AFIC continues to provide its shareholders with steady and attractive dividend income as it maintains its focus on investing in quality companies that produce good returns over the long term. This is reflected in our full-year financial results for 2022/23.

AFIC's 2022/23 financial year net profit was $310.2 million, down 14.0% from the prior year which included $74.9 million of dividend arising from the BHP Petroleum/Woodside merger. Excluding this one-off item from last year, our full-year net profit was up 8.6% from $285.7 million in the prior corresponding period. This increase was driven by higher dividends received from investee companies and adjustments made to our portfolio during the year.

Earnings per share for 2022/23 were 25.1 cents per share and the final dividend was maintained at 14 cents per share, fully franked, bringing total fully franked dividends for the year to 25 cents per share, following the 1 cent per share increase in the interim dividend. Seven cents per share of the final dividend comes from capital gains, on which AFIC has paid or will pay tax. The pre-tax attributable gain is equivalent to 10 cents per share, enabling some shareholders to claim a tax deduction.

In line with our objective to keep costs low for our shareholders, our Management Expense Ratio was 0.14%, compared to 0.16% in 2021/22.

We've been recycling capital within the portfolio

We focused our portfolio activity during the year mainly on recycling capital into existing holdings. We trimmed some positions where companies were trading at extreme valuations and sold positions where we believed companies had challenging growth prospects because of significant structural industry challenges and competition.

Recycling capital from companies trading at extreme valuations to capture an appropriate buying opportunity remains fundamental to our aim of providing our shareholders with attractive returns over the long term.

We trimmed our holdings in a number of companies including IRESS, Carsales.com, Commonwealth Bank, Westpac, ANZ, Mainfreight, and Transurban and exited our positions in Temple & Webster, Orica, InvoCare, Reliance Worldwide, and Ryman Healthcare.

We increased existing holdings in BHP, National Australia Bank, Domino's Pizza, IDP Education, Santos, CSL, Mirvac, Computershare, and Goodman Group and we initiated a position in kitchen appliance supplier Breville Group.

Our portfolio return for the year was 13.9%, including franking, in comparison to the S&P/ASX 200 Index return of 16.6%, including franking. The materials sector was up 22.6% over the financial year, significantly outperforming both the broader Industrials sector and the S&P/ASX 200 Index. Consequently, our long-term underweight position in materials, particularly in lithium and gold, detracted from relative performance. Nonetheless, we're comfortable with our portfolio's long-term positioning in this more cyclical part of the market.

It's important to remember that AFIC's performance returns are after costs. Sometimes when we realise capital gains tax on the sale of shares, not all the of the franking generated from these realised capital gains is paid out as dividends, so they are not included in the performance figures.

In an unpredictable environment, we stay focused on fundamentals

The economic environment is unpredictable over the medium term. Economic growth and the employment rate remain sound despite inflationary pressures, higher interest rates, and slowing economic growth in China. In this context, equity markets have been surprisingly strong despite expectations of a significant slowing in many global economies, including Australia.

In this environment, we continue to focus on the fundamentals of each business we invest in.

We remain invested in quality companies that we believe will deliver an appropriate mix of income and growth over the long term.

We can afford to be patient for opportunities and use any short-term volatility to our advantage. We believe that will deliver the best outcome for our shareholders over the long term.

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