Half Yearly Report and Accounts as at 31 December 2018

Appendix 4D Statement
for the Half-Year ending
31 December 2018
90
YEARS OF INVESTMENT
EXPERIENCE
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 Company’s
2018 Annual Report.
Australian Foundation Investment Company Limited
ABN 56 004 147 120
1

RESULTS FOR ANNOUNCEMENT TO THE MARKET
The reporting period is the half-year ended 31 December 2018 with the previous corresponding
period being the half-year ended 31 December 2017. The results have been reviewed by the
Company’s auditors.
Results for announcement to the market
 Revenue from operating activities was $250.3 million, up $96.3 million or 62.5% from the
previous corresponding period. This excludes capital gains on investments. The increase
was predominantly due to a demerger dividend received as a consequence of the Coles
demerger from Wesfarmers and participation in the Rio Tinto and BHP off-market buy-backs.
 Profit after tax was $239.8 million (up 75.4% on the previous corresponding period’s $136.7
million).
 Profit after tax attributable to members was $239.4 million (up 75.5% on the previous
corresponding period’s $136.4 million).
 The interim dividend is 10 cents per share, fully franked, the same as last year. In addition,
the Directors have declared a special dividend of 8 cents to distribute the proceeds of the
Company’s participation in the Rio Tinto and BHP off-market buy-backs. The dividends will
be paid on 25 February 2019 to ordinary shareholders on the register on 11 February 2019
and the shares are expected to commence trading on an ex-dividend basis on 8 February
2019. 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 2.5% 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 12 February 2019.
 The final dividend for the 2018 financial year was 14 cents per share (fully franked), and it
was paid to shareholders on 31 August 2018.
 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 2018 were $5.69, down from $6.15
at the end of the previous corresponding period (both before allowing for any announced
dividends).

2

8 cent special dividend from buy backs as profit lifts
Half Year Report to 31 December 2018


 AFIC invests in a diversified portfolio of Australian equities, seeking to provide attractive
income and capital growth over the medium to long term at a low cost.
 Half Year Profit was $239.8 million, up 75.4% from $136.7 million in the
corresponding period last year:
- A number of one-off factors increased investment income by 62.5% to $250.3
million. This included participation in the Rio Tinto and BHP off-market share
buy-backs and the recognition of a dividend because of the Coles demerger
from Wesfarmers.
- Income from the Trading Portfolio (which includes the marking-to-market of
open option positions) was $4.2 million, whereas in the corresponding period
last year, these portfolios incurred a loss of $6.6 million.
 Interim dividend maintained at 10 cents per share, fully franked.
 A special dividend of 8 cents per share, fully franked has also been declared. This
distributes the proceeds of the Company’s participation in the recent Rio Tinto and
BHP off-market share buy-backs.

 Sharp falls in the market towards the end of the period meant the six-month portfolio
return, including franking, was negative 6.4%. For 12 months including franking, it
was negative 2.3%. The S&P/ASX 200 Accumulation Index over these periods,
including franking, was negative 6.2% and negative 1.4% respectively. AFIC’s
performance numbers are after costs.

Investment of $1,000 (including benefit of franking) − 10 Years to 31 December 2018


3

Portfolio Performance


Following a period where the Australian market reached post GFC highs in August, volatility towards
the end of the period resulted in negative returns across most of the market. This reversal was a
result of concerns arising from ongoing global trade tensions, rising interest rates in the US and
large swings in the oil price, which severely tested investor sentiment during the period. As the US
market reacted negatively to these issues, large falls were also experienced across the Australian
share market. This was particularly evident in smaller companies as they moved back towards more
realistic levels from previously very high valuations.
AFIC’s portfolio was down 6.4% for the six months to 31 December 2018 compared with the
S&P/ASX 200 Accumulation Index, which fell 6.2% over the same period (these figures include the
benefit of franking credits).

Companies in the portfolio that contributed positively to relative returns through the six-month period
were Mainfreight, Brambles, TPG Telecom, Qube Holdings and Transurban. In contrast,
participation in the BHP and Rio Tinto off-market buy-backs, which had the advantage of generating
significant franking credits for the Company, provided some headwind to performance as holdings
were sold at a 14% discount to the market.

The long-term performance of the portfolio, which is more aligned with the Company’s investment
timeframes, was 10.6% per annum for the ten years to 31 December 2018, which is in line with the
Index return over the same period. These figures include the benefit of franking credits, although
AFIC’s performance numbers are after costs.

