AMCIL Objectives

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AMCIL Objectives

• Provide medium to long term investment growth
  through core holdings in media,
  telecommunications and related sectors.
• To enhance returns through use of derivatives and
  short term opportunities.

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SLIDE 1

• AMCIL, then known as Australian Media
  Communications Investments Limited commenced
  operations in late October 1996 with the twofold
  aim of
• Providing medium to long term investment gains
  through holding core investments in leading
  media, telecommunications and related sectors
  and
• To enhance returns from investments through
  shorter term trading opportunities and the use of
  options, futures and other derivative products.
• The investment horizon is medium to long term.

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Investment Environment
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SLIDE 2

• If we cast back to that time using September 1996
  as a convenient reference point, the Media Price
  Index at the end of September 1996 was 14,388 and
  at 30 September 2001 the media index was 23,940,
  a rise of 66 over five years or compound growth
  rate of 10.7 p.a. Although, if we go back just
  one year to 30 September 2000, the media index
  was 46,468. So in the space of one year it has
  fallen 52.
• Similarly, the telecommunications index in
  September 1996 was 830. By September 2001 it was
  1,174, a rise of 41 over the five years or a
  compound growth rate of 7 p.a. On the other
  hand, it reached its peak in the March 2000
  quarter at 2,275. It has also fallen 52 from
  its peak.
• These numbers are intended to paint a picture of
  an environment where there has been reasonable
  growth over a five year period, but the
  intermediate volatility has been enormous. Such
  swings in sentiment provide a treacherous
  environment for investment. It has made the
  management of AMCILs portfolio very challenging.

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AMCIL Financial History
00/01 99/00 98/99 97/98 96/97 (8mths) PROF
IT m 8.8 7.1 5.0 2.8 1.9 INVESTMENTS m 187 251
159 88 36 SHAREHOLDERS FUNDS m 210 275 200 126 7
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SLIDE 3

• Against this background how has AMCIL performed?
• This next table shows key financial data for the
  period of the companys life.
• Profit grew to 8.8 million in this latest year
  up from 7.1 million in the previous year and has
  been showing good growth over the companys life.
  
• However profits by themselves are not the whole
  picture. One can also see that our investment
  portfolio and our shareholders funds have fallen
  sharply in the year to 30 June 2001. The
  investment portfolio was down from 251 million
  to 187 million and shareholders funds from 275
  million to 210 million by 30 June 2001. This was
  the result of falls in both the Media and
  Telecommunications sectors of the Share Market
  which flowed through to the companies in our
  portfolio.
• This was disappointing given the good growth in
  the company in prior years.

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AMCIL Returns
00/01 99/00 98/99 97/98 96/97 (8mths) DIVI
DEND/SHARE Cents 14 8 7.5 7 4 NET
ASSETS/SHARE Cents 210 271 250 225 203 TOTAL
RETURN pa -17.3 14.0 24.0 20.6 4.9 COMPOUND
ANNUAL 5 YEAR RETURN 8.2 pa
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SLIDE 4

• Another way of measuring the performance of the
  management of the company is by looking at the
  total return to shareholders as measured by
  movement in Net Assets per share plus dividends
  paid. This is a measure of the internal
  performance of the companys management of its
  assets including dividends paid out to
  shareholders from the profits earned.
• This next table shows the movement in net asset
  backing per share plus dividends paid. For the
  latest year the total return was negative 17.3.
  After total positive returns of 14, 24 and
  20.6 in the three prior full years of operation.
• Even after this years negative return the
  compound growth rate over the nearly 5 years of
  operation was just over 8 per annum.

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Overview 2000-2001

• AMCIL Total return (Net Assets divs) down 17
• SP/ASX Media Accum Index down 22
• SP/ASX Media Accum Index ex NCP down 24
• SP/ASX Telco Accum Index down 31
• SP/ASX Telco Accum Index ex TLS down 49

