Half-Yearly Review to Securityholders

Half-Year Review to
31 December 2016
EXPERIENCE
INCOME
GROWTH

CONTENTS
The Company’s primary
investment goals are:
To provide attractive total
returns over the medium
to long term.
To pay dividends which, over
time, grow faster than the rate
of inflation.
1 Half-Year in Summary
2 Review of Operations and Activities
8 Top 25 Investments
9 Income Statement
10 Balance Sheet
11 Summarised Statement
of Changes in Equity
12 Holdings of Securities
19 Major Transactions in
the Investment Portfolio
20 Company Particulars
21 Shareholder Meetings
The Company aims to provide
shareholders with attractive investment
returns through access to a growing
stream of fully franked dividends and
enhancement of capital invested.
Australian Foundation Investment Company Limited
ABN 56 004 147 120

HALF-YEAR IN SUMMARY
PROFIT FOR THE HALF-YEAR
$118.3m
Down 18.9% from 2015
FULLY FRANKED INTERIM DIVIDEND
10¢
Unchanged
TOTAL 6 MONTH PORTFOLIO RETURN
8.6%
S&P/ASX 200 Accumulation Index 10.6%
TOTAL 6 MONTH SHAREHOLDER RETURN
5.2%
Share price plus dividend
MANAGEMENT EXPENSE RATIO
0.13%
0.16% in 2015
TOTAL PORTFOLIO
$6.8b
$6.5 billion in 2015
Including
cash at
31.12.16
Annualised
1Australian Foundation Investment Company Limited Half-Year Review to 31 December 2016

Profit and Dividend
Profit for the half-year was $118.3 million
compared to $145.6 million for 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
last half were not repeated this half-year.
The Board has maintained the fully
franked interim dividend of 10 cents
per share fully franked.
Market Commentary
The Australian market in recent months
has risen strongly on the back of rising
commodity prices as investors embraced
a more positive outlook for global growth
spurred in part by the outcome of the
United States presidential election. Banking
stocks also performed strongly. Both of
these sectors had been previously out of
favour for some time. This rebound pushed
the resources index up 23.2 per cent and
banks increased 19.4 per cent over the
six month period (Figure 1).
The other trend that emerged through the
period was the relative underperformance
of the small and mid cap sector relative to
larger companies (Figure 2). In particular,
smaller industrial companies retraced some
of their more recent gains as investors
reassessed the valuations of a number
of these companies, many of which had
been trading at very high levels. In some
cases disappointing company updates,
which looked to dampen strong growth
expectations, further accelerated the
decline in share prices.
Infrastructure and utility sectors, many of
which are in the Mid Cap 50 sector, were
also down as longer term interest rates
started to rise in line with expectations of
a more buoyant United States economy.
Portfolio and Share
Price Returns
AFIC’s portfolio was up 8.6 per cent for the
six months to 31 December 2016 compared
with the S&P/ASX 200 Accumulation Index,
which increased 10.6 per cent. 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 per cent over the period.
REVIEW OF OPERATIONS AND ACTIVITIES
2

Figure 1: Banks and resources relative to the S&P/ASX 200
S&P/ASX 200 – MaterialsS&P/ASX 200 – BanksS&P/ASX 200
95
125
120
100
105
Index
110
115
Jan 17
Jul 16
Aug 16
Sep 16
Oct 16
Nov 16
Dec 16
Figure 2: Index performance by market capitalisation
S&P/ASX 200S&P/ASX Small OrdinariesS&P/ASX Mid Cap 50
Jan 17
Jul 16
Aug 16
Sep 16
Oct 16
Nov 16
Dec 16
95
115
100
105
Index
110
3Australian Foundation Investment Company Limited Half-Year Review to 31 December 2016

