is not a one-quarter phenomenon. Silicon Motion is riding a multi-year product-led growth cycle. Its expensive, high-performance chips – PCIe Gen5 controllers, enterprise SSD solutions, and new AI-optimised products – are all coming into a market where demand is outstripping supply on a structural basis.

We continue to see outsized earnings growth ahead for the company. While some of that is now in the price, we see further upside from current levels.

What we take from this: When you get a thematic call right we don’t want to let our sector exposure continue to grow aggressively. When the market is crowding into a thematic, discipline requires taking money off the table – but the key is to identify which stock has more to run compared with the one where more of the upside has been realised. The hardest trades to make are often the ones after you’ve been right.

Artivion – When the market derates faster than the earnings

We wrote up specialised aortic device business Artivion in April 2026 (link here).

Our thesis was that this was a high-quality medtech compounder. It is run by a management team we have known and trusted for years. And it has a product pipeline that could sustain double-digit growth to the end of the decade.

We bought it pre-COVID, sold at the 2025 highs, and re-entered in February 2026on a pullback that was overdone.

Since then, the stock has continued lower. It is now trading around $US22. It’s down from its November 2025 high of around $48 and down from ~$35 at the time of our write-up. A disappointing result in May contributed to the share price decline.

Here is the key point, though: Even though the stock has fallen close to 40%, the company only reduced its FY26 earnings expectations by mid-single digits. That multiple de-rating is difficult to reconcile with the fact that the issues driving the guidance softening were non-structural:

• Elevated capex in FY26 to fund the closing of the Endospan acquisition earn-out.
• Some conservatism on new product timing.
• A broader derating of medtech companies in an environment that has been driven by momentum rather than fundamentals.

None of this changes the shape of Artivion’s earnings power in 2027 and beyond, which should be accelerated by the launch of new products, AMDS and NEXUS.

We tested our thesis directly.

After the pullback, we met with two separate US cardiologists and a European competitor to check whether anything had changed at the customer, clinical, or competitive level. It hadn’t. Product adoption remained strong. Cardiologist sentiment toward Artivion continued to be positive. There was no material change in the competitive landscape.

Why we still own it: Our valuation of the business has not changed. Our confidence in Pat Mackin and the management team remains. The earnings power we are confident in for 2027 and beyond is still in front of us, and the channel checks confirm the recent issues are not structural.

What we take from this: When a stock derates by 30-40% on a mid-single-digit earnings revision, the market is expressing a view about the business’s long-term earnings power, not just the current year’s number.

The discipline in those moments is to check whether the market is right – to test the thesis with the customers, the competitors, and the clinical data – rather than either doubling down reflexively or capitulating. When the channel checks come back clean, as they did with Artivion, that gives us the confidence to stay invested.

Looking forward: Three vital characteristics of our holdings

We enter the second half of 2026 with the portfolio positioned around businesses we believe combine three characteristics:

1. Structural tailwinds that don’t depend on any single macro outcome.
2. Valuations that leave room for re-rating as well as earnings growth.
3. And management teams we have known through multiple cycles.

Marex remains one of our largest positions. Silicon Motion has been trimmed, but we retain meaningful exposure. And we continue to hold Artivion hold with conviction – its earnings power has not changed, and the recent share price weakness has made it more attractive on our numbers, not less.

Financial Year 2026: Breadth arrives and stock picking does the talking

PDF

In this Letter to Investors, we look at:

• How the Ophir Funds fared in FY2026 – including a +31.8% after fees return from our Ophir Global Opportunities Fund.
• Our win at the Money Management/ Lonsec Fund of the Year Awards.
• Why stock picking, not AI, drove our outperformance, again, this year.
• The long-awaited arrival of breadth, why that’s good for our small-cap space, and the key factors that indicate it can continue.
• Why the Fed Chair is talking hawkish, but markets are dovish.
• Our views on the AI theme including bubble talk & how we are thinking about it.

We’re writing this month’s Letter from our US office. We’re at the end of a couple of weeks on the road with the investment team, meeting companies, their customers and their competitors.

We’re now extremely knowledgeable – or as they say, ‘full bottle’ – on what’s happening on the ground here in the US. (More on that below.)

But first, to the financial year just ended.

Importantly, and excitingly, the thing we’ve been calling for, and patiently waiting for, finally arrived: breadth. (Breadth is basically the number of stocks participating in a move.)

After years of a handful of mega caps doing all the heavy lifting, returns started spreading across the market, including our areas of small caps, with the spread accelerating right into 30 June.

For small-cap stock pickers, breadth is rocket fuel. And it showed in our Fund performance for the financial year just gone.

Ophir Fund Performance: FY2026

The Ophir Opportunities Fund significantly outperformed its benchmark  (ASX Small Ordinaries Accumulation Index, which returned +8.1%) with a +22.4% return net of fees.

Another cracking year for our original Fund!

Over the last 14 years, while its benchmark has compounded at +6.6% per annum after fees, our Opportunities Fund has compounded at +23.1%.

The Ophir High Conviction Fund, however, had a disappointing year, down -4.9% for its net asset value.

The Fund faced stiff headwinds. As a growth-style manager, we tend to be underweight cyclical sectors like materials. Unfortunately, in FY26 the gap between the ASX200’s best-performing sector (materials +47.5%) and the worst (health care -37.4%) was the largest ever.

The High Conviction Fund was also overweight quality software names, that were ‘hit for six’ in late 2025 and early 2026 on fears of AI disruption.

We cut that weight quickly, but it still hurt. We’re not sugar-coating it, and we’re working our butts off to fix it.

Global Equities Small & Mid Caps ‘Fund of the Year’ for 2026

The stars of FY2026 were our Global Funds.

While its benchmark (MSCI World SMID Cap Index NR, AUD) returned +16.0%, the Ophir Global Opportunities Fund returned +31.8% net of fees.

It has now delivered around +19.8% per annum after fees – over almost eight years – roughly +10% per annum ahead of its benchmark.

That makes it the best-performing global small-cap fund available in Australia over that period (Morningstar data).

The Ophir Global High Conviction Fund enjoyed a similarly stellar year, up +28.5%.

This performance was recognised with our Global High Conviction Fund (Class A) winning the Money Management/Lonsec Global Equities Small & Mid Caps Fund of the Year, a fantastic reward for all the team’s hard work.

From stock picking … again

So where did those global returns come from?

Were we just lucky enough to ride the AI boom?

Let’s look at the Global Opportunities Fund multi-factor performance attribution to find out.

Source: Bloomberg. Data as of 30 June 2026. Benchmark: MSCI World SMID Index NR (AUD). Performance is net of fees. Past performance is not a reliable indicator of future performance. Performance figures are net of fees.

If you read the chart from left to right, you can see the benchmark was up 16.0%, and the Fund was up 31.8%.

In between sit the factors that explain the gap in performance between the benchmark and Fund, and almost all of them are noise:

• Industry effects barely registered, which is important because it shows we weren’t just riding the AI tidal wave.
• Country was actually a drag.
• Size and beta? Small change.

What was the most important factor?

It was the Selection Effect (i.e., pure stock picking) which added +29.0%.

So stock picking represented more than 100% of the Fund’s outperformance.

That’s right, our outperformance came from stock picking again.

Stock picking is the kind of outperformance that endures because it is based on replicable skill and not just luck.

And it’s the kind of outperformance you should demand of any small-cap manager you own, whether Australian, global or otherwise.

Twenty-one stocks did the talking

Global Opportunities Fund Stock Contributors:

Source: Bloomberg. Data as of 30 June 2026.

