Australian Foundation Investment Co. Ltd. · ASX:AFI
Australian Foundation Investment — Shareholder Meeting (October 2003)
47 slides from Australian Foundation Investment's shareholder meeting presentation, Oct 21, 2003
Slide 1: Chairman's Presentation - 2003 Sydney Shareholder Information Meeting
Australian Foundation INVESTMENT COMPANY 21 October 2003 Australian Stock Exchange Limited Company Announcements Office Exchange Centre 20 Bridge Street Sydney NSW 2000 Australian Foundation Investment Company Limited 2003 Sydney Shareholder Information Meeting Chairman’s Presentation Australian Fou
Slide 2: A sound track record
A sound track record 4 Australian Foundation THVESTMENT COMPANY
Slide 3: All Ordinaries Performance - 2003 Financial Year
All Ordinaries Performance - 2003 Financial Year Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
Slide 4: Financial Highlights — Year to June 2003
Financial Highlights — Year to June 2003 Profit After Tax $102.8m Net Asset Backing $3.12 Total Return (net asset backing + dividends) 1.4% S&P/ASX 200 Acc. Index return -1.7% Total dividends per share (inc special) 14.25c Special dividends per share 2.0c Management Expense Ratio 0.16%
Slide 5: Profit After Tax
f= = =~ == ——h——r——<“‘“_CSSSC Profit After Tax | ® Special dividends @ Profit after tax $ million (op) o) Financial year
Slide 6: Earnings Per Share vs Dividends Per Share
Earnings Per Share vs Dividends Per Share 8 : Earnings Per Share Dividends Per Share Special Dividends Per Share Cents per share iS Financial year
Slide 7: Dividend Growth % per year
Dividend Growth % per year Dividend growth @ CPI . retun . en
Slide 8: Portfolio Management Performance — % Per Year
Portfolio Management Performance — % Per Year @ AFIC net asset per share growth plus dividends ®@ CPI @ S&P/ASX 200 Accumulation tr dex
Slide 9: Market movements between June 2002 and June 2003
Market movements between 30 June 2002 and 30 June 2003 » ASX200 Accumulation - 1.7% » ASX200 Industrials Accumulation - 1.1% » 50 Leaders Accumulation - 3.4% » ASX200 Banks Accumulation + 0.5% « AFIC NTA Accumulation + 1.4%
Slide 10: Net Asset Backing
[a fees £27 Net Asset Backing (Pre CGT) 30 June 2001 30 June 2002 30 June 2003 31 Aug. 2003 end Sept. 2003 end Sept. 2003 $3.22 CD $3.23 CD $3.12 CD $3.15 XD $3.17 pre issue $3.15 post issue* *Assumes 99.8 million shares at $3.00 per share are allotted at end Sept. and proceeds after costs invested
Slide 11: Year Performance of Major Indices
2 Year Performance of Major Indices (base is 100 in June 2001) 120> ASX200 Banks Accum \, ASX200 Telco Accum
Slide 12: Market movements between June 2002 and June 2003
Market movements between 30 June 2002 and 30 June 2003 » Media Accumulation +11.3% » Telecommunications Accum +2.0% # Building Materials Accum - 0.8% » Infrastructure & Utilities Accum +21.9% » Property Trust Accumulation +12.1% » Health Care & Biotech Accum - 4.9% » Banks Accumulation +0.5%
Slide 13: Investment by Sector
Investment by Sector 2008 2002 w@ Energy 3.63% 3.17% @ Materials 18.16% 17.01% industrials 13.87% 14.83% ® Consumer discretionary 6.32% 6,08% @ Consumer staples 9.60% 9.84% ® Banks 30.25% 30.51% iti Other financials 12.18% 12.40% Telecommunications 3.19% 3.55% B Other: Healthcare, 2.80% 2.64% info t
Slide 14: Top Ordinary Securities — June 2003
ce a eae) Es Top 20 Ordinary Securities — 30 June 2003 Shares 2003 2002 Rank $m Rank $m NAB 1 229.1 1 242.1 Westpac 2 = 178.1 2 178.0 Wesfarmers 3 124.1 4 133.4 CBA 4 124.0 3 138.2 ANZ Bank 5 87.0 6 90.2
Slide 15: Top Ordinary Securities — June 2003
Top 20 Ordinary Securities — 30 June 2003 Shares 2003 2002 Rank $m Rank $m Amcor 6 79.7 7 80.8 BHP Billiton 7 78.7 5 91.5 Telstra 8 74.9 8 75.9 Coles Myer 9 57.9 10 52.2 Toll Holdings 10 56.6 9 63.4
Slide 16: Top Ordinary Securities — June 2003
fF Top 20 Ordinary Securities — 30 June 2003 Shares 2003 2002 Rank $m Rank $m WA News 11 42.9 14 36.9 James Hardie 12 41.8 13 38.6 Milton 13 38.4 62 7.8 Woolworths 14 37.6 15 35.5 Rinker 15 34.4 na na
Slide 17: Top Ordinary Securities — June 2003
Top 20 Ordinary Securities — 30 June 2003 Shares 2003 2002 Rank $m Rank $m Woodside 16 31.4 23 23.9 St George Bank 17 31.2 20 = =28.1 Brambles 18 27.9 11 49.1 Fosters Group 19 27.5 17 30.8 Suncorp Metway 20 27.3 19 29.0
Slide 18: Movements in the Top
Movements in the Top 20 Movements In $m Rank Milton 38.4 13 * Rinker 34.4 15 Woodside 31.4 16 * Due to the demerger of CSR.