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SLIDE 5

• We need to bear in mind however that we are
  investing largely in two specific sectors of the
  market, media and telecommunications.
• Our performance in managing the portfolio will be
  affected by the performance of the companies in
  these two sectors.
• How did we perform against the indices which
  gauge the performance of these sectors?
• On this next table we see that the media
  accumulation index fell 22 over the year. (I
  should add that an accumulation index includes
  both share price moves and dividends paid to
  calculate its levels to make the comparison with
  our performance proper and fair).
• However by far the largest component of that
  index is News Corporation. If we look at the
  index of stocks other than News Corporation the
  index was down 24.
• Similarly if we look at the telecommunications
  sector this accumulation index was down 31.
  Again if we exclude its largest company, Telstra,
  it was down over 49 in just one year.
• The reason for highlighting the two indices
  without News and without Telstra is to show just
  how large the falls were in the market beyond the
  two dominating investments in the sectors. We
  have taken a conscious decision not to be index
  weighted in News and Telstra because if we had
  they would have constituted over 80 of the
  portfolio and investors would not gain effective
  exposure to other companies operating in these
  sectors
• Against all these measures AMCIL had
  significantly outperformed, especially bearing
  mind that our performance is after the costs of
  running the company.

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Amcil NTA Accum VsMedia Accum and Media Accum ex
NCP (June 2000 to Sept 2001)
SP/ASX Media Accum Ex NCP
AMCIL NTA Accum
SP/ASX Media Accum
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SLIDE 6

• The next few slides shows this information in
  graphical form over the year and brings it up to
  the end of September.
• This graph compares AMCIL performance against the
  media accumulation index and against that index
  for stocks other than News Corporation.

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Amcil NTA Accum VsTelco Accum and Telco Accum ex
TLS (June 2000 to Sept 2001)
AMCIL NTA Accum
SP/ASX Telco Accum
SP/ASX Telco Accum Ex TLS
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SLIDE 7

• This graph shows the same information relative to
  the Telecommunications accumulation index and the
  index for stocks other than Telstra. We can see
  that for stocks other than Telstra the drop has
  been around 50 over one year. This is the extent
  to which the bubble for tech stocks has deflated.
  It truly has been a tech wreck.

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Amcil Share Price VsMedia Accum and Media Accum
ex NCP (June 2000 to Sept 2001)
SP/ASX Media Accum Ex NCP
SP/ASX Media Accum
AMCIL Share Price
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SLIDE 8

• So far I have been highlighting the performance
  in terms of returns from net asset backing per
  share.
• But how has this been reflected in our share
  price?
• Our history of share price performance does not
  go back to the commencement of the company as we
  were only listed on 10 February 2000.
• This next graph shows that for the period from
  June 2000 to the end of September how our share
  price plus dividends paid compared with the Media
  accumulation index and the index for media stocks
  other than News Corporation.
• In this case the share price performance has
  underperformed these two indices.

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Amcil Share Price VsTelco Accum and Telco Accum
ex TLS (June 2000 to Sept 2001)
AMCIL Share Price
SP/ASX Telco Accum
SP/ASX Telco Accum Ex TLS
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SLIDE 9

• This graph compares AMCIL share price performance
  with the Telecommunications accumulation index
  and the index for Telco stocks other than
  Telstra.
• We are disappointed by the share price
  performance as we do not believe it has reflected
  the underlying performance of the portfolio.
• We think there are a number of reasons for this.
  The major one being the negative sentiment
  towards the media and telecommunications sectors
  over most of the year. Another contributing
  factor up to May 2001 was that the Governments
  Capital Gains Tax changes affected sentiment
  negatively towards all Listed Investment
  Companies. Although recently this issue has now
  been redressed by the Government.

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Specific Actions

• Manage the portfolio defensively
• Retain high cash levels
• Maintain sound financial position
• Increase options activity
• Pay a special dividend to clear franking credits
• Introduce share buy back

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SLIDE 10

• I think you can see from these numbers that the
  past 18 months have been about as difficult as
  they could possible get in investment in these
  two sectors.
• What have we done in this environment to preserve
  the companys position and to look after our
  shareholders interests?
• The key actions have been to
• Manage the portfolio defensively and I propose to
  talk more about the various activities in
  managing the portfolio later
• Retain high cash levels
• Maintain the companys sound financial position
• Increase our activity in options
• Pay a special dividend to clear franking credits
• Introduce a share buy back

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Equity Changes
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SLIDE 11

