Selector June 2012 Quarterly Newsletter

SelectorFundsManagementLtd QuarterlyNewsletterNo.
30
In this quarterly edition we review performance and attribution. We profile Technology One and take a look at retailer Super Group Limited. We also comment on theeconomiclandscapeandtransformations.Photo
SelectorFundsManagementLimited ACN102756347AFSL225316 Level3,66HunterStreet SydneyNSW2000Australia Tel61280903610 www.selectorfund.com.au
June2012
June2012 2SelectorAustralianEquitiesFu undQuarterlyNe ewsletter#30
DearInv vestor, Inarerun r oftheeve entsthattookholdduring gthelatterstagesof2011, ,globalfinancialmarketsand investor rs are once again a contem mplating the worst. w Fear has h taken hold and no am mount of logic c or reasoning will shake e away the co oncerns of inv vestors when n all around, governments s are doing th heir levelbe esttodestroy yconfidence. InourDecember D 201 11quarterlynewsletter, n w wehighlighted dtherushtocashwithten nyearAustralian governm ment bondshitting h record d lows of 3.7% %. At the time e, it was note ed that thiswas w equivalent to share in nvestors buying businesses on price to earnings rati ios (PER) of 27 2 times. We followed this s up intheMarch M 2012quarterlywhe en we quotedJames Grant t, editorofGr rants Interes st Rate Observer, who un nashamedly added a that with w US yield ds pushed to o near zero and investo ors desperate e to preserve their capita al, abandonin ng all sense o of investment logic, I think its going to be the wo orst investm mentofthene extgeneration. Three months m on an nd the situatio on has not im mproved, with h the run into o cash becom ming a stampe ede, reflecte ed in ten year bonds selling at all time lows in the e US, Germany, France, United U Kingdo om, Netherlands andAus stralia,justto onameafew w.Suchistheswing,thatUS U Treasuriesarenowtrad ding onanequivalentPER Rof65timeswhiletheS& &P500ShareIndexisona12.9timesmultiple. m Not sur rprisingly, the stampede into cash has h been mirrored by th he stampede e out of shares. Investors have been n pushed to the limit and are now voti ing in the mo ost direct way y, by selling out. o Under these t circums stances, its understandab u ble to seek co over, howeve er what we ar re now endur ring seems extreme. No otwithstandin ng the rising g tide of resentment to owards equit ties, we rem main convinc cedthatnowis notthe tim me toexit. Rather itis atim metoconside ertheopport tunitieson of ffer. Nowisthe t timetobeinequitiesbecausetheo overwhelmingconsensusistellingyoudootherwise e. Stock selection s is always critic cal in this p process, as any a number of recent company pr rofit downgr rades and new w capital rais sings would re einforce. Tha at said, invest tors are apply ying a signific cant riskdisc counttosharevaluationsacrossthebo oard,thatinour o opinionappearunjustified.Inourlead article this t quarter, we profile one such co ompany that ticks all the e boxes. The e company is s IT specialist Technolog gy One. We follow this up with a short s article on the changing economic landscapefacingbus sinessesandhow h onebusi inessisdealin ngwiththese echanges. Finally, over the cou urse of the fin nancial year, t the Fund out tperformed th he general market, deliver ring a gross negative return of 1.13% % as compared to the 7.04 4% fall in the e All Ordinarie es Accumulat tion Index.Under U thecirc cumstances,we w believeth hisisacomme endableresult. Toallou urinvestorswe w trustthatyoufindthereportinform mative. Regards s TonySc cenna CoreyVincent V
SelectorFunds F Managem mentLimited ACN102 2756347AFSL22 25316 Level3,66 6 HunterStree etSydneyNSW2000, 2 Australia Telephon ne6128090361 10Webwww.se electorfund.com m.au
TableofContents Page1:Lettertoinve estors eviewTechn nologyOne Page4:CompanyRe 3:Survivalofthe t fittestsnapshot s revie ewSuperRet tailGroup Page13 Page17 7:Changingec conomicland dscape Page18 8:Transforma ations Page20 0:CompanyvisitdiaryJune eQuarter201 12 Quote Finallyapoliticianth hatgetsit; By making a series of sensible decisions, d whi ich build on each e other an nd which are signalled well in advance e, and by tak king most people with you as you go, you can effe ect real and durable chan nge, whichwont w simplybe b reversedby ythenextlot twhocomein ntogovernme ent. I am at a pains to po oint out most t days in parl liament job bs are only cr reated when business own ners have the confidence to invest the eir own mone ey to expand what w they are e doing or tostart someth hing new. Whoisthe t politician nthatgetsitJohnKey,Pr rimeMinister rofNewZealand,anedite edtextrecent tly givento otheMenzies sResearchCe entre.
Perform manceGlobalEquityMark kets
Source:The T AustralianFinancialreview
As the accompanyin ng table abov ve illustrates, , the past tw welve months have been difficult d for lo ocal investor rs with the in ndex down double digit co ompared to positive p gains s recorded in n the US market. That sa aid, for all th he woes emanating from m Europe, the local mark ket actually rose 0.6% since Decemb ber2011,rein nforcingourview v thatinve estorsarecop pingwithatid deofnegativesentiment. For the June quarter r a couple of notable perfo ormers includ ded News Corporation and d Sirtex Medi ical. In the case c of News s Corporation n, the past year has seen n managemen nt focused on improving the groups business transparency which w has culm minated in th he company a announcing the possible split s of the business b into two listed entities, e being g publishing and a entertain nment. We are supportive e of themov ve andexpec ct furtherpositive perform manceover th he course oftheyear.Inth hecase ofSirt tex, growing g internation nal awarenes ss regarding the groups s liver cance er treatment t has lifted the compan nys profile reflected in strong s dose u unit sales. Flight Centre provided the e Fund with the largestnegativecontributionforthe quarter, howeverweexpectavery y strongfullyear y resultto ore focus in nvestors on the groups cheap fundam mental valuation. Also imp pacting performance was the Funds holding in Ph harmaxis, wh hich took ano other positive e step during g the quarter r with both f final Europea an approval as well Aust tralian Pharm maceutical Be enefit Scheme listing granted during the period.Firstsalesare enowexpect tedthisquart terwithUSap pprovalsough htduring201 13.SFM
TechnologyOne(TN NE) Table1:Technology yOnetimelin ne1987201 12