Just as important is how widely our stock picking was spread in our Global Funds. Twenty-one stocks did most of the talking for the year in our Global Opportunities Fund, with the biggest single contributor adding 5.3%. See this month’s Stock in Focus report for some recent winners and losers (link)

This is important because if a fund manager’s year hinges on one stock going up 10x, it’s hard to be confident they can repeat that performance the following year.

A broad spread of winners – as we had in 2026 – is another fingerprint of a repeatable process.

Our returns aren’t riding on AI

And here’s further evidence that our strong recent performance isn’t because of a correlation with AI stocks.

The chart below shows the Global Opportunities Fund’s daily outperformance in June against the daily returns of semiconductor and momentum stocks.

Source: Bloomberg. Data as of 30 June 2026.

On the days the AI complex was body slammed (circled in red), we still did just fine. In short:

• We hold roughly the index weight in the AI complex. We are not making hero bets either for an AI bubble or against … because we don’t pretend to know the answer.
• Our outperformance has come on AI up days and AI down days alike.
• Our returns are coming from idiosyncratic small caps marching to the beat of their own performance; not from stocks trading at 100 times revenue with a lot of expectations to deliver into.

That’s how we think about risk and portfolio construction today for our Global Funds.

A Deep Breadth, part two

Regular readers know we’ve been banging on about breadth for a while.

That is, we argued that the market’s rise would spread from a narrow number of stocks, most notably the Magnificent 7, to a broader range of stocks, including small caps, where we focus.

Well, here we are.

Source: Bloomberg. Data as of 30 June 2026.

After years of underperformance against the S&P 500, US small caps have finally turned the corner.

That continued in June, with the Russell 2000 index (small caps) up +3.7%. The S&P 500 index was actually down -1.0%, weighed down by the once-poster-child Magnificent 7, which fell -8.8%.

Last week in New York, we had lunch with Michael Kantrowitz of leading investment bank Piper Sandler. If he’s not the number one US equity strategist, he’s top three.

Michael’s big call: breadth is going to keep coming.

Hawkish Fed speak, dovish market speak

A key question that will help determine the likely persistence of breadth is: what will the new Fed Chair, Kevin Warsh, do next?

Warsh chaired his first meeting in June and struck a notably hawkish tone. Indeed, the Fed’s projections pencilled in one rate RISE this year.

You can blame the Iran war-induced inflation: oil, fertiliser and shipping costs all spiked as the Strait of Hormuz was choked off.

Source: Piper Sandler, June 2026.

Yet look at what markets are saying (the grey line above): inflation expectations are actually falling! Oil is now back near pre-war levels, and ships are getting through the Strait again.

Like Kantrowitz, we expect that the hike currently priced for late 2026 will likely not eventuate, which is positive for breadth and small caps.

Alongside falling inflation (and likely no rate rises), we also have other important conditions for breadth to continue:

• A US consumer who is looking stronger on the ground from all our recent company meetings.
• 75% of easings from the Fed over the last 18 months are still making their way through the economy.
• And Trump’s One Big Beautiful Bill household and business tax cuts.

Breadth is manna from heaven for small caps!

Is AI a bubble?

The big question we’re getting asked everywhere we go is whether AI is a bubble.

Sadly, if we are being honest, no one really knows with any high degree of confidence, including us.

What we do know is that this year not all ‘AI’ returns are the same.

We mapped the AI stack from top to bottom. Then, to see each layer’s return weighted by market cap, we looked at what key players have actually returned so far in calendar 2026.

As you can see, in terms of returns, the cream is at the bottom of the cake:

• Energy and electrification names are up about a third, led by companies like GE Vernova at +70%.
• Chips and memory are up roughly 80%, with Micron nearly tripling, Intel up 263% and AMD up 151%.

The top of the cake – the shiny software companies now incorporating AI tools – is where money went to die. This Applications group is down 5%, but some members fared much worse – Adobe down 44%, Salesforce down 42% and ServiceNow down 38%.

There are some winners, but lots of potentially disrupted losers. Why? Well, it comes back to a simple idea: this year, companies are getting paid to sell what’s scarce, not buy it.

The cloud giants and software firms are the buyers. Their capex is revenue for the sellers – the chip, memory and power providers. (When there is a genuine shortage of something, the seller sets the price and keeps the margin. The buyer just keeps spending.)

The question investors need to ask is: does the cream stay at the bottom of the cake? Or does 2027 finally reward the layers doing the buying? In other words, will there be a ‘return on investment’ (ROI) from all that capex for the Application, Model and Infrastructure layers?

Our take is that there better be an ROI or this cake will crumble under its own weight.

Should I dump equities to avoid potential bubble trouble?

What if it is a bubble? Does that mean you should sell your equities?

Not necessarily. History suggests you shouldn’t abandon the share market.

Source: BCA Research.

When the dot-com bubble burst, tech stocks fell 55% and the S&P 500 lost 13%. Yet over the following twelve months, the rest of the market rose around 11%.

Even in the textbook bubble, the one everyone points to, owning the rest of the market was a completely different experience to owning the thing that popped.

The bubble and the market are not the same animal. You don’t need to pick the top. You just need to avoid being overexposed to the froth when it pops.

To be clear: we don’t know that we are in an AI bubble.

The earnings sitting underneath these companies are tangible in a way that a lot of 1999 simply wasn’t. It might deflate. It might not. If Micron’s recent result is any indication, the AI theme doesn’t look to be slowing down today. Regardless, as we showed above, we’ve been able to outperform recently even on days when things like semiconductors at the heart of AI theme have been sold off.

Come see us: Meet the Managers is back

Finally, a date for your diary: Our annual Meet the Manager presentations run from late July into early August in every capital city around Australia. Seats are limited and we are near capacity for many of the events already.

If you’d like to hear how the Funds are positioned and grill us in person, email ophir@ophiram.com and we’ll save you a seat and a bite/drink.

As always, if you’d like to chat to us about any of the Funds, please feel free to call us on (02) 8188 0397 or email us at ophir@ophiram.com.

Thank you for entrusting your capital with us.

Kindest regards,

Andrew Mitchell & Steven Ng

Co-Founders & Senior Portfolio Managers

Ophir Asset Management

This document has been prepared by Ophir Asset Management Pty Ltd (ABN 88 156 146 717, AFSL 420082) (“Ophir”) and contains information about one or more managed investment schemes managed by Ophir (the “Funds”) as at the date of this document. The Trust Company (RE Services) Limited ABN 45 003 278 831, the responsible entity of, and issuer of units in, the Ophir High Conviction Fund (ASX: OPH), the Ophir Global Opportunities Fund and the Ophir Global High Conviction Fund. Ophir is the trustee and issuer of the Ophir Opportunities Fund.

This is general information only and is not intended to provide you with financial advice and does not consider your investment objectives, financial situation or particular needs.  You should consider your own investment objectives, financial situation and particular needs before acting upon any information provided and consider seeking advice from a financial advisor if necessary. Before making an investment decision, you should read the relevant Product Disclosure Statement (“PDS”) and Target Market Determination (“TMD”) available at www.ophiram.com or by emailing Ophir at ophir@ophiram.com. The PDS does not constitute a direct or indirect offer of securities in the US to any US person as defined in Regulation S under the Securities Act of 1993 as amended (US Securities Act).

All Ophir Funds are deemed high risk within their respective Target Market Determination documentation.  Ophir does not guarantee the performance of the Funds or return of capital.  An investment may achieve a lower than expected return and investors risk losing some or all of their principal investment.  Past performance is not a reliable indicator of future performance.  Any opinions, forecasts, estimates or projections reflect our judgment at the date this was prepared, and are subject to change without notice.  Rates of return cannot be guaranteed and any forecasts, estimates or projections as to future returns should not be relied on, as they are based on assumptions which may or may not ultimately be correct.

