Australian Foundation Investment Co. Ltd. · ASX:AFI
Australian Foundation Investment — Investor Presentation (April 2006)
32 slides from Australian Foundation Investment's investor presentation, Apr 27, 2006
Slide 1: Australian Foundation Investment Company
Australian Foundation INVESTMENT COMPANY 27 April 2006 The Manager Company Announcements Office Australian Stock Exchange Limited Exchange Centre Level 4 20 Bridge Street Sydney NSW 2000 Electronic Lodgement Australian Foundation Investment Company Shareholder meetings Dear Sir or Madam Please find
Slide 2: Shareholder Meetings
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Slide 3: Disclaimer
Disclaimer Australian Foundation Investment Company Limited, 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 faith. However, no warranty (express or implied) is made as to
Slide 4: AFIC's Investment Aims
AFIC’s Investment Aims « Attractive total returns from a diversified portfolio of Australian listed securities. « Primary goals are: » 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 « A medium to long
Slide 5: AFIC's Investment Structure
AFIC’s Investment Structure » Long Term Investment portfolio: « A$4.5 billion « Approximately 100 securities. » Trading portfolio: * Up to 10% of total portfolio « Short term positions « Option writing strategies «= Currently at A$ 0.1 billion or 2.7% of total portfolio
Slide 6: Investment Portfolio by Industry Sector
Investment Portfolio by Industry Sector Telecom Other Energy Other 3%, aie —— 5% Financials 14% Materials 22% Industrials Banks 14% 25% Consumer Consumer Staples Discretionary 7% 6%
Slide 7: AFIC's Investment Structure —con't.
AFIC’s Investment Structure —con’t. x a a x a sour) LT trac Cash and liquids - A$17 million at 31 December 2005 Capacity to gear the balance sheet on a limited basis MER of 0.12% 76,000 shareholders record we vy
Slide 8: Approach to Investing - AFIC
Approach to Investing - AFIC Based on Investment Committee process - input from dealing team, Committee members and broker research from a panel of major brokers: ¥ Good industry economics ¥ Assessment of Board & Management ¥ Good fundamental value ¥ Likelihood of dividend growth ¥ Contrarian buyers
Slide 9: Approach to Investing - AFIC
Approach to Investing - AFIC Sells are not common, usually from takeovers Driven by risk considerations: ¥ Corporate governance problems v¥ Management problems v Extreme overvaluations ¥ Concerns about dividend stream Not pressured from fund outflows or index
Slide 10: Value
Value All Ordinaries 20 Year Performance 6000 5 5000 5 4000 + 3000 5 2000 | 1000 - 0 T T T T T T T T T T T T T T T T T T T 1 SMS PP SP Dd Sh DP fm PS SN PP SS MP HF Y & FF FPF PF PHF F FF FF wF TK YF FX yw KF FY Date a sound INI rd |
Slide 11: ASX Accum. Historical Six Month Returns (Dec Year End)
ASX 200 Accum. Historical Six Month Returns (Dec Year End) 30% 4 25% 7 24% 20% | 15% 15% 7 439 1% 11% 10% | 9% 6% " ct " | 0% I 5% 4% -T% “10% - & 2 & 2 & S & as = S & & = S ¥ ¥ ¥ ro ¥ ¥ ¥ rod rod ¥ eid eg ¥ ¥
Slide 12: Financial Highlights - Half Year to December
Financial Highlights - Half Year to 31 December 2004 2005 Change AIFRS Reported Profit After Tax* [$81.9m |$118.0m |+44.2% Operating Profit After Tax $80.6m |$87.0m | +8.0% Operating Profit Per Share 8.9c 9.5c +6.3% Interim dividends per share 6.0c 6.5c +8.3% * Includes realised gains on the sale of
Slide 13: Financial Highlights - Half Year to December con't.
Financial Highlights - Half Year to 31 December con't. 2004 2005 Change Net Asset Backing (cum dividend) | $3.93 $4.56 +16.0% Total Return (net asset backing + | 15.8% 12.4% dividends) S&P/ASX 200 Acc. Index return 17.2% 13.9% Management Expense Ratio 0.13% 0.12% -0.01%
Slide 14: AGAAP vs. AIFRS Profit Analysis — 2005 Half Year vs. 2004
$ million FRS vs. AGAAP Profit Analysis — 2005 Half Year vs. 2004 Half Year 120 $118.0m 90 80 70 60 50 40 Major Factors Major Factors + $31.7m in realised gains from investment portfolio + $2.5m in realised gains from investment + $4.0m other portfolio + $3.6m other 2004 Half Year Hi AGAAP MBAIFRS 2
Slide 15: Operating Profit Analysis — 2005 Half Year
Operating Profit Analysis — 2005 Half Year vs. 2004 Half Year Major Factors 100 — $87.0m + $15.2m in dividends 90 - = — - $8.0m in trading - 805 — x) - $1.0m in interest : 70 - received A 60 + 50 + 40 + 2004 Half Year 2005 Half Year Net Operating Net Operating Profit Profit
Slide 16: Earnings Per Share vs. Dividends Per Share
Earnings Per Share vs. Dividends Per Share Cents per share & Ss ae v s Financial Year & > ¥v Please note 2001 to 2004 use Earnings per Share whilst 2005 & 2006 use Net Operating Profit per share @ Dividends per share - 1st half @ Dividends per share - 2nd half @ Earnings per Share - ist half Earning