Year 1987 1999 1999 1999 2000 2000 2000 2000 2000 2001 2001 2001 2002 2002 2002 2002 2003 2003 2003 2004 2005 2006 2007 2008 2009 2010 2011 2011 2012 Event TechnologyOne O foundedbyAdrian A DiMarco ofocusedonpro ovidingaccountin ngsoftwareforbusiness. December,bu usinesslists onstock s exchangew with$1.00pershare s issueprice e,raising$28M,valuingcompan ny at$101M.WithaforecastNP PATof$5.5M,th hegroupspriceearningsratiost toodat18.5x. TechnologyOne O offeringrepositioned p onpro ovidingbusiness seswithcriticale enterprisesoftw waresolutions. Technology One O service repu utation built on Power of One , whereby the c company builds, , implements an nd supportstheIT I requirements sofitsclientsinafullserviceoff fering. UniversityofTechnology T Sydn neyselectsStud dentOnesoftwaresystemtosup pportstudentgr rowth. Shareshitalltime t highof$4.74pershare,va aluingbusinessat a $478million. October,Tech hnologyOnerais ses$18Mforacq quisitionviaplac cementofnews sharesat$4.03pershare. November,co ompanyunderta akes3for1sharesplit,increasin ngissuedsharesto316M. December,ac cquiressoftware eproviderProCla aim softwarefor$10.6M,enabl lingTechnologyOnetoprovidea fullyintegrate edsoftwaresolu utiontolocalgov vernment. January,founderAdrianDiMarco M appointedChairmanwhile econtinuingasC CEO. April,compan nyannouncesa0.95 0 centpersharespecialdivid dendtoreleasee excessfrankingcredits. c August,annou uncesrevenueup u 39%to$40M,netprofitpre amortisation a up41%to$8.1M. May,localgov vernmentclientlistexceeds50,with50%marketshareof75of flargestAustraliancouncils. July,company yannounces10% %onmarketbuy ybackofshares,representingamaximumof31 1.7Mshares. November, company update es market, with h net profits to fall 25% below 2002 levels s of $9.4M post pendingslowdow wn,dividendsof f2centspersharemaintained. technologysp November,sh harepricehitsal lltimelowof20 0centspershare e (equalto60ce entsbefore3:1sharesplit). September,netprofitdrops20% 2 to$7.0M,fu ullyeardividend dsup25%to2.5 5centspershare e. September,announcesnewon o market10%b buybackofshar res,tomaximum m29.8Mshares. CEO Di Marc co reaffirms co ommitment to invest heavily in research and d development (R&D) with th he expectedrele easeofnextgene erationsoftware eConnectedIntelligenceCIser ries. August,2004revenueup7%to$50M,netpr rofitsup35%to$9.5M,R&Dfullyexpensedtota alling$9.5M. November,co ompanyannouncesintentiontoopenoperation nsinUnitedKing gdom. February,initiallicencefeesfor f thehalfyeargrew70%,withcustomernumb bersnowexceed ding500. Companyreportingperiodch hangedfromJunetoSeptember. Revenueexce eeds$100M,R&Dinvestmenthi its$21M,record dnetprofitof$1 17M,customerbase b 900. Companycele ebratestenyear rssincelisting,fu ulltimeemploye eenumbers670,R&Dteamheadcount500. Recordrevenuesof$136M,net n profitsof$17 7.1Mandfullye eardividendsof5.70 5 centspershare. Revenuepass ses$150M,R&D Dinvestment$32 2M,netprofitshit h $20M,cashb balance$45M. Major corpor rations utilising Technology One enterprise software applicati ions passes 800 0, significant new investmentin nnextgeneration nCloud(Ci2)sof ftwareoffering,newoffshoreR& &Dcentretolev veragecostbase e. Firsthalfprof fitsup2%$9.3M M,fullyearprofit tsexpectedtorise1015%to$2 23M,FTEexceed ds1,000.
History The Tec chnology One e business tra aces its origin ns back 25 ye ears, with founder, major shareholder and a current executive ch hairman Adria an Di Marco, developing and a offering c company enterprise softw ware solution ns, servicing the financia al manageme ent and acco ounting indu ustry. In 198 89, the busin ness established a separa ate division to o investigate the developm ment of large e scale custom m built softw ware applicat tionsculmina atinginagrow wingclientlistservicinged ducationandgovernmentorganisations s. In Dece ember 1999, Technology T One O listed on n the stock ex xchange, raising $27.8 million that valued the gro oup at just over $100 million. These were the he eady days of the technology boom, with w investor rs keen for information technology t (IT T) exposure. Back then the Technolog gy One busin ness
was rar re in what it offered inve estors. It actually made money, m with the group fo orecasting in n its prospec ctus documen nt a net profi it of $5.5 million and a div vidend payme ent of 1.5 cents per share e. In August 2000, the sh hares hit an all time of $4.74 ($1.58 adjusted a for 3:1 share sp plit in Novem mber 2000). In subs sequent year rs manageme ent has inve ested heavily y in building g out the so oftware solut tion offering gs. Today, th he group targ gets seven industry segm ments, offering ten comp plete enterprise softwar re solution pr roducts. Impo ortantly the c companys ke ey point of dif fferentiation revolves arou und its com mmitment to customers, which mana agement term ms the Pow wer of One. By developing, marketi ing, impleme enting and su upporting the eir clients, Te echnology On ne has built a successful and a formida ablebusiness, ,whichintur rnhasreward dedsharehold ders. Table2: 2 Technology yOneFinanci ialSnapshot
$M Revenu ue Operati ingExpenses Researc ch&Developme ent EBIT NPAT EBITMa argins(%) Shareho oldersEquity NetDeb bt/(netcash) Market tCapitalisation Enterpr riseValue Buyout(%)** ROCE(% %)*** GOCF/EBITDA(%) Underly yingEPS() PER Dividen ndpershare() Dividen ndYield% SharePrice P 30June($) Issuedshares s (m) 2000 28.1 (14.6) (4.7) 8.8 5.8 31.3 14.3 (14.3) 369.7 355.4 2.5 >100 90.0 1.9 61.5 1.5 1.3 1.17 316.0* 3.5 15.1 3.1 5.8 0.53 299.4 4 4.1 16 6.1 3 3.4 5 5.2 0. .66 29 96.7 5.0 23.6 3.8 3.2 1.18 297.7 5.8 13.6 4.1 5.2 0.79 298.9 5.2 2 15.2 2 3.8 8 4.8 8 0.79 9 300. .3 38.3 (22.7) 158.7 136.0 10.7 94.9 86.0 39 9.3 (18 8.1) 19 95.8 17 77.7 9 9.2 76 6.9 71 1.0 44.3 (24.0) 351.3 327.3 5.6 91.1 106.0 50.5 (16.5) 236.1 219.6 9.9 64.1 71.0 57.1 1 (22.8 8) 237. .2 214. .4 9.1 1 56.8 8 103. .0 2005 53.7 (28.9) (10.2) 14.6 10.6 27.1 20 006 65 5.2 (36 6.2) (12 2.7) 16 6.3 12 2.3 25 5.1 2007 76.8 (44.5) (13.8) 18.5 14.8 24.0 2008 108.5 (65.5) (21.2) 21.8 17.2 20.1 2009 120. .7 (76.3 3) (24.9 9) 19.5 5 15.7 7 16.1 1 2010 134.0 (84.8) (27.0) 22.2 17.8 16.6 63.4 (29.8) 242.7 212.9 10.4 66.1 140.0 5.9 13.6 5.7 7.1 0.80 303.4 2011 153.4 (96.4) (31.8) 25.2 20.3 16.4 68.4 (33.8) 315.5 281.7 8.9 72.8 88.0 6.7 15.5 6.1 5.9 1.04 303.4 7.5 16.0 0 7.0 5.8 1.20 0 303.4 4 69.8 8 (45.1 1) 364.1 1 319.0 0 9.3 119.8 8 98.0 0 2012(e e) 168.0 0 (104.4 4) (34.0 0) 29.6 6 22.7 7 17.6 6