• Before I talk about management of the portfolio I
  wanted to talk about the companys financial
  position and the other actions we have taken.
• The company remains in a very sound financial
  position with no debt and substantial cash
  reserves as at 30 September 2001. The company
  holds just on 30 million in cash and income
  securities at its disposal.
• Having said this however, the value of the
  company is very much dependant on the market
  value of our investments. If the markets fall in
  the sectors in which we are investing then this
  will result in the portfolio value falling and
  this will be reflected in shareholders funds. I
  thought that the following break down of the
  movement in shareholders funds over the year
  under review might be of interest to shareholders
• This table shows the components of this change
  in shareholders funds during the year.
• We added 8.8 million of profit during the year.
• As a result of falls in the market the
  revaluation reserve was written down by 62
  million.
• There was an increase in the realisation reserve
  as a result of sales of assets and also an
  adjustment to tax for the prior year together
  these added 5.6 million to equity.
• The company bought back 1.7 million shares at an
  average price of 1.88 costing 3.2 million of its
  share capital.
• We paid out to shareholders 14.1 million in
  dividends, including 6 million of special
  dividends to clear the franking balances at the
  34 tax rate. We took the step to pay out to
  shareholders as much of the franking credit
  balance as possible which resulted in the large
  special dividend of 6 cents per share paid in
  June. These franking credits were of more value
  in the hands of shareholders than remaining with
  the company.

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Profit
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SLIDE 12

• If we look at the components of profit in the
  2001 year as compared to the prior year we can
  see that there was a modest increase in dividends
  and interest, but there was a very major increase
  in revenue from sales of options from 2.1
  million up to 7.2 million last year. This
  resulted from our action in increasing the option
  writing activity undertaken and as the market was
  falling we were able to keep all the option
  premium we received. This provided significant
  additional income for distribution to
  shareholders.
• The other major component in the profit number
  relates to the writedown of investments of 3
  million. Previously this did not need to go
  through the profit loss account because we had
  built up reserves. But as a result of the writing
  down of all of the companys revaluation reserve
  to zero we were obliged to take this further 3
  million write-down of the portfolio through the
  profit loss account. This is required by the
  accounting standards.
• Given that our revaluation reserve is now used up
  and given the further significant market falls
  since 30 June, the accounting standards have
  continued to oblige us to write-down the
  portfolio through the profit loss for the
  current year.
• Unless there is a significant improvement in the
  market between now and the end of the half year
  this may mean that the company reports a loss for
  the period. Even though the accounting standards
  require this treatment, we are still receiving
  dividend income and option premiums that we would
  have available to distribute to shareholders when
  the market valuations recover or in future years.
  It is not yet clear to us how this will impact
  our ability to pay a dividend this year, but it
  may mean that we would be unable to pay an
  interim dividend in March. We will keep this
  matter under review.

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AMCIL Major disposals
Proceeds mil AAPT 10.9 (takeover) Mobile
Communications 3.6 (takeover) Cable Wireless
Optus 3.3 Telemedia Networks 2.5
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SLIDE 13

• Next I wanted to talk about the management of the
  portfolio.
• The first comment to make is that we disposed of
  more stocks than we bought. In total we sold
  stocks for proceeds of 26.7 million compared to
  purchases of 24.5 million.
• Our major disposals were AAPT and Mobile
  Communications through takeover and we sold in to
  the market some of our holdings in Cable
  Wireless Optus and Telemedia Networks.

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Other disposals

• Pirelli Cables
• PMP
• RG Capital Radio
• Reckon
• Spike Networks
• Techniche
• Tennyson Holdings
• Voxson

• Austar
• Chariot
• Davnet
• iiNet
• Macquarie Telecommunications
• NewTel
• OneTel

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SLIDE 14

• However as the position of other companies
  deteriorated during the year we also sold all or
  part of our holdings in the following companies
• Austar, Chariot Internet Ltd, Davnet, iiNET,
  Macquarie Telecommunications, New Tel Limited,
  One.Tel,Pirelli Cables, PMP Limited, RG Capital
  Radio, Reckon, Spike Networks, Techniche ,
  Tennyson Holdings and Voxson.
• The portfolio is monitored daily by our dealing
  team and the Investment Sub-Committee of the
  Board meets fortnightly to review the investment
  activities of the company, such as reviewing all
  option and investment transactions, considering
  major news items about stocks in the portfolio,
  dealing with proxies and takeovers, together with
  other portfolio management activities.
• We were active in trying to dispose of situations
  where the circumstances had changed adversely.
  Often such changes happened very rapidly in the
  market and we were not able to take action as we
  would have liked in every case.