Portfolio Adjustments

Major sales arose because of participation in the Rio Tinto and BHP off-market share buy-backs
(AFIC was previously well overweight the index in Rio Tinto). There was also a reduction in holdings
of AGL Energy, Washington H. Soul Pattinson and Perpetual. In addition, the Company disposed of
its entire position in QBE Insurance Group and Bega Cheese during the period.

More significant purchases included adding to holdings in James Hardie Industries, Transurban
Group via participation in its rights issue to fund the WestConnex purchase, Adelaide Brighton,
Reliance Worldwide, Woolworths Group and Sydney Airport, all of which have strong positions in
their respective market segments. Purchases in Qantas Airways and CYBG plc (Clydesdale Bank)
also involved call option strategies to help generate some additional income from these investments.

Going Forward


The significant correction in the market has produced a more conducive environment for long term
investing. Valuations have moved towards longer term averages, which make for a sensible starting
point to invest. Volatility is likely to persist at least in the short term as the market digests the
changing environment, with interest rates likely to increase further in the US and no short-term
solution to trade and geopolitical dislocations. In this environment, AFIC will continue to look for
opportunities to add positions in companies that have a sustainable competitive advantage, sound
balance sheets and, importantly, strong management that can deliver long term benefits to
shareholders.

Refundability of Franking Credits Policy Proposal

We continue to receive feedback from our shareholders about the significant negative impact
they will experience from the current policy proposal from the Federal Opposition to end the
refundability of franking credits. AFIC will continue to advocate for a reassessment of this
proposal on our shareholders’ behalf. We believe the proposal is more likely to significantly
impact our investors who have a low income, and for them we believe it to be both inequitable
and very unfair.

Please direct any enquiries to:
Mark Freeman Geoff Driver
Managing Director General Manager
(03) 9225 2122 (03) 9225 2102


21 January 2019
4

MAJOR TRANSACTIONS IN THE INVESTMENT PORTFOLIO


Acquisitions
Cost
($’000)



Coles Group
(Demerger from Wesfarmers) 73,544
James Hardie Industries 37,665
Transurban Group
(10 for 57 share issue at $10.80 per share) 37,557
Adelaide Brighton 35,208
Qantas Airways* 34,841
CYBG plc
(Clydesdale Bank)* 27,025
Reliance Worldwide 25,633
Woolworths Group 22,027
Sydney Airport 20,167

*Subject to call options during the period


Disposals
Proceeds
($’000)

Rio Tinto
(participation in off-market share buy-back) 105,737
QBE Insurance Group
#
42,603
AGL Energy 37,371
Washington H. Soul Pattinson 31,516
Bega Cheese
#
21,191
Perpetual 18,387
BHP
(participation in off-market share buy-back) 15,970
#
Complete disposal from the portfolio.
5

TOP 25 INVESTMENTS AS AT 31 DECEMBER 2018

Includes investments held in both the Investment and Trading Portfolios.



Total Value % of
$ million Portfolio
1 Commonwealth Bank of Australia571.9 8.6%
2 * BHP462.6 7.0%
3 Westpac Banking Corporation389.2 5.9%
4 CSL 355.5 5.4%
5 * Transurban Group270.6 4.1%
6 National Australia Bank 234.3 3.5%
7 Wesfarmers 216.6 3.3%
8 Australia and New Zealand Banking Group 207.6 3.1%
9 Macquarie Group 193.7 2.9%
10 * Woolworths Group 178.1 2.7%
11 Amcor 166.0 2.5%
12 Rio Tinto 152.7 2.3%
13 * Woodside Petroleum 131.6 2.0%
14 Brambles 123.2 1.9%
15 * Sydney Airport120.4 1.8%
16 Oil Search 118.0 1.8%
17 Telstra Corporation 114.5 1.7%
18 James Hardie Industries91.7 1.4%
19 Qube Holdings88.8 1.3%
20 Mainfreight 87.7 1.3%
21 * Ramsay Health Care 86.9 1.3%
22 * Sonic Healthcare 81.7 1.2%
23 Treasury Wine Estates 80.7 1.2%
24 Computershare 80.1 1.2%
25 Coles Group 78.9 1.2%
4,683.0
As % of Total Portfolio Value 70.8%
(excludes Cash)
* Indicates that options were outstanding against part of the holding
Valued at closing prices at 31 December 2018


