Half Yearly Report and Accounts as at 31 December 2016

ABN. 56 004 147 120.





APPENDIX 4D STATEMENT
FOR THE HALF-YEAR ENDED 31 DECEMBER 2016





CONTENTS


• Results for announcement to the market

• Media release

• Appendix 4D Accounts

• Independent Auditors’ Review Report



This half-year report is presented under listing rule 4.2A and should be read in conjunction with
the Group’s 2016 Annual Report.
1

RESULTS FOR ANNOUNCEMENT TO THE MARKET
The reporting period is the half-year ended 31 December 2016 with the previous corresponding
period being the half-year ended 31 December 2015. The results have been reviewed by the
Company’s auditors.
Results for announcement to the market
• Revenue from operating activities was $135.5 million, down $21.1 million or 13.5% from the
previous corresponding period. This excludes capital gains on investments.
• Profit after tax attributable to members was $118.0 million (down 18.9% on the previous
corresponding period’s $145.5 million).
• The interim dividend is 10 cents per share, fully franked, the same as last year. It will be
paid on 24 February 2017 to ordinary shareholders on the register on 8 February 2017 and
the shares are expected to commence trading on an ex-dividend basis on 7 February 2017.
There is no conduit foreign income component of the dividend.
• A Dividend Reinvestment Plan (DRP) and Dividend Substitution Share Plan (DSSP) are
available, the price for which will be set at a nil discount
to the Volume Weighted Average
Price of the Company’s shares traded on the ASX and Chi-X automated trading systems
over the five trading days from when the shares trade ex-dividend. The last date for the
receipt of an election notice for participation in the DRP & DSSP is 5.00 pm (Melbourne
time) on 9 February 2017.
• The final dividend for the 2016 financial year was 14 cents per share (fully franked), and it
was paid to shareholders on 30 August 2016.
• Net tangible assets per share before any provision for deferred tax on the unrealised gains
on the long-term investment portfolio as at 31 December 2016 were $ 5.83, up from $5.63 at
the end of the previous corresponding period (both before allowing for interim dividends).
• The interest payment on the 6.25% Convertible Notes issued in December 2011 will be
$3.0993 per $100 Note, payable on 28 February 2017 to note holders on the register on 20
February 2017. The notes are expected to commence trading on an ex-interest basis on 17
February 2017. The last date for the receipt of Exit Notices for the final conversion of Notes
into ordinary shares is 13 February 2017. Noteholders should be aware that any Notes not
converted will be redeemed for $100 per Note on 28 February 2017.


2

Improved markets but uncertainty lies ahead

Half Year Report to 31 December 2016


Key Themes –



AFIC is an investor in a diversified portfolio of Australian equities seeking to
deliver attractive income and capital growth over the medium to long term.

From the time of the US election there has been a marked change in
sentiment as investors anticipated improved economic growth and interest
rates started rising.

As a result, global investors have been moving out of fixed interest markets
and into equities.

In response to the improved outlook for global growth, resource and financial
stocks have benefited particularly from this shift to equities.

Equity markets in our view appear fully valued.

Uncertainty arising from the new administration in the US and ongoing
geopolitical issues is likely to increase volatility in markets.

AFIC will look for long term value out of this volatility.


Result Summary –


Half Year Profit of $118.3 million, down from $145.6 million in the
corresponding period last year.
- Investment income declined $21.1 million primarily as a result of the
significant cut in dividends across a broad range of large companies.
- Trading income was down $9.7 million, as the gains generated in the prior
corresponding period were not repeated this half year.


Earnings per share of 10.4 cents.

Interim Dividend maintained at 10 cents per share fully franked.

Management expense ratio of 0.13%.

Six month portfolio return was 8.6%; including franking it was 9.7%.

3

Po
rtfolio Performance

The
Australian market in recent months has risen strongly with investors looking to a more positive
outlook for global growth with rising commodity prices and higher interest rates.
As a result, there
was a recovery in resource
and banking sectors, both of which had been previously out of favour
for some time. This rebound pushed the resources index up 23.2% and banks increased 19.4%
over the six month period.
AFIC’s portfolio was up 8.6% for the 6 months to 31 December 2016 compared with S&P/ASX
200 Accumulation Index which increased 10.6%. AFIC traditionally only invests in the large
resource companies such as BHP Billiton and Rio Tinto. The portfolio was not exposed to the
significant rise in the more cyclical mid-sized resource companies which increased by
approximately 40.2% over the period.
The best performing companies in the AFIC portfolio outside of the large resource companies
and the banks were Woolworths, Wesfarmers and Computershare.
The longer term performance of the portfolio, which is more in line with the Company’s
investment timeframes, was 7.2% per annum for the 10 years to 31 December 2016 versus the
Index return of 6.1% per annum (these returns include the full benefit of franking). AFIC’s
performance numbers are after expenses and tax paid.
Po
rtfolio Adjustments

