Information Meetings – Presentation

15 March 2017


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
Information Meetings – Presentation


Dear Sir / Madam


Please find attached the presentation to be given at the Information Meetings being
held in March 2017.


Yours faithfully


Matthew Rowe
Company Secretary

SHAREHOLDER MEETINGS MARCH 2017

SHAREHOLDER MEETINGS MARCH 2017
DISCLAIMERAustralian Foundation Investment Company Limited an
d its subsidiary AICS (AFSL 303209), their
related entities and each of their respective direc
tors, officers and agents (together the Disclosers)
have
prepared the information contained in these materia
ls in good faith. However, no warranty (express or
implied) is made as to the accuracy, completeness o
r reliability of any statements, estimates or opini
ons
or other information contained in these materials (
any of which may change without notice) and to the
maximum extent permitted by law, the Disclosers dis
claim all liability and responsibility (including,
without
limitation, any liability arising from fault or neg
ligence on the part of any or all of the Disclosers
) for any
direct or indirect loss or damage which may be suff
ered by any recipient through relying on anything
contained in or omitted from these materials.This information has been prepared and provided by
AICS. To the extent that it includes any financial
product advice, the advice is of a general nature o
nly and does not take into account any individual’s

objectives, financial situation or particular needs
. Before making an investment decision an individua
l
should assess whether it meets their own needs and
consult a financial advisor.

SHAREHOLDER MEETINGS MARCH 2017
INTRODUCTION

SHAREHOLDER MEETINGS OCTOBER 2016
HOW WE INVEST – WHAT WE LOOK FOR IN COMPANIES
Quality First
Growth
(including dividends)
Value
Portfolio that is actively managed
for the long term

SHAREHOLDER MEETINGS OCTOBER 2016
RESULTS & SHAREHOLDER RETURNS

SHAREHOLDER MEETINGS MARCH 2017
HALF YEAR FINANCIAL SUMMARY – 31 DECEMBER 2016

SHAREHOLDER MEETINGS MARCH 2017
SHARE PRICE IS AT A SLIGHT DISCOUNT TO NET ASSET BACKING

SHAREHOLDER MEETINGS MARCH 2017
RECENT SHARE PRICE RETURN HAS REFLECTED FALL IN PREMIUM – PERFORMANCE PER ANNUM TO 28 FEBRUARY 2017 INCLUDING BENEFIT OF FRANKING CREDITS*
*Assumes an investor can take full advantage of the
franking credits.

SHAREHOLDER MEETINGS MARCH 2017
CUMULATIVE LONG TERM SHARE PRICE PERFORMANCE, INCLUDING THE BENEFIT OF FRANKING*
*Includes dividends. Assumes an investor can take f
ull advantage of the franking credits

SHAREHOLDER MEETINGS MARCH 2017
THE MARKET & THE PORTFOLIO

SHAREHOLDER MEETINGS MARCH 2017
Source: FactSet
US MARKET HAS RISEN STRONGLY SINCE NOVEMBER 2016

SHAREHOLDER MEETINGS MARCH 2017
Source: FactSet
WITH THE AUSTRALIAN MARKET FOLLOWING WITH LARGE
COMPANIES BACK IN FAVOUR

SHAREHOLDER MEETINGS MARCH 2017
DRIVEN LARGELY BY BANKS AND MATERIAL SECTORS
Source: FactSet

SHAREHOLDER MEETINGS MARCH 2017
PORTFOLIO PERFORMANCE INCLUDING BENEFIT OF FRANKING

CREDITS* – PER ANNUM RETURN TO 28 FEBRUARY 2017
After tax paid and expenses.
*Assumes an investor can take full advantage of the
franking credits.

SHAREHOLDER MEETINGS MARCH 2017
AFIC’S PORTFOLIO VS THE ASX 200 INDEX –
MAJOR VARIATIONS

SHAREHOLDER MEETINGS MARCH 2017
WHAT HAVE WE BEEN DOING?
• AFIC is fully invested.• Changes made to the portfolio:
• Small number of new stocks added.• Topped up selected holdings – CSL, Cochlear.
• Used market conditions to buy stock and write call
options to
generate additional income.

SHAREHOLDER MEETINGS MARCH 2017
PORTFOLIO AT 28 FEBRUARY 2017 – TOP 10 HOLDINGS REPRESENT 48.7% OF THE PORTFOLIO
Rank
Company
% of Portfolio
1
Commonwealth Bank of Australia
9.6%
2
Westpac Banking Corporation
7.8%
3
BHP Billiton
5.2%
4
National Australia Bank*
4.7%
5
Wesfarmers
4.3%
6
Australia and New Zealand Banking Group*
4.0%
7
Telstra Corporation
3.7%
8
Rio Tinto
3.4%
9
CSL*
3.1%
10
Transurban Group
3.0%
99 holdings in the Portfolio
* Indicates options were written against part of th
e holding.

SHAREHOLDER MEETINGS MARCH 2017
PORTFOLIO AT 28 FEBRUARY 2017 – NEXT 10 HOLDINGS REPRESENT 16.8% OF THE PORTFOLIO
Rank
Company
% of Portfolio
11
Amcor
2.6%
12
Woolworths
1.9%
13
Brambles*
1.8%
14
AGL Energy
1.7%
15
Oil Search
1.7%
16
Woodside Petroleum
1.5%
17
Ramsay Health Care
1.5%
18
AMP
1.5%
19
QBE Insurance Group
1.4%
20
Treasury Wine Estates*
1.2%
99 holdings in the Portfolio
* Indicates options were written against part of th
e holding.

SHAREHOLDER MEETINGS MARCH 2017
FEATURED COMPANIES ADDED THIS FINANCIAL YEAR

SHAREHOLDER MEETINGS MARCH 2017
LARGE COMPANIES REPRESENT 80% OF THE PORTFOLIO
At 28 February 2017

SHAREHOLDER MEETINGS MARCH 2017
LOOKING AHEAD

SHAREHOLDER MEETINGS MARCH 2017
COMMENTS ON THE RECENT REPORTING SEASON
Earnings were slightly ahead of expectationsRecent trend of ‘below the line’ one offs continuedInput cost pressures emerging, particularly energy Slight upturn in dividends, buy backs announcedEarnings expected to improve – mostly from resources.








SHAREHOLDER MEETINGS MARCH 2017
HOW WILL THESE TRENDS PLAY OUT?Source: FactSet
Current iron ore price not expected to last
S&P/ASX 200 p/e still above long term average
Source: FactSet

SHAREHOLDER MEETINGS MARCH 2017
HOW WILL THESE TRENDS PLAY OUT? – continued
$A will also influence how the economy performs
Long term interest rates have started to rise
Source: FactSet
Source: FactSet

SHAREHOLDER MEETINGS MARCH 2017
WHERE DOES THIS LEAVE US?
• Australian economy improving, remains largely dependan
t on China
• Reporting season provided some earnings improvement• Cash rate in Australia currently stable but likely to h
ead upward
• Market tone is currently positive• Believe the portfolio remains well placed