* Adjusted d for 3:1 share split Nov 2000 ** Bu uyout represents E EBIT / EV as a per rcentage *** ROCE E = EBIT / (Shareh holders Equity + de ebt cash.Share epriceasat30June2012
Whatis sEnterpriseSoftware? S Unlike consumers c who w look to access a individ dual pieces of o software to o perform sp pecific functio ons, busines ssesrequiresy ystemsthatare a farmorecomplex c andintegrated.O Organisations slikeTechnology One hav ve developed d specific app plication softw ware tools to meet specific business ne eeds. They range from ac ccount keepin ng, automated billing syste ems, supply chain c manage ement, huma an resources and a payroll to name a fe ew. And while small busi inesses can do d without su uch expensiv ve tailoredmade softwar reapplication ns,theyareamustforlarg gercomplexorganisations. o . Deploying enterprise e software is not without its issues. In fact, the rollo out of large and a integrated IT projects sisoftenaso ourceof significantbusine essrisk.This is sbecause sof ftware isrequ uiredtonotonly o store a large amoun nt of complex x data but to also allow fo or interpretat tion of that data. d In turn this f improved efficiency, productivity and ultimately y better decis sion making by b manageme ent. allows for Too often however, projects face e cost overru uns and fail the customer brief of prov viding outcom mes thatdel liverperformance,scalabilityandrobus stness. Technol logyOnebus sinessmodel The com mpany promo otes heavily the Power of One business model, where custo omers enjoy the benefit of One Vision, One Vendor, One Experience. . In the enterprise softw ware space, the Technology One offe ering is rathe er unique in t that it is prep pared to cont trol all aspects of the serv vice chain. In contrast major m compet titors including German based b SAP an nd US based Oracle, rely y on externa al parties to undertake th he implemen ntation side of things. Th his is an imp portant point t of differen nce that Di Marco M is more e than happy y to exploit for f good com mmercial reasons, noting that t thingsoften o gowron ngattheimpl lementations stage. The sec cond point of o difference surrounds the company s targeted a approach, choosing to bu uild, market, ,implementand a supportenterprise e sol lutionstarget tedatsevenv verticalmarketsincluding; ; LocalGove ernment State&FederalGovernment Education S FinancialServices partments HealthDep Utilities S ManagedServices These are a markets where w manag gement have built up significant expertise along with a high pro ofile customerbasenowexceeding e 90 00thatincludes; Over130Government G departments d ocalGovernm ments,servicingabout30% %ofallnation nalratepayers s Over220Lo reditunions Buildingsocietiesandcr tutions Over40educationinstit re Healthcareandagedcar veringwater,power,ports sandairports s Utilitiescov
Managedservicescover ringmedia,pr ropertyproje ects,entertain nment.
By focusing on these e key markets s, the company has benef fited in a num mber of ways. . First it has built b up leading market positions in ke ey industry se egments. This s in turn has a allowed the group g to deepen ice,offeringten t products, covering fou urteen precon nfigured solut tionsthatcus stomers are able a its servi to purchase on a pe er user basis s under a lice ence model. Finally, mana agement con ntinues to inv vest heavilyonimproving gboththeint tellectualpropertythatsupportstheso oftwareandthe t servicelev vels stomersexpe ect. thatcus Researc ch&Develop pment Success sful companie es invariably y lead from the front. Key K attributes s include pe ersistency and a prepare edness to invest today to reap future rewards. r In the case of Te echnology On ne, managem ment has nev ver been back kward in acce epting the ch hallenge. While investors c can always qu uestion whet ther thedollarsspenttod daywilldelive erthereturns sexpectedto omorrow,itis snevertheless sahallmarkt that allgreat tcompaniesdisplay. d In our circle c of comp petence, com mpanies that f fulfil that requirement include bionic ear manufactu urer Cochlea ar, obstructive sleep apnoea market leader ResMed d, blood plasm ma supplier CSL C and vitam mins leader Blackmores to name ju ust a few. In nvestors fam miliar with the t role tha at research and a develop pment plays will w also ackn nowledge that financially, a dollar spen nt is a dollar not available for distribution. It is in this t context a brave mana agement team that stands in the way of sharehold ders andthe eirprofits.Equ uallyimporta antthenishowmanageme entgoaboutaccountingfo ortheirresea arch anddev velopmentex xpenditure.So omecompanieswilllookto t spendthemoneybutfa ailtorecognis seit as an expense, e preferring to ca apitalise the outlay onto the balance e sheet. In doing so it gi ives shareho olders the impression that t profits are h higher today than what th hey should be e and potenti ially createsaproblemdo ownthetrack kifthespend ddoesntdeliv veronexpect tations. Manage ementteamsrunning cons servativecom mpaniesdo th heopposite. They T allocate e and expense e all theirresearchanddevelopmentcosts c inthey yearthatthey yfall due,the ereby lowerin ngtodayspro ofits but rem moving any long term balance sheet issues. Obviously, the more a company in nvests, the more m it needs to justify its actions to o shareholder rs. It is a fin ne line, but c companies lik ke Cochlear and ResMed d in particular, have show wn over the p past decade that t taking a conservative e accounting line whilst maintaining m high h levels of research and d developme ent investmen nt, has left th he company and shareho oldersingood dstead.Toth hislistwecan nalsoaddTechnologyOne e,abusinessthathasoverits relatively short public life, consist tently reinvested shareho older funds with the aim of o enhancing and develop pingnewreve enuestreams s. Table3:Research&developmen ntexpenditur reprofile
Year 2000 2001 20 002
47 7.4 8.1 8 17.0 1 8.8 8
2003
48.3 9.3 19.3 7.0
2004
51.5 9.5 18.4 9.5
2005 5
55.8 10.2 18.3 10.3
2006
66.5 12.7 19.1 12.3
200 07
78.4 4 13. .8 17. .6 14. .8
2008 20 009 2010

