Australian Foundation Investment Co. Ltd. · ASX:AFI
Australian Foundation Investment — Shareholder Meeting (October 2006)
29 slides from Australian Foundation Investment's shareholder meeting presentation, Oct 3, 2006
Slide 1: 2006 Annual General Meeting Chairman's Address and Presentation
Australian Foundation INVESTMENT COMPANY 3 October 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 Limited 2006 Annual General Meeting Chairman’s Add
Slide 2: Chairman's Address: The Year in Review
mA Australian Foundation INVESTMENT COMPANY October 2006 Dear Shareholder Set out below, for your information, is my address from the Company's recent Annual General Meeting held in Adelaide on 3 October 2006. CHAIRMAN’S ADDRESS The Year in Review AFIC had a very good year. The year to 30 June 2006
Slide 3: Operating Profit
Operating Profit The operating profit for the year reflects what we are able to earn from our portfolio and from our trading activities. It is a measure of the underlying and ongoing income we can generate, after management expenses. We see this as the most important profit number. It is this operat
Slide 4: Earnings Per Share and Dividend
Earnings Per Share and Dividend We had a good lift in operating earnings per share as a result of the increase in operating profit. Accordingly, the dividend rose from 16.0 to 17.0 cents. It is the Board’s policy to seek to progressively increase this dividend. We have sought to set the dividend at
Slide 5: Outlook
Outlook | would like to now turn to some comments about the outlook for the market. | think the key point to make is that the trend is not very clear. The Australian market is off its peak, but still relatively close to its high. While the Australian economy looks in reasonable shape, profit margins
Slide 6: Top Investments as at 30/09/2006
TOP INVESTMENTS AS AT 30/09/2006 Valued at closing prices at 29 SEPTEMBER 2006 Top 25 Investments ~- Ordinary securities MM PMY A ARBAB BRR BRO OHNYADHOBNATRANADEONODARWN = NN ons CBA BHP WBC NAB WES CML RIO ANZ TOL WOW TLS RIN WPL AGL AMP AWC SGB BIL WAN WDC AMC TCL CPU QBE MLT Commonwealth Bank of
Slide 7: Australian Foundation Investment Company
wA Australian Foundation INVESTMENT COMPANY
Slide 8: All Ordinaries Price Index - Monthly
a All Ordinaries Price Index - Monthly Index was 5080 at 30 August 2006 5500 5000 July 05 to June 06 4500 increase of 19.0% Value SP PD PDK A VPM MIM VM VG SO PVgeXY 2262 2 & © © F Ff dS Ss SH SS Sh SP SS PSS SP SSS SS SS FF PH PK PF PH yw ew 9
Slide 9: AFIC's Investment Structure — June 2006
AFIC’s Investment Structure — 30 June 2006 = Long Term Investment portfolio: > A$4.4 billion > Approximately 100 securities >» Focus on S&P/ASX 200 = Trading portfolio: > Up to 10% of total portfolio - A$101 million or 2.2% > Short term positions > Options writing strategies « Borrowings of $41 mill
Slide 10: Operating Profit Analysis
Operating Profit Analysis ie — 2006 Full Year vs. 2005 Full Year $179.6m $ million 180 - 160 - 140 120 + 100 - 60 - Major Differences + $29.7m in dividends/distributions - $2.6m in trading ~ $1.3m income tax 2005 2006 Operating Operating Profit Profit
Slide 11: AIFRS Profit Analysis
AIFRS Profit Analysis —2006 Full Year vs. 2005 Full Year 220 180 160 140 $ million 120 100 80 Major Differences $214.1m + $29.3m in realised gains largely from takeovers of Foodland, National Foods and Western Mining 2006 AIFRS Profit Profit
Slide 12: Operating Earnings Per Share, Dividends Per Share and Payout Ratio
oa Operating Earnings Per Share*, Dividends Per Share and the Payout Ratio 25.0 ~ + 140% 120% 20.0 +. @ - 100% g < +4 ° 15.0 80% § a F ~ 10.0 - 60% = ° 40% 5.0 + 20% 0.0 0% 2001 2002 2003 2004 2005 2006 l@mm Earnings Per Share *Before 2005, under AGAAP the figure was Earnings Per Share ' Dividends P
Slide 13: Annualised Returns - Year Ended June 2006
wae § eT Annualised Returns - Year Ended 30 June 2006 35% 4 30% 4 29.4% 25% 4 23.9% 20.5% 20% 7 ae 15.2% 15.3% 15% 4 — 13.2% 13.1% 11.9%12.3% 10% + 5% 7 0% T 1 year return 5 year return 10 year return m@ Net Asset per share growth plus dividends Share Price growth plus dividends @ S&P/ASX 200 Accumu
Slide 14: AFIC Share Price Relative to Net Asset Backing