Actual returns could differ significantly from any forecasts, estimates or projections provided.

The Trust Company (RE Services) Limited is a part of the Perpetual group of companies. No company in the Perpetual Group (Perpetual Limited ABN 86 000 431 827 and its subsidiaries) guarantees the performance of any fund or the return of an investor’s capital.

1For small-cap investors, broader market participation may support investment returns; however, outcomes
remain uncertain and are subject to prevailing market conditions.

PDF

Backing up April’s record month in May + Distributions: your time to decide.

In this Letter to Investors, we look at

• How our Funds backed up April’s record returns in May – and why stock picking, not the red-hot AI trade, did the heavy lifting.
• Momentum, AI, semiconductors and memory stocks are going vertical. Should investors worry?
• Micron joining the US$1 trillion club, and the new memory ETF hoovering up money faster than the Mag 7.
• The heroic expectations baked into SpaceX’s record-breaking IPO valuation.
• Ophir Fund distributions are coming. To maximise compounding and wealth building, we reinvest ours – should you? You have until 30 June to decide.

After April’s big returns across our Funds – including the best month ever for our Global Opportunities Fund, up +12.3% (see last month’s Letter) – it was pleasing to back that performance up in May. Every Ophir Fund rose circa 5-6% in absolute terms and outperformed their benchmarks by around 2-4%.

Importantly for us, it was stock picking that again delivered outperformance in May, not some big overweight to the red-hot AI thematic in semiconductor and memory stocks. (More on that below.)

But AI certainly contributed to share markets across the world almost universally rising for the month:

• The S&P 500 led, putting on another +5.3% to hit fresh all-time highs – in the process notching up its ninth straight weekly gain.
• Tech again did the heavy lifting. The S&P 500 IT index rose a whopping +16.0%, following April’s 17.5%.
• In US small caps, the Russell 2000 IT sector put on a combined 52.6% over April-May. Insane!

Domestically, however, the story was much more muted. The ASX 200 rose +1.3% with the RBA’s hiking cycle and the fallout from the Federal Budget weighing on local shares.

Backing it up

As mentioned, all our Funds backed up strong results in April and posted pleasing performances in May:

• Our original Aussie Fund, the Ophir Opportunities Fund, kept up its strong track record. It beat its benchmark by +2.7% in May. Since its inception in August 2012 – almost 14 years ago – it has now returned +23.0% per annum after fees.
• The Ophir High Conviction Fund (ASX: OPH) was back on the leaderboard too after a tougher 12 months, with its investment performance rising +6.2% for the month and outperforming its benchmark by just over 4%.
• And our Global Opportunities Fund backed up its record April with a +5.1% gain in May, against a +3.1% return for its benchmark (MSCI World SMID Cap Index NR AUD), an outperformance of +2.0%.

After April, prospective investors naturally asked us: “Is this a good time to invest? Have I missed it?”

Our answer then was that April’s surge was our companies’ share prices catching up with their strong February/March earnings results.

But just as importantly, we were also cycling out of companies whose share prices had run hard and putting that money into fresh ideas. Those additions started contributing in May. That, to us, is especially encouraging.

AI trade explodes higher in May

There is no polite way to describe what semiconductor and memory stocks did in May. They went vertical!

Exhibit A: Micron.

On 26 May, the memory maker jumped 19% in a single session – after broker UBS more than tripled its price target to US$1,625 – and crossed US$1 trillion in market value for the first time. Its entire 2026 output of high-bandwidth memory (the chips that feed AI data centres) is already sold out.

How hot is the money chasing this trade?

A brand-new ETF dedicated to memory (DRAM) stocks has gone vertical – its inflows are already double what the flagship Magnificent 7 ETF gathered over the last three years.

It’s a measure of the optimism, and perhaps speculation, now built into these share prices.

Source: Bloomberg, Roundhill Memory ETF, Roundhill Magnificent Seven ETF

The good news?

The rally – as narrow as it is, led by AI, energy and memory – has been driven by corporate earnings expectations being revised upwards. That gives some confidence it’s standing on reasonable foundations rather than hot air.

It’s also showing up in the economic data. The US economy has been rock solid on the back of the AI infrastructure build-out. Though our conversations with European cyclical companies have been decidedly downbeat – a big part of why we’ve reduced our weight to European cyclicals in recent months. It’s no coincidence that Europe, a net importer of energy, has struggled versus the U.S., a net exporter, during the worst energy crisis in history courtesy of the Iran war. Fortunately at writing it looks like the Strait of Hormuz is reopening for seaborne oil transit.

Source: Bloomberg. Data as of 31 May 2026.

A US$1.75 trillion moonshot

Speaking of optimism: the most topical listing on the planet (and off it) is SpaceX’s IPO, which Aussie investors are being offered through local brokers. We don’t invest in large caps, so we own none. But the valuation expectations caught our eye.

Source: Ophir, Bloomberg.

SpaceX grew revenue 33% last year, to around US$18.7 billion. It listed at roughly US$1.75 trillion – close to 100 times sales. Amazon listed at 28 times revenue while growing around 1,700%; Meta at 28 times growing 87%. SpaceX investors are getting a fraction of that growth for a multiple several times higher.

Now, betting against Elon Musk has historically been dangerous. And we can only hope, for humanity’s sake, that he delivers. BUT – those are the loftiest growth expectations, at scale, the world has ever asked anyone to live up to! And the market seems happy to oblige. SpaceX has since jumped +20% in its first days of trading.

Not a one-trick pony

So how are we positioned for all this frothiness?

Our weighting to semiconductors is around 10% in our Global Funds – roughly the index weight. We are not chasing momentum, or the leverage that hedge funds are piling into the trade.

Maybe some funds can read the memory supply cycle perfectly and will pivot right before any crash. Good luck to them. Our performance is built differently. We spread investments across many companies that have their own idiosyncratic earnings drivers and march to their own beat.

You can see it in our multi-factor attribution for May in our Global Opportunities Fund below.

Source: Ophir, Bloomberg. Data as at 31 May 2026. MSCI World SMID Index NR (AUD), performance is net of fees. Past performance is not a reliable indicator of future performance. Performance figures are net of fees.

The benchmark was up +3.1% and we were up +5.1%. Industry positioning – the factor that’s been driving the market’s narrow leaders – was actually a small negative for us. The gold bar is where our outperformance came from: +3.2% from stock selection; i.e. finding hidden gems before the market discovers them!

Fund distributions are coming – we reinvest ours, should you?

While many investors are focused on price appreciation, it’s also vital to be across distributions if you’re seeking to maximise your wealth creation and realise important financial goals.

At Ophir, we seek to compound investors’ capital. Over the long run, we’ve done exactly that, returning:

• +23.0% per annum in the Ophir Opportunities Fund (since August 2012)
• +12.1% per annum in the Ophir High Conviction Fund (since August 2015)
• +18.7% per annum in the Ophir Global Opportunities Fund (since October 2018)
• +14.3% per annum in the Ophir Global High Conviction Fund (since September 2020)

(The returns are all net of fees and assume reinvestment of distributions.^[1])

But under Australian managed-fund rules, we’re required to pass through net realised gains and income to unitholders each year. Some years it’s a meaningful distribution, some a modest one, and occasionally none at all.

When there is a distribution, however, the mechanics can confuse some investors. And what you do with the cash is often one of the most consequential investment decisions you’ll make all year.

What is a distribution?

A distribution is your share of the year’s profits – the dividends, interest and net realised capital gains your fund has earned, paid out in proportion to how many units you hold.

Realised gains – i.e. when we sell a stock for a profit – are what swing most year to year. Some years we crystallise a lot, and some years prior-year losses are still absorbing gains before they reach you.