110.2 12 22.5 135.9 21.2 24.9 26.9 19.2 20.3 19.8 17.2 15.7 17.8
2 2011
156.7 1 31.8 20.2 20.3
Revenue($m) 28.1 39.9 R&D*($m m) 4.7 7.8 R&D/Re ev% 16.7 19.5 NetProfit($m) 5.8 7.8 *Research&Developm ment
AsTable e 3 highlights s,thecompan nyhascumulatively invest tedover$180 0millionsincelistingin19 999. Duringthis t sameper riod,thegrou uprecordedc cumulativene etprofitstota alling$147million. m Expres ssed asaper rcentage,managementha asmaintained danannualsp pendequivale enttoalmost ttwentyperc cent ofreven nue.Thegrow wthincompa anyrevenues andearnings sovertheyea arsissupport tiveofthisspe end but management ha ave recently acknowledged that a cr ritical level o of investment t has now been reached d. We will dis scuss the con nsequences of this further r in the repor rt, suffice to say at this po oint that sca ale does matt ter in business and that w while the qua antum of the spend will be b maintained d in future periods, p as a percentage of revenue it t will drop, allowing a lot more dollars to drop to the bottomline. enditure is the groups 50 00 plus softw ware developm ment personnel. Making up the bulk of the expe 2 thegroupcompleted d itsmoveto oits newBrisb baneheadqua artersaspict turedbelow.The T During2010 consolid dation of thr ree offices in nto one of Australias A lar rgest comme ercial softwar re research and a develop pment faciliti ies brings wi ith it scope for significan nt productivit ty improvem ments as well as attractingandretain ningthebesttechnology t ta alent. Diagram m1:Technolo ogyOnenew wBrisbanehea adquarters
Technol logyOnereve enuemodel Some companies are protective of their reve enue models, , preferring to tell investo ors very little e, in fear of what compe etitors may do. d In stark contrast c Di Marco M openly y explains the e model, clearly outlinin ng the three revenue r stage es that under rpin the busin ness case for investment. Table 4 sets out
the thre ee types of fees f that a customer will incur while Table 5 and Table 6 profiles their gro oup contribu utionoverres spectivehalfandfullyearperiods. yOnerevenue emodel Table4:Technology Typeof o Fee Pay yment U User Duration Example ter rms N Numbers $
1.Initia alLicence 2.Cons sultingFee 3.Annu ualServiceFee e Per rmodule P user Per Onceoff Onceoff Reoccurringannually 100* 120 22.5
*Calculatedbynumberof o modulespurch hasedXnumber rofusers(compa anyhasapprox3 300modulescov vering10produc cts)
When a customer se elects an ente erprise softw ware solution, it does so ca arefully and deliberately. d The T consequ uences of get tting it wrong are profound, since in the t majority of situations s the softwar re is providin ng mission critical c solutio ons. It is in this context that one ca an begin to understand the importa ance of softw ware impleme entation and the relations ship that exis sts between a supplier an nd a customer. Technology Ones service s offering is positio oned in what t the compa any describes s as the mid ddle market, , notably orga anisations that are looking to impleme ent complex enterprise so olutions that can range in n value from $100 million to over $1 billion. b As Tab ble 4 highligh hts, the reven nue streams t that flowfro omeachnewcontractaredividedintothreeareas.The T firstisreferredtoasthe t initiallicence fee and is calculated d by the numb ber of produc ct modules purchased by t the number of o users who are licensed dtoaccessth hem.Ifoneca animagineauniversity,or rlocalcouncil lwhomayrequireasoftw ware solution n to enable students to ac ccess informa ation or staff f to log onto work sheets s, the number of users ca an vary signif ficantly in sca ale. This fee is one off in nature n and le eads onto an implementat tion servicefee. Graph1: 1 Halfyearre evenuestreamperforman nces200320 012
Di Marco highlights s the implem mentation of f the software or consul lting as the crucial bit t that compet titors dont do o, choosing in nstead to out tsource this service s to others. It is a sig gnificant point of differen nceandonethat t thecomp panywishest tofullyexploi it.Underthemodel,thecompanychar rges an implementation fee f that is on ne hundred and a twenty percent greate er than the in nitial licence fee value. In the examp ple above, if the custome er were to enter into a contract c valued at $100, the compan ny would also o receive an implementation fee valu ued at $120. While this fee f is one of ff in nature, each time the customer increases th he number of f users, buys s additional modules m or adds new pro oducts, the three t revenue e streams are reactivated for the add ditional reven nues purchas sed. Thelast tstringtothe erevenuebow wisthecharg gingofanann nualfee. The ann nual service fee is as the name n suggest ts, charged an nnually at the e rate of twenty two and half percent t of the origin nal licence fe ee value. This s service not only allows the company y to maintain n an ongoing g relationship p with its cust tomers, unde ertaking upgr rades and oth her services but b it also allo ows forfeed dbackonfutu ureproducten nhancements s. Table5:Feecontributionsplit20 0022011
Year
Revenue e($m) LicenceFees ConsultingFees AnnualFees
200 00 2001 20 002