AFIC continued to diversify the portfolio with the addition of new holdings including Link
Administration Services, Carsales.com, Isentia Group and AMA Group. Other major additions
were in existing holdings of CSL and Cochlear, both of which we believe are soundly positioned
for the growing demand for their products arising from ageing demographics globally.
Maj
or sales were in Asciano as a result of the combined takeover offer from Brookfield and Qube
Holdings, the complete disposal of the remaining position in Santos and a slight reduction in the
holding in APA Group.
Pr
ofit and Dividend

Profit for the half year was $118.3 million compared to $145.6 million from the corresponding
period last year. The fall was due to the decline in investment income received, primarily as a
result of the significant cut in dividends across a broad range of large companies including
resources, energy and supermarkets as operating conditions remained challenged in 2016. The
contribution from the trading portfolio and options was also down $9.7 million, as the realised gains
generated in the prior corresponding period were not repeated this half year.
The
Board has maintained the fully franked interim dividend of 10 cents per share fully franked.
Goi
ng Forward

The strength in the US market following the presidential election has also helped drive an
increase in the broad Australian equity index to just over 5700 by the end of the calendar year. At
current market levels it is difficult to find outstanding value. We will continue to look for quality
companies that can provide good long term growth, including dividends, but will only do this at
appropriate prices where reasonable value is on offer. In this context we will be looking to any
possible market pullback, which may arise from further interest rate rises in the US over the
course of the year or heightened geopolitical tensions, as a way of adding to holdings at more
reasonable prices.

Please direct any enquiries to:
Ross Barker Geoff Driver
Managing Director General Manager
(03)9225 2101(03)9225 2102
23
J anuary 2017
4

MAJOR TRANSACTIONS IN THE INVESTMENT PORTFOLIO
Acquisitions (above $10 million)
Cost
($’000)
Link Administration Services 20,754
Carsales.com 18,537
CSL 14,917
Isentia Group 12,065
Vocus Communications (includes participation in 1 for 8.9 Rights Issue at $7.55 per share) 11,831
Cochlear 11,551
Disposals (above $10 million)
Proceeds
($’000)
Asciano
#
(takeover by Brookfield and Qube) 16,280
Santos
#
12,385
APA Group 12,107
#
complete disposal from the portfolio
New Companies Added to the Investment Portfolio
Link Administration Holdings
Carsales.com
AMA Group
Altium
Isentia Group
5

TOP 25 INVESTMENTS AS AT 31 DECEMBER 2016

Includes investments held in both the Investment and Trading Portfolios

Valued at closing prices at 30 December 2016
Total Value
% of the
$ millionportfolio
1Commonwealth Bank of Australia651.09.6%
2Westpac Banking Corporation506.87.5%
3BHP Billiton350.65.2%
4*National Australia Bank306.04.5%
5Wesfarmers283.34.2%
6Telstra Corporation267.54.0%
7*Australia and New Zealand Banking Group263.43.9%
8Rio Tinto218.73.2%
9Transurban Group189.22.8%
10Amcor183.92.7%
11* CSL178.52.6%
12* Brambles155.72.3%
13Woolworths122.11.8%
14Oil Search118.21.7%
15AGL Energy112.01.7%
16Woodside Petroleum102.31.5%
17AMP101.31.5%
18QBE Insurance Group97.81.4%
19Ramsay Health Care96.61.4%
20* Incitec Pivot80.21.2%
21Qube Holdings77.51.1%
22* Treasury Wine Estates73.41.1%
23Healthscope68.71.0%
24* James Hardie Industries68.11.0%
25* Macquarie Group60.50.9%
4,733.3
As % of Total Portfolio Value 70.1%
(excludes Cash)



