Australian Foundation Investment Co. Ltd. · ASX:AFI
Australian Foundation Investment — Shareholder Meeting (September 2008)
27 slides from Australian Foundation Investment's shareholder meeting presentation, Sep 29, 2008
Slide 1: 2008 Annual General Meeting Chairman's Presentation
For personal use only 29 September 2008 The Manager Company Announcements Office Australian Securities Exchange Limited Exchange Centre Level 4 20 Bridge Street Sydney NSW 2000 Electronic Lodgement Australian Foundation Investment Company Limited 2008 Annual General Meeting Chairman’s Presentation D
Slide 2: Annual General Meeting 29 September 2008 Presentation
For personal use only Annual General Meeting 29 September 2008 Presentation
Slide 3: What Happened in the Market - All Ordinaries
For personal use only Value Ju n- 2500 3000 3500 4000 4500 5000 5500 6000 6500 7000 Se 02 p- D 02 ec - M 02 ar -0 Ju 3 n- Se 03 p- D 03 ec -0 M 3 ar - Ju 04 n- Se 04 p- D 04 ec - M 04 ar -0 Ju 5 n- 19 Se 05 p- % Date D 05 ec - pa M 05 ar - Ju 06 Price Index n- Se 06 p- D 06 ec - M 06 ar - Ju 07 n- S
Slide 4: All Ordinaries Price Index – A Long Term View
All Ordinaries Price Index – A Long Term View For personal use only
Slide 5: Operating Profit Analysis – 2008 Full Year vs. 2007 Full Year
Operating Profit Analysis For personal use only – 2008 Full Year vs. 2007 Full Year Major Differences 240 $224.4m Interest income $11.2m higher than last year 200 because of increased $205.1m cash levels 160 $ million Trading income was 120 negative $7.6m whereas last year this 80 was positive $30.5
Slide 6: Profit for the Year (AIFRS) Profit Analysis
Profit for the Year (AIFRS) Profit Analysis For personal use only –2008 Full Year vs. 2007 Full Year Major Contributor 450 to Realised Gains $416.1m in 2007/08 400 Disposal of Coles 350 Group and Rinker $ million Group as a result of 300 takeovers $259.3m 250 200 $224.4m $205.1m 150 2007 2008 AIFRS
Slide 7: Earnings Per Share and Dividends Per Share
Earnings Per Share and Dividends Per Share For personal use only 25.0 120% 100% 20.0 80% 15.0 60% 10.0 40% 5.0 20% 0.0 0% 2004 2005 2006 2007 2008 Net Operating Profit Per Share Dividends Per Share Payout Ratio
Slide 8: Benefit of LIC Capital Gains
Benefit of LIC Capital Gains For personal use only Final Dividend fully franked: 13.0 cents per share Sourced from pre tax capital gains: 18.57 cents per share Shareholders (non super) entitled to tax deduction of 50% of 18.57 cents: 9.29 cents per share At 45% tax rate, a shareholder has a tax savi
Slide 9: AFIC's Investment Structure – August 2008
AFIC’s Investment Structure – For personal use only 31 August 2008 Long Term Investment portfolio: A$4.7 billion Approximately 100 securities Focus on S&P/ASX 200 Trading portfolio: Up to 10% of total portfolio – currently A$87 million or 1.7% Short term positions Options writing strategies Fixed ra
Slide 10: Key Investment Themes that Emerged Over the Year
Key Investment Themes that Emerged Over For personal use only the Year Financial stocks hit by concerns about global financial system arising out of US sub prime problems Higher inflation Higher interest rates & borrowing costs Awareness of risk and need to minimise Avoidance of companies with compl
Slide 11: Key Investment Themes that Emerged Over the Year con't.
Key Investment Themes that Emerged Over the For personal use only Year con’t. Takeover activity Positive long term outlook for Resources and Energy sectors Significant change in earnings expectations Trying to pick the bottom of the market is difficult
Slide 12: Comparative Price Index Returns July 2007 to September 2008
Comparative Price Index Returns For personal use only 1 July 2007 to 19 September 2008 40% 30% 20% 10% 0% Resources -10% -20% S&P/ASX 200 -30% Industrials -40% Financials 7 8 7 8 08 08 07 08 l-0 l-0 -0 -0 n- - p- p- ay ov ar Ju Ju Ja Se Se M M N S&P/ASX 200 Industrials Resources Financials
Slide 13: What we did - Major Sales (above $5m) 2007/2008
What we did - Major Sales (above $5m) 2007/2008 For personal use only TAKEOVER ACTIVITY $m Coles Group (a) 149.9 Rinker Group (b) 114.2 Alinta (c) 37.0 Dyno Nobel (c) 28.1 Southern Cross Broadcasting (d) 18.6 Smorgon Steel (f) 9.5 Symbion Health (c) 8.5 (a) Takeover by Wesfarmers, (b) Sold after CEM
Slide 14: Major Sales in the Investment Portfolio con't.
Major Sales in the Investment Portfolio (above $5m) For personal use only 2007/2008 con’t. OTHER $m Asciano Group 42.9 Centro Properties Group 18.8 Bunnings Warehouse Property Trust 14.0 Spotless Group 11.7 Transpacific Industries Group 11.1 Energy Developments 9.5 Publishing and Broadcasting (g) 7.
