Half-Yearly Review to 31 Dec 2018 & Letter to Shareholders

25 February 2019




The Manager
ASX Market Announcements
Australian Securities Exchange
Exchange Centre
Level 4
20 Bridge Street
Sydney NSW 2000


Electronic Lodgement


Australian Foundation Investment Company Limited (the “Company”)
Half-Yearly Review to 31 December 2018

Dear Sir / Madam

Please find attached Australian Foundation Investment Company’s Half-Yearly
Review to 31 December 2018 and a letter to shareholders.


Yours faithfully

Matthew Rowe
Company Secretary

Half-Year Review to
31 December 2018

Contents
1 Half-Year in Summary
2 About the Company
4 Review of Operations
and Activities
11 Top 25 Investments
12 Income Statement
13 Balance Sheet
14 Summarised Statement
of Changes in Equity
15 Holdings of Securities
19 Major Transactions in
the Investment Portfolio
20 Company Particulars
21 Shareholder Meetings
Australian Foundation Investment Company is a
listed investment company investing in Australian
and New Zealand equities.
1
Australian Foundation Investment Company Limited Half-Year Review to 31 December 2018
Australian Foundation Investment Company Limited ABN 56 004 147 120

Half-Year in Summary
Profit for the Half-Year
$ 23 9.8 m
Up 75.4% from 2017
- 6.4 %
S&P/ASX 200 Index including
franking* -6.2%
Total 6 Month Portfolio Return
Total 6 Month Shareholder Return
- 0.4%
Share price plus dividend
0 .11%
0.11% last year
Management Expense Ratio
Total Portfolio at 31 December 2018
$6.8b
Including cash $7.2 billion in 2017
* Assumes an investor can take full advantage
of the franking credits.
Annualised
Including
franking*
Fully Franked Dividend
10 cents per share in 2017
18 ¢Total
10¢ Interim
8¢ Special
1
Australian Foundation Investment Company Limited Half-Year Review to 31 December 2018
Australian Foundation Investment Company Limited ABN 56 004 147 120

Australian Foundation Investment
Company (AFIC) is a listed investment
company investing in Australian and
New Zealand equities.
Investment Objectives
The Company aims to provide shareholders
with attractive investment returns through
access to a growing stream of fully franked
dividends and growth in capital invested.
The Company’s primary investment
goals are:
• to pay dividends which, over time, grow
faster than the rate of inflation; and
• to provide attractive total returns
over the medium to long term.
Approach to Investing
The investment philosophy is built on taking
a medium to long-term view on companies
in a diversified portfolio with an emphasis
on identifying quality companies that are
likely to sustainably grow their earnings
and dividends over this time frame.
Quality in this context is an outcome of our
assessment of the board and management
as well as some key financial metrics such
as the level of gearing in the balance sheet,
product margins and free cash flow. The
structure of the industry and a company’s
competitive position in this industry is also
an important indicator of quality. Linked
to this assessment of quality is the ability
of companies to grow earnings over time,
which ultimately should produce good
dividend growth.
Recognising value is also an important
aspect of sound long-term investing.
Short-term measures such as the price
earnings ratio, price to book or price to
sales may be of some value, but aren’t
necessarily strong predictors of future
performance. Our assessment of
value tries to capture the opportunity
a business has to prosper and thrive
over the medium to long term.
In building the investment portfolio in this
way, we believe we can offer investors
a well-diversified portfolio of high-quality
companies that is intended to deliver total
returns ahead of the Australian equity market
and with less volatility over the long term.
About the Company
How AFIC Invests – What We Look
For in Companies
Quality First
Growth
Including dividends
Value
A portfolio that is actively
managed to achieve long-term
capital and dividend growth
3
Australian Foundation Investment Company Limited Half-Year Review to 31 December 2018
2
Australian Foundation Investment Company Limited Half-Year Review to 31 December 2018