* Indicates that options were outstanding against part of the holding.
6

PORTFOLIO PERFORMANCE TO 31 DECEMBER 2016



PERFORMANCE MEASURES TO 31 DECEMBER 2016 6 MONTHS 1 YEAR 5 YEARS
%PA
10 YEARS
%PA
AFIC PORTFOLIO RETURN - NET ASSET BACKING INCLUDING
DIVIDENDS REINVESTED
*
8.6% 8.2% 10.8% 5.3%
S&P/ASX 200 ACCUMULATION INDEX
10.6% 11.8% 11.9% 4.5%


NET ASSET BACKING GROSS RETURN INCLUDING DIVIDENDS
REINVESTED
*
9.7% 10.2% 12.8% 7.2%
S&P/ASX 200 GROSS ACCUMULATION INDEX*
11.4% 13.4% 13.6% 6.1%

*Incorporates the benefit of franking credits for those who can fully utilise them.


Note: AFIC net asset per share growth plus dividend series is calculated after management fees, income tax and capital gains
tax on realised sales of investments. It should also be noted that Index returns for the market do not include the impact of
management expenses and tax on their performance.


7

A
USTRALIAN
FOUNDATION
INVESTMENT
C
OMPANY
LIMITED
ABN 56 004 147 120








HALF-YEAR REPORT
31 DECEMBER 2016




8

COMPANY PARTICULARS
Australian Foundation Investment Company Limited (“AFIC”)
ABN 56 004 147 120
AFIC is a Listed Investment Company. As such it is an investor in equities and similar securities on the
stock market primarily in Australia.
Directors:
Terrence A. Campbell AO, Chairman
Ross E. Barker, Managing Director
Jacqueline C. Hey
Graeme R. Liebelt
John Paterson
David A. Peever
Catherine M. Walter AM
Peter J. Williams
Company Secretaries:
Matthew J. Rowe
Andrew J.B. Porter
Auditor:
PricewaterhouseCoopers, Chartered Accountants
Country of
incorporation:
Australia
Registered office:
Level 21
101 Collins Street
Melbourne, Victoria 3000
Contact Details:
Mail Address:
Telephone :
Facsimile:
Email:
Internet address:
Level 21, 101 Collins St., Melbourne, Victoria 3000
(03) 9650 9911
(03) 9650 9100
invest@afi.com.au
www.afi.com.au
For enquiries regarding net asset backing (as advised each month to the
Australian Securities Exchange):

Telephone: 1800 780 784 (toll free)
Share Registrar:
Computershare Investor Services Limited

Mail Address:


AFIC Shareholder
enquiry lines :

Facsimile:
Internet:
GPO Box 2975, Melbourne, Victoria 3001
Yarra Falls, 452 Johnston Street, Abbotsford, Victoria
3067
1300 662 270 (Aus)
0800 333 501 (NZ)
+613 9415 4373 (from overseas)
(03) 9473 2500
www.investorcentre.com/contact


For all enquiries relating to shareholdings, dividends and related matters, please
contact the share registrar.
Securities Exchange
Codes:
AFI Ordinary shares (ASX and NZX)
AFIG 6.25% 2017 Convertible Notes (ASX)- Mature 28 February 2017



9

DIRECTORS' REPORT

The Directors present their report in relation to the half-year to 31 December 2016 on the
consolidated entity (“the Group”) consisting of Australian Foundation Investment Company Limited
(“the Company” and “AFIC”) and its subsidiary, Australian Investment Company Services Limited
(“AICS”).

Directors
The following persons were Directors of the Company during the half-year and up to the date of
this report:

T.A. Campbell AO (appointed September 1984)
R.E. Barker (appointed September 2001)
J.C. Hey (appointed July 2013)
G.R. Liebelt (appointed June 2012)
J. Paterson (appointed June 2005)
D.A. Peever (appointed November 2013)
C.M. Walter AM (appointed August 2002)
P.J. Williams (appointed February 2010)

Review of the Group's operations and results
Overview
The Company maintains a diversified portfolio of equity and similar securities, predominantly in
entities listed on the Australian Securities Exchange. There has been no change in the nature of
the Company’s activities during the period. Its primary objectives are to pay dividends which, over
time, will grow at a faster rate than inflation, and to generate attractive total returns in terms of
growth in net asset backing plus dividends.