5.8 8 9.8 8 5.0 0 10.1 10.3 8.4 11.5 1 13.8 1 10.7 1
2003
8.1 14.1 12.4
2004
11.5 13.3 14.4
2005 5
10.6 14.8 17.2
2006
15.6 18.1 21.1
200 07
18. .4 22. .5 25. .6
2008 20 009 2010

22.6 35.9 36.3 24.3 4 41.0 4 43.1 26.8 41.6 48.5
2 2011
30.7 42.8 55.3
10
Custom mers initially enter e into con ntracts that a are long term m in nature, t typically exceeding ten years. Howeve er in reality, customers c ar re loathe in c changing such h critical pieces of softwar re infrastruct ture or IT ve endors. It is an a aspect of the t business that we find d very appealing and best reflected in the fact tha at the compa any boasts a 99.9% clien nt retention rate, while o over two thirds of revenues generat ted each yea ar are from existing e custo omers who are a either pa aying existing g annual fees s or increasi ing their usage via new product p modules and use er numbers. A As Table 5 highlights, h it is a wonder rful annuity model m that go oes some wa ay to explaini ing why man nagement is so s committed d to investin ngasignifican ntportionofshareholder s funds f intores searchandde evelopmentsolutions. Theway yforwardfor rTechnology yOne Manage ement have always a had an eye to the future with a preparedne ess to spend upfront to reap long term benefits. As noted earlier, a deli iberate focus s has been f funds directe ed towards new n product t offerings. In n addition, co omplementin ng the group s onshore re esearch centr re highlighted d in Diagram m 1, manage ement has be een trialling a new offsho ore research and develop pment operat tion based in n Indonesia. The T new centre currently houses over r thirty person nnel with an aim to continue the pilo ot study until year end. Sh hould the cen ntre deliver on o its busines ss case, mana agement expe ects thegrou upsefficienc cytorisethreefold. Another area of inv vestment has been the g groups expa ansion into t the United Kingdom. K Hav ving entered d the market in 2005, the path to profi itability has been b a long ti ime coming. In the latest half yearres sult,the UK subsidiaryrec corded a $780 0,000 loss and dwhile mana agement hasexpanded int to a
secondoffice,thebu uildupofnew wclientsandtheannuitytype t natureo ofthebusines sswouldsugg gest that a breakeven b re esult is still so ome time off f. That said, Di Marco rem mains commi itted to the t task althoug ghhismainat ttentionrema ainsthelocalmarket. Financia als Since lis sting in 1999, , Technology One has plot tted a deliberate and consistent path, with its prim mary objectiv ve to build a better, more e sustainable e business. Ta able 2 provid des an outline e of the grou ups financia alprogresssin nce2000.Wh hiletherearemanywaysto t interpretth hedataset,themostobvious and ple easing aspect of the numb bers are their underlying trends. Spec cifically, the key k indicators s of revenue e,profitsanddividendsareallheadingnorth. ement have steered s the business in a sensible an nd largely org ganic manner right from the Manage start. While W operati ing margins have fallen f from 31% in 2000 to a f forecast 17.6 6% in 2012, the reasons s behind the fall involve the groups deliberate commitment c to reinvest profits into the busines ss. This is refl lected in the research and developme ent cost line, which has spiked from $4.7 $ million in 2000 (or 16.7% 1 of grou up revenue) to o $34 million in 2012 (20.2% of group revenue). As we noted earlier, e this is s a cost that lies within m management s discretion, from which future produ ucts and pro ofits are exp pected to flow w. As such, while profits s could have e been highe er if not for the addition nalspend,ma anagementhasseenfittoploughmore emoneyintoproductdeve elopment.As swe willadd dressalittlefu urtherinthereview,theb benefitsofthi isspendarenow n settoflo ow. The oth her most pleasing aspect of o the companys progress s to date has been its cons servative stan nce. Since lis sting, the com mpany has ke ept a clean ba alance sheet, , carrying no net debt, cas sh of $45 million and wit th all research and deve elopment cos sts written off. o To this w we would als so add that the compan nys growth to t date has been achieve ed without recourse to shareholders and in times s of market volatility, management has h seen fit to buy back company sh hares. All in all, a the finan ncial report card c is not only pleasing to t the eye bu ut underlies one o of the ke ey attractions s of the grou up that the e interests of f both custom mers and sha areholders ar re considered d paramount t in any decis sion makingactivityunde ertaken. Compan nyoutlook After a decade of significant pro oduct investm ment, Di Mar rco told inves stors at the recent half year y results presentation n that profit margins were now set to rise over the ensuing g five years. His reasoning put simply y is thatthegroup g was no owready tole everagethec considerable levelof resea arch and dev velopment in nvestment made m over recent years. The T completi ion of the gr roups extend ded product t range was seen as an im mportant inf flection point t that would allow the co ompany to gr row revenue eandprofitsatafasterpa acethanprod ductinvestme ent. To this end Di Marco forecast re esearch and d development spend as a percentage p of f revenue wo ould fall from m the current t 20% to 18.5 5% by 2016, with 15% see en as a long term target. Should he meet m this tar rget the actu ual dollar spe end, althoug gh rising from m $34 millio on to $47 million, would be significa antly lower than the $67 million, had the group maintained m it ts 20% level of research and a develop pment spendi ing. Table 6 outlines o our t take on what this could mean to shareholders in terms ofreven nues,profitsand a dividendslookingoutfiveyears.
11
Table6:Technology yOneearning gssnapshot2012 2 2016

Year Revenu ue($m) EBITDA ARD*($m) R&D($ $m) EBITDA A**($m) D&A($ $m) EBIT($m) NPAT($m) EPS() DPS() ) PER(x) Yield(% %) Revenu ueGrowth% R&D/Revenue R (%) 2 2012(e) 168.0 71.1 (34.0) 37.1 (7.5) 29.6 22.7 7.5 7.0 16.0 5.8 10.0 20.2 2013(e) 186.0 80.0 (37.3) 42.7 (6.7) 35.9 26.2 9.1 8.0 13.2 6.7 10.7 20.1 2014(e) 202.0 86.8 (40.3) 46.5 (6.7) 39.8 29.0 10.1 9.0 11.9 7.5 8.7 19.9 2015(e) 223.0 97.9 (41.2) 56.7 (7.3) 49.4 36.1 11.9 12.0 10.1 10.0 10.4 18.5 2016(e) 245.0 107.7 (45.3) 62.4 (8.1) 54.3 39.7 13.1 13.0 9.2 10.8 9.9 18.5
*EBITDA ARDearningsbefore b interest,tax, t depreciation n,amortisation,research&deve elopment.

**EBITDA Aearningsbef foreinterest,tax x,depreciation&amortisation.
Whilewe w aremindfu ulthattryingtoextrapolat teprofitnum mbersfiveyearsoutisfraug ghtwithdang ger, theTechnologyOnebusinessmodelhasprove entobeaver ryconsistentearner;builtaroundastrong product t developmen nt pipeline an nd revenue m model that pr romotes at its core, long lasting l custom mer relation nships. As Ta able 6 highlig ghts, by redu ucing the res search and d development spend to more m historical levelsandliftingrevenu uesbyaround dten percen ntperannum, ,netprofitsare a settoalm most double to $39.7 mill lion by 2016, , along with a dividend yield approach hing 11% fully y franked, ba ased onapurchasemadetoday. Owners ship The two o major com mpany shareh holders collec ctively contro ol 40% of the e business with w founder and a executiv ve chairman Di Marco ho olding 18.2%, , while origin nal angel inve estor, the Mactaggart fam mily holding the balance with 21.9%. It is perhaps s appropriate to provide some backgro ound on the role r that the e Mactaggart t family has played, and in particular Dugald Mact taggart who recently pas ssed away. During D the early years whe en Di Marco w was looking to t establish the Technolog gy One busine ess, he turned to Mactag ggart for funding, having assisted his business yea ars earlier. It is a relations ship that ha as lasted the distance an nd perhaps speaks volum mes of how t the right management te eam coupled dwiththerigh htshareholde erbasecandelivertherightbusinesso outcomes. Summa ary Whenwe w firstconsid derwhetherabusinessisw worthbuying gweaskourse elvesfourquestions; 1. Doweratemanagement m ? 2. Dotheyoperateabusine essthatisuniq queorwellpositioned? 3. Dotheyposs sessastrongbalanceshee et? 4. Dosharehold dersfeaturehighlyinman nagementsopinionandac ctions?
12
On our assessment the t company ticks all the boxes. The business is we ell positioned to grow with h an attractiv veandwellestablished e re evenuemodel,accompanie edbyacleanbalanceshee etwithnetca ash, a mana agement team m that has delivered d for current shar reholders as well as inve esting for fut ture shareho oldersandafinancial f recordthatstandsthescrutiny yofeventhemostardentcritic.SFM Survivalofthefittes st During the past qua arter we visite ed a number r of businesse es and listened to and interviewed many manage ement teams. Perhaps mo ore than ever r the question n that appear rs to be most t on the mind d of investor rsisbusinesslongevity.Will W thebusine essgrow,willitprosperan ndwillitactua allysurvive? Therollthattechnologyplays,the emigrationtoonlineandtheglobalisationofecono omieshasplaced busines sses onhighalert. a Whilenoneofthese changesarenew,the spe eedatwhichthesetrends are taking hold h has take en many by surprise and led to the question of viability for man ny long stand ding compan nies. In this context, c nam mes like Kodak, Dell and even e Nokia are a few tha at in their prime dominated their fie eld only to have h succumbed to newe er technolog gies or more aggressive and a relevantcompetitors s. For inve estors, the bu urning issue that t must be e addressed when w assessin ng a business s is whether the threatsfacedarecyc clicalorstruct turalinnatur re.Botharedamaging d toabusiness,ho oweverthemore m perman nent and the erefore more e destructive e are the str ructural chan nges that em merge. It is not surprising then, that t the biggest structural is ssue facing bu usiness is the e extent to which w online has allowed d end users to o connect dir rectly to supp pliers of good ds and service es, thereby bypassing b a la ayer ofcosts sandfeegene eratingservic ces. In this context, onl line has allowed for greater price tr ransparency which has decimated d so ome busines sses while fo orcing others to adapt. For those wh ho do adapt, the use of technology and accepta anceofonline easapowerfulbusinessto ool,arebette erpreparedfo orthebattle. In our earlier e article we profiled Technology T One O and how its significan nt investment t in research and a develop pment had po ositioned the e business to remain both relevant and d industry lea ading. Below we shine the light on domestic re etail player S Super Retail Group and specifically its most rec cent acquisit tionoftheRe ebelSportsbu usiness. SuperRetail R Group(SUL) ( BriefHi istory The bus siness was fo ounded in 19 972 by Reg a and Hazel Ro owe, providin ng an automo otive mail or rder service,followedby an expansion n intoretailstores in1974 4. Anamecha ange in1981, , toSuperCheap Auto, set the stage for a signifi icant organic c store roll out, o predomin nately in the e home state e of Queens slandandexte endingintoth heNewSouth hWalesmark ketin1997.
13
The ext ternal appoin ntment in 19 998 of Bob T Thorn as man naging direct tor undersco ored the grou ups growth trajectory, which w at the time of its s stock exchang ge listing in J July 2004, ha ad the company valuedat a $210millio onandstorenumbers n approaching200 0. The gro oup expande ed into the recreational r arena a in 200 05, with the store launch h of BCF sto ores (Boating g Camping & Fishing). How wever, a critical turning point for the g group came with w the inter rnal appoint tment of new w managing director Peter Birtles in 2006. With a retailing background b t that included doveradeca adewithUKBoots B group,Birtleshaselevatedthebusiness inanumber n ofare eas, none more m important than the introduction of product sourcing s and supply logistic systems t that betterunderpins u the egroupsmultiplebrandst trategy. is appointme ent, Birtles ha as executed on o both an or rganic and ret tail acquisitio on drive that has Since hi seen th he group acq quire bicycle business Go oldcross Cycl les in 2008, outdoor leis sure group Ray R Outdoo ors in 2010 an nd more recently, sports operator o Rebe el Group in O October 2011. . A name change to Supe er Retail Grou up in 2011, illustrated the diverse nature of the bus siness and the e six brands that t itnowrepresents. r Diagram2sets soutthegrou upsoperationsandthecu urrentstorepenetration. p Diagram m 2
14