FY26 distribution estimates

Below are our estimated distributions per unit (DPU) for each Fund and unit class, based on portfolio data, as of 30 April 2026:

Estimates only, based on portfolio data as of 30 April 2026. Final distributions are calculated after 30 June 2026 and may differ materially. Do not rely on these figures for tax purposes.

Why your unit price falls on 30 June

Like clockwork, after each distribution, we get an influx of concerned investors asking: what on earth happened to the Fund in June for the unit price to drop?

The reassuring answer is usually: nothing!

We just paid you a distribution.

You can see this in the following example:

• Imagine your unit price starts FY26 at $2.50.
• Through the year, the Fund earns $0.50 per unit that must be distributed.
• By 30 June 2026, the unit price is $3.00: your original $2.50, plus the $0.50 waiting to be paid out.
• On 30 June, that $0.50 gets paid out as a cash distribution, and the unit price retreats to $2.50, exactly where it started.

If you looked at the price alone, you’d swear you made nothing all year. But the $0.50 is in your pocket. Add it back and your total return is 20% ($0.50 ÷ $2.50). (We’ve simplified here – generally not all of a year’s unit-price rise is paid out.)

That $3.00 is the cum-price – the unit with the income still inside it. The $2.50 is the ex-price – after the cash has been handed out.

The gap between them isn’t a loss. It’s your distribution.

The price didn’t fall. It just stopped carrying cash, which is now yours.

The cost of cash

Everyone loves a bonus – and to be clear, the cash is your real profit from the stocks we hold. The only question is what taking the distribution costs you, compared to leaving it in the Fund.

Here’s the answer in dollars.

Assume you invested $100,000 into the Ophir Opportunities Fund at inception in August 2012. The chart below shows what you’d have as of 31 May 2026, depending on what you did with each distribution along the way.

Source: Ophir. Index Return = the ASX Small Ordinaries Total Return Index. Note: investors in the Fund have not been / will not be able to reinvest the FY25 and FY26 distributions, to constrain the capacity of the Fund and help optimise our ability to generate performance. Past performance is not a reliable indicator of future performance.

If you had ticked the dividend reinvestment plan (DRP) box at inception, then your $100,000 is worth $1.76 million today (after fees and before tax).

But if you took every distribution as cash and let it sit earning the cash rate,  you’d have $801,000. That’s around $960,000 of difference.

What if you’d instead put every cash distribution into the Australian small-cap index along the way? You’d have $953,000 – better, but still over $800,000 short of the DRP investor.

Both numbers tell the same story: cash rarely gets a plan. After the distribution lands in your bank account, it’s easy to sit on your hands waiting to ‘buy the dip’. The problem is that the market, more often than not, keeps rising, leaving you and your cash behind.

These figures are illustrative only, based on the fund’s actual past returns and a calculated cash rate over the period shown. Outcomes will depend on how distributions are used. Holding cash or reinvesting into different assets may lead to different results. Past performance is not a reliable indicator of future performance.

Don’t Retire your Profits (DRP)

The case for reinvesting is the oldest one in investing: compounding. As Warren Buffett put it: “Life is like a snowball. The important thing is finding wet snow and a really long hill.”

Here’s how it rolls:

• When you reinvest your distribution, you receive new units issued at the post-distribution net asset value (NAV), with no transaction costs.
• Those units earn next year’s distribution, which buys more units, which earn the year after … Gentle at first, quietly remarkable by year ten, and genuinely transformative by year twenty (based on historical returns).

Four things you should know about the DRP:

• Free. No transaction costs or buy/sell spreads.
• Flexible. You can reinvest fully, partially, or not at all … or change your mind any time.
• Tax-neutral. Your distribution is assessable in the year it’s earned regardless of whether you take cash or reinvest. Reinvesting doesn’t defer or reduce the tax.
• Set-and-forget. You can choose to elect once. Reinvestment runs in the background until you stop it.

The DRP isn’t for everyone. If you rely on your distribution for income, take the cash. But if you don’t need it right now and you’re investing for the long term, reinvestment is the simplest decision you can make to compound your position.

The above is general information only, not personal financial advice. Market conditions, cash flow needs and tax outcomes may affect long-term results, and outcomes are not guaranteed. Consider seeking licensed financial or tax advice for your circumstances.

What to do now

There are two things you should do between now and 30 June:

• Check your DRP preference. If you want to reinvest your FY26 distribution, or change your existing election, log in to the Automic Investor Portal (link), follow Automic’s step-by-step DRP guide (link), or use the paper DRP form (link) and email a copy to ophir@automicgroup.com.au. Elections close at the close of business on 30 June 2026 for the unlisted funds, and 2 July 2026 for OPH in line with the ASX timetable.
• Check your bank account details. Important: missing or out-of-date details mean you may be deemed to have elected DRP by default.

Final figures of distributions and statement timing will be confirmed in our late-July follow-up communication

[1]Past performance is not a reliable indicator of future performance.

As always, if you’d like to chat to us about any of the Funds, please feel free to call us on (02) 8188 0397 or email us at ophir@ophiram.com.

Thank you for entrusting your capital with us.

Kindest regards,

Andrew Mitchell & Steven Ng

Co-Founders & Senior Portfolio Managers

Ophir Asset Management

This document has been prepared by Ophir Asset Management Pty Ltd (ABN 88 156 146 717, AFSL 420082) (“Ophir”) and contains information about one or more managed investment schemes managed by Ophir (the “Funds”) as at the date of this document. The Trust Company (RE Services) Limited ABN 45 003 278 831, the responsible entity of, and issuer of units in, the Ophir High Conviction Fund (ASX: OPH), the Ophir Global Opportunities Fund and the Ophir Global High Conviction Fund. Ophir is the trustee and issuer of the Ophir Opportunities Fund.

This is general information only and is not intended to provide you with financial advice and does not consider your investment objectives, financial situation or particular needs.  You should consider your own investment objectives, financial situation and particular needs before acting upon any information provided and consider seeking advice from a financial advisor if necessary. Before making an investment decision, you should read the relevant Product Disclosure Statement (“PDS”) and Target Market Determination (“TMD”) available at www.ophiram.com or by emailing Ophir at ophir@ophiram.com. The PDS does not constitute a direct or indirect offer of securities in the US to any US person as defined in Regulation S under the Securities Act of 1993 as amended (US Securities Act).

All Ophir Funds are deemed high risk within their respective Target Market Determination documentation.  Ophir does not guarantee the performance of the Funds or return of capital.  An investment may achieve a lower than expected return and investors risk losing some or all of their principal investment.  Past performance is not a reliable indicator of future performance.  Any opinions, forecasts, estimates or projections reflect our judgment at the date of this was prepared, and are subject to change without notice.  Rates of return cannot be guaranteed and any forecasts, estimates or projections as to future returns should not be relied on, as they are based on assumptions which may or may not ultimately be correct.

Actual returns could differ significantly from any forecasts, estimates or projections provided.

The Trust Company (RE Services) Limited is a part of the Perpetual group of companies. No company in the Perpetual Group (Perpetual Limited ABN 86 000 431 827 and its subsidiaries) guarantees the performance of any fund or the return of an investor’s capital.

PDF

The quiet half of the infrastructure trade

When investors think about infrastructure, they usually think about the building of it – the cranes, the ribbon cuttings, the multi-billion-dollar contracts to construct new highways, fibre networks, and water treatment plants.

What is often overlooked is the quieter, less glamorous component: maintenance. Someone has to inspect the pipes, fix the leaks, upgrade the substations and respond when a storm takes down a network. None of it is headline-grabbing. All of it keeps the country running.