Profit Performance and Dividend
Profit for the half-year was $118.3 million, down 19% from the previous corresponding period.
The net profit per share for the six months to 31 December 2016 was 10.4 cents per share with an
interim dividend declared of 10 cents per share fully-franked, the same as last year.
The portfolio return for the 6 months (measured by change in net asset backing per share plus
dividends reinvested) was 8.6% compared to the return of the S&P/ASX 200 Accumulation Index
for the same period which was 10.6%. AFIC’s portfolio return is calculated after management
fees, income tax and capital gains tax on realised sales of investments and does not reflect the
value of franking credits or LIC credits attached to the dividends. Index returns for the market do
not include the impact of management expenses and tax on their performance.
During the half-year 7.2 million shares were issued under the DRP, DSSP and the conversion of
Convertible Notes, resulting in an additional $37.6 million of capital (after costs).
Auditors’ independence declaration
A copy of the auditors’ independence declaration as required under section 307C of the
Corporations Act 2001 is set out on page 12.

10

11

12

CONSOLIDATED INCOME STATEMENT FOR THE HALF-YEAR ENDED 31
DECEMBER 2016
Note Half-year
2016
Half-year
2015
$’000 $’000

Dividends and distributions 132,043 153,065
Revenue from deposits and bank bills 928 1,170
Other revenue 2,523 2,327

Total revenue
135,494

156,562

Net gains/(losses) on trading portfolio and non-equity
investments
(363)

9,384

Income from operating activities 3 135,131 165,946

Finance & related costs (6,597) (6,961)
Administration expenses (6,502) (7,327)
Profit before income tax expense

122,032 151,658
Income tax expense (3,745) (6,018)
Profit for the half-year 118,287 145,640


Profit is attributable to :
Equity holders (members) of Australian Foundation
Investment Company Ltd
118,023 145,534
Minority Interest 264 106
118,287 145,640

Cents

Cents
Basic earnings per share 9

10.40 13.23
Diluted earnings per share 9 10.45 13.17





This Income S tatement should be read in conjunction with the accompanying notes.

13

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE
HALF-YEAR ENDED 31 DECEMBER 2016

Half-Year to 31 December 2016
Half-Year to 31 December 2015


Revenue Capital Total
Revenue Capital Total

$’000 $’000 $’000
$’000 $’000 $’000


Net Profit for the half-year 118,287 - 118,287 145,686 (46) 145,640


Other Comprehensive Income


Items that will not be recycled through the Income Statement
Gains/(losses) for the period on equity
securities in the investment portfolio
- 418,915
418,915
-
(214,784)
(214,784)
Deferred tax on above - (130,335)
(130,335)
- 62,580
62,580
Total other comprehensive income
1
- 288,580 288,580

- (152,204) (152,204)



Total comprehensive income
2
118,287 288,580 406,867

145,686 (152,250) (6,564)



1
Net capital income not accounted for through the Income Statement


2
This is the company’s Net Return for the half-year, which includes the Net Profit plus the net realised and
unrealised gains or losses on the Company’s investment portfolio.




Half-Year to 31 December 2016
Half-Year to 31 December 2015

Revenue Capital Total
Revenue Capital Total

$’000 $’000 $’000
$’000 $’000 $’000
Total Comprehensive Income is
attributable to:




Equity holders of Australian Foundation
Investment Company Ltd
118,023 288,580
406,603
145,580 (152,250)
(6,670)
Minority Interest 264 -
264
106 -
106

118,287 288,580 406,867

145,686 (152,250) (6,564)



This Statement of Comprehensive Income should be read in conjunction with the accompanying

notes.


14

CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2016
31 Dec 30 June
2016 2016
Note $’000 $’000
Current assets
Cash 70,397 155,903
Receivables 9,159 45,358
Total current assets 79,556 201,261

Non-current assets
Investment portfolio 6,757,058 6,250,233
Deferred tax assets 1,770 1,034
Total non-current assets 6,758,828 6,251,267

Total assets 6,838,384 6,452,528

Current liabilities
Payables 4,863 20,932
Tax payable 7,817 14,393
Convertible notes 5 185,344 190,057
Trading portfolio 4 2,735 226
Provisions 3,110 3,636
Total current liabilities 203,869 229,244

Non-current liabilities
Provisions 979 1,796
Deferred tax liabilities - investment portfolio 6 936,415 812,947
Total non-current liabilities 937,394 814,743

Total liabilities 1,141,263 1,043,987

Net Assets 5,697,121 5,408,541

Shareholders' equity
Share Capital 7 2,559,006 2,521,441
Revaluation Reserve 2,056,416 1,767,628
Realised Capital Gains Reserve 440,687 457,593
General Reserve 23,637 23,637
Retained Profits 615,963 637,094
Parent Entity Interest 5,695,709 5,407,393
Minority Interest 1,412 1,148
Total equity 5,697,121 5,408,541