Table7: 7 SuperRetai ildivisionalsp plit

Year GroupRevenue($m) EBIT($m) NPAT($m) ReturnonCapital(%) ) DivisionalRevenue($ $m) Auto&Cycle($m) EBIT($m) Leisure e($m) EBIT($m) 2006 526 28.9 16.5 11.7 2007 625 38.1 22.3 13.9 2008 715 45.7 25.8 14.1 20 009 82 29 55 5.1 32 2.1 15 5.6 2010 0 938 65.8 38.1 16.8 686 48.2 252 21.3 2011 1,092 87.5 55.6 17.5
482 32.6 44 (3.4)
625 37.9 99 1.8
559 41.6 156 7.9
62 23 42 2.5 20 06 16 6.4
708 63.6 384 32.0
RebelGroup G In October 2011, Bir rtles announc ced the purch hase of sports s retailer Reb bel Group from m private equity vendors s, outlaying $610 $ million in the process. The group p funded the e deal with a combination n of new de ebt totalling $296 $ million and new cap pital provided d by existing shareholders to the tune e of $334million. Compris sing92Rebel lSportstores sand36AmartAllSportsstores, s thene ewlyacquired dbusinessisnow n housed under the companys c ne ewly formed third division n, aptly name ed Sporting Goods G Retailing. Followin ng this purch hase, the Super Retail Gro oup is now co omprised of 5 564 retail stores, with ann nual revenue esof$1.7billionandearni ingsbeforein nterestandta ax(EBIT)of$1 155million. At a tim me of intense e debate rega arding the structural shift t of retail bus siness from traditional t bricks and mo ortar stores to o online, the move by Birt tles carries with w it additio onal risk. Having acquired the retailer on reasonab bly attractive financial ter rms, it is now w up to the management m team to lift net profits over the nex xt five years, so as to hit its stated re eturn on capital hurdle of f 20%. Should it succeed d,profitsfrom mthisdivision narelikelytoexceed$120 0millionperannum. a Investorday DuringMay M weatten ndedtheSuperRetailinve estorday,spe ecificallyfocus sedontheRe ebelbusiness.As with an ny presentatio on that talks to the futur re, vision and d aspiration are a fine but what w counts are results. As things currently stand d, the combin ned operation ns of Rebel an nd Amart, en njoy a 19% sh hare of a ma arket valued at $3.2 billion. By 2017, management m expects to lift its share to t 33%, equa al to $1.0billioninrevenu ue.Storenum mbersareexp pectedtorisefrom127toafigureclose erto185,larg gely drivenby b theAmartstorerolloutwhichisexpe ectedtorisefromthecurr rent36to85. In mana agements vie ew, the comp panys sports offering sits squarely between traditio onal departm ment stores and a specialty retailers. As a sports dest tination retai iler, the groups key stren ngth resides with w
15
its leading market position and brand b strengt th. While Reb bel will cater for the sport ting enthusia asts, Amartwill w offeramo orecommuni ityfocusedan ndpriceconsciousserviceoffering. m3:Sportsre etailingvision n Diagram
16
ment offers t the following that prices will be fair, competitive and a On the issue of pricing, managem m readily compete wit th online offe erings, the group will activ vely market consistent. In order to more engage with supplie ers, including the likes of Nike and Adidas, to offer r relevant pro oduct at vary ying price po oints. The aim m is not to be eat online prices but to de eliver what th he consumer wants at a price thatsup pportsthesto oreinfrastruc cture. Manage ement cites the online risk k as the bigge est on the rad dar but also n notes that the e opportunity y to grab sig gnificant mar rket share is equally big. The record so s far sugges sts that Birtle es and his te eam know something ab bout running retail stores s. The succe ess of Super Cheap Auto in particular is testame enttomanag gementsabili itytotacklemany m ofissue esthatplague ebusinessow wners.AsTable7 highligh hts, over the past five yea ars, revenues s at the grou ups Auto div vision has rise en 47% to $708 million while EBIT has h jumped 95% 9 to $63.6 6 million. Sim milarly the groups return n on capital has improve edfrom11.7% %to17.5%ov verthesameperiod. As the groups g forme er chief finan ncial officer, Birtles B has a feel f for the numbers and an eye on co osts. In an environment e of rising co osts and com mpetitive threats from online, now more m than ever e manage ement teams s need to ma anage their c costs more effectively. e W While the focu us should be on driving more sales, our o sense is that compan nies have to do d both and avoid borrow wing excessiv vely. Thosethatcanadapttotheseconditionswillthrive t andbe ebetterpositionedtotack klethestructu ural issuesthatareathan nd.SFM
Thecha angingeconomiclandscap pe The Aus straliannewspaper recent tly published an articleonthechanging gfaceof indu ustry.Specific cally thearticlecentredon o a reporttit tledAsnapshotofAustra aliasDigitalF Futureto 2050sponsored dby IBM. Th he report highlighted the need for bus sinesses and governments s to look bey yond the curr rent minerals boom and d towards the burgeoning Informatio on and Comm munication Technology T (I ICT) industri iestoexploititspotential. With bu usiness and government g discussions d no ow centred on o ways to im mprove produ uctivity, the shift s within business b is to o embrace technology to n not only com mbat the onlin ne threat but t to reduce co osts andimp proveefficien ncy. Therep portalsowarn nsthat; As ICT becomes a utility u service as electric city did during g the industrial age up to 15 traditio onal industri ies, including g freetoair television t and newspaper publishing, could be wiped out by the advance e of digital technology t by b 2050. Hig ghspeed broadband spells the declin ne of traditio onal retailing g in the decad des ahead. Much M of whole esale trade may m eventuall ly be cut out of the equation, as the new n utility will enable pro oducers to target endconsumers witho out the need for middlem men. Table 8 profiles how w our economy my look by 2050 and d the contrib butions flowing from various industri ies. Table8:Changingmix m ofindustry yrevenue
17
Source: The T Australian SelectorFunds F Managem mentLimited ACN102 2756347AFSL22 25316 Level3,66 6 HunterStree etSydneyNSW2000, 2 Australia Telephon ne6128090361 10Webwww.se electorfund.com m.au
