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

2. 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.

3. Ethical fund of the Year
18,500 investors/members
$650 million funds under management
$1.3 million community grants

4. Great Australian Success Stories
“Going Global”

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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

12. 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

13. Smaller Companies Trust
Business Models

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

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

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

17. 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