This Balance Sheet should be read in conjunction with the accompanying notes.
15

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE HALF-YEAR ENDED 31 DECEMBER 2016

Attributable to members of Australian Foundation Investment Company
Ltd

Half-Year to 31 December 2016


Note


Share
Capital
$’000


Revaluation
Reserve
$’000

Realised
Capital
Gains
$’000


General
Reserve
$’000


Retained
Profits
$’000

Total
Parent
Entity
$’000


Minority
Interest
$’000



Total
$’000
Total equity at the beginning of the half-
year
2,521,441 1,767,628 457,593 23,637 637,094 5,407,393 1,148 5,408,541
Dividends paid
8
- - (16,698) - (139,154)
(155,852)
-
(155,852)
Shares issued - Dividend Reinvestment Plan
7
32,493 - - - -
32,493
-
32,493
- Convertible Note Conversion
7
5,133
- - - -
5,133
-
5,133
Other Share Capital Adjustments
7
(61) - - - -
(61)
-
(61)
Total transactions with shareholders 37,565 - (16,698) - (139,154) (118,287) - (118,287)

Profit for the half-year

- - - - 118,023
118,023
264
118,287






Other Comprehensive Income for the half-year




Net gains for the period on equity securities in
the investment portfolio

- 288,580 - - -
288,580
-
288,580
Other Comprehensive Income for the half-
year
- 288,580 - - - 288,580 - 288,580
Transfer to Realised Capital Gains Reserve
of net cumulative losses on investments sold

- 208 (208) - -
-
-
-






Total equity at the end of the half-year 2,559,006 2,056,416 440,687 23,637 615,963 5,695,709 1,412 5,697,121

This Statement of Changes in Equity should be read in conjunction with the accompanying notes.



16

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE HALF-YEAR ENDED 31 DEC. 2016 (CONT)

Attributable to members of Australian Foundation Investment Company Ltd
Half-Year to 31 December 2015


Note


Share
Capital
$’000


Revaluation
Reserve
$’000

Realised
Capital
Gains
$’000


General
Reserve
$’000


Retained
Profits
$’000

Total
Parent
Entity
$’000


Minority
Interest
$’000



Total
$’000
Total equity at the beginning of the half-
year
2,301,232 2,152,455 391,773 23,637 576,382 5,445,479 965 5,446,444
Dividends paid

- - (53,704) - (96,668)
(150,372)
-
(150,372)
Shares issued - Dividend Reinvestment Plan

31,670 - - - -
31,670
-
31,670
- Convertible Note Conversion

9,551 - - - -
9,551
-
9,551
- Share Purchase Plan

153,340 - - - -
153,340
-
153,340
Other Share Capital Adjustments

(444) - - - -
(444)
-
(444)
Total transactions with shareholders 194,117 - (53,704) - (96,668) 43,745 - 43,745



Profit for the half-year

- (46) - - 145,580
145,534
106
145,640






Other Comprehensive Income for the half-year






Net losses for the period on equity securities
in the investment portfolio

- (152,204) - - -
(152,204)
-
(152,204)
Other Comprehensive Income for the half-
year
- (152,204) - - - (152,204) - (152,204)
Transfer to Realised Capital Gains Reserve
of net cumulative gains on investments sold

- (67,190) 67,190 - -
-
-
-






Total equity at the end of the half-year 2,495,349 1,933,015 405,259 23,637 625,294 5,482,554 1,071 5,483,625
This Statement of Changes in Equity should be read in conjunction with the accompanying notes


17

CONSOLIDATED CASH FLOW STATEMENT FOR THE HALF-YEAR
ENDED 31 DECEMBER 2016
Half-year Half-year
2016 2015
$’000 $’000
INFLOWS/ INFLOWS/
(OUTFLOWS) (OUTFLOWS)
Cash flows from operating activities
Sales from trading portfolio 20,119 103,152
Purchases for trading portfolio (13,810) (65,871)
Interest received 924 1,481
Dividends and distributions received 163,702 158,047
170,935 196,809

Other receipts 2,521 2,330
Administration expenses (7,982) (8,153)
Finance costs paid (6,349) (6,769)
Taxes paid (9,797) (11,192)
Net cash inflow/(outflow) from operating activities 149,328 173,025

Cash flows from investing activities
Sales from investment portfolio 103,555 251,953
Purchases for investment portfolio (207,522) (445,787)
Taxes paid on capital gains (7,635) (20,821)
Net cash inflow/(outflow) from investing activities (111,602) (214,655)

Cash flows from financing activities
Shares issued under Share Purchase Plan - 153,281
Share issue costs (61) (391)
Dividends paid (123,171) (118,443)
Net cash inflow/(outflow) from financing activities (123,232) 34,447

Net increase/(decrease) in cash held (85,506) (7,183)
Cash at the beginning of the half-year 155,903 163,840
Cash at the end of the half-year 70,397 156,657











This Cash Flow Statement should be read in conjunction with the accompanying notes.

