The purpose of AMCIL is to deliver to shareholders returns from the Australia and New Zealand equity markets that exceed the market over the medium to long term through capital growth and the generation of fully franked dividends.
Our approach is to create a portfolio of quality companies which are likely to sustainably grow their earnings and dividends over the medium to long term. The portfolio is diversified and covers large and small companies. As a result, small companies by market size can have an equally important impact on portfolio returns as larger companies in the Australian and New Zealand markets.
We prefer a company that has a leadership position or is developing one within the industry in which it operates. We look for companies with a sustainable competitive advantage or a unique set of assets and we want those businesses to reinvest, to defend and enhance their position and provide an attractive return on invested capital.
We like businesses that have a conservative balance sheet and avoid those with high debt levels. We want companies that have passionate management teams who are good stewards of capital and have a deep understanding of the industry and the business. These are often what we call owner-drivers.
Furthermore, we want to invest in companies that have an opportunity to grow and an ability to take market share. We also prefer companies that have a consistent earnings profile. We want to buy these companies when we see value in the market, so sometimes we must be patient.
In considering the quality of a company, the sustainability of the business model is one of our key inputs. As a long-term investor, we want to invest in companies that have strong governance and risk management processes. This includes consideration of environmental and social risks.
We regularly review companies to ensure ongoing alignment with our investment frameworks. Engagement with companies is a very important part of our process. Voting on company resolutions is a key function that we have as a shareholder to ensure better long-term returns and management of investment risk.
Investing in AMCIL offers some unique benefits. First, there is the consistency of our long-term returns. There is a strong alignment of interests with shareholders as the Board and Management have larger shareholdings in AMCIL. There are no external fund management fees, which means relative costs to investors is low. Finally, the tax effectiveness of an investment in AMCIL that comes from a long-term, low-turnover investment approach is also an important consideration.