Service Stream (ASX: SSM) is one of Australia’s largest essential network services companies, delivering operations and maintenance work across telecommunications, utilities, transport, and (as of February 2026) defence.

We have owned Service Stream at various points of different cycles. Today, Service Stream is in an absolute sweet spot. It has significant earnings upside over the next three years, a valuation that does not appropriately reflect this, and, on top of this, a net cash balance sheet that gives it optionality to take acquisition opportunities that arise.

Not just another ‘bad contractor’

We initially bought into Service Stream in 2023. At the time, the company had taken on several utilities contracts that were poorly priced and poorly risk-managed. Margins collapsed, the stock derated heavily, and the market wrote the business off as a typical ‘bad contractor’ story.

Source: Ophir, Bloomberg. Data as at 31 May 2026.

However, we could see the opposite was true. The contracts in question were finite. The management team had evolved. Pricing discipline was being restored. And the underlying franchise, multi-year operations and maintenance (O&M) contracts with blue-chip utilities and telcos, was inherently a high-quality annuity business once the legacy issues were worked through.

The share price has obviously increased a long way since then. But we believe the market is still underestimating the upside of the company.

There are three reasons we have been adding to the position over the past year, and all point to the same thing: earnings upside.

1. The utilities margin recovery has further to run

Service Stream’s utilities division was the heart of the original problem back in 2022. Over the past 24 months, the team has methodically restructured pricing, exited unprofitable scopes, and rebuilt the discipline around contract risk.

The result is now becoming visible in the numbers. The 1H26 result showed a step-change in utility EBITDA margins to 5.5%, up 130 basis points on the prior corresponding period and ahead of the segment repositioning target of 5.0%. Management has indicated that it is targeting further incremental margin expansion.

We think this is achievable. The company is now in a position to selectively pursue minor capital works at higher margins, and the broader contracting environment is supportive. As a result, utilities can continue to grow organically at high single digits, with EBITDA margins expanding towards 6.5% over the next two years.

Source: Service Stream FY26 Half Year Results Presentation.

2. Defence is a genuine step-change in the addressable market

In FY26, Service Stream achieved a long-term strategic objective when it was appointed as a Tier 1 Defence contractor. The win was a six-year Property & Asset Services agreement with the Department of Defence covering the Northern Territory and South Australia, with two 1- to 3-year extension options. Initial contract value is $1.6 billion over the first six years.

Source: Service Stream FY26 Half Year Results Presentation.

This is genuinely significant for two reasons. First, it represents a major expansion of the Group’s addressable market – Defence facilities maintenance has historically been a duopoly dominated by Ventia and Downer. Service Stream is now part of that conversation. Second, the contract mobilised on 1 February 2026 and is expected to contribute meaningfully to earnings from FY27 onwards.

The market is currently using a ~5% margin assumption for this work, which we think is conservative. In time, the team will scale, optimise operations, and start winning the minor capital works that typically accompany the incumbent facilities maintenance contractor. We believe Defence could generate over $250 million of annual revenue for Service Stream at margins north of 5%.

Source: Service Stream FY26 Half Year Results Presentation.

3. Telecommunications remains a steady earner with embedded growth

The telco segment has cycled off a strong period (the 1H25 comparable was inflated by programs that have since rolled off), but the underlying franchise is in good shape. Most notably, Service Stream has:

• Successfully transitioned to a new NBN Field Services contract with exclusive coverage of VIC, SA, WA & NT.
• Commenced initial mobilisation on the new NBN fibre upgrade in QLD, NSW and ACT.
• Signed a new five-year strategic partnership with Telstra.
• Secured a new program supporting Optus HFC decommissioning.

These are all multi-year, annuity-style contracts that underpin the segment for the next 3-5 years. We believe Service Stream’s telco segment can grow revenue 3-5% next year at margins of around 9%.

Source: Service Stream FY26 Half Year Results Presentation.

A hidden order book

What gives us particular confidence in the company’s earnings trajectory is the rate at which Service Stream has been securing new work.

In 1H26 alone, the company secured $2.2 billion of new multi-year operations and maintenance (O&M) agreements and strategically renewed 93% of existing contracts that proceeded to market. Total Work in Hand (WIH) has grown 55% on the prior corresponding period to $9.2 billion, with an additional $6 billion in extension options on top.

Source: Service Stream FY26 Half Year Results Presentation.

Average contract tenure is now 17.5 years.

Since the 1H result, Service Stream has continued to add to that order book. Recent announcements include:

• A nine-year, $405 million contract with Yarra Valley Water under its Maintenance Services Delivery Partners program (mobilisation October 2026),
• Two contracts with Millmerran Operating Company at its Queensland power station worth a combined ~$50 million over three years.

These wins illustrate exactly what a diversification strategy is designed to deliver: more water, more industrial, more power.

In a contractor, Work in Hand growth of this magnitude doesn’t show up in the P&L immediately. It shows up over the following 2-3 years as new contracts mobilise and existing ones extend at improved margins.

Source: Service Stream FY26 Half Year Results Presentation.

The market is treating Service Stream’s headline FY26 numbers (revenue down 5.8% on previous corresponding period due to the 1H25 telco skew) without giving credit for the order book that sits behind them.

Optionality on top

Management has indicated they continue to actively assess M&A opportunities to expand service offerings, capabilities, and addressable markets.

Past acquisitions have focused on quality and have been bedded down well. With ~$100 million of net cash expected to be available outside of leases by FY27, a sensibly priced bolt-on at ~8x EV/EBIT would add another ~9% to earnings on top of the organic upgrade we already see.

The offshore lens

It is worth stepping back and putting Service Stream in the context of its global peers, because the Australian market does not always price contractors the way the US market does.

In the US, the listed network and infrastructure services contractors – Dycom Industries (NYSE: DY), MasTec (NYSE: MTZ), EMCOR (NYSE: EME), and Quanta Services (NYSE: PWR) – trade on materially higher multiples than their Australian counterparts.

Dycom, for example, has just reported FY26 revenue of US$5.5 billion at 13.3% adjusted EBITDA margins, with a backlog of more than US$8 billion, and trades on more than 25x forward earnings. MasTec sits even higher at around 35x.

Source: Ophir, Bloomberg.

The drivers are not identical to Service Stream, US peers benefit more directly from fibre-to-the-home buildouts, data centre construction, and the AI-driven power infrastructure cycle. But the structural features investors are paying premium multiples for, long-dated O&M contracts with blue-chip customers, recurring revenue, net cash balance sheets, and operating leverage from incremental volume, are exactly the features Service Stream now has. And who knows … maybe data centres are next for Service Stream!

The US private market reinforces the point. ITG Communications, a private US network services provider, has been on an aggressive acquisition spree (Quasar in December 2025, Advantage Utilities in November 2025, and others), backed by global alternatives firm Oaktree Capital. Private capital is paying up to consolidate this category, even as Australian listed peers in the same category trade at material discounts to global comps.

Looking ahead: arguably a higher-quality earnings stream

Service Stream’s management has guided earnings growth in FY26, with a traditional 2H bias driven by the mobilisation and scaling of new operations including Defence.

We believe consensus FY27 EBITDA of ~$180 million is too low. We see upside risk to earnings as utilities margins continue to expand, telco grows modestly, and Defence begins to contribute meaningfully.

Service Stream is currently trading on around 18x consensus FY27 earnings, which, given our earnings expectations, is overstated and should be closer to ~14x.

For reference, Ventia trades on ~18x, Downer on ~17x, and smaller specialist contractor SRG well above 24x. It could be argued that Service Stream has a higher-quality earnings stream than some of these. More annuity, less Design & Construct, with a net cash balance sheet and clearer earnings upgrades ahead.