As Table 8 highlights s, by 2050 th he driving forces of the ec conomy are unlikely u to be e the mining and a manufa acturing secto ors. While cr rystal ball gazing has its issues, it is h hard to stand d in the way y of progres ss, particularly when the external e force es are so pow werful. This was w most evident during the past quarter with th he announcem ment from Fa airfax Media that is was shutting down n its Sydney and a Melbou urne printing presses and d moving the e traditional broadsheet newspaper formats for the getoatabloi SydneyMorningHer raldandTheMelbourne M Ag id. h, Fairfax has s struggled to o adapt its bu usiness mode el to the new w world, as revenues r shif fted In truth from ha ardcopy news spapers to on nline. New co ompetitors, in ncluding the likes of carsales.com, the REA R Group and a SEEK, hav ving stolen a march on th he incumbent ts, now domi inate their re espective sect tors for thes se sought after revenue st treams, once e dubbed Fair rfaxs rivers of gold. We e doubt that this will be the last mov ve by Fairfax x managemen nt as it looks s to take its offering into the digital age. a Howeve er the jury is still out on what w the new w revenue mo odel will look like and whe ether consum mers areprep paredtopayforonlinecontenttothes sameextentthat t Fairfaxonce o enjoyed. . As the Fairfax F experience highligh hts, business leaders will be forced to adapt to the e new challen nges that the e online wor rld brings. In nvestment in new techno ologies and b broadening the t product and a service offering to cater for these e challenges is necessary. Those that g grasp the cha allenges head don arenotguaranteedof o success,ho owevertoign norethemisto t ignoreecon nomicreality.SFM Transfo ormations Too oft ten in business life, past disasters are dealt with by b way of a new manage ement team and a transfor rmationalund dertakings.Theymeanwe ell,buttothe eordinaryinvestor,itjustadds a uptomore m costs an ndmore prom mises. Already y this year an nd particularly y this lastqua arteranumb berofcompan nies have so ought new ca apital and undertaken mo ore transform ming feats to arrest poor performance. p . To this list we can now w add a business where o one of our portfolio p man nagers cut his s teeth in funds manage ementPerpetual. After a string of faile ed new business ventures, a prolonged d downturn in n investment markets and d an ageing investor bas se growing weary w of sha are markets, Australias leading independent wea alth manage er announced d a three ye ear transform mation progra am costing all up $70 million, to deliver ongoing g permanent cost reductio ons of $50 m million per ann num. In his w webcast address to investors, newish CEO Geoff Lloyd, L having been appoin nted in Febru uary, outlined d three core strategies un nder the hea ading Transf formation 2015. While th he use of the e word trans sformation co overs many sins, s Lloydtr rottedoutthe ewordsixteentimesinhis spresentation n. As a ge eneral rule investors sho ould be very y fearful of companies that t announce transform ming acquisit tions or tran nsforming res structures. Perpetual P is no exception n, however at its core, the busines ss is a simple e one and fro om what we gleaned, Lloy yd seems to understand that and is n now aiming to execute on o returning the t business to a more st treamlined, fo ocused, weal lth managem ment busines ss. Again, we e are mindful l of the dang gers of long term transfo orming deals but this is one o busines ssweareprep paredtogivesomeleeway ytooandwill lwatchwithinterest. i SFM M
18
Compan nyvisitdiaryJuneQuarter2012 April ABC Adel laideBrighton nCementUBSconference e AAD Arde entLeisureUBSconferenc ce IFL IOOF FHoldingsUB BSconference e TNE Tech hnologyOneUBSconferen nce N/A BISIndustriesUBSconference e N/A Skyw westUBSconference IIN Iinet tUBSconfere ence MQA Mac cquarieAtlasRoadsUBSco onference REA REAGroupUBSconference SSUBSconfer rence IRE IRES WHC Whit tehavenCoalextraordinar rygeneralme eeting SRX Sirte exmanageme entsitemeeti ing SXY Sene exEnergyRBS Sconference DSL DrillsearchEnergyRBSconfere ence AQC Amb bassadorOil&GasRBScon nference BPT Beac chEnergyRBS Sconference JIN JumboInteractive emanagementmeeting PXS Phar rmaxisQ3con nferencecall WOW Woo olworthsQ3conference c ca all TNE Tech hnologyOnehalf h yearresu ultspresentat tion CCP Cred ditCorpmana agementmee eting May FLT Fligh htCentreMac cquarieconfe erence SKE Skille edGroupMa acquarieconfe erence SAI SAIGlobal G Macqu uarieconference LCM LogicammsMacq quarieconfere ence IMD Imde exMacquarie econference TOX ToxFreeSolution nsMacquarieconference ILU Iluka aResourcesMacquarie M conference TPI Tran nspacificIndustriesMacquarieconferen nce MQG Mac cquarieGroup pMacquarieconference c CPU Com mputershareMacquarie M conference ORL Orot tonGroupMa acquarieconf ference SUL Supe erRetailGrou upMacquarie econference RWH Roya alWolfMacquarieconfere ence ARP ARBCorporationMacquarieco onference FXL FlexigroupMacqu uarieconfere ence IFL IOOF FHoldingsMacquarieconference NVT Navi itasMacquarieconference e WTF Wot tif.comHoldin ngsMacquarieconference e FLT Fligh htCentreman nagementme eeting CXD Cath hRxinvestorconference c
04/04/12 2 04/04/12 2 04/04/12 2 04/04/12 2 04/04/12 2 04/04/12 2 04/04/12 2 04/04/12 2 04/04/12 2 04/04/12 2 16/04/12 2 17/02/12 2 18/04/12 2 18/04/12 2 18/04/12 2 18/04/12 2 18/04/12 2 09/04/12 2 20/04/12 2 23/04/12 2 29/04/12 2 02/05/12 2 02/05/12 2 02/05/12 2 02/05/12 2 02/05/12 2 02/05/12 2 02/05/12 2 02/05/12 2 03/05/12 2 03/05/12 2 03/05/12 2 03/05/12 2 04/05/12 2 04/05/12 2 04/05/12 2 04/05/12 2 04/05/12 2 04/05/12 2 08/05/12 2 09/05/12 2
19
BBG NWS PXS IPR N/A JIN ACG SYD BXN CPB DTL SUL TNE MYS CVW ASZ QFX MLB SEK FXL PRG SRX SHL COH June RHC BKL N/A RMD NHC QRN COK NCR CLR BND SMR Ram msayHealthCa areUBSconfe erence BlackmoresUBSconference c iSele ectUBSconfe erence ResM MedIncUBSconference c New wHopeCorpo orationRBSco oalconferenc ce QRNational N RBScoalconferen nce Cock katooCoalRB BScoalconfer rence Nuco oalResources sRBAcoalco onference Cara abellaResourcesRBScoalconference Band dannaEnergy yRBScoalcon nference Stan nmoreCoalRB BScopalconf ference 07/06/12 2 07/06/12 2 08/06/12 2 08/06/12 2 13/06/12 2 13/06/12 2 13/06/12 2 13/06/12 2 13/06/12 2 13/06/12 2 13/06/12 2 BillabongInternationalinvesto orconference e New wsCorporationQ3confere encecall Phar rmaxismanag gementmeet ting Ipernicamanagem mentmeeting g Deal lsDirectmanagementmee eting JumboInteractive emanagementmeeting Atco orMedicalHo oldingsmanag gementmeet ting Sydn neyAirportAnnualmeetin ng Biox xynemanagem mentmeeting g Cam mpbellBrothersfullyearre esultspresent tation Data a#3investorday d Supe erRetailGrou upinvestorda ay Tech hnologyOneinvestor i day MyS Statemanagementmeetin ng ClearviewWealth hmanagemen ntmeeting ASGGroupmanagementmeeting Quic ckflixmanage ementmeetin ng Melb bourneITma anagementm meeting SEEK Kconferencecall Flexigroupconfer rencecall Prog grammeMain ntenancefullyearresults Sirte exsitevisit SonicHealthcaresitevisit Coch hlearsitevisit t 09/05/12 2 09/05/12 2 11/05/12 2 15/05/12 2 15/05/12 2 15/05/12 2 16/05/12 2 17/05/12 2 17/05/12 2 21/05/12 2 21/05/12 2 22/05/12 2 22/05/12 2 24/05/12 2 24/05/12 2 24/05/12 2 24/05/12 2 24/05/12 2 30/05/12 2 30/05/12 2 30/05/12 2 31/05/12 2 31/05/12 2 31/05/12 2
20
SelectorFundsManagementLim mitedDisclaim mer The info ormation con ntained in this document is general in nformation only. This do ocument has not been prepared p taki ing into acco ount any pa articular Inve estors or cla ass of Invest tors investm ment objectiv ves, financial situation or needs. The Directors D and d our associat tes take no responsibility r for error or omission; however h all care is taken n in preparin ng this docum ment. The Di irectors and our associat tes may hold units in the fund f and may y hold investments in individual compa anies mentioned inthisdocument. d SF FM

