Australian Foundation Investment Co. Ltd. · ASX:AFI
Australian Foundation Investment — Investor Presentation (November 2007)
31 slides from Australian Foundation Investment's investor presentation, Nov 26, 2007
Slide 1: Presentation to New Zealand Investors (ASX cover letter)
Australian Foundation INVESTMENT COMPANY Australian Foundation Investment Company Limited ABN 56 004 147 120 Level 21, 101 Collins Street Melbourne Victoria 3000 26 November 2007 GPO Box 2114 Melbourne Victoria 3001 Telephone (03) 9650 9911 Facsimile (03) 9650 9100 The Manager Email invest@afi.com.a
Slide 2: Presentation to New Zealand Investors
For personal use only Australian Foundation Investment Company Presentation to New Zealand Investors November 2007
Slide 3: Disclaimer
Disclaimer For personal use only 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 i
Slide 4: Australian Foundation Investment Company
Australian Foundation Investment Company For personal use only We invest shareholders’ capital in a diversified portfolio of quality Australian Companies to achieve: Dividends which, over time, grow faster than the rate of inflation; and Attractive total returns over the medium to long term 3
Slide 5: AFIC's Investment Structure – October 2007
AFIC’s Investment Structure – 31 October 2007 For personal use only Long Term Investment portfolio: A$5.8 billion Approximately 100 securities Focus on S&P/ASX 200 Trading portfolio: Up to 10% of total portfolio - A$172 million or 3.0% Short term positions Options writing strategies Fixed rate borro
Slide 6: All Ordinaries Price Index - Monthly
For personal use only Value Ju n- 7000 6500 6000 5500 5000 4500 4000 3500 3000 2500 Se 02 p- D 02 ec - M 02 ar - Ju 03 n- Se 03 p- D 03 ec - M 03 ar - Ju 04 n- Se 04 p- D 04 ec - M 04 5 ar - Ju 05 n- Se 05 increase of 25.4% p- D 05 ec - 1 July 06 to 30 June 07 M 05 ar - Ju 06 n- Se 06 p- Index was 6
Slide 7: Relative Performance - Australian and NZ Markets
Relative Performance - Australian and NZ Markets For personal use only 2450 2250 2050 1850 1650 1450 1250 1050 850 Oct-02 Apr-03 Oct-03 Apr-04 Oct-04 Apr-05 Oct-05 Apr-06 Oct-06 Apr-07 Oct-07 NZ50 Price Index ASX 200 Price Index ASX 200 Price Index in $NZ 6
Slide 8: Operating Profit Analysis – 2007 Full Year vs. 2006 Full Year (A$)
Operating Profit Analysis For personal use only – 2007 Full Year vs. 2006 Full Year (A$) Major Differences 240 $224.4m + $33.7m in dividends/distributions 200 $179.6m +$19.8m in trading 160 - $4.5m income tax $ million 120 80 40 0 2006 2007 Operating Operating Profit Profit 7
Slide 9: AIFRS Profit Analysis – 2007 Full Year vs. 2006 Full Year (A$)
AIFRS Profit Analysis For personal use only –2007 Full Year vs. 2006 Full Year (A$) Major Contributor $259.3m 260 $37.5m in realised gains largely from 220 $214.1m takeover of Promina $224.4m Group and merger of 180 Rural Press and Fairfax Media $ million $179.6m 140 100 60 20 2006 2007 AIFRS AIFRS
Slide 10: Earnings Per Share and Dividends Per Share
Earnings Per Share and Dividends Per Share For personal use only 25.0 23.7 21.0 19.4 20.0 17.3 17.0 16.0 Australian Cents 15.0 14.25 14.25 14.3 14.25 13.2 11.5 10.0 5.0 0.0 2002 2003 2004 2005 2006 2007 Earnings Per Share Dividends Per Share Note : 2001 to 2004 use earnings per share (AGAAP) whilst
Slide 11: Annualised Returns to October 2007 in A$
Annualised Returns to 31 October 2007 in A$ For personal use only 35% 30% 29.3% 30.3% 27.8% 25% 22.3% 20.4% 20% 18.8% 15.6% 15.2% 15% 13.6% 10% 5% 0% 1 year return 5 year return 10 year return Net Asset per share growth plus dividends Share Price growth plus dividends S&P/ASX 200 Accumulation Index
Slide 12: Annualised Returns to October 2007 in $NZ
Annualised Returns to 31 October 2007 in $NZ For personal use only 40% 35.2% 36.3% 35% 33.6% 30% 25% 23.7% 21.6% 20.0% 20% 16.3% 16.0% 15% 14.3% 10% 5% 0% 1 year return 5 year return 10 year return Net Asset per share growth plus dividends Share Price growth plus dividends S&P/ASX 200 Accumulation I
Slide 13: Our Approach to Investing
Our Approach to Investing For personal use only We BUY to hold for the medium to long term not resale SALES are not common, often driven by takeovers Not pressured from fund flows or the index 12
Slide 14: The Investment Process - Illustrative
The Investment Process - Illustrative For personal use only Investment Committee Overview Investment Team Board/management Profit/EPS Value based Cashflow Margin formation Investment Contrarian buyers Considerations Dividend Industry economics generation Growth capacity Industry position Balance She
Slide 15: Management Expense Ratio
