MACQUARIE TELECOM GROUP LIMITED ANNUAL GENERAL MEETING FRIDAY, 23 NOVEMBER 2012 CHAIRMAN’S ADDRESS Ladies and gentlemen, good morning. My name is Robert Kaye, the Chairman of Macquarie Telecom Group Limited, and I would like to extend a warm welcome to shareholders at the Annual General Meeting for 2012. INTRODUCTION OF BOARD I would like to introduce you to the Board Members here with me this morning: David Tudehope – David is co-founder and Chief Executive of Macquarie Telecom. In addition to supervising the general management and strategic direction of the company, David is also actively involved in Macquarie Telecom’s participation in regulatory issues. Aidan Tudehope – Aidan is co-founder of Macquarie Telecom, and Managing Director of our Hosting business, with a focus on business growth, operational efficiency and customer satisfaction. He has played a key role in the development of Macquarie Telecom’s data networking and Intellicentre strategies. Prior to taking on the leadership of the Hosting business, Aidan was Chief Operating Officer responsible for the design and delivery of operational excellence within Macquarie Telecom. John Palfreyman – John’s career spans more than 25 years in the IT industry. He was executive chairman of 90East Inc, an Australian supplier of managed security services to federal government agencies, until the company’s successful trade sale in early 2004. John joined the Board in July 2004 and is chairman of the Audit and Risk Management Committee and a member of the Corporate Governance, Nomination and Remuneration Committee. Anouk Darling – Anouk is currently CEO/Managing Director at Moon Communications Group. Anouk has vast experience in brand strategy and has gained invaluable experience on the client side in marketing roles across some of Australia's best known retail brands. At Moon, Anouk has overseen some of the largest re- branding projects in Australia including Westfield, Westpac and the creation of the brand Jetstar. She works with a number of global clients across Asia Pacific, North America, the Middle East, Europe and the United Kingdom. Anouk joined the Board in March of this year and is a member of the Audit and Risk Management Committee and the Corporate Governance, Nomination and Remuneration Committee. Peter James – Peter's experience includes 21 years as a board member of a range of Australian publicly listed companies. In addition, he has 16 years experience in Chief Executive Officer roles, including Computer Power Group Limited, Ainsworth Game Technology Limited, and Adcorp Australia Limited, a publicly listed media and communications company. Mr James is currently a Non-Executive Director of iiNet, Australia’s second largest DSL Internet Services Provider. Peter joined the Board in April of this year and is a member of the Audit and Risk Management Committee and the Corporate Governance, Nomination and Remuneration Committee. I would also like to introduce Richard Lutterbeck, the Company Secretary, and Michael Simmonds our Chief Financial Officer. BUSINESS OF MEETING I will now take a moment to outline this morning’s agenda. First you will hear an address from me and then For personal use only from David. We will give you a brief overview of Macquarie Telecom’s recent performance and overall business strategy. Then we will proceed to the ordinary business of the meeting. ORDINARY BUSINESS We will consider six items of ordinary business: 1. The receipt of the financial statements and accompanying reports; 2. The adoption of the remuneration report for the year ended 30 June 2012; 3. The election of Anouk Darling as Director 4. The election of Peter James as Director 5. The re-election of Aidan Tudehope as a Director; and 6. An increase in Non-Executive Director fees OTHER BUSINESS There has been no notice of other business validly given by any member under the Corporations Act 2001. NOTICE OF MEETING The notice of meeting was sent to all members. Can I take it that the notice of meeting convening this meeting is to be taken as read? Thank you. MINUTES OF THE PREVIOUS GENERAL MEETING The minutes of the previous general meeting of members of the company, which was the Annual General Meeting held on 25 November 2011, have been approved by the Board and signed by the Chair. The original minutes are tabled and are available for inspection by any member wishing to see them. And now to the Chairman’s Address:- Once again, thank you for coming today. This is my ninth AGM as Chairman, and I am pleased to report to you today that during a year of significant investment for future growth, Macquarie Telecom delivered another strong profit result, and generated solid operational cash flows. We achieved this pleasing result in fiscal 2012, whilst continuing to expand our market leadership position in the provision of mission critical application hosting to Australian business and government