wae a AFIC Share Price Relative to Net Asset Backing 500.00 5 475.00 450.00 425.00 400.00 375.00 350.00 Cents 325.00 300.00 275.00 250.00 225.00 200.00 175.00 + T T T T T T T ¥ T T T T T T ¥ T T ¥ T T ot 8 oe A sof A ee so a Oo a sie oe A Po Oe # go Net Asset Backing — Share Price
Slide 15: Premium / Discount to Net Asset Backing
Premium Discount Aug-96 Aug-98 Aug-00 Aug-02 Aug-04 Aug-06
Slide 16: Analysis of Costs 2005 2006
: Analysis of Costs 2005 2006 Non-Executive Directors 489 436 Staff Costs 2,014 2,615 Premises & IT 419 905 Shareholder costs (incl. Registry) 1,490 1,695 Professional Fees 474 513 Sundry 97 90 Total 4,983 6,254 Recoveries (992) (1,212) Net 3,991 5,042 " Staff costs are impacted by full year cost of
Slide 17: AFIC's Administration Fees Received
AFIC’s Administration Fees Received ($000) Admin Fee (Incl. GST) Djerriwarrh : 621 (683) AMCIL : 204 (224) Mirrabooka : 225 (248) Total 1,050 MD’s Reimbursed Total Director’s Expenses Fees 50 15 686 35 10 249 40 12 277 125 37 1,212 Directors Fees appear in the Financial Statements of Djerriwarrh, AM
Slide 18: Outlook
Outlook Margins are under some pressure as a result of increasing input costs Companies becoming cautious about earnings outlook Slowdown in the US economy causing some market commentators concern about outlook for global growth Australia remains well positioned to benefit from resource demand from
Slide 19: Australian Foundation Investment Company
wA Australian Foundation INVESTMENT COMPANY
Slide 20: Top Ordinary Securities — June 2006
—_ oO T oON Ooh WD = a rop 25 Ordinary Securities — 30 BHP Billiton Commonwealth Bank of Australia Westpac Banking Corporation National Australia Bank Wesfarmers Rio Tinto Australia and New Zealand Banking Group Woolworths Telstra Corporation Toll Holdings a June 2006 Smillion 370.5 358.9 288.9 240.
Slide 21: Top Ordinary Securities — June 2006 con't.
Top 25 Ordinary Securities — 30 June 2006 con't. 11 12 13 14 15 16 17 18 19 20 Smillion Coles Myer 111.9 Rinker Group 104.6 Woodside Petroleum 94.6 Alumina 88.1 AMP 83.3 St George Bank 76.0 The Australian Gas Light Company 69.5 West Australian Newspapers Holdings 67.0 Computershare 64.0 Westfield Gr
Slide 22: Top Ordinary Securities — June 2006 con't.
7 rop 21 22 23 24 25 f | a | 25 Ordinary Securities — 30 June 2006 Smillion Brambles Industries 63.5 Amcor 61.6 Transurban Group 61.1 Orica 57.6 Milton Corporation 57.5 Total 3,192.3 As % of Total Portfolio Value 70.7% (excludes Cash & Bank Bills) % Of portfolio 1.4% 1.4% 1.4% 1.3% 1.3%
Slide 23: Movements in the Top 25 from 2005 to 2006
Movements in the Top 25 from 2005 to 2006 Movements In AMP (purchase and value) Orica (rights issue) Milton (value) $m 83.3 57.6 57.5 Rank 15 24 25
Slide 24: Movements in the Top 25 from 2005 to 2006
Movements in the Top 25 from 2005 to 2006 Movements Out News Corporation CML 6.5% Non —redeemable pref’s. Suncorp-Metway Previous Rank 21 22 24
Slide 25: Major Acquisitions (above $10m)
Major Acquisitions mY (above $10m) investment Portfolio from 2005 to 2006 Coles Myer (Conversion from CMLPA’s) Oil Search Woolworths AMP ConnectEast Group Rio Tinto BHP Billiton Promina Group Insurance Australia Group Rural Press Preferred Ord $million 49.6 29.0 27.7 22.7 21.3 21.3 15.9 14.8 12.2 11
Slide 26: Major Disposals (above $10m)
Major Disposals (above $10m) Investment Portfolio from 2005 to 2006 Coles Myer 6.5% Pref Coles Myer Foodland Associated National Foods WMC Resources Smorgon Steel 8% Pref Djerriwarrh 6.5% Conv Note Smillion 49.6 37.2 29.5 20.3 13.8 10.0 10.0 Reason Conversion to Ordinary Shares Reduced following con
Slide 27: Major Acquisitions in the Investment Portfolio since 1 July 2006
a 4 ue Major Acquisitions in the Investment Portfolio (above $1m) since 1 July 2006 Fairfax Australian Infrastructure Metcash Baxter Group Rural Press Pref Rio Tinto $million 2.8 2.1 2.0 1.8 1.1 1.1
Slide 28: New Stocks in the Investment Portfolio for the Year
ee! i a New Stocks in the Investment Portfolio for the Year Baxter Cedar Woods DCA Group Dyno Nobel Metcash Sonic Healthcare
Slide 29: Australian Foundation Investment Company
wA Australian Foundation INVESTMENT COMPANY
Australian Foundation Investment Company — Shareholder Meeting (October 2006) on 6ix