Australian Foundation Investment Co. Ltd. · ASX:AFI
Australian Foundation Investment — Shareholder Meeting (October 2014)
32 slides from Australian Foundation Investment's shareholder meeting presentation, Oct 8, 2014
Slide 1: 2014 Annual General Meeting Presentation
For personal use only 8 October 2014 The Manager ASX Market Announcements Australian Securities Exchange Exchange Centre Level 4 20 Bridge Street Sydney NSW 2000 Electronic Lodgement Australian Foundation Investment Company Limited 2014 Annual General Meeting Presentation Dear Sir / Madam Please fin
Slide 2: Annual General Meeting October 2014
For personal use only ANNUAL GENERAL MEETING OCTOBER 2014
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: 1. The Market
For personal use only 1. THE MARKET ANNUAL GENERAL MEETING OCTOBER 2014
Slide 5: Including dividends the Australian market has surpassed pre GFC levels
INCLUDING DIVIDENDS THE AUSTRALIAN MARKET HAS SURPASSED PRE GFC LEVELS For personal use only ANNUAL GENERAL MEETING OCTOBER 2014
Slide 6: Low interest rates helping to drive market valuations
LOW INTEREST RATES HELPING TO DRIVE MARKET VALUATIONS (PRICE EARNINGS RATIO) For personal use only Source: FactSet. ANNUAL GENERAL MEETING OCTOBER 2014
Slide 7: All Ordinaries Price Index long term performance
ALL ORDINARIES PRICE INDEX LONG TERM PERFORMANCE For personal use only Note: A semi log scale has been used to better show a comparison of the relative size of the percentage changes over the period. ANNUAL GENERAL MEETING OCTOBER 2014
Slide 8: 2. Results & Shareholder Returns
For personal use only 2. RESULTS & SHAREHOLDER RETURNS ANNUAL GENERAL MEETING OCTOBER 2014
Slide 9: Financial summary for 2014
FINANCIAL SUMMARY FOR 2014 For personal use only ANNUAL GENERAL MEETING OCTOBER 2014
Slide 10: Dividends
DIVIDENDS For personal use only “Board’s current intention is to lift the upcoming interim dividend by 1 cent per share to adjust the disparity between the interim and final dividends.” ANNUAL GENERAL MEETING OCTOBER 2014
Slide 11: Share price performance – per annum return to September 2014
SHARE PRICE PERFORMANCE – PER ANNUM RETURN TO 30 SEPTEMBER 2014 For personal use only ANNUAL GENERAL MEETING OCTOBER 2014
Slide 12: Share price performance including franking
SHARE PRICE PERFORMANCE – PER ANNUM RETURN TO 30 SEPTEMBER 2014 INCLUDING FRANKING* For personal use only * Assumes an investor can take full advantage of franking credits. ANNUAL GENERAL MEETING OCTOBER 2014
Slide 13: Imputation under discussion
IMPUTATION UNDER DISCUSSION • Current system means company income is not taxed twice in the For personal use only hands of shareholders • Supports share ownership in Australia – evident through the GFC • Dividends to shareholders puts greater discipline on companies and their use of retained profit
Slide 14: Share price is trading at a premium
SHARE PRICE IS TRADING AT A PREMIUM For personal use only ANNUAL GENERAL MEETING OCTOBER 2014
Slide 15: 3. Portfolio Highlights
For personal use only 3. PORTFOLIO HIGHLIGHTS ANNUAL GENERAL MEETING OCTOBER 2014
Slide 16: Portfolio performance – per annum return to September 2014
PORTFOLIO PERFORMANCE – PER ANNUM RETURN TO 30 SEPTMEBER 2014 For personal use only After tax and expenses. Ignores benefits of franking and LIC tax credits. ANNUAL GENERAL MEETING OCTOBER 2014
Slide 17: Top contributors and detractors to portfolio return
TOP CONTRIBUTORS AND DETRACTORS TO PORTFOLIO RETURN BY VALUE (INCLUDING DIVIDENDS)* For personal use only ✓ Commonwealth Bank ✓ Westpac ✓ BHP Billiton ✓ ANZ Banking Group ✓ National Australia Bank ✗ Coca-Cola Amatil ✗ QBE Insurance *FY 2014. ANNUAL GENERAL MEETING OCTOBER 2014