Management Expense Ratio For personal use only AFIC MER for the year ended 30 June 2007 = 0.13% Internal Management External Management Tend to have a deep Tend to have a growth bias value/dividend income bias Long holding periods Holdings periods tend to vary MERs tend to be lower than MERs tend to
Slide 16: Structure
For personal use only Structure Issue of shares at the discretion of the Board Investment approach can be medium to long term Cash flow management is controlled by the company We are not forced by fund flows to buy/sell stocks There is less need to stay close to the Index ‘Back Office’ costs are red
Slide 17: Structure
For personal use only Structure Investors buy or sell shares on market Share price vs Net Asset Value LIC’s can trade at NAV or at a premium or discount Entry and Exit timing may be more important for an LIC investor Differences between LIC’s need to be understood 16
Slide 18: AFIC Share Price Relative to Net Asset Backing
AFIC Share Price Relative to Net Asset Backing For personal use only 20% Premium 15% 10% 5% 0% -5% -10% -15% Discount -20% Oct-97 Oct-99 Oct-01 Oct-03 Oct-05 Oct-07 17
Slide 19: Top Ordinary Securities (A$) – October 2007
Top 25 Ordinary Securities (A$) – 31 October 2007 For personal use only % of $m portfolio * 1 BHP Billiton 662.5 11.1% * 2 Commonwealth Bank of Australia 483.2 8.1% 3 Westpac Banking Corporation 374.5 6.3% * 4 National Australia Bank 297.2 5.0% * 5 Rio Tinto 282.5 4.7% * 6 Wesfarmers 217.5 3.6% 7 Wo
Slide 20: Top Ordinary Securities (A$) – October 2007
Top 25 Ordinary Securities (A$) – 31 October 2007 For personal use only % of $m portfolio * 11 Woodside Petroleum 117.4 2.0% * 12 Toll Holdings 109.3 1.8% 13 West Australian Newspapers Holdings 106.7 1.8% * 14 Brambles 99.7 1.7% * 15 AMP 94.0 1.6% 16 St George Bank 92.5 1.5% * 17 Alumina 89.8 1.5% *
Slide 21: Top Ordinary Securities (A$) – October 2007
Top 25 Ordinary Securities (A$) – 31 October 2007 For personal use only % of $m portfolio 21 Bradken 73.4 1.2% * 22 Amcor 73.0 1.2% * 23 Asciano Group 70.7 1.2% 24 Computershare 69.7 1.2% 25 Orica 68.9 1.2% Total 4,354.5 As % of Total Portfolio Value 72.9% (excludes Cash & Bank Bills) * Indicates th
Slide 22: Major Trends in Investment Portfolio Relative to Industry Sector
Major Trends in Investment Portfolio Relative to For personal use only Industry Sector Actively Increasing Holding Energy Banks Information Technology Consumer Discretionary Materials Other Financials Note AFIC is not typically a seller of shares 21
Slide 23: Major Acquisitions in the Investment Portfolio since 1 July 2007
Major Acquisitions in the Investment Portfolio (above For personal use only A$1m) since 1 July 2007 to 16 November 2007 $million OneSteel (takeover of Smorgon Steel) 9.5 Equity Trustees 9.3 Campbell Brothers 3.0 Brambles 2.4 Hastings Diversified 2.3 Commonwealth Bank 2.1 Metcash 1.8 Macquarie Group
Slide 24: Major Sales in the Investment Portfolio since 1 July 2007
Major Sales in the Investment Portfolio (above For personal use only A$1m) since 1 July 2007 to 16 November 2007 $million Rinker Group * 114.2 Alinta * 37.0 Southern Cross Broadcasting* 18.6 Transpacific Industries 11.1 Smorgon Steel * 9.5 NAB Income Securities 4.0 * as a result of takeovers 23
Slide 25: New Stocks in the Investment Portfolio 2005 to 2007
New Stocks in the Investment Portfolio 2005 to 2007 For personal use only Cedar Woods ASG Group Dyno Nobel Oakton Metcash Equity Trustees Sonic Healthcare Queensland Gas 24
Slide 26: Comparative Price Index Returns Since July 2007
Comparative Price Index Returns Since 1 July 2007 For personal use only 25% 20% 15% Resources 10% S&P/ASX 200 5% 0% Industrials -5% -10% -15% Au Se Ju O N ov ct l -0 g- p- -0 -0 07 07 7 7 7 25
Slide 27: ASX Industrials Prospective PER - Rolling Months Forward
ASX 200 Industrials Prospective For personal use only PER - Rolling 12 Months Forward 26
Slide 28: ASX Resources Prospective PER Chart - Rolling Months Forward
ASX 300 Resources Prospective PER Chart - For personal use only Rolling 12 Months Forward 27
Slide 29: The Changing Profile of Economic Growth
The Changing Profile of Economic Growth For personal use only 1. Exchange rates based on Purchasing Power Parity Source IMF October 2007 28
Slide 30: Outlook
Outlook For personal use only Investors are requiring a higher return for risk Corporate costs for borrowing are rising Inflation pressures are evident Growth in China/India will continue to support the Australian economy Australian equity market is close to record highs but turbulent 29
Slide 31: For personal use only
om Australian Foundation A / / C IL INVESTMENT COMPANY * D/JJE/R|R| T/W/A]R|RIH ¢. 1/N|V|E|s|T|M|E|N|T|s MIRRABOOKA * Investments Limited
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