What a Small Cap Fund Manager looks for in Emerging Companies Alpha hunting 24 October 2012

Important Notice This presentation does not take into consideration the investment objectives, financial situation or particular needs of any particular investor. Certain statements in the presentation relate to the future. Such statements involve known and unknown risks and uncertainties and other important factors that could cause the actual results, performance or achievements to be materially different from expected future results, performance or achievements expressed or implied by those statements. Australian Ethical Investment does not give any representation, assurance or guarantee that the events expressed or implied in any forward looking statements in this presentation will actually occur and you are cautioned not to place undue reliance on such forward looking statements. This presentation has not been subject to auditor review.

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Great Australian Success Stories “Going Global”

Great Australian Companies CSL (ASX Code: CSL) Blood Products 30% US market share Strong presence in Europe Organic growth + acquisitions ROE = 28.6% 10 Year Rev growth = 13% pa

Great Australian Companies Cochlear (ASX Code: COH) Implanted hearing devices 65% Global market shares Organic growth ROE = 35.8% 10 Year Rev growth = 10.7% pa

Great Australian Companies Resmed (RMD) Sleep disorder breathing company (medical device) >40% market share in continuous positive airway pressure (CPAP) Organic growth ROE = 11.9% 10 Year Rev growth = 21% pa

Great Australian Companies Computershare (CPU) Global leader in share registry and services Strong technology heritage Acquisitions ROE = 22.3% 10 Year Rev growth = 9% pa

What made them great? Commonalities Global focus Sustainable growth Heavy emphasis on IP and/or technology High margins and high ROE Thematic drivers Recurring revenue streams Strong management / leadership

Some tools and investment principals Screening tools Ear to the ground Understanding of industry drivers/thematic Understanding market opportunity, regulatory and funding environments Understanding time horizons Sticking with solid product quality/efficacy

How we go about searching Look for positive industry dynamics Look for barriers to entry Look for strength of intellectual property Look for control of customer relationship Look for sectors/industries where we have domain knowledge and experience Management quality Challenging valuation aspects Market premium/discount vs. historical norms and peers

Smaller Companies Trust Asset Allocation at 30 June 2012 Solid and dependable large cap companies With good business models and yield. Mixture of quality domestic focussed smalls & globally focussed small companies

Smaller Companies Trust Business Models

Smaller Companies Trust Global Growth Focus* ~ 20% of portfolio * As at 30/06/2012

Smaller Companies Trust Quality Domestics* ~ 38% of the Portfolio * As at 30/06/2012

Smaller Companies Trust Large Cap stocks ~32% of Portfolio * As at 30/06/2012

Summary Understanding the greats gives clues Best growth is organic, while growth by acquisition works better where there is a heavy emphasis on technology/IP Australia has pedigree with technology Its worth paying up for sustainable growth Small caps will give investors superior growth potential over the long term