Source: Ophir, Bloomberg.

Why it fits this environment

In a market consumed by the AI debate, where every software business is being asked whether its cash flows are durable at all, Service Stream is the other side of the coin.

Its earnings are tied to ageing infrastructure that has to be maintained, telecommunications networks that have to be operated, water assets that have to keep flowing, and defence sites that have to stay functional. None of this changes if AI model capability doubles next year. None of it changes if the macro slows. The work simply has to happen.

It is, in short, the kind of compounder that doesn’t need a benign macro to work. It just needs the infrastructure of modern Australia to keep running – and that, increasingly, runs through Service Stream.

Your Distribution Guide – the decision that compounds.

PDF    |    OPH ASX Announcement

At Ophir, we seek to compound investor capital.

Over the long run, we’ve done exactly that, returning (as at 31 May 2026):

• +23.0% p.a. in the Ophir Opportunities Fund (since August 2012)
• +12.1% per annum in the Ophir High Conviction Fund (since August 2015)
• +18.7% per annum in the Ophir Global Opportunities Fund (since October 2018)
• +14.3% per annum in the Ophir Global High Conviction Fund (since September 2020)

all net of fees and assuming reinvestment of distributions. Past performance is not a reliable indicator of future performance.

Under Australian managed-fund rules, we’re required to pass through net realised gains and income to unitholders each year.

Some years that means a meaningful distribution, some a modest one, and occasionally none at all. When there is one though, the mechanics can confuse some investors. The choice of what to do with the cash is often one of the most consequential investment decisions they’ll make all year.

This piece covers three things:

• How a distribution actually works: what you’ll see, and why.
• The cost of taking cash: the long-term impact on your investment.
• The practical bits: FY26 distribution estimates for the Ophir Funds, key payment and statement dates, and what to do before 1 July.

What is a distribution, exactly

A distribution is your share of the year’s profits: the income and realised gains your fund has earned, paid out in proportion to how many units you hold. For our funds, that typically includes:

• Dividends from the companies we own
• Interest on any cash holdings
• Net realised capital gains from holdings we’ve sold during the year

That last one is what swings most year to year. Some years we crystallise a lot of gains, some years we don’t, and some years prior-year losses are still absorbing gains before they reach you.

Why your unit price falls on 30 June

In the weeks after a distribution, like clockwork, we get an influx of concerned investors asking what on earth happened to the fund in June for the unit price to drop. And the reassuring answer is usually, nothing! We just paid you a distribution.

Imagine your unit price starts FY26 at $2.50, and through the year the fund earns $0.50 per unit that must be distributed. That money doesn’t sit in a separate pot; it increases your unit price over the year. By 30 June 2026, the unit price is $3.00: your original $2.50, plus the $0.50 waiting to be paid out. On 30 June, that $0.50 gets paid out as a cash distribution, and the unit price retreats to $2.50, exactly where it started.

Look at the price alone and you’d swear you made nothing all year, a 0% price return. But the $0.50 is in your pocket. Add it back and your total return is 20% ($0.50 ÷ $2.50). Note: generally it’s not 100% of any rise in the unit price throughout the year that is paid out as a distribution – we have just simplified the example here.

But, this is where the jargon trips people up. That $3.00 is the cum-price, the unit with the income still inside it. The $2.50 is the ex-price, after the cash has been handed out. The gap between them isn’t a loss. It’s your distribution.

The price didn’t fall. It just stopped carrying cash that’s now yours.

The cost of cash

Everyone loves a Brucey bonus. There’s something satisfying about seeing cash hit the bank from an investment, and to be clear, it’s your real profit from the stocks we hold.

The only question is: what taking it as cash costs you, compared to leaving it in the fund.

Here’s the answer in dollars. Put $100,000 into the Ophir Opportunities Fund at inception in August 2012. The chart below shows what you’d have as at 31 May 2026: the value of your holding, plus whatever you did with each distribution along the way.

Source: Ophir, Bloomberg. Note: Index refers to ASX Small Ordinaries Index Total Return.

Tick the DRP box at inception and your $100,000 is worth $1.76 million today (after fees and before tax). Take every distribution as cash and let it sit earning the cash rate, and you have $801,000. That’s around $960,000 difference.

But what if you’d got around to reinvesting it yourself, putting every cash distribution into the Australian small cap index along the way? You’d have $953,000. Better, but still over $800,000 short of the DRP investor.

Both numbers tell the same story, and it isn’t about the index, the cash rate, or the maths. It’s that cash rarely gets a plan. The first distribution lands, you ponder what to do with it, you sit on your hands waiting to “buy the dip”, while the market it came from has continued compounding without it.

These figures are illustrative only, based on the fund’s actual past returns and a calculated cash rate over the period shown. Outcomes will depend on how distributions are used. Holding cash or reinvesting into different assets may lead to different results. Past performance is not a reliable indicator of future performance.

Don’t Retire your Profits (DRP)

But officially? The Distribution Reinvestment Plan.

The case for reinvesting is the oldest one in investing: compounding. As Warren Buffett put it, “Life is like a snowball. The important thing is finding wet snow and a really long hill.”

The DRP hands you both. The wet snow is a fund with strong long-term returns. The long hill is the time horizon that lets compounding do its work.

Here’s how it rolls. Reinvest your distribution and you receive new units, issued at the ex-price, with no transaction costs. Those units earn next year’s distribution, which buys more units, which earn the year after. Each year your slice gets a little bigger. Gentle at first, quietly remarkable by year ten, genuinely transformative by year twenty (based on the historical returns).

That’s the snowball. The DRP is how you keep it rolling.

Four things to know about the DRP

• Free: No transaction costs or buy/sell spreads.
• Flexible: Reinvest fully, partially, or not at all. Change your mind any time.
• Tax-neutral. Same tax either way. Your distribution is assessable in the year it’s earned regardless of whether you take cash or reinvest. Reinvesting doesn’t defer or reduce the tax.
• Set-and-forget. Elect once. It runs in the background until you stop it.

The DRP isn’t for everyone. If you rely on your distribution for income, take the cash. But if you don’t need the cash right now and you’re investing for the long term, reinvestment is the simplest decision you can make to compound your position.

Based on their own circumstances, the investors in our funds who’ve quietly reinvested for the last decade didn’t make a difficult decision once. They made an easy decision once and left the snowball alone.

The above is general information only, not personal financial advice. Market conditions, cash flow needs and tax outcomes may affect long-term results, and outcomes are not guaranteed. Consider seeking licensed financial or tax advice for your circumstances.

FY26 distribution estimates

Below are our estimated distributions per unit (DPU) for each fund and unit class, based on portfolio data as at 30 April 2026:

Please note: for all Ophir funds, the ex-distribution date is 30 June 2026, and the record date is 1 July 2026.

Estimates only, based on portfolio data as at 30 April 2026. Final distributions are calculated after 30 June 2026 and may differ materially. Do not rely on these figures for tax purposes.

Why OPH works differently

The Ophir High Conviction Fund (OPH) is our listed investment trust (LIT), so its Distribution Reinvestment Plan works differently to our unlisted funds.

In the unlisted funds, your reinvested distribution simply becomes new units, created at the ex-price. Because OPH units trade on the ASX, our current DRP policy is to use your distribution to buy OPH units on-market through our broker, rather than issuing new units. In plain terms, an on-market buyback.

That’s good news for you. The buyback can never pay more than the end of financial year reported NAV per unit, and when OPH trades at a discount, as it does today, you pay less.

Note: because the buyback takes time to complete and settle, OPH’s distribution and tax statements arrive a few weeks later than the unlisted funds, typically mid-to-late August. For more details please refer to the ASX announcement (link) and the terms and conditions of the DRP (link here).