6

P
ORTFOLIO
P
ERFORMANCE TO
31

D
ECEMBER
2018






P
ERFORMANCE
M
EASURES TO
31

D
ECEMBER
2018
6

M
ONTHS

1
YEAR

5
YEARS

%

PA
10
YEARS

%

PA
P
ORTFOLIO
R
ETURN
–

N
ET
A
SSET
B
ACKING
R
ETURN INCLUDING
DIVIDENDS REINVESTED

-7.3% -3.9% 3.8% 8.6%
S&P/ASX

200

A
CCUMULATION
I
NDEX

-6.8%
-2.8%
5.6%
9.0%


P
ORTFOLIO
R
ETURN
–

N
ET
A
SSET
B
ACKING
G
ROSS
R
ETURN
INCLUDING DIVIDENDS REINVESTED
*

-6.4% -2.3% 5.5% 10.6%
S&P/ASX

200
GROSS
A
CCUMULATION
I
NDEX
*
-6.2%
-1.4%
7.2%
10.6%

* Incorporates the benefit of franking credits for those who ca
n fully utilise them.
Note: AFIC net asset per share growth plus dividend series is
calculated after management expenses, 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 2018




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:
John Paterson, Chairman
Ross E. Barker
Graeme R. Liebelt
David A. Peever
Catherine M. Walter AM
Peter J. Williams
R. Mark Fre
eman, Managing Director
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
in
vest@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 ov
erseas)
(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)
9

DIRECTORS' REPORT

The Directors present their report in relation to the half-year to 31 December 2018 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:

J. Paterson (appointed June 2005)
R.E. Barker (appointed September 2001)
T.A. Campbell AO (appointed September 1984, retired October 2018)
J.C. Hey (appointed July 2013, retired January 2019)
G.R. Liebelt (appointed June 2012)
D.A. Peever (appointed November 2013)
C.M. Walter AM (appointed August 2002)
P.J. Williams (appointed February 2010)
R.M. Freeman (appointed January 2018)

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 $239.8 million, up 75.4% from the previous corresponding period. The
increase was predominantly due to a demerger dividend received as a consequence of the Coles
demerger from Wesfarmers and participation in the Rio Tinto and BHP off-market buy-backs.
The net profit per share for the six months to 31 December 2018 was 20.1 cents per share with an
interim dividend declared of 10 cents per share fully-franked, the same as last year and an
additional 8 cents per share fully-franked special dividend, as a consequence of the participation
in the aforementioned buy-backs.
The portfolio return for the 6 months (measured by change in net asset backing per share plus
dividends reinvested) was -7.3% compared to the return of the S&P/ASX 200 Accumulation Index
for the same period which was -6.8%. 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 5.9 million shares were issued under the DRP and the DSSP resulting in an
additional $33.0 million of capital (after costs).
10

11

12

CONSOLIDATED INCOME STATEMENT FOR THE HALF-YEAR ENDED 31
DECEMBER 2018
Note Half-year
2018
Half-year
2017

$’000 $’000
Dividends and distributions 246,708 150,792
Revenue from deposits and bank bills 1,136 810
Other revenue 2,430 2,380
Total revenue
250,274

153,982
Net gains/(losses) on trading portfolio and non-equity
investments
4,187

(6,553)
Income from operatin
g activities 3 254,461 147,429
Finance & related costs (400) (425)
Administration expenses (6,280) (6,240)
Profit before income tax expense

247,781 140,764
Income tax expense (7,977) (4,023)
Profit for the half-year 239,804 136,741
Profit is attributable to :
Equity holders (members) of Australian Foundation
Investment Company Ltd
239,430 136,402
Minority Interest 374 339

239,804 136,741


Cents

Cents
Basic earnings per share 8 20.11 11.56




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

13

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE
HALF-YEAR ENDED 31 DECEMBER 2018
Half-Year to 31 December 2018
Half-Year to 31 December 2017
Revenue Capital Total
Revenue Capital Total
$’000 $’000 $’000
$’000 $’000 $’000
Profit for the half-year 239,804 - 239,804136,741
-
136,741
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
- (745,125)
(745,125)
-
317,183
317,183
Deferred tax on above
-
215,197
215,197
- (95,707)
(95,707)
Total other comprehensive income
1
- (529,928) (529,928)-221,476 221,476
Total comprehen
sive income
2
239,804 (529,928) (290,124) 136,741 221,476 358,217
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 2018
Half-Year to 31 December 2017
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
239,430 (529,928)
(290,498)
136,402 221,476
357,878
Minority Interest 374 -
374
339 -
339
239,804 (529,928) (290,124) 136,741 221,476 358,217
This Statement of Compr
ehensive Income should be read in conjunction with the accompanying

notes.
14

CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2018
31 Dec

30 June
2018 2018

Note $’000

$’000
Current assets

Cash 178,266 99,183
Receivables 14,379 77,234
Total current assets 192,645 176,417