Slide 19: Milton Share Price to Net Asset Backing - Premium/Discount
Milton Share Price to Net Asset Backing - Premium/Discount 10% 5% 0% -5% AFIC acquired $28.3 million of Milton shares in November 2002 -10% -15% Jun-99 Jun-00 Jun-01 Jun-02 Jun-03
Slide 20: Movements in the Top
Movements in the Top 20 Previous Movements Out Rank *CSR 12 AMP 16 Southcorp 18 * Due to demerger
Slide 21: Major Acquisitions (above $15m)
Major Acquisitions (above $15m) Acquisitions $million Milton 28.3 C’wealth Property Fund 17.0 Alumina 16.8
Slide 22: Major Disposals (above $10m)
Major Disposals (above $10m) Disposals $million Incitec 18.8 (takeover) Lend Lease 14.3 (disposal) Singtel 10.5 (disposal)
Slide 23: Top Ordinary Securities — Changes to September 2003
Top 20 Ordinary Securities — Changes to 30 September 2003 Rank $m NAB 1 226.5 Westpac 2 177.6 CBA 3 162.6 Wesfarmers 4 133.0 BHP Billiton 5 97.5 +/- $m -2.6 -0.5 +38.6 +8.9 +18.8
Slide 24: Top Ordinary Securities — Changes to September 2003
Top 20 Ordinary Securities — Changes to 30 September 2003 Rank $m +/- $m Telstra 6 93.7 +18.8 ANZ 7 87.5 +0.5 Amcor 8 85.3 +5.6 Coles Myer 9 62.2 +4.3 Toll Holdings 10 60.6 +4.0
Slide 25: Top Ordinary Securities — Changes to September 2003
Top 20 Ordinary Securities — Changes to 30 September 2003 Rank $m +/- $m Woolworths 11 45.3 +7.7 James Hardie 12 43.7 +1.9 WA News 13 43.1 +0.2 Aust. Gas Light 14 39.4 +12.3 Alumina 15 39.3 +13.9
Slide 26: Top Ordinary Securities — Changes to September 2003
Top 20 Ordinary Securities — Changes to 30 September 2003 Rank $m Milton 16 39.2 Rinker 17 37.0 Woodside 18 33.9 St George Bank 19 29.6 Cwth Property Fund 20 29.5 +/- $m -0.8 +2.6 +2.5 -1.6 +6.2
Slide 27: AFIC Shareholder Value Performance
AFIC Shareholder Value Performance 2O% 15% | retum Stun @ Share price growth plus dividends a CPI BB S&P/ASXK 200 Accumulation Index
Slide 28: Share Price to Net Asset Backing - Premium/Discount
Share Price to Net Asset Backing - Premium/Discount Jun-93 Jun-95 Jun-97 Jun-99 Jun-01 Jun-03
Slide 29: AFIC Expense Rate
AFIC Expense Rate (% of average portfolio value) Gross Net* . 1997 / 1998 0.17% 0.15% . 1998 / 1999 0.15% 0.13% . 1999 / 2000 0.13% 0.10% 7 2000 / 2001 0.14% 0.12% . 2001 / 2002 0.15% 0.12% . 2002 / 2003 0.16% 0.13% * After recoupment of fees from Djerriwarrh, Mirrabooka and AMCIL
Slide 30: Comparison of Operating Expense Ratios
Comparison of Operating Expense Ratios = AFIC 0.16% = Superannuation Funds 0.81% =» * Managed Investments 1.81% * In Retail Active Domestic Equity Funds
Slide 31: A sound track record
A sound track record @4 Australian Foundation INVESTMENT COMPANY Ci
Slide 32: AFIC continues to face a more complex and dynamic environment
AFIC continues to face a more complex and dynamic environment = Changing relationship with Goldman Sachs JBWere. = Increasing focus and attention on good corporate governance = Significant increase in regulatory requirements, including changing accounting standards, the complexity of the tax system
Slide 33: AFIC continues to face a more complex and dynamic environment
AFIC continues to face a more complex and dynamic environment = Increasing needs in terms of shareholder presentations and other business development activities. » The growing complexity involved in stock market research, including the need for regular dialogue with companies and their senior manage
Slide 34: The Board is committed to implementing a more professional management structure
As a result, the Board is committed to implementing a more professional management structure = Full time professional CEO with wide ranging experience =» GM Business Development and Investor Relations = Over time, an in-house investment research and dealing team = As required further finance/back of
Slide 35: AFIC's Remuneration Policy
AFIC’s Remuneration Policy AFIC operates as an independent professional investor in an increasingly competitive market and complex regulatory environment. The Board is committed to having a professional management structure with quality executives. Key Principles: =" Rewards reflect the competitive
Slide 36: Key Questions
Key Questions » What is the potential remuneration? = Is it sufficient to attract the best people for the job? » What proportion is at risk? » What does the executive need to achieve before the “at risk” portion is paid — what are the performance hurdles? = When do the performance share vest?
