Australian Foundation Investment Co. Ltd. · ASX:AFI
Australian Foundation Investment — Shareholder Meeting (October 2011)
31 slides from Australian Foundation Investment's shareholder meeting presentation, Oct 3, 2011
Slide 1: 2011 Annual General Meeting Presentation
For personal use only 3 October 2011 The Manager Company Announcements Office Australian Securities Exchange Exchange Centre Level 4 20 Bridge Street Sydney NSW 2000 Electronic Lodgement Australian Foundation Investment Company Limited 2011 Annual General Meeting Presentation Dear Sir / Madam Please
Slide 2: Annual General Meeting 3 October 2011
For personal use only Annual General Meeting 3 October 2011
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: Strong rise in dividends and participation in BHP Billiton buy back lifted profits
Strong rise in dividends and participation in BHP Billiton buy back lifted profits For personal use only FY11 FY10 Key factors: $m $m • dividends and distributions up Income 247.6 199.4 30.2% Admin. Expenses (8.4) (7.6) • revenue from deposits down Finance Costs (4.2) (4.2) as cash invested Income T
Slide 5: Earnings Per Share covered dividends this year
Earnings Per Share covered dividends this year after a period of funding dividends from For personal use only reserves Note: Earnings per share is based on net operating profit per share
Slide 6: Share price has moved to a discount over the year
Share price has moved to a discount over the year, long term performance in line with the portfolio For personal use only Annualised Returns to 31 August 2011 * After tax and expenses. Ignores benefits of franking and LIC tax credits
Slide 7: Franking credits are an important part of AFIC's investment approach
Franking credits are an important part of AFIC’s investment approach and make a significant For personal use only difference to returns* Annualised Returns to 31 August 2011 * After tax and expenses. Assumes a shareholder can take full advantage of the franking credits. Ignores benefits of LIC tax c
Slide 8: AFIC Share Price Relative to Net Asset Backing
AFIC Share Price Relative to Net Asset Backing* and the performance of the share For personal use only price Premium/Discount Cents Share Price NTA estimate on 30 September 2011 was $4.15 * Before provision for capital gains tax
Slide 9: The market displayed some confidence early but sentiment has turned very negative
The market displayed some confidence in the first half of the year but sentiment has turned For personal use only very negative All Ordinaries Price Index
Slide 10: Key Investment Themes Over the Year
Key Investment Themes Over the Year For personal use only Adopted a cautious approach looking for sustainable cash flows in sound industries Looked to take advantage of market dips - close to fully invested so some debt was utilised when appropriate Exited some securities where industry struct
Slide 11: Two new stocks were added to the nursery
Two new stocks were added to the “nursery” during the year For personal use only Senex Energy Engaged in the exploration and development of oil and gas in the Copper Basin and coal seem gas in the Surat Basin Asciano A transport and infrastructure business, with a focus on rail and ports. Its po
Slide 12: Recent falls in the market provided great opportunities
Recent falls in the market provided great For personal use only opportunities for a long term investor
Slide 13: Largest Acquisitions this financial year
Largest Acquisitions this financial year For personal use only $m Ansell (new holding) 9.6 National Australia Bank 7.6 BHP Billiton 7.3 ANZ 6.0 Ramsay Health Care 3.6 Transurban 2.7 Senex Energy 2.4 Telstra 2.3
Slide 14: Largest disposals this financial year
Largest disposals this financial year For personal use only $m Fairfax Media# 7.0 Oakton# 4.1 Commonwealth Property Trust 3.6 APN News & Media 2.0 NAB Income Securities # 2.0 #complete disposal
Slide 15: The top holdings represent 82% of the total portfolio
The top 25 holdings represent 82%of the total portfolio For personal use only Sector Exposure at 31 August (excludes cash)
Slide 16: We remain positive about diversified resources
We remain positive about diversified resources For personal use only In the top 25 at 31 August 2011 % of portfolio (excl. Rank $m cash) 1 * BHP Billiton 566.6 12.4% 4 * Rio Tinto 259.5 5.7% Total 18.1% * Indicates that options were outstanding against part or all of the holding in the Trading Portf
Slide 17: Exposure to companies servicing resources and agriculture
Our exposure to companies servicing the resources and agriculture sectors For personal use only In the top 25 at 31 August 2011 % of portfolio (excl. Rank $m cash) 18 Incitec Pivot 70.8 1.5% 19 * Orica 66.8 1.5% 24 Bradken 56.6 1.2% Total 4.2% * Indicates that options were outstanding against part o
Slide 18: Attracted to the return profile of the major banks
We remain attracted to the return profile of the major banks, including strong dividends For personal use only In the top 25 at 31 August 2011 % of portfolio (excl. Rank $m cash) 2 * Commonwealth Bank of Australia 411.2 9.0% 3 * Westpac Banking Corporation 378.7 8.3% 5 * National Australia Bank 236.
