Australian Foundation Investment Co. Ltd. · ASX:AFI
Australian Foundation Investment — Investor Presentation (November 2011)
36 slides from Australian Foundation Investment's investor presentation, Nov 28, 2011
Slide 1: New Zealand Shareholder Information Meetings – Presentation
28 November 2011 For personal use only The Manager Company Announcements Office Australian Securities Exchange Exchange Centre Level 4 20 Bridge Street Sydney NSW 2000 Electronic Lodgement Australian Foundation Investment Company Limited New Zealand Shareholder Information Meetings – Presentation De
Slide 2: New Zealand Shareholder Meetings November/December 2011
For personal use only New Zealand Shareholder Meetings November/December 2011
Slide 3: Disclaimer
DISCLAIMER For personal use only Australian Foundation Investment Company Limited and its subsidiary AICS (AFSL 303209), their related entities and each of their respective directors, officers and agents (together the Disclosers) have prepared the information contained in these materials in good fai
Slide 4: AFIC's Investment Objectives
AFIC’s Investment Objectives For personal use only to pay dividends which, over time, grow faster than the rate of inflation; and to provide attractive total returns over the medium to long term
Slide 5: AFIC's Approach to Investing
AFIC’s Approach to Investing For personal use only Universe of Australian equities – S&P/ASX 200 Seeking fundamental value and dividends Buy and hold for the long term Not driven by index weightings or fund flows
Slide 6: Overview of AFIC – Investment Structure at September 2011
Overview of AFIC – Investment Structure at 30 September 2011 For personal use only Long Term Investment portfolio: A$4.2 billion - Approximately 75 securities Trading portfolio: Up to 10% of total portfolio - A$110 million or 2.5% Short term positions, options writing strategies Borrowin
Slide 7: Strong rise in dividends and participation in BHP Billiton buy back lifted profits
Strong rise in dividends and participation in BHP Billiton buy back lifted profits For personal use only FY11 FY10 Key factors: A$m A$m • dividends and distributions up Income 247.6 199.4 30.2% Admin. Expenses (8.4) (7.6) • revenue from deposits down Finance Costs (4.2) (4.2) as cash invested Income
Slide 8: Earnings Per Share covered dividends this year
Earnings Per Share covered dividends this year after a period of funding dividends from For personal use only reserves Note: Earnings per share is based on net operating profit per share
Slide 9: Annualised Returns to October 2011 in $NZ
Annualised Returns to 31 October 2011 in $NZ* For personal use only * After tax and expenses.
Slide 10: Net Asset Backing relative to the share price
Net Asset Backing* relative to the share price For personal use only Premium Discount * Before provision for capital gains tax
Slide 11: What has happened in the Australian Market – All Ordinaries Price Index
What has happened in the Australian Market – All Ordinaries Price Index For personal use only
Slide 12: Recent falls in the market provided great opportunities for a long term investor
Recent falls in the market provided great For personal use only opportunities for a long term investor
Slide 13: Key Investment Themes Over the Year
Key Investment Themes Over the Year For personal use only Adopted a cautious approach looking for sustainable cash flows in sound industries Looked to take advantage of market dips - close to fully invested so some debt was utilised when appropriate Exited some securities where industry struct
Slide 14: Largest acquisitions this financial year
Largest acquisitions this financial year For personal use only Ansell (new holding) Transurban National Australia Bank Senex Energy BHP Billiton Telstra ANZ Origin Energy Woodside Petroleum Ramsay Health Care QBE Insurance
Slide 15: Largest disposals this financial year
Largest disposals this financial year For personal use only Fairfax Media# Oakton# Commonwealth Property Trust # APN News & Media # NAB Income Securities # #complete disposal
Slide 16: New stocks added to the portfolio
New stocks added to the portfolio For personal use only Financial Year 2011 Amalgamated Holdings Asciano ARB Corporation Blackmores Dulux (spin off from Orica) Engenco Fletcher Building (from takeover of Crane Group) Invocare Senex Energy Treasury Wines (spin off from Foster’s Group) Westfield Retai
Slide 17: New stocks added to the portfolio con't.