The Company also uses options written
against a small proportion of its investments
and a small trading portfolio to generate
additional income.
From time to time, some borrowings
may be used where potential investment
returns justify the use of debt. This is
managed within very conservative limits,
as determined by the Board.
AFIC is managed for the benefit of its
shareholders with fees based on the
recovery of costs rather than as a fixed
percentage of the portfolio. There are
no performance fees. As a result, the
benefit of scale over time results in a very
low expense ratio for investors. For the
six months to 31 December 2018, this was
0.11 per cent (annualised), or 11 cents
for each $100 invested.
3
Australian Foundation Investment Company Limited Half-Year Review to 31 December 2018

Profit and Dividend
Profit for the half-year was $239.8 million,
up 75.4 per cent from $136.7 million in the
corresponding period last year. A number
of one-off factors increased investment
income by 62.5 per cent 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, this
portfolio incurred a loss of $6.6 million.
The Board has maintained the interim
dividend of 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. Please note
there is no listed investment company
capital gain attached to this dividend.
It is not AFIC’s normal practice to pay a
special dividend. However, with the large
amount of income and franking credits
generated from the participation in the Rio
Tinto and BHP off-market share buy-backs,
it was felt appropriate to distribute these
funds as a special dividend with the
half-year profit result.
Market Commentary
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 United
States and large swings in the oil price,
which severely tested investor sentiment
during the period. As the United States
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.
The other interesting feature of the market
is that large companies in the Index
(represented by the S&P/ASX 20 Index)
outperformed the small and mid cap
companies over the period, although this
was somewhat of a reversal from previous
trends (Figure 2).

Review of Operations and Activities
5
Australian Foundation Investment Company Limited Half-Year Review to 31 December 2018
4
Australian Foundation Investment Company Limited Half-Year Review to 31 December 2018

Figure 1: Performance of S&P/ASX 200 and the Impact on Market Volatility
S&P/ASX 200 Index (left hand side)
Index
ASX200 implied volatility (right hand side)
Dec 18
Nov 18
Oct 18
Sep 18
Aug 18
Jul 18
Jun 18
5,400
6,400
6,200
5,600
6,000
5,800
15%
17%
25%
23%
19%
21%
S&P/ASX 20
total return index
S&P/ASX Mid Cap 50
total return index
S&P/ASX Small Ordinaries
total return index
Source: FactSet
110
105
100
95
90
85
80
Index
Dec 18
Nov 18
Oct 18
Sep 18
Aug 18
Jul 18
Jun 18
Figure 2: Small and Mid Cap Companies Versus the S&P/ASX 20 Index
5
Australian Foundation Investment Company Limited Half-Year Review to 31 December 2018

Review of Operations and Activities continued
Portfolio Returns
AFIC’s portfolio was down 6.4 per cent
for the six months to 31 December
2018 compared with the S&P/ASX 200
Accumulation Index, which fell 6.2 per cent
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 share
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 per cent discount to the market.
The long-term performance of the
portfolio, which is more aligned with the
Company’s investment time frames, was
10.6 per cent per annum for the 10 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.
Net asset per share growth plus dividends,
including franking
S&P/ASX 200 Accumulation Index,
including franking
10 year return
10.6%
10.6%
5.5
%
7.2%
5 year return
* Annualised returns other than six-month figures. Assumes an investor can take full advantage of the franking credits.
Note AFIC’s net asset per share growth plus dividend series is calculated after expenses, income tax and capital gains
tax on realised sales of investments. It should be noted that Index returns for the market do not include expenses or tax.
This chart also does not include the benefit of any LIC capital gain distributions made.
6 month return
-6.4 %
-6.2 %
1 year return
-2.3%
-1 .4%
Figure 3: Portfolio Performance to 31 December 2018, Including the Benefit
of Franking*
7
Australian Foundation Investment Company Limited Half-Year Review to 31 December 2018
6
Australian Foundation Investment Company Limited Half-Year Review to 31 December 2018

The significant correction in the market has produced a more
conducive environment for long term investing.
“
“
Special
Dividend at
8¢
Per Share
7
Australian Foundation Investment Company Limited Half-Year Review to 31 December 2018

Review of Operations and Activities continued
Figure 4 highlights where AFIC’s share price
was trading relative to the net asset backing
at 31 December 2018.
Portfolio Adjustments
Major sales arose because of participation
in the Rio Tinto and BHP off-market
buy-backs (AFIC was previously well
overweight the Index in Rio Tinto).
There was 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.