customers. Macquarie Telecom is experiencing increased demand for its hosting services due to the growing trend of selective outsourcing of internal Information Technology. We believe this trend of outsourcing is accelerating due to higher speed internet connectivity driving new web technology, and the associated demand for managed hosting. In order to take full advantage of future growth opportunities, and to capitalise on the increasing demand for our Hosting services, we invested significantly in 2012 to expand our Hosting capacity, by completing the construction of our second Sydney data centre, Intellicentre 2. This facility, built on a 20,000 sqm site in North Ryde, Sydney, is accredited to the highest global security standards in order to support the data management needs of both corporate and government customers. The data centre also utilises state-of-the-art energy, cooling and management technologies, in order to drive down power consumption to match world-class levels. Shortly I will hand over to Chief Executive Officer, David Tudehope. But before I hand over to David, I would like to briefly review the past year and outline what the year ahead holds for the company. Our strategy of investing in high margin businesses is having a positive impact on the company’s financial results, with the 2012 full-year result ending in line with expectations. • Overall, the company delivered a net profit after tax from continuing operations of $19.6 million, up 11% on the previous corresponding period. • We declared a fully franked final dividend of 12.0 cents per share, with the total dividend for fiscal 2012 being 24.0 cents per share fully franked. • Our EBITDA profit from continuing operations was $40.6 million, a pleasing increase of 9% on the previous corresponding period. For personal use only • Our EBIT profit from continuing operations, of $24.4 million, was up 12% on last year. • Our Hosting business continued its strong revenue performance, growing by 9% on 2011, contributing $58.5 million, or 27 per cent of total revenue. The Hosting business recorded EBITDA of $15.3 million, an increase of 5.9% on last year. • Our Telco EBITDA rose to $31.2 million, up 9% on the previous corresponding period. • Capital expenditure for the year was $51.9 million of which $27.0 million related to building construction, mechanical and electrical fit out of Intellicentre 2, $7.0 million related to software implementation and development and data centre networking, and the remaining $17.9 million related to business as usual capital expenditure. We exited the year in a strong financial position, with a robust balance sheet, $30.8 million in cash and cash equivalents and a $30 million undrawn working capital facility in place. Combined with our strong operating cash flows Macquarie Telecom is well positioned to take advantage of future organic and inorganic growth opportunities as they emerge. Outlook In fiscal 2013 Macquarie Telecom will continue to invest to position itself for strong future growth. Earnings in fiscal 2013 will be impacted by the full operational cost of IC2, investment in staff to support the expansion of our Government business in Canberra and continued operational costs associated with our Cloud Computing offerings. It is expected that revenues flowing from our investments in IC2, Government and Cloud Computing will begin to have a significantly positive impact on EBITDA earnings in FY14 and beyond. EBITDA profit for the full year is expected to be between $38 and $42 million. Depreciation for the full year is expected to increase to between $22 and $23 million, the increase being primarily attributable to depreciation associated with Intellicentre 2. Capital expenditure for fiscal 2013 is expected to be approximately $48 million of which it is expected approximately: • $20 million will be spent on business as usual activities; • $14 million will be spent on the expansion of Hosting capacity; and • as part of our ongoing commitment to the Federal Government we also expects to invest an additional $14 million on Canberra capacity, networking infrastructure, software, and product development, in order to deliver services to the Lead Agency Secure Internet Gateway program, including DAFF. We will remain focused in the year ahead on being Australia’s number one Managed Hosting and integrated Telco provider to business and government customers through the delivery of service excellence To conclude ladies and gentlemen, Macquarie Telecom has a highly skilled and experienced management team which is executing the company’s growth strategy effectively. We enter the new financial year confident that our strategies are working, and that our significant investments in data centre capacity and Cloud Computing, will provide the platform for continued growth. I will now hand over to David Tudehope, Chief Executive of Macquarie Telecom. For personal use only.