New stocks added to the portfolio con’t. For personal use only Financial Year 2012 Ansell MAp Group QR National
Slide 18: We remain positive about diversified resources
We remain positive about diversified resources For personal use only In the top 25 at 30 September 2011 % of portfolio (excl. Rank A$m cash) 1 * BHP Billiton 499.3 11.6% 6 Rio Tinto 221.2 5.1% Total 16.7% * Indicates that options were outstanding against part or all of the holding in the Trading Por
Slide 19: Exposure to companies servicing the resources and agriculture sectors
Our exposure to companies servicing the resources and agriculture sectors For personal use only In the top 25 at 30 September 2011 % of portfolio (excl. Rank A$m cash) 18 * Orica 67.3 1.6% 20 Incitec Pivot 61.4 1.4% 25 Bradken 47.0 1.1% Total 4.1% * Indicates that options were outstanding against pa
Slide 20: Attracted to the return profile of the major banks
We remain attracted to the return profile of the major banks, including strong dividends For personal use only In the top 25 at 30 September 2011 % of portfolio (excl. Rank A$m cash) 2 * Commonwealth Bank of Australia 388.4 9.0% 3 * Westpac Banking Corporation 374.0 8.7% 5 * National Australia Bank
Slide 21: Expanding our exposure to the energy sector
We have been expanding our exposure to the energy sector For personal use only In the top 25 at 30 September 2011 % of portfolio (excl. Rank A$m cash) 10 Woodside Petroleum 91.9 2.1% 11 * Origin Energy 88.6 2.1% 13 * Santos 83.6 1.9% 15 * Oil Search 79.8 1.8% 21 AGL Energy 61.3 1.4% Total 9.3% * Ind
Slide 22: Retail exposure is primarily to the largest and more diversified companies
Retail exposure is primarily to the largest and more diversified companies For personal use only In the top 25 at 30 September 2011 % of portfolio (excl. Rank $m cash) 4 Wesfarmers (a) 239.9 5.6% 9 Woolworths 154.2 3.6% Total 9.2% (a) Includes $45.1 million of WESN partially protected securities
Slide 23: Financials/insurance representation - AXA taken over by AMP
Financials/insurance representation - AXA taken over by AMP For personal use only In the top 25 at 30 September 2011 % of portfolio (excl. Rank $m cash) 16 * QBE Insurance Group 74.2 1.7% 17 * AMP 71.9 1.7% 22 Computershare 60.9 1.4% Total 4.8% * Indicates that options were outstanding against part
Slide 24: Telstra and industrial company exposure
Telstra and industrial company exposure For personal use only In the top 25 at 30 September 2011 % of portfolio (excl. Rank A$m cash) 8 Telstra Corporation 157.7 3.7% 12 Amcor 87.5 2.0% 23 Brambles 56.3 1.3% 24 * Coca-Cola Amatil 56.0 1.3% Total 8.3% * Indicates that options were outstanding against
Slide 25: Infrastructure exposure
Infrastructure exposure For personal use only In the top 25 at 30 September 2011 % of portfolio (excl. Rank A$m cash) 14 Transurban Group 83.4 1.9% 19 Australian Infrastructure Fund 61.5 1.4% Total 3.3%
Slide 26: The recent reporting season was reasonable
The recent reporting season was reasonable For personal use only Balance sheets are generally strong Dividends were slightly ahead of expectations as payout ratios increased Margins were maintained Continuing strong demand for resources
Slide 27: A number of issues were raised during discussions with companies
However a number of issues were raised during discussions with companies For personal use only Rising cost pressures on capital items and wages Industrial Relations climate making it difficult to achieve productivity gains High Australian dollar/high interest rates negatively impacting many co
Slide 28: Issues raised during discussions with companies – con't.
However a number of issues were raised during discussions with companies – con’t. For personal use only Uncertainty created by the minority government Lack of effective consultation Proliferation of regulatory intrusion Tax - carbon, mining Sovereign risk is high on the agenda for offshore
Slide 29: The medium term outlook
The medium term outlook For personal use only Developed economies face major structural issues – particularly high sovereign debt levels Markets likely to remain volatile for some time Many companies in Australia are facing difficulties and lowering their earnings expectations Demand for res
Slide 30: Australian market looks attractive based on ASX Forward Price Earnings Ratio
The Australian market looks attractive based on ASX 200 Forward Price Earnings Ratio For personal use only
Slide 31: ASX forward dividend yield provides a sound basis of return
And the ASX 200 forward dividend yield provides a sound basis of return For personal use only
Slide 32: Despite recent market difficulties
Despite recent market difficulties For personal use only AFIC remains focused on companies with “annuity streams” and a discipline on returns on invested capital The portfolio is in good shape We are confident about the companies we are invested in
Slide 33: AFIC Convertible Note Issue
AFIC Convertible Note Issue For personal use only AFIC is seeking to raise approximately A$200m from an issue of redeemable, unsecured convertible notes with the ability to raise more or less The purpose of the Offer is to raise additional funds for general corporate purposes, including to inves
Slide 34: AFIC Notes – Offer Details
AFIC Notes – Offer Details For personal use only Key features of AFIC Notes Security Redeemable, unsecured convertible note Credit rating Unrated Face Value A$100 Minimum application 50 AFIC Notes (A$5,000) Interest Payment 6.25% per annum fixed coupon payable semi-annually in arrears Maturity 28 Fe
Slide 35: AFIC Notes - Timetable
AFIC Notes - Timetable For personal use only Key dates Announcement of AFIC Notes Offer 14 November 2011 Record Date for Shareholder Priority Offer 22 November 2011 Offer opens 23 November 2011 Offer closes 12 December 2011 Broker Firm Offer Settlement Date 16 December 2011 Issue of AFIC Notes 19 De
Slide 36: Australian Foundation Investment Company
AUSTRALIAN FOUNDATION INVESTMENT COMPANY
Australian Foundation Investment Company — Investor Presentation (November 2011) on 6ix