Figure 5 highlights the profile of the portfolio
by the various sectors of the market at the
end of the calendar year relative to the
S&P/ASX 200 Index. AFIC actively manages
the portfolio with 85 holdings currently in the
investment portfolio. Invariably the portfolio
will differ quite markedly from the Index,
although the Index can provide a useful
point of reference for investors.
The continued underweight position in
Banks is reflective of the ongoing concerns
about the outlook for growth relative to
recent years as credit for housing slows
and competitive and regulatory pressures
become greater. AFIC traditionally has also
not been a large investor in Property Trusts
given the observation that over the long
term industrial companies have tended
to outperform Property Trusts and the
distributions from these Trusts do not
carry franking credits.
Going Forward
The significant correction in the market has
produced a more conducive environment
for long term investing (Figure 6 over page).
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 United States 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.
Directorship Matters
As previously advised, Mr Terry Campbell
did not seek re-election as Chairman of
the Company at the 2018 Annual General
Meeting and therefore retired at the
conclusion of that meeting.
9
Australian Foundation Investment Company Limited Half-Year Review to 31 December 2018
8
Australian Foundation Investment Company Limited Half-Year Review to 31 December 2018

15%
-10%
-5%
0%
5%
10%
Dec 08
Dec 1
0
Dec 1
2
Dec 1
4
Dec 1
6
Dec 1
8
Figure 4: Share Price Premium/Discount to Net Asset Backing
AFIC portfolio weightS&P/ASX 200 Index weight
Banks
Materials
Industrial
Healthcare
Consumer
Staples
Energy
Other
Financials
21.2%17.2%14.5%10.5%10.3%5.4%
Cash
2.6%4.8%
Communication
Services
3.1%
Information
Technology
4.2%
Property
Trusts
1.3%
Utilities
1.2%
Consumer
Discretionary
3.7%
25%
20%
15%
10%
5%
0%
Figure 5: AFIC Investment by Sector Versus the S&P/ASX 200 Index
as at 31 December 2018
9
Australian Foundation Investment Company Limited Half-Year Review to 31 December 2018

Review of Operations and Activities continued
Mr John Paterson was elected as Chairman
by the Board with effect from the conclusion
of the Annual General Meeting. Mr Paterson
has been a Director of the Company
since 2005 and prior to that served as an
Alternate Director for Mr Campbell from
April 1987 to June 2005. He is Chairman
of Djerriwarrh Investments Limited. He
was formerly a Director of Goldman Sachs
JBWere and is a former member of the
Board of Guardians of Australia’s
Future Fund.
The Board wishes to record its sincere
appreciation to Mr Campbell for his
invaluable contribution to the Board
deliberations over the last 34 years.
Mr Campbell has been a Director since
1984, Deputy Chairman since October 2008
and Chairman since October 2013. His very
broad industry experience at the highest
levels of the Australian corporate world has
been of outstanding value to the Board,
executives and shareholders of Australian
Foundation Investment Company Limited.
Ms Jacqueline Hey retired as a Director
on 18 January 2019. Ms Hey has been
a Director of the Company since July 2013.
She has been a member of the Company’s
Investment Committee and Nomination
Committee.
She has been a valuable contributor
to Board and executive discussions,
reflecting her deep knowledge and
experience gained in her long career
in the telecommunications technology
sector and the subsequent exposure she
has had to a wide range of industries.
Her contributions to Board deliberations
will be missed and the Board wishes to
record its thanks to Ms Hey for her valued
service to shareholders and wishes
her well for the future.
Times
17
16
15
14
13
12
11
10
9
20092010201120122013201420152016201720182019
Source: FactSet
Average 14.1
Figure 6: S&P/ASX 200 Price Earnings Ratio
11
Australian Foundation Investment Company Limited Half-Year Review to 31 December 2018
10
Australian Foundation Investment Company Limited Half-Year Review to 31 December 2018