Slide 19: Expanding our exposure to the energy sector
We have been expanding our exposure to the energy sector For personal use only In the top 25 at 31 August 2011 % of portfolio (excl. Rank $m cash) 10 Woodside Petroleum 96.8 2.1% 11 * Origin Energy 89.9 2.0% 12 * Oil Search 89.0 1.9% 13 * Santos 85.3 1.9% 20 AGL Energy 66.4 1.5% Total 9.4% * Indicat
Slide 20: Retail exposure is primarily to the largest companies
Retail exposure is primarily to the largest and more diversified companies For personal use only In the top 25 at 31 August 2011 % of portfolio (excl. Rank $m cash) 6 Wesfarmers (a) 233.5 5.1% 8 Woolworths 156.5 3.4% Total 8.5% (a) Includes $43.9 million of WESN partially protected securities * Indi
Slide 21: Financials/insurance representation
Financials/insurance representation - AXA taken over by AMP For personal use only In the top 25 at 31 August 2011 % of portfolio (excl. Rank $m cash) 15 * AMP 81.6 1.8% 17 * QBE Insurance Group 77.7 1.7% 22 Computershare 63.1 1.4% Total 4.9% * Indicates that options were outstanding against part or
Slide 22: Telstra and industrial company exposure
Telstra and industrial company exposure For personal use only In the top 25 at 31 August 2011 % of portfolio (excl. Rank $m cash) 9 Telstra Corporation 154.1 3.4% 14 Amcor 84.6 1.8% 23 * Brambles 58.5 1.3% 25 * Coca-Cola Amatil 55.3 1.2% Total 7.7% * Indicates that options were outstanding against p
Slide 23: Infrastructure exposure
Infrastructure exposure For personal use only In the top 25 at 31 August 2011 % of portfolio (excl. Rank $m cash) 16 Transurban Group 79.6 1.7% 21 Australian Infrastructure Fund 64.4 1.4% Total 3.1% * Indicates that options were outstanding against part or all of the holding in the Trading Portfolio
Slide 24: The recent reporting season was reasonable
The recent reporting season was reasonable For personal use only Balanced sheets are generally strong Dividends were slightly ahead of expectations as payout ratios increased Margins were maintained Continuing strong demand for resources
Slide 25: A number of issues were raised during discussions with companies
However a number of issues were raised during discussions with companies For personal use only Rising cost pressures on capital items and wages Industrial Relations climate making it difficult to achieve productivity gains High Australian dollar/high interest rates negatively impacting many co
Slide 26: Issues raised during discussions with companies (continued)
However a number of issues were raised during discussions with companies – con’t. For personal use only Uncertainty created by the minority government Lack of effective consultation Proliferation of regulatory intrusion Tax - carbon, mining Sovereign risk is high on the agenda for offshore
Slide 27: The medium term outlook
The medium term outlook For personal use only Developed economies face major structural issues – particularly high sovereign debt levels Markets likely to remain volatile for some time Many companies in Australia are facing difficulties and lowering their earnings expectations Demand for res
Slide 28: The Australian market looks attractive based on ASX Forward Price Earnings Ratio
The Australian market looks attractive based on ASX 200 Forward Price Earnings Ratio For personal use only
Slide 29: ASX forward dividend yield provides a sound basis of return
And the ASX 200 forward dividend yield provides a sound basis of return For personal use only
Slide 30: Despite recent market difficulties
Despite recent market difficulties For personal use only AFIC remains focused on companies with “annuity streams” and a discipline on returns on invested capital The portfolio is in good shape We are confident about the companies we are invested in
Slide 31: Australian Foundation Investment Company
AUSTRALIAN FOUNDATION INVESTMENT COMPANY
Australian Foundation Investment Company — Shareholder Meeting (October 2011) on 6ix