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AMCIL Major acquisitions

• Cost mil
• News Corporation (net) 5.3
• Ten Network 1.9
• Telecom Corp of NZ 1.6
• Telstra 1.5
• Sky Network Television 1.5

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SLIDE 15

• Just looking at the major acquisitions during
  the year we invested a further 5.3 million (net)
  into News Corporation, 1.9 million into Ten
  Network, 1.6 million into Telecom Corporation of
  New Zealand, 1.5 million into Telstra and 1.5
  million into Sky Network Television.

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AMCIL Portfolio Composition30 September 2000
Cash 16 (liquid securities, cash deposits)
Telco 33
Related Sectors 3
Media 48
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SLIDE 16

• In terms of portfolio composition in percentage
  terms this has not changed appreciably over the
  year.
• If we look at the portfolio composition at the 30
  September last year we see Telco exposure at 33,
  Media at 48, related sectors 3, cash and
  liquids at 16.

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AMCIL Portfolio Composition30 September 2001
Cash 17 (liquid securities, cash deposits)
Telco 28
Related sectors 2
Media 53
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SLIDE 17

• Lets now move forward and look at the position
  as at 30 September 2001, the telco exposure had
  reduced to 28, media had increased to 53,
  related sectors had decreased to 2 and the cash
  had increased to 17 of the portfolio.
• So the significant decision we took was to
  maintain our very large cash component in the
  portfolio. We did not believe it was time to go
  out and become fully invested in these two
  segments of the market.
• Also, as a result of the sales and purchases and
  market falls our portfolio is now more
  concentrated in the major companies in the two
  sectors. This can be shown by the proportion of
  the portfolio in our top 20 holdings, which moved
  from 88 at 30 June 2000 to 94 at 30 June 2001.
  
• Many of the positions that we hold in the
  remaining 6 of the investment portfolio are with
  companies that are at very low prices. Given the
  poor sentiment towards these smaller companies, a
  number of them are trading at prices below the
  asset backing per share. Although an argument
  could be made for selling these holdings, we
  believe it is still worthwhile following some of
  the smaller companies as they seek to develop
  their businesses, particularly if their
  valuations are below their net asset value.
  Examples of smaller companies in which we have
  retained holdings include Powertel, Uecomm,
  Melbourne IT and Neighbourhood Cable. The
  current stringent environment may not allow them
  all to succeed in building and growing their
  businesses. However, we believe it is
  appropriate for at least part of the portfolio to
  remain in some of these more speculative areas in
  those two sectors.

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Top 20 Listed Investments30 September 2001
mil mil 1 Telstra Corporation 36.3 6 Teleco
m NZ 7.7 2 News Corporation 25.6 7 Sky Network
TV 6.8 3 Southern Cross
Broadcasting 11.0 8 Ten Network 6.5 4 W A
Newspapers 8.8 9 John Fairfax 6.1 5 Publishing
Broadcasting Ltd 7.8 10 Seven Network 4.9
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SLIDE 18

• The annual report sets out the top 20 holdings of
  the company and how it has changed over the year.
  I dont need to go through that table but I
  thought you might be interested to see how the
  Top 20 portfolio looks at 30 September 2001.
• This table shows the top 10 shareholdings at 30
  September 2001.

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Top 20 Listed Investments30 September 2001
mil mil 11 APN News Media 4.8 16 Rural
Press Ltd 2.3 12 Independent 17 Village Newsp
apers 3.8 Roadshow 1.8 13 Singapore Telecom.
3.3 18 Austereo Group 1.6 14 United
Energy 2.8 19 Television Media Services
1.0 15 Prime Television 2.3 20 Text
Media 0.7 Total 145.9
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SLIDE 19

• This next slide shows the listed investments
  number 11 through to 20 at September 30, 2001.
• Together these twenty investments now account for
  a total of 145.9 million out of our portfolio
  (excluding cash and income securities) of 151.3
  million or 96.