The best performing companies in the AFIC
portfolio outside of resource companies and
the banks were Woolworths, Wesfarmers
and Computershare.
The long term performance of the portfolio,
which is more in line with the Company’s
investment timeframes, was 5.3 per cent
per annum for the 10 years to 31 December
2016 versus the Index return of 4.5 per cent
per annum (Figure 3). When adding the
full benefit of franking credits, the return
for AFIC over this period is 7.2 per cent
per annum and 6.1 per cent per annum
for the Index.
Over the six month and one year periods,
AFIC’s share price has fallen from a
premium to net asset backing to a slight
discount by 31 December 2016 (Figure 4).
This has meant the share price return
was below that of the portfolio over
these periods. This can sometimes
occur depending on market conditions.
Importantly the share price return is
more in line with the portfolio return over
the five and 10 year periods (Figure 3).
Portfolio Adjustments
AFIC continued to diversify the portfolio
with the addition of new holdings including
Link Administration Holdings, 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.
AFIC also participated in the capital
raising by Vocus Communications.
Details of major new additions
to the investment portfolio:
• Link Administration Holdings is
a global provider of share registry,
shareholder management, analytics
and fund administration services. In
December 2014 Link Group acquired
Superpartners, which is a superannuation
administration provider for Australian
industry super funds.
• Carsales.com is the largest online
automotive classifieds business in
Australia. It also has interests in leading
online automotive classified businesses
in Brazil, South Korea, Malaysia,
Indonesia, Thailand and Mexico.
• Isentia Group, formerly known as
Media Monitors, is a media intelligence
group headquartered in Sydney,
with locations in New Zealand,
South East Asia and Greater China.
It tracks and monitors news published
from newspapers, magazines, journals,
television, radio, internet and social
networking sites for corporate clients.
This monitoring includes content analysis
and evaluation of media campaigns.
• AMA Group provides automotive
aftercare services. It engages in
the management of the company’s
investments in the wholesale vehicle
aftercare and accessories market,
including smash repairs and repair
panel shops, vehicle protection
equipment, brakes and transmission
service workshops and the wholesale
distribution of automotive and
electrical accessories.
REVIEW OF OPERATIONS AND ACTIVITIES
continued
4

Figure 3: Portfolio and share price performance to 31 December 2016*
10 years
Net asset per share growth plus dividendsS&P/ASX 200 Accumulation Index
Share price growth plus dividends
6 months1 year5 years
10.6
%
8.6
%
5.2
%
11.8
%
8.2
%
1.0
%
11.8
%
10.8
%
11.9
%
4.5
%
5.3
%
5.4
%
Note: AFIC’s 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 be noted that Index returns
for the market do not include management expenses or tax.
This chart does not include the benefit of franking credits attached to dividends paid by AFIC and any
LIC capital gain distributions made.
* Annualised returns other than six month figure.
Figure 4: Share price premium/discount to net asset backing
15%
-10%
-5%
0%
5%
10%
Dec 06Dec 08Dec 10Dec 12Dec 14Dec 16
5Australian Foundation Investment Company Limited Half-Year Review to 31 December 2016

6

Major 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.
Figure 5 highlights the profile of the portfolio
by the various sectors of the market at the
end of the calendar year. In comparison
to the corresponding period last year, the
major changes have been in banks (down
from 27.8 per cent last year), materials
(up from 14.0 per cent last year), healthcare
(up from 8.4 per cent last year) and a
reduction in cash (down from 2.4 per cent
last year). The investment portfolio
comprises 104 companies.
Going Forward
The strength in the United States market
following the presidential election has
also helped drive an increase in the broad
Australian equity index to just over 5,700
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 United States over the course
of the year or heightened geopolitical
tensions, as a way of adding to holdings
at more reasonable prices.
REVIEW OF OPERATIONS AND ACTIVITIES
continued
1.0%
Information
Technology
Consumer
Discretionary
2.3%
Cash
2.5%
Utilities
4.5%
Energy
2.5%
Property
Trusts
4.8%
Telecom
Services
8.5%
Consumer
Staples
10.4%
Healthcare
9.1%
Other
Financials
10.7%
Industrials
16.7%
Materials
25.5%
Banks
Figure 5: Investment by sector as at 31 December 2016
1.8%
7Australian Foundation Investment Company Limited Half-Year Review to 31 December 2016