Slide 15: Major Acquisitions in the Investment Portfolio 2007/2008
Major Acquisitions in the Investment Portfolio For personal use only (above $5m) 2007/2008 $m Wesfarmers (a) 65.2 Wesfarmers Partially Protected Shares (a) 55.6 Telstra 3 Instalment Receipt - final payment 26.3 National Australia Bank 15.7 QBE Insurance Group 11.4 Equity Trustees 10.9 Campbell Broth
Slide 16: Major Acquisitions in the Investment Portfolio con't.
Major Acquisitions in the Investment Portfolio For personal use only (above $5m) 2007/2008 con’t. $m OneSteel(b) 9.5 Commonwealth Bank of Australia 8.0 Dyno Nobel 5.6 Iress Market Technology 5.1 Westpac 5.0 (b) Takeover of Smorgon Steel Group
Slide 17: New Stocks in the Investment Portfolio 2007/2008
New Stocks in the Investment Portfolio 2007/2008 For personal use only OneSteel (as a result of takeover of Smorgon Steel) Fleetwood Corporation IRESS Market Technology Crane Group
Slide 18: Major Purchases from 1 July 2008 to 31 August
Major Purchases in the Investment Portfolio For personal use only (above $1m) from 1 July 2008 to 31 August – including transfers from the Trading Portfolio* $million Telstra Corporation* 15.8 Alumina (rights issue) 9.0 National Australia Bank 8.3 Orica (rights issue) 6.3 Woodside Petroleum* 5.8 Que
Slide 19: Investment by Sector (excluding cash) at June 2008
Investment by Sector (excluding cash) at 30 June 2008 (2007) For personal use only Other Telecom 3.9%(4.9) Energy 4.4% (3.5%) 9.8%(5.2%) Other Financials 11.9% (14.1%) Materials 28.8%(23.4%) Banks 19.7% (21.8%) Industrials 6.8% (14.5%) Consumer Consumer Staples Discretionary 11.1% (7.3%) 3.6% (5.3%)
Slide 20: Top Ordinary Securities – June 2008
Top 25 Ordinary Securities – 30 June 2008 For personal use only % of portfolio $million (excl. cash) * 1 BHP Billiton 624.9 13.0% * 2 Rio Tinto 332.3 6.9% * 3 Commonwealth Bank of Australia 320.8 6.7% * 4 Wesfarmers (a) 299.4 6.3% 5 Westpac Banking Corporation 249.6 5.2% * 6 Telstra Corporation 210.
Slide 21: Top Ordinary Securities – June 2008 con't.
Top 25 Ordinary Securities – 30 June 2008 con’t. For personal use only % of portfolio $million (excl. cash) * 11 Santos 100.2 2.1% * 12 Australia & New Zealand Banking Group 96.1 2.0% * 13 Oil Search 78.6 1.6% * 14 Origin Energy 77.6 1.6% 15 Computershare 75.1 1.6% 16 St George Bank 69.0 1.4% 17 QBE
Slide 22: Top Ordinary Securities – June 2008 con't.
Top 25 Ordinary Securities – 30 June 2008 con’t. For personal use only % of portfolio $million (excl. cash) * 21 Alumina 63.8 1.3% * 22 AMP 63.8 1.3% 23 West Australian Newspapers Holdings 62.2 1.3% * 24 AGL Energy 61.8 1.3% 25 Milton Corporation 55.8 1.2% Total 3,726.8 As % of Total Portfolio Value
Slide 23: Annualised Portfolio Returns – Year Ended August 2008
Annualised Portfolio Returns–Year Ended 31 August 2008 For personal use only 20% 14.7% 14.7% 15% 13.3% 12.1% 10% 5% 0% 1 year return 5 year return 10 year return -5% -10% -9.7% -15% -14.2% -20% Net Asset per share growth plus dividends S&P/ASX 200 Accumulation Index
Slide 24: Portfolio Performance in Different Market Cycles
Portfolio Performance in Different Market Cycles* For personal use only 40.0% underperformance in strongly rising markets 30.0% 20.0% 10.0% 0.0% 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 19 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 20 20 -10.0% Strong outperformance in wea
Slide 25: Share Price Relative to Net Asset Backing (pre CGT)
Share Price Relative to Net Asset Backing (pre CGT) For personal use only 20% Premium 15% 10% 5% 0% -5% -10% Discount -15% -20% Aug-98 Aug-00 Aug-02 Aug-04 Aug-06 Aug-08
Slide 26: Outlook
Outlook For personal use only Markets remains nervous about the flow-on effects of the US slowdown on the global economy Deleveraging impacting the value of financial and physical assets Australia has two distinct economies (resources, agriculture versus the rest) Earnings outlook is subdued, some b
Slide 27: Australian Foundation Investment Company Annual General Meeting
For personal use only Australian Foundation Investment Company Annual General Meeting 29 September 2008
Australian Foundation Investment Company — Shareholder Meeting (September 2008) on 6ix