Interim Results Webcast Presentation

24 January 2022


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
Interim Results Webcast Presentation

Please find attached the presentation to be given at the Shareholder Teleconference/
Webcast being held today, Monday 24 January 2022 at 1.30 p.m. (AEDT).

To join the webcast please use the below link (this will be made available on the
afi.com.au website).

Webcast Link: Please register for the results webcast here (This link will open directly
in your internet browser). Questions can be asked through the webcast link.

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 2850 (outside Australia)
Conference ID: 2923939

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 2923939, 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.


International Dial-In Numbers are available via the Company’s website.

The shareholder presentation material will be made available through our website.

ASX Release authorised by the Company Secretary, Matthew Rowe.

Interim Results Presentation
24 January 2022

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

Agenda
•Interim Result – Andrew Porter
•Investment Process – Mark Freeman
•Markets and the Portfolio – David Grace and Nga Lucas
•Outlook –David Grace
3

Interim Result
4

Interim Result Summary – 6 months to 31 December 2021
* Assumes a shareholder can take full advantage of the franking credits.
5

AFIC’s share price relativeto the NTA- 31 December 2021
6

Objectives and the Investment
Process
7

Objectives
AFIC’s investment focus is on a diversified portfolio of Australian equities,
seeking to provide attractive income and capital growth to shareholders
over the medium to long term.
This is achieved at a low cost, with lower volatility than the market, and
with low portfolio turnover which produces tax effective outcomes for
shareholders.
8

Our investment process – how we assess quality
Uniqueness of Assets
Long-term Sustainability
Independence
People
EarningsConsistency
Financial Strength
Competitivelandscape, leadership position, can the assets be replicated
Barriersto entry, sustainability of competitive advantage, track record of new entrants,
threat of substitution
Pricing power, bargaining power of suppliers, government interference, exposure to
commodity cycles
Owner/driver model, insider buying/selling, track record, remuneration incentives,
corporate governance
Volatility and quality of earnings, cash flow analysis
Balancesheet gearing, structure of the debt book, dividend policy, ability to invest for
future growth
9

Long term investor in companies, not traders of share prices
Identify quality companies with sound growth prospects that we can buy at a reasonable price
This supports our belief in the power of compounding returns from great businesses
Our research process is built on observing the key characteristics of a company that our experience
indicates will produce strong investment returns
Our investment process – focus on long term quality
10

ESG is integrated into our investment framework
oAssessment of ESG risk factors is an important part of our investment process as the
sustainability of a business is a key input in our assessment of a company.
oAs a long-term investor, we seek to invest in companies that have strong governance and risk
management processes, which includes consideration of environmental and social risks.
oWe regularly review companies to ensure ongoing alignment with our investment framework.
oWe conduct our own evaluation of the merits of any shareholder resolution and take input from
proxy advisors.
oWe vote on all company resolutions as part of ourregular engagement with companies.
oWe actively engage with companies when we have concerns those resolutions are not aligned
with shareholders’ interests.
Engagement with companies
Approach to Environmental, Social and Governance (ESG) factors
Voting on resolutions is one of the key functions that a shareholder has in ensuring better long-
term returns and management of investment risk:
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Markets and The Portfolio
12

Long term value in the context of recent market moves
Source: FactSetSource: FactSet
Price to Book -
S&P/ASX 200 Index
Price to Sales -
S&P/ASX 200 Index
13

Market and key sector performance*- Year to 31 December 2021
*includes dividends but not franking
14

Source: Mercer Investment Performance Survey of Wholesale-Equity – Australia. Note AFIC’s return is after tax paid and
costs. The universe for Wholesale-Equity – Australia returns are before tax and after fees
Over the 5-year period to 31 December 2021 AFIC has a higher
portfolio return with less volatility than the S&P/ASX 200 Index
(both exclude franking)
Note AFIC share price returns have a significantly lower volatility (beta
and standard deviation) than the Index.
Portfolio performance, including franking
- per annum returns to 31 December 2021
Portfolio performance metrics
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Transurban Limited
•Transurban owns a high quality, diversified toll road portfolio
•Good track record of capital allocation by management driving strong long term FCF growth
•Solid balance sheet, gearing high but before contribution from funded growth projects
•Sydney and Melbourne lockdowns temporary impact on traffic and DPS, expect FY23 recovery
•The cost blowout issue at the West Gate Tunnel project now resolved
•Attractive pipeline of potential opportunities
16

CSL Limited
• Leading global bio-tech company specialising in
the treatment of rare diseases and influenza.
• Has consistently delivered a high return on
capital. The company has a long and successful
track record of capital allocation driving
shareholder returns.
• Significantinvestment in Research and
Developmentbeing 10%-11% of global sales.
• Recent acquisition of ViforPharma, a new growth
area treating kidney disease and iron therapy.
Source: CSL
17

Portfolio Update - Recent Transactions
New
Purchases
SalesTrimmed
Additions to
existing holdings
(Nursery stock)
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Top 30 holdings – 31 December 2021
RankCompany% ofPortfolio
1
Commonwealth Bank of Australia8.4%
2
CSL 7.1%
3
BHP6.1%
4
Macquarie Group 4.8%
5
Wesfarmers 4.6%
6
Transurban Group 4.2%
7
Westpac Banking Corporation3.5%
8
National Australia Bank 3.4%
9
Mainfreight 3.1%
10
James Hardie Industries*2.8%
Total Portfolio 60 Holdings
* Options were outstanding against part of the holding.
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Top 30 holdings – 31 December 2021 continued
RankCompany% ofPortfolio
11
Woolworths Group2.6%
12
Australia and New Zealand Banking Group 2.5%
13
Telstra Corporation* 2.4%
14
Sydney Airport2.3%
15
Goodman Group2.2%
16
Reece 2.1%
17
Amcor2.0%
18
Rio Tinto 2.0%
19
ARB Corporation 1.8%
20
Sonic Healthcare 1.8%
Total Portfolio 60 Holdings
* Options were outstanding against part of the holding.
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Top 30 holdings – 31 December 2021 continued
RankCompany% ofPortfolio
21
Coles Group 1.7%
22
ResMed1.6%
23
Carsales.com 1.6%
24
Ramsay Health Care 1.4%
25
ASX 1.4%
26
Fisher & Paykel Healthcare1.3%
27
Xero 1.2%
28
Seek 1.2%
29
IRESS 1.1%
30
NEXTDC 1.1%
Total Portfolio 60 Holdings
21

Closing Comments
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Outlook
Cost inflation and the likely end of the rate easing cycle is providing a
near term headwind for equity valuations. This is evident in some of
our high quality companies that were trading at high valuations.
The outlook for company dividends remains positive.
Despite short term volatility, holding a diversified portfolio of quality companies
remains appropriate to deliver our long term investment objectives.
However, quality companies remain best positioned to continue delivering
earnings growth in the current uncertain environment.
23

International Portfolio – 31 December 2021
Additional investments and portfolio returns has seen investment rise to
$72 million (70bps of total portfolio).
Portfolio holdings in 41 companies.
Performance is encouraging.
Applying the AFIC way of investing to International companies.
Looking to build a consistent track record.
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Questions
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