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
$ Million
% of
Portfolio
1Commonwealth Bank of Australia651.09.6
2Westpac Banking Corporation506.87.5
3BHP Billiton350.65.2
4National Australia Bank*306.04.5
5Wesfarmers283.34.2
6Telstra Corporation267.54.0
7Australia and New Zealand Banking Group*263.43.9
8Rio Tinto218.73.2
9Transurban Group189.22.8
10Amcor183.92.7
11CSL*178.52.6
12Brambles*155.72.3
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
20Incitec Pivot*80.21.2
21Qube Holdings77.51.1
22Treasury Wine Estates*73.41.1
23Healthscope68.71.0
24James Hardie Industries*68.11.0
25Macquarie Group*60.50.9
Total4,733.3
As a percentage of total portfolio value (excludes cash)70.1%
* Indicates that options were outstanding against part of the holding.
8

Half-Year
2016
$’000
Half-Year
2015
$’000
Dividends and distributions132,043153,065
Revenue from deposits and bank bills9281,170
Other revenue8383
Net gains/(losses) on trading portfolio and non-equity investments(363)9,384
Total income132,691163,702
Finance costs(6,597)(6,961)
Administration expenses(4,062)(5,083)
Profit before income tax 122,032151,658
Income tax (3,745)(6,018)
Profit for the half-year 118,287145,640
CentsCents
Earnings per share10.4013.23
INCOME STATEMENT
For the half-year ended 31 December 2016
9Australian Foundation Investment Company Limited Half-Year Review to 31 December 2016

31 Dec
2016
$’000
30 Jun
2016
$’000
Current assets
Cash 70,397155,903
Receivables9,15945,358
Total current assets79,556201,261
Non-current assets
Investment portfolio 6,757,0586,250,233
Deferred tax assets1,7701,034
Total non-current assets6,758,8286,251,267
Total assets6,838,3846,452,528
Current liabilities
Payables4,86320,932
Tax payable7,81714,393
Convertible notes185,344190,057
Trading portfolio2,735226
Provisions3,1103,636
Total current liabilities203,869229,244
Non-current liabilities
Provisions9791,796
Deferred tax liabilities – investment portfolio936,415812,947
Total non-current liabilities937,394814,743
Total liabilities1,141,2631,043,987
Net assets5,697,1215,408,541
Shareholders’ equity
Share capital2,559,0562,521,491
Revaluation reserve2,056,4161,767,628
Realised capital gains reserve440,687457,593
General reserve23,63723,637
Retained profits617,325638,192
Total shareholders’ equity (including minority interests)5,697,1215,408,541
BALANCE SHEET
As at 31 December 2016
10

Half-Year
2016
$’000
Half-Year
2015
$’000
Total equity at the beginning of the half-year5,408,5415,446,444
Dividends paid(155,852)(150,372)
Dividend Reinvestment Plan/convertible notes37,62641,221
Share Purchase Plan-153,340
Other share capital adjustments(61)(444)
Total transactions with shareholders(118,287)43,745
Profit for the half-year118,287145,640
Revaluation of investment portfolio418,915(214,784)
Provision for tax on revaluation(130,335)62,580
Revaluation of investment portfolio (after tax)288,580(152,204)
Total comprehensive income for the half-year406,867(6,564)
Realised gains on securities sold6,65879,315
Tax expense on realised gains on securities sold(6,866)(12,125)
Net realised gains/(losses) on securities sold(208)67,190
Transfer from revaluation reserve to realised gains reserve208(67,190)
Total equity at the end of the half-year5,697,1215,483,625
A full set of AFIC’s interim accounts are available on the Company’s website.
SUMMARISED STATEMENT OF CHANGES
IN EQUITY
For the half-year ended 31 December 2016
11Australian Foundation Investment Company Limited Half-Year Review to 31 December 2016

Individual investments for the combined investment and trading portfolios as at 31 December
2016 are listed below. The list should not, however, be used to evaluate portfolio performance
or to determine the net asset backing per share at other dates. Net asset backing is advised
to the Australian Securities Exchange each month and is recorded on the toll free telephone
service at 1800 780 784 and posted to AFIC’s website afi.com.au
Individual holdings in the portfolios may change during the course of the year. In addition,
holdings that are part of the trading portfolio may be subject to call options or sale commitments
by which they may be sold at a price significantly different from the market price prevailing at the
time of the exercise or sale.
CodeOrdinary Shares, Trust Units or Stapled Securities
Number
Held
’000
Market
Value
$’000
AACAustralian Agricultural Company9,76416,551
ACXAconex1,0845,497
AGLAGL Energy5,070111,992
AIAAuckland International Airport 1,77010,886
ALQALS9,20555,601
ALUAltium6255,056
AMAAMA Group8,4288,302
AMCAmcor12,300183,885
AMPAMP20,100101,306
ANNAnsell1,28431,724
ANZ*Australia and New Zealand Banking Group8,683263,388
APAAPA Group5,07543,493
HOLDINGS OF SECURITIES
At 31 December 2016
12