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Movement 30 June 30 Sept 2001

• SP/ASX Media Accum Index down 27
• SP/ASX Telco Accum Index down 2

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SLIDE 20

• Now for some comments on the OUTLOOK.
• Prior to the tragic events of 11 September 2001
  the anticipation of weakening economic conditions
  had significantly dampened the outlook for media
  companies. Also the falling growth expectations
  for telecommunication companies had also
  significantly affected their share prices.
  Following the events in the United States there
  was a very significant further fall in News
  Corporation, being a major component of the media
  sector as the market absorbed the likely impact
  of a recession in the United States. This has
  severely dented the current share price of most
  media companies. From 30 June 2001 the media
  accumulation index is down 27 whereas the
  telecommunications accumulation index is down
  only 2.
• Given the uncertain state of political and
  economic affairs globally no one can reasonably
  predict what will happen. The markets are now
  pricing in a significant global recession which
  will inevitably affect Australia. The recent
  severe weakness in markets has prompted central
  banks to reduce interest rates in the hope that
  this will stimulate economic growth. The recent
  events have almost certainly pushed out the
  prospect of a significant improvement in
  economic conditions till probably the second half
  of 2002. Typically the markets anticipate such an
  improvement by 6 to 9 months.

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Media Stock Valuations
DCF Valuation Market Price News
Corporation 18.20 12.40 Publishing
Broadcasting 10.28 8.67 Seven
Network 6.50 6.47 Ten Network 2.09 1.67 Sky
Network Television NZ4.15 NZ3.15 source JB
Were prices as at 28 Sept 2001

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SLIDE 21

• Having said this, I have asked JB Were to provide
  valuations of major media stocks and to compare
  them with the current share prices. This slide
  shows the JBWere Discounted Cash Flow valuations
  for the major media stocks and compares them with
  the current market prices. We can see that in
  the case of News, PBL, Seven, Ten Network and Sky
  Network in New Zealand, the current share prices
  are below ( some significantly below) the current
  brokers estimates which have factored in
  substantial falls in future profit as a result of
  recent events. Either the market has overshot on
  the downside for media stocks now that sentiment
  turns has turned decisively bearish, or
  alternatively, the market may be indicating that
  the earnings of the companies may be affected
  even more than the brokers are currently
  predicting.

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Media Stock Valuations
DCF Valuation Market Price John Fairfax
Holdings 3.80 3.15 Southern Cross
Broadcasting 12.20 10.90 APN News
Media 3.95 3.60 WA Newspapers 5.40 4.95 Indepe
ndent Newspapers NZ3.56 NZ3.09 source JB
Were prices as at 28 Sept 2001

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SLIDE 22

• There is a similar picture for Fairfax, Southern
  Cross Broadcasting, APN News and Media, WA
  Newspapers and Independent Newspapers in New
  Zealand.

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Telecommunication Stock Valuations
DCF Valuation Market Price Telstra
Corporation 4.88 5.24 Telecom
NZ NZ7.20 NZ4.41 Singapore Telecomm. 1.55 2.05
source JB Were prices as at 28 Sept 2001

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SLIDE 23

• Paradoxically, the events in New York have
  provided a small encouragement to the
  telecommunications sector, particularly Telstra
  and Singtel, because of the perceived cash flow
  security that these companies may offer in an
  uncertain environment as the market rotates away
  from growth prospects which have evaporated and
  turns towards the safety of earnings certainty.
• It is interesting to note that in this slide the
  market price of Telstra and Singapore
  Telecommunications both exceed the current
  brokers DCF valuations.

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Brokers
ABN Amro BNP Equities Burdett Buckeridge
Young Credit Suisse First Boston Deutsche
Securities Findlay Co Stockbrokers Foster
Stockbroking Hartley Poynton Intersuisse
Limited JB Were (Equities Options) JP
Morgan Macquarie (Equities Options) Merrill
Lynch Equities Salomon Smith Barney Tricom
Securities UBS Warburg NZ Equities Wilson HTM

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SLIDE 24

• We intend to continue to be cautious over the
  short term and part with our cash sparingly.
• We do maintain client relationships with a large
  number of brokers so that we are obtaining good
  research input regarding the companies in which
  we invest. And it is of considerable assistance
  in staying in contact with the detailed
  developments in the companies in our portfolio.
• This slide shows the range of brokers that we
  have dealt with in the last 12 months.
• Although we foresee conditions being difficult in
  the next six months, we anticipate when the
  turnaround occurs it will be significant. We
  look forward to participating in that when it
  occurs.
• All resolutions were passed at the meeting on a
  show of hands.

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