A note for Global High Conviction Fund holders

Our Global High Conviction Fund (Class A and Class B units), based on current estimates, may not pay a distribution this year.

The fund had built up carry-forward losses from prior years. This financial year to date, the fund has produced strong returns, and those carry-forward losses have done exactly what they’re designed to do: absorb the realised gains the fund made so far during FY26. The capital losses have been fully recouped, and the remaining gains have been offset by some leftover carried-forward revenue losses.

Based on current estimates, the expected outcome is a $0 distribution, with the value the fund has generated staying in your unit price rather than being paid out.

If that estimate holds, GHCF holders won’t receive a distribution statement or an AMMA tax statement (the document you’d normally use at tax time) for FY26.

Your 30 June statement will arrive later

Because the final ex-distribution unit price can’t be confirmed until after the distribution is calculated and audited, your 30 June 2026 holding statement arrives once everything is finalised. It comes bundled with your distribution and AMMA tax statements: late July to early August for the unlisted funds, and the second half of August for OPH.

Dates are estimates only. All statements will be sent via our unit registry Automic Group and will be made available in the Automic Investor Portal.

Withdrawing?

Unitholders who lodged a redemption request during the June cycle remain entitled to their FY26 distribution. As the final distribution calculation is still being completed, payment of redemption proceeds will be delayed and is expected to be made at approximately the same time as distribution payments. We appreciate your patience while this process is finalised.

What to do now

Three things between now and 30 June:

• Check your DRP preference. If you want to reinvest your FY26 distribution, or change your existing election, log in to the Automic Investor Portal (link), follow Automic’s step-by-step DRP guide (link), or use the paper DRP form (link) and email a copy to ophir@automicgroup.com.au. For the unlisted funds, elections must be received by close of business 30 June 2026. For OPH, in line with the ASX timetable, DRP elections close on 2 July 2026 (the first business day after the record date).
• Check your bank account details. Important: missing or out-of-date details means you may be deemed to have elected DRP by default.
• Final figures and statement timing will be confirmed in our late-July follow-up.

As always, if you’d like to chat to us about any of the Funds, please feel free to call us on (02) 8188 0397 or email us at ophir@ophiram.com.

Thank you for entrusting your capital with us.

Kindest regards,

Andrew Mitchell & Steven Ng

Co-Founders & Senior Portfolio Managers

Ophir Asset Management

This document has been prepared by Ophir Asset Management Pty Ltd (ABN 88 156 146 717, AFSL 420082) (“Ophir”) and contains information about one or more managed investment schemes managed by Ophir (the “Funds”) as at the date of this document. The Trust Company (RE Services) Limited ABN 45 003 278 831, the responsible entity of, and issuer of units in, the Ophir High Conviction Fund (ASX: OPH), the Ophir Global Opportunities Fund and the Ophir Global High Conviction Fund. Ophir is the trustee and issuer of the Ophir Opportunities Fund.

This is general information only and is not intended to provide you with financial advice and does not consider your investment objectives, financial situation or particular needs.  You should consider your own investment objectives, financial situation and particular needs before acting upon any information provided and consider seeking advice from a financial advisor if necessary. Before making an investment decision, you should read the relevant Product Disclosure Statement (“PDS”) and Target Market Determination (“TMD”) available at www.ophiram.com or by emailing Ophir at ophir@ophiram.com. The PDS does not constitute a direct or indirect offer of securities in the US to any US person as defined in Regulation S under the Securities Act of 1993 as amended (US Securities Act).

All Ophir Funds are deemed high risk within their respective Target Market Determination documentation.  Ophir does not guarantee the performance of the Funds or return of capital.  An investment may achieve a lower than expected return and investors risk losing some or all of their principal investment.  Past performance is not a reliable indicator of future performance.  Any opinions, forecasts, estimates or projections reflect our judgment at the date of this was prepared, and are subject to change without notice.  Rates of return cannot be guaranteed and any forecasts, estimates or projections as to future returns should not be relied on, as they are based on assumptions which may or may not ultimately be correct.

Actual returns could differ significantly from any forecasts, estimates or projections provided.

The Trust Company (RE Services) Limited is a part of the Perpetual group of companies. No company in the Perpetual Group (Perpetual Limited ABN 86 000 431 827 and its subsidiaries) guarantees the performance of any fund or the return of an investor’s capital.

An all-time month for Ophir’s flagship Funds in April

PDF

In this Letter to Investors, we look at:

• The big reason the U.S. market keeps charging higher despite the Iran war remaining unresolved.
• The pleasing explanation for why our Global Opportunities Fund had its best month ever.
• Our flagship Global and Aussie small-cap Funds topping the leaderboards in April.
• The potential for a ‘soft close’ of our Global Opportunities Fund to help optimise our ability to generate returns.
• The hot industry sector in the AI thematic that has killed it over the last year, including a stock up a massive 2,939%.
• Why we don’t need big skews to risky ‘hot themes’ to drive our strong performance.

The outbreak of the Iran war triggered an ‘every equity market down month’ in March. But then in April we saw an almost universal relief rally in markets as investors got more comfortable that there was likely to be a de-escalation in military hostilities.

During the month, the S&P 500 ripped +10.5% to new all-time highs. Domestically, however, the RBA’s continued hiking led to a relatively muted +2.2% gain for the ASX 200.

A hawkish RBA also saw the Australian dollar jump +4.4% versus the U.S. dollar, which trimmed offshore gains for unhedged Aussie investors. Global equities (MSCI World Index) were up +9.6% in U.S. dollar terms in April. But in Australian dollar terms gains were almost cut in half to +5.1%.[1]

It’s earnings, stupid

Understandably, investors have been scratching their heads and wondering why the US share market is back at all-time highs when the Iran war and the global oil supply situation remain unresolved.

The answer likely lies in the chart below.

It’s earnings!

Normally in the first few months of the year (as shown by the grey line), corporate earnings expectations in the U.S. get downgraded.

But this year, earnings expectations have been going bananas.

They’ve been juiced up by stellar growth from AI-related businesses.

But expectations for earnings growth have also been strong outside the Magnificent 7, including in small-cap land where we fish.

How Ophir’s stock picking drove April outperformance

Our Ophir Funds in April collectively had one of their best months ever.

In fact, measured by the collective increase in our Funds Under Management due to investment returns, we added more to our investors’ back pockets in April than any month before!

Of course, in our view, investing in shares is a long-term endeavour and that is what’s most important, but it’s nonetheless pleasing to have had a good month.

Leading the way was our Global Opportunities Fund (global small caps), which in April was up +12.3%.

As you can see in the chart below, over the 91 months since it started in October 2018, this was its best month ever.

Importantly, most of this return was outperformance.

While the Fund was up 12.3 per cent in April, its benchmark (MSCI World SMID Cap Index NR AUD) rose +3.2% — an outperformance of 9.1%.

Just as important, the vast majority of that 9.1% outperformance came, not from a big factor or thematic tailwind, but from stock picking (a point we’ll elaborate on later).

The April outperformance was essentially the stock prices of our companies catching up with the Feb/March reporting season.

While they handed down strong earnings back then, they weren’t fully rewarded at the time because the Iran war had stolen the market’s attention.

Ophir Flagship Funds top leaderboards

Not only was April the best month for our Global Opportunities Fund in its history. But it was also the best performance in April of any global small/mid-cap fund available in Australia (see chart below).

For prospective investors in the Fund, a natural question might be: “Have I missed out? Have all the returns already been squeezed from the current portfolio?”

Well, we’d note that the competition for stocks to get into our Global Opportunities Fund remains amongst the highest it’s ever been.

