Announcement PDF Welcome to the 2015 Annual General Meeting argoinvestments.com.au 1 Disclaimer This presentation has been prepared by Argo Service Company Pty Ltd (ASCO) (ACN 603 367 479) (Australian Financial Services Licence 470477), on behalf of Argo Investments Limited (ACN 007 519 520). ASCO’s Financial Services Guide is available on request or at www.argoinvestments.com.au. This presentation contains unsolicited general information only, which does not take into account the particular objectives, financial situation or needs of any individual investor. It is not intended to be passed on or relied upon as a recommendation by any person. Before making any decision about the information provided, an investor should consult their independent adviser and consider the appropriateness of the information, having regard to their objectives, financial situation and needs. Past performance may not be indicative of future performance and no guarantee of future returns is implied or given. While all reasonable care has been taken when preparing this presentation, no responsibility is accepted for any loss, damage, cost or expense resulting directly or indirectly from any error, omission or misrepresentation in the information presented. 2 Welcome to the 2015 Annual General Meeting argoinvestments.com.au 3 4 Summary of financial results for the year ended 30 June, 2015 2015 2014 change $228.1 million $195.9 million +16.5% Earnings per share 34.3 cents 30.2 cents +13.6% Final dividend per share 15.5 cents(a) 14.5 cents +6.9% Total dividends per share for the full year 29.5 cents(a) 28.0 cents +5.4% Net tangible asset backing (NTA) per share $7.52 $7.35 +2.3% Management expense ratio (MER) 0.15% 0.15% - Profit (a) Includes a 3.0 cents per share listed investment company (LIC) capital gain component, compared to no LIC capital gain component in the previous year. 5 Good performance Profit Dividends per share 228.1 26.0 26.5 28.0 29.5 6.52 2013 7.52 2014 2015 dollars cents 2012 7.35 5.50 $ millions 167.3 175.0 195.9 NTA per share 2014 2015 2012 2013 2014 2015 2012 2013 6 Total Portfolio Return to 30 September, 2015: % per annum 15.9% 16% 12% 10.2% 6.9% 8% 6.5% 3.9% 4% 0% 9.8% 9.4% 6.5% 5.3% 5.2% 10.3% 8.9% 7.3% -0.7% -0.8% 1 Year 3 Years 5 Years 10 Years 15 Years -4% NTA Share Price S&P ASX 200 acc. 7 Share price relative to NTA to 30 September, 2015 20% Premium or Discount % 10% 0% -10% -20% 8 Argo Global Listed Infrastructure Limited (AGLI) 9 AGLI strategic initiative Diversification into global listed infrastructure sector Simple, tradeable listed company structure Access to specialist fund manager with strong track record Management fee provides additional revenue stream for Argo 10 argoinvestments.com.au 11 Outlook Australia weathered the GFC better than most Commodities boom has since faded Global economic recovery is still slow Dependent on monetary stimulus Markets are volatile and uncertain Relatively modest returns likely to continue Volatility creates opportunities for Argo 12 argoinvestments.com.au 13 The rear-view mirror 23 October, 2015 24 October, 2014 change ASX 200 Index 5,352 5,412 -1.1% Interest rates 2.0% 2.5% -20.0% Australian dollar (against the USD) $0.72 $0.88 -18.2% ARG share price $7.70 $7.82 -1.5% 14 S&P ASX 200 Index – increasing volatility S&P ASX 200 vs. Argo Investments Limited 30-Jun-2014 to 22-Oct-2015 Price (Local Currency) 8.4 6,000 8.2 5,800 8 5,600 7.8 5,400 7.6 7.4 5,200 7.2 5,000 7 Jul Oct S&P ASX 200 (Right) Jan Apr Jul Oct Argo Investments Limited (Left) Source: FactSet Prices 15 Major investment purchases during the year to 30 June, 2015 $M Medibank Private 30.0 Argo Global Listed Infrastructure 25.0 APA Group 19.5 Santos 19.3 Commonwealth Bank 17.6 National Australia Bank 12.8 Asaleo Care 11.7 Affinity Education Group 11.7 16 Major investment sales during the year to 30 June, 2015 $M Milton Corporation 25.8 Toll Holdings* 22.8 David Jones* 13.7 Newcrest Mining 10.6 Echo Entertainment* 7.6 Orora* 7.5 Southern Cross Media* 7.5 * completely removed from the portfolio 17 Investment purchases since year end to 23 October, 2015 Total purchases of approximately $120m, with larger purchases including: Commonwealth Westpac Banking Bank of Australia Corporation ANZ Banking Group BHP Billiton Origin