Non-current assets

Investment portfolio 6,617,237 7,280,706
Deferred tax assets 1,241 1,257
Total non-current assets 6,618,478 7,281,963

Total assets 6,811,123 7,458,380

Current liabilities

Payables 1,346 712
Tax payable 24,522 8,245
Borrowings – bank debt

- 100
Trading portfolio
4
4,164 6,757
Provisions 3,145 4,385
Total current liabilities 33,177 20,199

Non-current liabilities

Provisions 1,049 1,394
Deferred tax liabilities - investment portfolio
5
857,527 1,097,527
Total non-current liabilities 858,576 1,098,921

Total liabilities 891,753 1,119,120

Net Assets 5,919,370 6,339,260

Shareholders' equity

Share Capital
6
2,844,755 2,811,721
Revaluation Reserve 1,845,981 2,422,568
Realised Capital Gains Reserve 472,294 448,892
General Reserve 23,637 23,637
Retained Profits 731,612 631,725
Parent Entity Interest 5,918,279 6,338,543
Minority Interest 1,091 717
Total equity 5,919,370 6,339,260



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

C
ONSOLIDATED
S
TATEMENT OF
C
HANGES IN
E
QUITY FOR THE
H
ALF
-Y
EAR ENDED
31

D
ECEMBER
2018

Attributable to members of Australian Foundation Investment Company
Ltd
Half-Year to 31 December 2018
Note
S
hare
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
2,811,721 2,422,568 448,892 23,637 631,725 6,338,543
717 6,339,260
Dividends paid
7
-
- (23,257)
-
(139,543)
(162,80
0)
-
(
1
62,800)
Sha
res issued - Dividend Reinvestment Plan
6
33,099 - -
-
-
33,099
-
33
,099
Other Share Capital Adjustments
6
(65) - -
-
-
(65)
-
(65)
Tot
al transactions with shareholders
33,034
- (23,257)
- (139,
543) (129,76
6)
-
(1
29,766)
Profit for the half-year
-
-
-
- 239,430
239,
430
374

239,804
Ne
t losses for the period on equity securities
in the investment portfolio
-
(529,928)
-
-
-
(529,928)
-
(
5
29,928)
Othe
r Comprehensive Income for the half-
year
-
(529,928)
-
-
- (529,928)
- (5
29,928)
Transfer to Realised Capital Gains Reserve of net cumulative gains on investments sold
-
(46,659) 46,659
-
-
-
-
-
Total equity at the end of the half-year
2,844,755 1,845,981 4
72,294 23,637 731,612 5,918,279 1,091 5,919,370
This Statement of Changes in Equity should be read in conjuncti
on with the accompanying notes.
16

C
ONSOLIDATED
S
TATEMENT OF
C
HANGES IN
E
QUITY FOR THE
H
ALF
-Y
EAR ENDED
31

D
EC
.

2018

(
CONT
)



Attributable to members of Aus
tralian Foundation Investment
Company Ltd


Half-Year to 31 December 2017

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
2,756,256 2,123,209 430,912 23,637 631,070 5,965,084
419 5,965
,503
Dividends
p
aid
7
-
-
-
-
(
161
,
955
)

(
161
,
955
)

-
(161,955)
Shares issued - Dividend Reinvestment Plan

32,249
-
-
-
-
32,249
-
32,249
Other Share Capital Adjustments

(69) - - - -
(69)
-
(69)
Total transactions with shareholde
rs
32,180
-
-
- (161,955) (129,775)
- (129,775)




Profit for the half-year

-
-
-
- 136,402
136,402
339
136,741






Other Comprehensive Income for the half-year





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

-
221,476
-
-
-
221,476
-
221,476
Other Comprehensive Income for the half-year

-
221,476
-
-
- 221,476
- 221,476
Transfer to Realised Capital Gains Reserve of net cumulative gains on investments sold

-
(1,856) 1,856
-
-
-
-
-






Total equity at the end of the half-year
2,788,436 2,342,829 4
32,768 23,637 605,517 6,193,187
758 6,193,945
This Statement of Changes in Equity should be read in conjuncti
on with the accompanying notes