Slide 18: Portfolio at September 2014 – top holdings
PORTFOLIO AT 30 SEPTEMBER 2014 – TOP 10 HOLDINGS REPRESENT 55.4% OF THE PORTFOLIO For personal use only * Indicates that options were outstanding against part the holding. ANNUAL GENERAL MEETING OCTOBER 2014
Slide 19: Portfolio at September 2014 – next holdings
PORTFOLIO AT 30 SEPTEMBER 2014 – NEXT 10 REPRESENT 18.2% OF THE PORTFOLIO For personal use only ANNUAL GENERAL MEETING OCTOBER 2014
Slide 20: Portfolio at September 2014 – by sector
PORTFOLIO AT 30 SEPTEMBER 2014 – BY SECTOR For personal use only ANNUAL GENERAL MEETING OCTOBER 2014
Slide 21: BHP and Rio well positioned despite falling iron ore prices
BHP AND RIO ARE WELL POSITIONED EVEN IN AN ENVIRONMENT OF FALLING IRON ORE PRICES Iron ore: break even costs For personal use only $US/tonne Source: UBS. ANNUAL GENERAL MEETING OCTOBER 2014
Slide 22: Energy an important part of the portfolio
ENERGY AN IMPORTANT PART OF THE PORTFOLIO – MOVING FROM CAPITAL INVESTMENT TO CASH FLOWS For personal use only ANNUAL GENERAL MEETING OCTOBER 2014
Slide 23: Healthcare has been an increasing focus
HEALTHCARE HAS BEEN AN INCREASING FOCUS For personal use only New after 31 August ANNUAL GENERAL MEETING OCTOBER 2014
Slide 24: Increasing the nursery
HOLDINGS HAVE RISEN FROM 73 TO 94 OVER THE YEAR – INCREASING THE NURSERY For personal use only ANNUAL GENERAL MEETING OCTOBER 2014
Slide 25: Continued allocation to buy and write strategies
CONTINUED ALLOCATION OF FUNDS TO BUY AND WRITE STRATEGIES WITHIN THE INVESTMENT PORTFOLIO TO ENHANCE INCOME For personal use only • Produced $9.8 million of income and $2.6 million of realised capital gains in 2013/2014 • Main holdings: - Asciano - CSL - Caltex - Twenty First Century Fox - Sonic Hea
Slide 26: 4. Looking Ahead
For personal use only 4. LOOKING AHEAD ANNUAL GENERAL MEETING OCTOBER 2014
Slide 27: Recent reporting season feedback from companies
RECENT REPORTING SEASON FEEDBACK FROM COMPANIES For personal use only • Overall earnings and dividends better than first expected • Cost efficiency generally driving earnings improvement • Top line revenue growth remains challenging • Company balance sheets are strong • Business conditions are mixed
Slide 28: Expected earnings per share growth by sector
EXPECTED EARNINGS PER SHARE GROWTH BY SECTOR – % CHANGE For personal use only Pro-rated to June FY14A FY15E Banks 8.3 5.4 Property Trusts 5.8 4.1 Resources 29.2 2.3 Industrials (excludes Res, LPT’s, Banks) 2.7 10.8 All Companies 10.0 6.6 Source: Macquarie Equities. ANNUAL GENERAL MEETING OCTOBER 201
Slide 29: Issues for the market
ISSUES FOR THE MARKET For personal use only • Short term interest rates likely to stay relatively low for some time given weak growth outlook – although bond yields have started to rise in the US • Overseas investor interest currently low, although local investors have high levels of cash, but will
Slide 30: Issues for the market – con't
ISSUES FOR THE MARKET - CON’T For personal use only • Opportunities to invest may occur – privatisations, IPO’s • Reporting season has been encouraging for dividends • After two strong years of performance equity market returns may be below the long term average ANNUAL GENERAL MEETING OCTOBER 2014
Slide 31: Share purchase plan
SHARE PURCHASE PLAN • Issue price of $5.88 For personal use only • 20.9% of shareholders participated • Raised $185 million • Shares were issued 6 October ANNUAL GENERAL MEETING OCTOBER 2014
Slide 32: Australian Foundation Investment Company
AUSTRALIAN FOUNDATION INVESTMENT COMPANY
Australian Foundation Investment Company — Shareholder Meeting (October 2014) on 6ix