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SelectorFundsManagementLtd QuarterlyNewsletterNo.

SelectorFundsManagementLimited ACN102756347AFSL225316 Level3,66HunterStreet SydneyNSW2000Australia Tel61280903610 www.selectorfund.com.au

June2012 2SelectorAustralianEquitiesFu undQuarterlyNe ewsletter#30

June2012 2SelectorAustralianEquitiesFu undQuarterlyNe ewsletter#30

June2012 2SelectorAustralianEquitiesFu undQuarterlyNe ewsletter#30

Perform manceGlobalEquityMark kets

June2012 2SelectorAustralianEquitiesFu undQuarterlyNe ewsletter#30

TechnologyOne(TN NE) Table1:Technology yOnetimelin ne1987201 12

June2012 2SelectorAustralianEquitiesFu undQuarterlyNe ewsletter#30

June2012 2SelectorAustralianEquitiesFu undQuarterlyNe ewsletter#30

June2012 2SelectorAustralianEquitiesFu undQuarterlyNe ewsletter#30

Managedservicescover ringmedia,pr ropertyproje ects,entertain nment.

2008 20 009 2010

June2012 2SelectorAustralianEquitiesFu undQuarterlyNe ewsletter#30

June2012 2SelectorAustralianEquitiesFu undQuarterlyNe ewsletter#30

*Calculatedbynumberof o modulespurch hasedXnumber rofusers(compa anyhasapprox3 300modulescov vering10produc cts)

June2012 2SelectorAustralianEquitiesFu undQuarterlyNe ewsletter#30

200 00 2001 20 002

2008 20 009 2010

June2012 2SelectorAustralianEquitiesFu undQuarterlyNe ewsletter#30

June2012 2SelectorAustralianEquitiesFu undQuarterlyNe ewsletter#30

Table6:Technology yOneearning gssnapshot2012 2 2016

*EBITDA ARDearningsbefore b interest,tax, t depreciation n,amortisation,research&deve elopment.

June2012 2SelectorAustralianEquitiesFu undQuarterlyNe ewsletter#30

June2012 2SelectorAustralianEquitiesFu undQuarterlyNe ewsletter#30

June2012 2SelectorAustralianEquitiesFu undQuarterlyNe ewsletter#30

Table7: 7 SuperRetai ildivisionalsp plit

482 32.6 44 (3.4)

625 37.9 99 1.8

559 41.6 156 7.9

708 63.6 384 32.0

June2012 2SelectorAustralianEquitiesFu undQuarterlyNe ewsletter#30

June2012 2SelectorAustralianEquitiesFu undQuarterlyNe ewsletter#30

June2012 2SelectorAustralianEquitiesFu undQuarterlyNe ewsletter#30

June2012 2SelectorAustralianEquitiesFu undQuarterlyNe ewsletter#30

June2012 2SelectorAustralianEquitiesFu undQuarterlyNe ewsletter#30

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