18

NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED
31 DECEMBER 2016
1. Basis of preparation of half-year financial report
This general purpose half-year financial report has been prepared in accordance with Accounting
Standard AASB 134 Interim Financial Reporting and the Corporations Act 2001.
This interim financial report does not include all the notes of the type normally included in an
annual financial report. This report should be read in conjunction with the 2016 Annual Report
and public announcements made by the Group during the half-year, in accordance with the
continuous disclosure requirements of the Corporations Act 2001.
The accounting policies adopted are consistent with those of the previous financial year and
corresponding interim reporting period.
In the interests of transparency in its reporting, the Group uses the phrase “market value” in place
of the AASB terminology “fair value for actively traded securities.”

2. Financial reporting by segments
The Group consists of a Listed Investment Company and a subsidiary which provides
administration services to it and to other Listed Investment Companies in Australia. It has no
reportable business or geographic segments.
(a) Segment information provided to the Board
The internal reporting provided to the Board for the Group’s assets, liabilities and performance is
prepared on a consistent basis with the measurement and recognition principles of Australian
Accounting Standards, except that net assets are reviewed both before and after the effects of
capital gains tax on investments (as reported in the Group’s Net Tangible Asset announcements
to the ASX).
The relevant amounts as at 31 December 2016 and 31 December 2015 were as follows:
2016
$


2015
$
Net tangible asset backing per share
Before Tax 5.83 5.63
After Tax 5.01 4.87

(b) Other segment information
Segment Revenue
Revenues from external parties are derived from the receipt of dividend, distribution and interest
income, and income arising on the trading portfolio.
The Company is domiciled in Australia and the Group’s dividend and distribution income is
predominantly from entities which maintain a listing in Australia. The Group has a diversified
portfolio of investments, with only the Group’s investment in Commonwealth Bank : 13.0% and
Westpac Bank : 10.8% comprising more than 10% of the Group’s income (including trading
portfolio) for the half-year ending 31 December 2016 (2015 : Commonwealth Bank : 12.3%,
Westpac Bank 11.9%).
19

3. Income from operating activities
Half-year
2016
$'000

Half-year
2015
$'000
Income from operating activities is comprised of the following:

Dividends & distributions
• securities held in investment portfolio
131,934 152,842
• securities held in trading portfolio
109 99
132,043 152,941
Interest income
• securities held in investment portfolio
- 124
• deposits and income from bank bills
928 1,170
928 1,294
Net gains/(losses) and write downs
• net gains from trading portfolio sales
655 9,286
• unrealised gains/(losses) in trading portfolio
(1,018) 163
• gains/(losses) on non-equity investments
- (65)
(363) 9,384

Administration fees received from other Listed Investment
Companies
2,256 2,185
Expenses recovered from other Listed Investment
Companies
133 7
Other expenses recovered 51 52
Other income 83 83
135,131 165,946



4. Current liabilities – trading portfolio

The Company enters into option contracts in the trading portfolio for the purpose of enhancing
returns, offsetting risk or providing opportunities to acquire or sell securities at advantageous
prices.
As at balance date there were call options outstanding which, if they were all exercised, would
require the Company to deliver securities to the value of $102.4 million (30 June 2016: $78.0
million).
As at balance date the Company had outstanding put options which at the option of the purchaser
may have required the Company to buy $24.5 million worth of securities prior to the respective
expiry dates if they were all exercised (30 June 2016 :$1.2 million ).