17

CONSOLIDATED CASH FLOW STATEMENT FOR THE HALF-YEAR
ENDED 31 DECEMBER 2018
Half-year

Half-year
2018

2017

$’000

$’000

INFLOWS/

INFLOWS/

(OUTFLOWS)

(OUTFLOWS)
Cash flows from operating activities

Sales from trading portfolio 11,511 52,731
Purchases for trading portfolio (9,485) (6,253)
Interest received 1,184 800
Dividends and distributions received 222,626 141,036
225,836 188,314

Other receipts 2,434 2,380
Administration expenses (7,792) (7,692)
Finance costs paid (400) (425)
Taxes paid (9,272) (9,410)
Net cash inflow/(outflow) from operating activities 210,806

173,167

Cash flows from investing activities

Sales from investment portfolio 434,560 181,877
Purchases for investment portfolio (430,281) (228,247)
Taxes paid on capital gains (6,653) -
Net cash inflow/(outflow) from investing activities (2,374)

(46,370)

Cash flows from financing activities

Share issue costs (65) (69)
Repayment of borrowings (100) -
Dividends paid (129,184) (129,497)
Net cash inflow/(outflow) from financing activities (129,349)

(129,566)

Net increase/(decrease) in cash held 79,083 (2,769)
Cash at the beginning of the half-year 99,183 105,125
Cash at the end of the half-year 178,266

102,356











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 2018
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 2018 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.” The Company’s investments in
listed securities are valued at the closing price on the ASX on the last trading day before the
period end.
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
unrealised 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 2018 and 31 December 2017 were as follows:
2018
$


2017
$
Net tangible asset backing per share

Before Tax 5.69 6.15
After Tax 4.97 5.24

(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 Wesfarmers (as a consequence of
the demerger of Coles Group) : 20.3% and Rio Tinto (as a consequence of the off-market buy-
back) : 17.9% comprising more than 10% of the Group’s income (including trading portfolio) for
the half-year ending 31 December 2018 (2017 : Commonwealth Bank : 12.5% and Westpac:
10.0%).
19

3. Income from operating activities
Half-year
2018
$'000

Half-year
2017
$'000
Income from operating activities is comprised of the following:

Dividends & distributions
 securities held in investment portfolio
246,597 150,683
 securities held in trading portfolio
111 109
246,708 150,792
Interest income
 deposits and income from bank bills
1,136 810
1,136 810
Net gains/(losses) and write downs
 net gains from trading portfolio sales
4,166 49
 unrealised gains/(losses) in trading portfolio
21 (6,602)
4,187 (6,553)

Administration fees received from other Listed Investment
Companies
2,179 2,180
Expenses recovered from other Listed Investment
Companies
189 147
Other expenses recovered 62 53

254,461 147,429



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 $167.1 million (30 June 2018: $61.7
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 $17.4 million worth of securities prior to the respective
expiry dates if they were all exercised (30 June 2018 :$19.7 million).







20

5. 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 $857.5 million (30 June 2018 : $1,097.5 million). As the Directors do not intend to
dispose of the portfolio, this tax liability may not be crystallised at this amount.
6. 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
01/07/2018 Opening Balance

1,186,147 2,811,721
31/08/2018 Dividend Reinvestment Plan
i
5,355
6.18
33,099
31/08/2018 Dividend Substitution Share Plan
ii
527
6.18
-
Various Other Share Capital adjustments

-

(65)
31/12/2018 Balance 1,192,029 2,844,755

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 The Company introduced an on-market Buy-Back Programme in December 2000. This plan
remains active. No shares were bought back during the period.

7. Dividends
Half-year
2018
$’000
Half-year
2017
$’000




Dividends (fully franked) paid during the period 162,800 161,955
(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, plus a special dividend of
8 cents, both fully franked. The aggregate amount of the
proposed interim and special dividends expected to be paid on
25 February 2019, but not recognised as a liability at the end of
the half-year is 214,565







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8. Earnings per Share
Half-year
2018

Half-year
2017


Number

Number
Weighted average number of ordinary shares used as the
denominator
1,190,047,001 1,180,025,058

$’000 $’000
Profit after tax for the half-year attributable to members of the
Company 239,430 136,402


Cents

Cents
Basic earnings per share 20.11 11.56

There are no dilutive instruments on issue and consequently diluted earnings per share are the
same as basic earnings per share.
9. Events subsequent to balance date
Since 31 December 2018 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.
10. 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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