CodeOrdinary Shares, Trust Units or Stapled Securities
Number
Held
’000
Market
Value
$’000
APEAP Eagers8698,016
ARBARB Corporation1,19821,146
ASXASX 70935,250
AWCAlumina5,51310,089
AZJ*Aurizon Holdings3,38016,698
BGABega Cheese2,2039,340
BHPBHP Billiton13,991350,613
BKWBrickworks1,50320,425
BLDBoral4,00821,686
BXB*Brambles12,570155,703
CAR*Carsales.com1,52016,632
CBACommonwealth Bank of Australia7,900651,039
CCLCoca-Cola Amatil5,16052,219
CGF*Challenger 4,26547,851
COH*Cochlear15919,206
CPUComputershare4,66058,064
CSL*CSL1,784178,481
CSRCSR3,10914,366
CTX*Caltex Australia66920,378
CVOCover-More Group11,35121,908
CVWClearView Wealth6,1798,311
13Australian Foundation Investment Company Limited Half-Year Review to 31 December 2016

CodeOrdinary Shares, Trust Units or Stapled Securities
Number
Held
’000
Market
Value
$’000
CYB*CYBG PLC2,52412,143
DJWDjerriwarrh Investments7,50528,370
DLXDuluxGroup2,55615,950
DUIDiversified United Investment12,03042,226
EQTEQT Holdings1,30322,807
EVTEvent Hospitality & Entertainment1,03014,187
F LTFlight Centre Travel Group2417,542
FNPFreedom Foods Group4,50719,829
FPHFisher & Paykel Healthcare Corporation5,00841,016
HSOHealthscope30,00068,700
IAG*Insurance Australia Group6,06636,121
ICQiCar Asia22,0305,508
IDXIntegral Diagnostics4,1635,058
IELIDP Education8803,510
ILU*Iluka Resources3,64226,016
INMIron Mountain2029,003
IPL*Incitec Pivot22,28080,189
IREIRESS3,44240,860
HOLDINGS OF SECURITIES continued
At 31 December 2016
14

CodeOrdinary Shares, Trust Units or Stapled Securities
Number
Held
’000
Market
Value
$’000
ISDIsentia Group3,80010,906
IVCInvoCare1,15015,951
JHCJapara Healthcare14,00731,657
JHX*James Hardie Industries3,11168,112
LICLifestyle Communities5,47021,718
LNK*Link Administration Holdings2,49118,838
MFTMainfreight2,84056,630
MIRMirrabooka Investments8,72825,922
M LTMilton Corporation10,84147,269
MPLMedibank Private2,0005,640
MQG*Macquarie Group70060,504
MYXMayne Pharma Group20,36127,386
NAB*National Australia Bank9,994305,958
NVTNavitas3,67818,314
OFXOFX Group5,1378,630
ORAOrora12,86438,464
ORGOrigin Energy6,00039,540
ORIOrica2,71247,942
15Australian Foundation Investment Company Limited Half-Year Review to 31 December 2016

CodeOrdinary Shares, Trust Units or Stapled Securities
Number
Held
’000
Market
Value
$’000
OSHOil Search16,483118,180
PPTPerpetual1,06151,740
QBEQBE Insurance Group7,87497,796
QUBQube Holdings31,75977,491
REAREA Group38421,206
REGRegis Healthcare5,35524,526
REHReece31814,276
RHCRamsay Health Care1,41596,645
RIORio Tinto3,652218,740
RMDResMed3,93533,762
RWCReliance Worldwide Corporation2,4007,680
S32*South3215,24141,656
SCGScentre Group12,95060,088
SEK*Seek3,31549,287
SHL*Sonic Healthcare1,84139,310
SOLWashington H Soul Pattinson1,70925,851
SRXSirtex Medical5587,907
SUN*Suncorp Group3,77050,878
HOLDINGS OF SECURITIES continued
At 31 December 2016
16