Slide 17: AFIC Share Price and Net Asset Backing Growth
AFIC Share Price and Net Asset Backing Growth (NAB pre Capital Gains Tax) 500 5 475 + 450 5 425 5 400 + 375 + 350 + 325 4 ‘ 300 +f 275 - 250 225 4 200 |Net Asset Backing at 31 March 2006 was $4.84 175 T T T T T T T T T T T T T T T T ¢ < RG Cents SDD MMH MP PP PKK Ke YF YF OY ST oF OS SF Se Fe SF Oe
Slide 18: AFIC Share Price Relative to Net Asset Backing (pre CGT)
AFIC Share Price Relative to Net Asset Backing (pre CGT) 20% 5 Premium 15% + | A ce | 10% + 5% 0% TE -10% - Hi) Discount IIIF -15% + il “20% ~ Mar-96 Mar-98 Mar-00 Mar-02 Mar-04 Mar-06 “a sound) |) |)/))] a i trackrecord | HH 0 hi Li,
Slide 19: Annualised Net Asset Backing Returns to December 2005
Annualised Net Asset Backing Returns to 31 December 2005 25.00% p-—-- === === yg gagg oon 21.69% 20.65% 20.52% 20.00% + 14.28% 358855 77-7 ap aaK 5.00% ----- 0.00% 1 year return 3 year return 5 year return 10 year return CPI @ S&P/ASX 200 Accumulation Index w AFIC net asset per share growth plus div
Slide 20: Annualised Share Price Returns to December 2005
Annualised Share Price Returns to 31 December 2005 30.00% 25.00% BA B3M Sed ne ea 9) eee 20.00% 16.25% 15.00% 10.00% 5.00% 0.00% 1 year return 3 year return 5 year return 10 year return m Share price growth plus dividends * CPI i S&P/ASX 200 Accumulation Index
Slide 21: Top Holdings A$ — March 2005
Top 25 Holdings A$ — March 2005 § million 1 CBA Commonwealth Bank of Australia 365.6 2 BHP BHP Billiton 352.6 3 WBC _ Westpac Banking Corporation 298.5 4 NAB National Australia Bank 257.9 5 WES Wesfarmers 171.1 6 RIO Rio Tinto 139.2 7 ANZ Australia and New Zealand Banking Group 131.1 8 RIN Rinker Gr
Slide 22: Top 25 Holdings A$ — March 2005 con't.
15 16 17 18 19 20 21 22 23 24 25 AMP SGB AGL AMC WDC NWS BIL MLT CPU TCL WAN Top 25 Holdings A$ — March 2005 con't. $ million AMP 84.2 St George Bank 81.3 The Australian Gas Light Company 73.5 Amcor 68.2 Westfield Group 62.7 The News Corporation (a) 62.4 Brambles Industries 62.0 Milton Corporation 6
Slide 23: New Stocks in the Investment Portfolio
New Stocks in the Investment Portfolio ABC Learning ConnectEast Group Oil Search Healthscope Bradken Peet & Company Ramsay Healthcare Hastings Diversified Utility
Slide 24: Outlook - Market
Outlook - Market Australia remains well positioned to benefit from the encouraging outlook for the global economy Reporting season generally positive, high levels of cash and continued flow into superannuation creates strong flow of funds into Australian equities Equity valuations in Australia appea
Slide 25: Outlook - AFIC
Outlook - AFIC Market likely to trade in a range near record highs AFIC close to fully invested Trading portfolio currently at 2.7% of total portfolio, with no inclination to increase at this point Continue to selectively invest in companies that represent specific long term value, including strong
Slide 26: fee
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Slide 27: Net Profit Performance - December 2004 (under AGAAP)
Net Profit Performance - December 2004 (under AGAAP) Comparison to December 2005 (under AIFRS) 130 - P&L Movement under both Changes under AIFRS AGAAP & AIFRS 120 5 $3.96 $118.04m 7s 110 5 Unrealised Gain on nc ‘ortfolio 100 | and Hybrids now & included in 90 $12.0m rer 80 | t $75.79m Net Realised t
Slide 28: AFIC Shares Turnover Per Month
AFIC Shares Turnover Per Month Shares Million 30 - “asound ||. ao : a _trac kr ord
Slide 29: Major Acquisitions Investment Portfolio
Major Acquisitions Investment Portfolio July to December 2005 A$ °000 Coles Myer (a) 49,581 Woolworths (b) 27,692 AMP 21,122 ConnectEast Group 20,545 Promina Group 14,034 Insurance Australia Group 12,160 Oil Search 11,971 Metcash (c) 9,450 (a) Conversion of CMLPA - CML 6.5% Reset Preference Shares i
Slide 30: Major Acquisitions Investment Portfolio
Major Acquisitions Investment Portfolio July to December 2005 — con’t. Telstra Corporation BHP Billiton Rio Tinto Rural Press QBE Insurance Group Rural Press Preferred Ordinary A$ ’000 9,215 9,054 8,903 8,768 8,514 8,434
Slide 31: Major Disposals Investment Portfolio
Major Disposals Investment Portfolio July to December 2005 A$ °000 Coles Myer 6.5% Reset Preference (a) 49,581 Coles Myer 35,567 Foodland Associated (c) 29,497 National Foods (d) 20,288 WMC Resources (e) 13,849 Transurban CARS 6,003 (a) Conversion of CMLPA — CML 6.5% Reset Preference Shares into CML
Slide 32: Major Acquisitions Investment Portfolio January 2006 to 15 March 2006
Gs Major Acquisitions Investment Portfolio 1 January 2006 to 15 March 2006 Acquisitions $million Oil Search 13.2 Hastings Diversified Utilities 3.9 Coca Cola Amatil 2.4 Transurban 2.1 AMP 1.6 Rio Tinto 1.1 Alinta 1.1 Brambles 1.0
Australian Foundation Investment Company — Investor Presentation (April 2006) on 6ix