20

5. Current liabilities – convertible notes
31 December
2016
$'000
30 June
2016
$'000
Current unsecured – convertible notes at amortised cost 185,344 190,057
There were 1,853,436 convertible notes outstanding at 31 December 2016 each with a face value
of $100 which were issued on 19 December 2011 (30 June 2016: 1,904,768). These notes carry
an interest entitlement of 6.25 per cent per annum. They may be converted at the option of the
holder into ordinary shares based on a conversion price of $5.0864 per share on 28 February or
31 August each year until 28 February 2017. Notes not converted will be redeemed at their face
value on 28 February 2017. At 31 December 2016, the face value of the convertible notes was
$185.3 million (30 June 2016 : $190.5 million). Terms of the notes are regulated under a trust
deed between the Company and Australian Executor Trustees Ltd. As per the 2016 Annual
Report, at issuance the residual value of the equity component of the convertible notes was
calculated as nil. The Group has sufficient assets and access to existing debt facilities to meet
any repayment obligations under the terms of the Trust Deed.

6. Deferred tax liabilities – investment portfolio
In accordance with AASB 112 Income Taxes, deferred tax liabilities have been recognised for
Capital Gains Tax on the unrealised gain in the investment portfolio at current tax rates (30%)
totalling $936.4 million (30 June 2016 : $812.9 million). As the Directors do not intend to dispose
of the portfolio, this tax liability may not be crystallised at this amount.
7. Shareholders’ equity – share capital
Movements in Share Capital of the Company during the half-year were as follows:
Date Details Notes Number
of shares
’000
Issue
price
$
Paid-up
Capital
$’000
01/07/2016 Opening Balance
1,130,305 2,521,441
30/08/2016 Dividend Reinvestment Plan i 5,823 5.58 32,493
30/08/2016 Dividend Substitution Share Plan ii 428 n/a -
31/08/2016 Convertible Note conversion iii 1,009 5.09 5,133
Various Unvested LTIP Share cancellation (29) n/a (122)
Various Other Share Capital adjustments - 61
31/12/2016 Balance 1,137,536 2,559,006

i The Company has a Dividend Reinvestment Plan under which some shareholders elected to
have all or part of their dividend payment reinvested in new ordinary shares. Pricing of the
new DRP shares was based on the average selling price of shares traded on the Australian
Securities Exchange & Chi-X automated trading systems in the five days from the day the
shares begin trading on an ex-dividend basis.
ii The Company has a Dividend Substitution Share Plan under which some shareholders
elected to forego all or part of their dividend payment and receive shares instead. Pricing of
the new DSSP shares was done on the same basis as the DRP.
iii During the period, 51,332 6.25% February 2017 convertible notes were converted into
ordinary shares.
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iv The Company introduced an on-market Buy-Back Programme in December 2000. This plan
remains active. No shares were bought back during the period.

8. Dividends
Half-year
2016
$’000
Half-year
2015
$’000

Dividends (fully franked) paid during the period 155,852 150,372
(excluding DSSP shares) (14 cents per
share)
(14 cents per
share)
Dividends not recognised at period end
Since the end of the half-year the Directors have declared an
interim dividend of 10 cents per share fully franked. The
aggregate amount of the proposed interim dividend expected to
be paid on 24 February 2017, but not recognised as a liability at
the end of the half-y ear is 113,754



9. Earnings per Share
Half-year
2016

Half-year
2015

Number Number
Weighted average number of ordinary shares used as the
denominator
1,135,136,382 1,100,344,692

$’000 $’000
Profit after tax for the half-year attributable to members of the
Company 118,023 145,534

Cents Cents
Basic earnings per share 10.40 13.23

Diluted*
Number Number
Weighted average number of ordinary shares attributable to
members of the Company
1,135,136,382 1,100,344,692
Weighted maximum number of potential shares as a result of
possible conversion
36,779,110 39,813,839
1,171,915,492 1,140,158,531

$’000 $’000
Profit after tax for the half-year attributable to members of the
Company
118,023 145,534
Interest & fees on convertible notes (after tax) 4,396 4,568
Adjusted profit after tax attributable to members of the Company 122,419 150,102

Cents Cents
Diluted earnings per share 10.45 13.17

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*The calculation of diluted earnings per share for the half-year ended 31 December 2016 adjusts
the profit or the net operating result attributable to ordinary equity holders and the weighted
average number of shares on issue for the effect of the convertible notes on issue at 31 December
2016.
10. Events subsequent to balance date
Since 31 December 2016 to the date of this report there has been no event specific to the
Company of which the Directors are aware which has had a material effect on the Group or its
financial position.
11. Contingencies
At balance date Directors are not aware of any material contingent liabilities or contingent assets
other than those already disclosed elsewhere in the financial report.
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