CodeOrdinary Shares, Trust Units or Stapled Securities
Number
Held
’000
Market
Value
$’000
SYD*Sydney Airport8,70052,058
TCLTransurban Group18,335189,220
TGGTempleton Global Growth Fund12,10614,829
TLSTelstra Corporation52,445267,470
TOXTox Free Solutions9,04623,430
TPM*TPG Telecom5,71538,935
TWE*Treasury Wine Estates 6,88273,448
VCXVicinity Centres15,62846,726
VOCVocus Communications4,61417,856
WBCWestpac Banking Corporation15,545506,767
WESWesfarmers6,723283,286
WFD*Westfield Corporation5,52351,640
WOWWoolworths5,065122,067
WPLWoodside Petroleum3,283102,295
WTCWiseTech Global7464,216
XROXero4377,420
Total6,742,190
* Part of the security was subject to call options written by the Company.
17Australian Foundation Investment Company Limited Half-Year Review to 31 December 2016

Code
Convertible Notes, Preference Shares
and Other Interest Bearing Securities
Number
Held
’000
Market
Value
$’000
RHCPARamsay Health Care convertible adjustable
rate equity securities
11512,133
Total12,133
HOLDINGS OF SECURITIES continued
At 31 December 2016
18

Acquisitions (Above $10 Million)
Cost
$’000
Link Administration Holdings20,754
Carsales.com18,537
CSL 14,917
Isentia Group12,065
Vocus Communications (includes participation in 1 for 8.9 rights issue at
$7.55 per share)
11,831
Cochlear11,551
Disposals (Above $10 Million)
Proceeds
$’000
Asciano* (takeover by Brookfield and Qube)16,280
Santos*12,385
APA Group12,107
* Complete disposal from the portfolio.
MAJOR TRANSACTIONS IN THE
INVESTMENT PORTFOLIO
New companies added to the investment portfolio
• Link Administration Holdings
• Carsales.com
• AMA Group
• Altium
• Isentia Group
19Australian Foundation Investment Company Limited Half-Year Review to 31 December 2016

COMPANY PARTICULARS
Contact Details
Telephone (03) 9650 9911
Facsimile (03) 9650 9100
Email invest@afi.com.au
Website afi.com.au
For enquiries regarding net asset backing
(as advised each month to the Australian
Securities Exchange and the New Zealand
Securities Exchange):
Telephone 1800 780 784 (toll free)
Share Registrar
Computershare Investor Services Pty Ltd
Yarra Falls, 452 Johnston Street
Abbotsford Victoria 3067
Shareholder
Enquiry Lines 1300 662 270 (Australia)
0800 333 501 (from New Zealand)
+61 3 9415 4373 (from overseas)
Facsimile (03) 9473 2500
Website investorcentre.com.au/contact
For all enquiries relating to shareholdings,
dividends and related matters, please contact
the Share Registrar in your country.
Australian and New Zealand Securities
Exchange Codes
AFI Ordinary shares (ASX and NZX)
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 JB Porter
Auditor
PricewaterhouseCoopers
Chartered Accountants
Country of Incorporation
Australia
Registered Office and Mailing Address
Level 21, 101 Collins Street
Melbourne Victoria 3000
20

Melbourne Meeting
Time 10.00am
Date Wednesday 15 March 2017
Venue RACV City Club
Location 501 Bourke Street
Melbourne
Adelaide Meeting
Time 10.00am
Date Friday 17 March 2017
Venue Adelaide Convention Centre
Location North Road
Adelaide
Sydney Meeting
Time 10.00am
Date Monday 20 March 2017
Venue Four Seasons Hotel
Location 199 George Street
Sydney
Canberra Meeting
Time 10.00am
Date Tuesday 21 March 2017
Venue Hyatt Hotel Canberra
Location 120 Commonwealth Avenue
Canberra
Perth Meeting
Time 10.00am
Date Monday 27 March 2017
Venue Pan Pacific Perth
Location 207 Adelaide Terrace
Perth
SHAREHOLDER MEETINGS
21Australian Foundation Investment Company Limited Half-Year Review to 31 December 2016

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