Slide 37: Executive Long Term Incentive Plan - Performance Criteria
Executive Long Term Incentive Plan - Performance Criteria Total Shareholder Return (TSR) Outperformance against the ASX 200 accumulation index (ASX200Al) measured over a minimum period of 4 years: AFIC TSR performance Percent of award vesting Below ASX200AI Return Above ASX200AI Return by <10% 25% 1
Slide 38: Executive Long Term Incentive Plan - Performance Criteria
Executive Long Term Incentive Plan - Performance Criteria Total Portfolio Return (TPR) Outperformance against other retail fund managers as indicated by the Mercer Investment Consulting Survey of Australian Retail Fund Managers measured over a minimum period of 4 years: AFIC TPR performance | Percen
Slide 39: Total Potential Remuneration
Total Potential Remuneration Year 1 Years — EE, LS Matching " Performance Base Sala amount y awarded as Shares bonus Perf. Shares =Scope of role __|| achievement|| 50% of actual, | Retention Experience der against . ||, bonus Vests =Market data hurdles +}. shares 2 years converted
Slide 40: An Example — Ross Barker
An Example — Ross Barker 2001/2002 2002/2003 2003/2004 $'000 $000 $'000 BASE REMUNERATION Salary 265 265 358 Superannuation 28 32 32 Other 7 7 7 300 304 397 SHORT TERM INCENTIVE Cash bonus 18) 150 *note 1 120 * note 3 Shares i) 150 *note 1 120 * note 3 LONG TERM INCENTIVE Notional cost of shares ie)
Slide 41: Remuneration — At Risk
Remuneration — “At Risk” Full Year 03/04 Ross Barker 52%
Slide 42: Q. What is the cost of the long term incentive component?
Q. What is the cost of the long term incentive component of AFIC’s Incentive Plan for 03/04? A. The estimated notional cost of the long term incentive component of the plan for Full Year 03/04, assuming target performance hurdles are met is $200,000 Forecast total annual wage bill for 03/04 is $2.2
Slide 43: Q. Is there a cap on the number of shares issued?
Q. Is there a cap on the number of shares that can be issued under AFIC’s Incentive Plan? A. Yes — 2%, a cap is required to implement the plan — in 03/04 the Board does anticipate issuing any more than 80,000 shares, or 0.01% of total shares on issue
Slide 44: Q. What is AFIC doing about shareholder concerns on remuneration?
Q. What is AFIC doing to take into account shareholder concerns about Executive remuneration? A. = Implementation of a Remuneration Report « Shareholders to consider and vote on Executive LT Incentive Plan «= Shareholders to consider and vote on Managing Directors’ Remuneration, including participat
Slide 45: A sound track record
A sound track record @4 Australian Foundation INVESTMENT COMPANY Ci
Slide 46: Dividend Statement
Dividend Statement Payment date: 25 August 2003 Record date: 11 August 2003 Reference no.: XXXXXXXXXX Dear Investor, The details below relate to the final dividend for the year ended 30 June 2003 payable on shares entitled to participate in the dividend at the record date. This dividend is 100% fran
Slide 47: Dividend Statement
Dividend Statement Payment date: 25 August 2003 Record date: 11 August 2003 Reference no.: XXXXXXXXX Dear Investor, The details below relate to the final dividend for the year ended 30 June 2003 payable on shares entitled to participate in the dividend at the record date. This dividend is 100% frank
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