Energy DUET Group CBL Corporation Primary Healthcare 18 Australian banking sector – major banks 19 Major banks – capital raisings since 30 June, 2014 Asset sales Residual capital generation Total 3.2 0.8 3.2 7.2 Commonwealth Bank of Australia 5.0 - 2.0 7.0 National Australia Bank 7.1 - 0.5 7.6 Westpac Banking Group 5.5 0.7 3.2 9.4 20.8 1.5 8.9 31.2 Capital raisings (incl. DRP) ANZ Banking Group 20 Australian banking sector – a number of levers Tightening credit standards Margin management Continued productivity improvements Prudent loan loss provisioning 21 Banking sector – price/earnings ratio 22 Banking sector – dividend yield by stock 23 Top 20 equity investments as at 30 September, 2015 Westpac Banking Corporation ANZ Banking Group Telstra Corporation Commonwealth Bank Of Australia Wesfarmers BHP Billiton National Australia Bank $M 316.4 264.4 241.3 233.0 213.4 188.4 181.5 Rio Tinto Woolworths CSL APA Group Sydney Airport Ramsay Health Care AMP $M 122.0 102.7 93.8 87.9 86.2 82.9 68.8 Macquarie Group 180.5 21st Century Fox, Inc. 64.9 Milton Corporation Australian United Investment Co. 132.7 123.0 Amcor QBE Insurance Group 64.8 64.6 24 Global oil production – rapid US growth 100 16 14 80 12 10 60 millions boe/day 8 millions boe/day 40 6 4 20 2 0 0 2000 2001 2002 2003 2004 OPEC (LHS) 2005 2006 2007 2008 Rest of World (LHS) 2009 2010 2011 United States (RHS) 2012 2013 2014 25 Oil price v Australian energy stocks 120 100 80 US$ 60 bbl oil price 40 20 0 2013 2014 Oil price (US$bl Oil) Origin Energy (%) Santos (%) Oil Search (%) 2015 Woodside (%) 26 Investment in new oil projects 500 120 100 400 forecast 300 80 60 200 40 100 20 0 0 2000 2001 2002 2003 2004 2005 US$bn - LHS 2006 2007 2008 2009 2010 2011 2012 Oil price (US$/bbl) - RHS 2013 2014 2015 2016 27 Portfolio impact 1 year total return & portfolio impact at 30 September, 2015 % 2.0 200% 1.5 150% 1.0 100% 0.5 50% 0.0 0% MMA Offshore Oil Search Origin Energy Santos Woodside Petroleum Worley Parsons -0.5 -50% -1.0 -100% Argo Portfolio Weight Attribution to Portfolio S&P/ASX 200 Index Weight Total Return (RHS) 28 Investment portfolio sector allocation as at 30 September, 2015 Consumer Discretionary 7.5% LIC holdings 6.6% Consumer Staples 8.0% Cash 2.3% Utilities 4.4% Telecommunication Services 5.3% Energy 3.8% Property Trusts 3.8% Materials 12.4% Banks 21.4% Information Technology 1.8% Other Financials 9.7% Industrials 7.1% Health Care 5.9% 29 Argo Global Listed Infrastructure Limited (AGLI) argoinfrastructure.com.au 30 AGLI – diversification at work listing date to 30 September, 2015 2.17% 3.0% 1.05% 0.0% -0.20% -1.81% -3.0% -6.0% -9.0% -8.93% -10.86% -12.0% Share Price (ALI+ALIO) ALI NTA AGLI Benchmark (A$) MSCI World (A$) S&P/ASX 200 (accum) MSCI World (US$) 31 Top 10 portfolio holdings as at 30 September, 2015 Security name Transurban Group Crown Castle International Corp. Union Pacific Corporation Sempra Energy Dominion Resources Inc. National Grid PLC PG&E Corporation NextEra Energy Inc. Alliant Energy Corporation CMS Energy Corporation Country of listing AU US US US US UK US US US US Sector Toll Roads Tower Freight Rails Gas Distribution Integrated Electric Regulated Electric Regulated Electric Integrated Electric Regulated Electric Regulated Electric Portfolio % 3.98 3.38 3.31 3.28 3.18 3.14 2.99 2.87 2.30 2.25 30.67 Index % 2.74 1.60 1.67 1.33 2.33 2.94 1.45 0.00 0.37 0.55 14.9832 Geographic & sub-sector weights as at 30 September, 2015 Cash 1.7% Airports 4.7% New Zealand 1.4% Switzerland Cash 1.8% Mexico 1.7% 2.2% France 4.0% Diversified Shipping 0.8% 1.1% Marine Ports Water 2.5% 0.7% Global Infra. Fixed-Income 7.9% Electric 32.7% China 1.1% Hong Kong 0.8% Germany 0.2% Spain 5.0% United Kingdom 5.3% Railways 7.9% Canada 5.4% Pipelines 9.7% Gas Distribution 9.7% United States 52.5% Australia 5.5% Toll Roads 10.6% Communications 10.0% Italy 6.4% Japan 6.7% 33 argoinvestments.com.au 34 Executive team Jason Beddow Managing Director Andy Forster Senior Investment Officer Brydie LloydRoberts Investment Analyst Colin Whitehead Investment Analyst Daniel Cuthbertson Investment Analyst Tim Binks Chief Operating Officer Paul Frost Investment Analyst Andrew Hill Chief Financial Officer Stephen Mortimer Operations Officer Jo Chipperfield Legal Officer 35 argoinvestments.com.au 36