Teleconference/ Webcast Presentation

16 March 2021


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
Letter to shareholders - Invitation to Shareholder Telephone / Webcast briefing

Please find attached the presentation to be given at the Shareholder Teleconference/
Webcast being held today, Tuesday 16 March 2021 at 10.00am (AEDT).

To join the webcast please use the below link (also available on the afi.com.au website).

Webcast Link: Please register for the results webcast here:
https://edge.media-server.com/mmc/p/akoqpggx.
(This link will open directly in your internet
browser).

Alternatively to join via the teleconference, please use the details below:

Telephone: 1800 175 864 (free call within Australia)
1300 212 365 (mobile, free call within Australia)
+61 2 8373 3550 (outside Australia)
Conference ID: 1888046

Joining the Conference Call:

1. In the 10 minutes prior to the call start time, call the appropriate dial-in number.
2. Enter the Event Plus passcode 1888046, followed by the pound or # key and leave any
information requested after the tone. You will be joined automatically to the conference. During
the call you can indicate if you would like to ask a question by pressing (*1) on your telephone
keypad and wait for your name to be announced.

The presentation will also be available under the News section of the Company’s website
www.afi.com.au
.


ASX Release authorised by the Company Secretary

Shareholder
Presentation
16 March 2021

Shareholder Presentation March 2021
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 faith. However, no warranty
(express or implied) is made as to the accuracy, completeness or reliability of any statements, estimates
or opinions or other information contained in these materials (any of which may change without notice)
and to the maximum extent permitted by law, the Disclosers disclaim all liability and responsibility
(including, without limitation, any liability arising from fault or negligence on the part of any or all of the
Disclosers) for any direct or indirect loss or damage which may be suffered 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 only and does not take into account any individual’s
objectives, financial situation or particular needs. Before making an investment decision an individual
should assess whether it meets their own needs and consult a financial advisor.
Disclaimer
2

Shareholder Presentation March 2021
•Long Term Markets (Mark Freeman)
•Objectives, Investment Process, Markets and the Portfolio (David Grace)
•Outlook (Mark Freeman)
•Questions
Presentation Agenda
3

Shareholder Presentation March 2021
4
In perspective... the very long term returns of the Australian share
market – All Ordinaries Price Index since 1940

Shareholder Presentation March 2021
S&P/ASX
Accumulation
Index
S&P/ASX
Price Index
5
Source: FactSet
Index
Dividends are an important part of the long term returns
in the Australian market

Shareholder Presentation March 2021
Long term value in the context of the recent market moves
Price to Book – S&P/ASX 200 IndexPrice to Sales –S&P/ASX 200 IndexS&P/ASX 200 Index
Times
Times
Index
Source: FactSet
Source: FactSet
Source: FactSet
6

Shareholder Presentation March 2021
Our Investment Objectives reflect a long term approach
The Company aims to provide
shareholders with attractive investment
returns through access to a growing
stream of fully franked dividends
and growth in capital invested.
The Company’s primary investment goals are:
• to pay dividends which, over time, grow
faster than the rate of inflation; and
• to provide attractive total returns over
the medium to long term.
7

Shareholder Presentation March 2021
Sustainable competitive
advantage – unique
assets producing strong
returns on capital
As does our investment approach which offers a diversified
portfolio of quality stocks – what we look for
Strong management
team and board
Recurring, predictable
earnings are preferred
Financial strength
– strong cash flow
and balance sheet
8

Shareholder Presentation March 2021
Businesses that can
grow over the long
term, producing
growing dividends
Nursery stocks
– developing the
preceding attributes
Look to buy when we
see long term value
As does our investment approach which offers a diversified
portfolio of quality stocks – what we look for
continued
9

Shareholder Presentation March 2021
•Invest in companies that have strong governance and risk management processes
that include environmental and social risks.
•We are seeking remunerations plans and outcomes that align with AFIC’s interests
as long-term shareholders.
•We engage with investee companies on these issues and will vote as shareholders
accordingly.
“As shareholders, we are ultimately the owners of the assets of companies we invest in. If we believe
these to be good assets that can generate satisfactory returns for our shareholders, we believe it is
our obligation to engage with Boards and management to make sure these assets are being managed
effectively. This includes having a meaningful social licence to operate and complying with practices
that reinforce this position, including having acceptable behaviours and accountabilities.”
In looking for quality companies for long term investment ESG
is integrated into our investment framework
10