Many great ideas have been relegated to ‘bench’ stocks, so we can keep the Fund full of just our very best ideas.  Given this, we have been personally allocating significant amounts to the Fund at the start of May.

Market leading performance

But it wasn’t just our flagship Global Fund that had a good April.

Our original Aussie small-cap fund, the Ophir Opportunities Fund, also outperformed all other Aussie small/mid-cap funds during April, rising +8.4%.

It wasn’t the Ophir Opportunities Fund’s best month ever in absolute terms. But after beating its benchmark (the ASX Small Ordinaries Index +3.3%) by 5.1% in April, it was a top-10 outperformance month. Not bad for a fund that’s been going 165 months (almost 14 years).

Since its 2012 inception, that original Ophir Opportunities Fund has now returned +22.8% per annum after all fees.

That puts it a long way ahead of the other Australian small/mid-cap funds that have been going since 2012. And way ahead of the ASX Small Ordinaries total return index which has returned 6.7% per annum – see chart below.

Why the Global Opportunities Fund may follow in the footsteps of the Ophir Opportunities Fund with a ‘soft close’

Relative to other global small/mid-cap funds available in Australia that have been going since at least the Fund’s inception in 2018, our Global Opportunities Fund also has a significant outperformance gap (see below).

For those unfamiliar, the Global Opportunities Fund has the same investment process and is run in a similar fashion to our Ophir Opportunities Fund, just in global small caps not Aussie small caps.

It also shares many of the same investment analysts and portfolio managers who have worked on the Ophir Opportunities Fund.

But while the Australian Ophir Opportunities Fund remains closed to new money at capacity, as it has been since 2015, the Ophir Global Opportunities Fund remains open.

However, to give ourselves the best chance of outperforming over the long term, in the not-too-distant future the Global Opportunities Fund may ‘soft close’ to new investors and advice groups. The reality is a month like April does chew through capacity and brings forward the date we’ll have to close the fund to those new investors.

The fund remains open and any decision regarding ‘soft close’ will be communicated in advance.

How Ophir is generating outperformance with no big skew to ‘hot’ themes or sectors

There is no getting around the fact that when it comes to investing, the hottest ticket in town is Artificial Intelligence (AI).

We use it in our business, and it can do wonderful things. Almost all the CEOs we talk to have a plan to implement it across their businesses.

The capex cycle behind this new technology is literally unprecedented. The current data centre build out eclipses the inflation-adjusted spend of every other megaproject in U.S. history, from the railroads, interstate highways, the Apollo Program, and the Manhattan Project.

Below, we have aggregated the 5,000-odd global small and mid-cap stocks in the MSCI World SMID Cap Index (our Global Opportunities Fund’s benchmark) into 60 industry groups.

We then show the share price performance of each industry group over the year to the end of April from best (‘Technology Hardware up 148%’) to worst (‘Advertising and Marketing down -32.1%’).

Source:Bloomberg.

Why has the technology hardware industry sector killed it over the last year?

Because it’s the picks and shovels of the AI boom. Two major sub-sectors of Technology Hardware are:

• Memory stocks, like SanDisk, Seagate and Western Digital.
• AI networking stocks, including Lumentum, Applied Optoelectronics and Ciena.

Each of these stocks is up 5x or more over the last year.

SanDisk is up a crazy 2,939%. That means a $100 investment a year ago would be worth $3,039 today.

To put that in perspective, if you had a 30-stock portfolio with $100 in each and 29 didn’t go anywhere and were worth $100 still at the end of the year but the 30^th stock was SanDisk, your portfolio return for the year would be 98%! That can hide a lot of sins in the rest of your portfolio![2]

Semiconductor stocks are also on a tear.

As measured by the SOX Index, semiconductors gained for 18 days straight in April. That’s the longest streak ever.

The ratio of the SOX Index to the S&P 500 is now well past the highs seen during the early-2000s dot-com bubble.

We are content as stock pickers

The problem with the ‘just buy big AI beneficiaries’ stocks is that while they have a lot of momentum, we can’t completely write off the possibility of an overbuild. And at some point, the popping of an AI bubble.

At Ophir we are not trying to ride big thematics with big overweight positions to them. If you are good at doing that, then play in large caps or run a macro hedge fund running tens of billions of dollars where you are not constrained by the capacity and liquidity issues that feature in small caps.

We are picking stocks with idiosyncratic drivers of their earnings.

We do have some exposure to the AI thematic, but we are not massively over-indexed to it.  You can see this in the red line of the chart above, which shows our over- or underweight position compared to the benchmark weight in each of the 60 industries.

None of our over- or underweight positions is that big.

Our Global Opportunities Fund has returned a strong 32.9% over the year to the end of April … without having any big overweight position in the industries (most of them AI-related) that have shot the lights out over the last year.

We like that.

We think it means we don’t have to rely on trying to time a certain thematic that has a lot more eyeballs on it.

We’re content picking stocks, not themes, because it means we will have lots of diverse drivers of earnings growth in our Funds. And it means we’re not putting performance at risk if the share prices of stocks exposed to a big thematic reverse at some point, as we’ve seen time and again throughout history.

[1] For those investors worried about any further appreciation in the Australian dollar our Global Opportunities Fund also has a currency-hedged version available (here).

[2] Admittedly SanDisk would have gone from 3.33% of your portfolio to over 50% of it by the end of the year and unless you had a cast-iron stomach would have sold down the holding before it reached half of your portfolio.

As always, if you’d like to chat to us about any of the Funds, please feel free to call us on (02) 8188 0397 or email us at ophir@ophiram.com.

Thank you for entrusting your capital with us.

Kindest regards,

Andrew Mitchell & Steven Ng

Co-Founders & Senior Portfolio Managers

Ophir Asset Management

This document has been prepared by Ophir Asset Management Pty Ltd (ABN 88 156 146 717, AFSL 420082) (“Ophir”) and contains information about one or more managed investment schemes managed by Ophir (the “Funds”) as at the date of this document. The Trust Company (RE Services) Limited ABN 45 003 278 831, the responsible entity of, and issuer of units in, the Ophir High Conviction Fund (ASX: OPH), the Ophir Global Opportunities Fund and the Ophir Global High Conviction Fund. Ophir is the trustee and issuer of the Ophir Opportunities Fund.

This is general information only and is not intended to provide you with financial advice and does not consider your investment objectives, financial situation or particular needs.  You should consider your own investment objectives, financial situation and particular needs before acting upon any information provided and consider seeking advice from a financial advisor if necessary. Before making an investment decision, you should read the relevant Product Disclosure Statement (“PDS”) and Target Market Determination (“TMD”) available at www.ophiram.com or by emailing Ophir at ophir@ophiram.com. The PDS does not constitute a direct or indirect offer of securities in the US to any US person as defined in Regulation S under the Securities Act of 1993 as amended (US Securities Act).

All Ophir Funds are deemed high risk within their respective Target Market Determination documentation.  Ophir does not guarantee the performance of the Funds or return of capital.  An investment may achieve a lower than expected return and investors risk losing some or all of their principal investment.  Past performance is not a reliable indicator of future performance.  Any opinions, forecasts, estimates or projections reflect our judgment at the date of this was prepared, and are subject to change without notice.  Rates of return cannot be guaranteed and any forecasts, estimates or projections as to future returns should not be relied on, as they are based on assumptions which may or may not ultimately be correct.

Actual returns could differ significantly from any forecasts, estimates or projections provided.

The Trust Company (RE Services) Limited is a part of the Perpetual group of companies. No company in the Perpetual Group (Perpetual Limited ABN 86 000 431 827 and its subsidiaries) guarantees the performance of any fund or the return of an investor’s capital.