Shareholder Presentation March 2021
Markets and the Portfolio
11

Shareholder Presentation March 2021
Market and key sector performance – Year to 28 February 2021
Includes dividends, but not franking.
12
Source: FactSet

Shareholder Presentation March 2021
Relative portfolio performance, including franking*
– returns to 28 February 2021
AFIC portfolio returns have a lower
level of volatility (Beta of 0.91) than
the Index.
Returns include growing/stable
fully franked dividends over
a 10 year period.
13

Shareholder Presentation March 2021
•Generally strong profits, with many companies above expectations.
•Better-than-expected margins have been the main driver of the upside
earnings surprise.
•Companies have done a good job in reducing costs, which is positive
for future earnings growth.
•Balance sheets generally in good condition also benefiting from reduced
funding costs.
•Large profit upgrades across the Banks and Resources.
•Dividends well above expectations, although still below pre COVID-19.
14
Observations from the recent reporting season

Shareholder Presentation March 2021
Top 30 holdings – 28 February 2021
RankCompany% ofPortfolio
1
BHP Group* 8.5
2
Commonwealth Bank of Australia8.1
3
CSL 7.2
4
Westpac Banking Corporation4.6
5
Wesfarmers 4.5
6
Macquarie Group 3.9
7
Transurban Group 3.8
8
National Australia Bank 3.4
9
Woolworths Group 3.1
10
Rio Tinto 3.1
* Options were outstanding against part of the holding.
Total Portfolio 61 Holdings
15

Shareholder Presentation March 2021
RankCompany% ofPortfolio
11
Australia and New Zealand Banking Group 2.8
12
Mainfreight 2.5
13
Telstra Corporation 2.1
14
James Hardie Industries2.1
15
Amcor2.1
16
Sydney Airport1.9
17
Reece 1.6
18
Ramsay Health Care 1.6
19
Sonic Healthcare 1.5
20
ARB Corporation 1.5
Total Portfolio 61 Holdings
16
Top 30 holdings – 28 February 2021 continued

Shareholder Presentation March 2021
RankCompany% ofPortfolio
21
Goodman Group1.4
22
Qube Holdings 1.4
23
Coles Group 1.4
24
Fisher & Paykel Healthcare Corporation 1.3
25
Xero 1.3
26
Resmed Inc1.2
27
Seek 1.2
28
Brambles 1.2
29
CarsalesCom 1.2
30
Woodside Petroleum* 1.1
Total Portfolio 61 Holdings
* Options were outstanding against part of the holding.
17
Top 30 holdings – 28 February 2021 continued

Shareholder Presentation March 2021
Closing Remarks
18

Shareholder Presentation March 2021
Current market
19
ASX 200 firms trade at an average forward PE
18.2x, which is 27% above the 20-yr average
High PE firms trade at an average forward PE
42.3x, which is 77% above the 20-yr average
Source: Goldman Sachs Global Investment Research, FactSet.Source: Goldman Sachs Global Investment Research, FactSet.
Times
Times

Shareholder Presentation March 2021
Current market continued
20
AUD/USD vs iron ore price, both of which have lifted10 year bond rates in Australia have lifted recently
Source: FactSetSource: FactSet
Per cent
Iron Ore
AUD/USD
Cents

Shareholder Presentation March 2021
The Australian
economy
appears to be
emerging from
COVID-19 better
than first
anticipated.
Full impact of
economic conditions
on company earnings
and dividends are
still to play out
despite the positive
earnings season as
government support
programs are scaled
back.
Market valuations
for many companies
still high, although
despite recent
pressure, interest
rates still relatively
low which has been
supportive of these
valuations.
These factors have
already caused
sector/stock rotations
as investors look for
emerging themes.
As a long term
investor, we believe
the portfolio remains
well positioned but is
being adjusted as
opportunities arise.
US fiscal stimulus
likely to be very
supportive of global
growth as will the
effective roll out
of vaccination
programs across
developed markets.
Inflationary trends
are being monitored
closely.
Outlook
21

Shareholder Presentation March 2021
AFIC’s share price was trading at a 7% premium to the NTA
at 28 February 2021
22

Shareholder Presentation March 2021
Questions
23