Includes investments held in both the investment and trading portfolios.
Valued at Closing Prices at 31 December 2018
Total Value
$ Million
% of the
Portfolio
1Commonwealth Bank of Australia571.98.6
2BHP*462.67.0
3Westpac Banking Corporation389.25.9
4CSL 355.55.4
5Transurban Group*270.64.1
6National Australia Bank 234.33.5
7Wesfarmers 216.63.3
8Australia and New Zealand Banking Group 207.63.1
9Macquarie Group 193.72.9
10Woolworths Group* 178.12.7
11Amcor 166.02.5
12Rio Tinto 152.72.3
13Woodside Petroleum* 131.62.0
14Brambles 123.21.9
15Sydney Airport*120.41.8
16Oil Search 118.01.8
17Telstra Corporation 114.51.7
18James Hardie Industries91.71.4
19Qube Holdings88.81.3
20Mainfreight 87.71.3
21Ramsay Health Care* 86.91.3
22Sonic Healthcare* 81.71.2
23Treasury Wine Estates 80.71.2
24Computershare 80.11.2
25Coles Group 78.91.2
Total4,683.0
As a percentage of total portfolio value (excludes cash)70.8%
* Indicates that options were outstanding against part of the holding.
Top 25 Investments
As at 31 December 2018
11
Australian Foundation Investment Company Limited Half-Year Review to 31 December 2018

Half-Year
2018
$’000
Half-Year
2017
$’000
Dividends and distributions246,708150,792
Revenue from deposits and bank bills1,136810
Net gains/(losses) on trading portfolio 4,187(6,553)
Total income252,031145,049
Finance costs(400)(425)
Administration expenses(3,850)(3,860)
Profit before income tax 247,781140,764
Income tax (7,977)(4,023)
Profit for the half-year 239,804136,741
CentsCents
Earnings per share20.1111.56
Income Statement
For the Half-Year Ended 31 December 2018
13
Australian Foundation Investment Company Limited Half-Year Review to 31 December 2018
12
Australian Foundation Investment Company Limited Half-Year Review to 31 December 2018

Balance Sheet
As at 31 December 2018
31 Dec
2018
$’000
30 June
2018
$’000
Current assets
Cash 178,26699,183
Receivables14,37977,234
Total current assets192,645176,417
Non-current assets
Investment portfolio 6,617,2377,280,706
Deferred tax assets1,2411,257
Total non-current assets6,618,4787,281,963
Total assets6,811,1237,458,380
Current liabilities
Payables1,346712
Tax payable24,5228,245
Borrowings – bank debt-100
Trading portfolio4,1646,757
Provisions3,1454,385
Total current liabilities33,17720,199
Non-current liabilities
Provisions1,0491,394
Deferred tax liabilities – investment portfolio857,5271,097,527
Total non-current liabilities858,5761,098,921
Total liabilities891,7531,119,120
Net assets5,919,3706,339,260
Shareholders’ equity
Share capital2,844,8052,811,771
Revaluation reserve1,845,9812,422,568
Realised capital gains reserve472,294448,892
General reserve23,63723,637
Retained profits732,653632,392
Total shareholders’ equity (including minority interests)5,919,3706,339,260
13
Australian Foundation Investment Company Limited Half-Year Review to 31 December 2018

Half-Year
2018
$’000
Half-Year
2017
$’000
Total equity at the beginning of the half-year6,339,2605,965,503
Dividends paid(162,800)(161,955)
Dividend Reinvestment Plan33,09932,249
Other share capital adjustments(65)(69)
Total transactions with shareholders(129,766)(129,775)
Profit for the half-year239,804136,741
Revaluation of investment portfolio(745,125)317,183
Provision for tax on revaluation215,197(95,707)
Revaluation of investment portfolio (after tax)(529,928)221,476
Total comprehensive income for the half-year(290,124)358,217
Realised gains/(losses) on securities sold71,462(8,923)
Tax expense on realised gains/(losses) on securities sold(24,803)10,779
Net realised gains/(losses) on securities sold46,6591,856
Transfer from revaluation reserve to realised gains reserve(46,659)(1,856)
Total equity at the end of the half-year5,919,3706,193,945
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 2018
15
Australian Foundation Investment Company Limited Half-Year Review to 31 December 2018
14
Australian Foundation Investment Company Limited Half-Year Review to 31 December 2018

Individual investments for the combined investment and trading portfolios as at 31 December
2018 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 which 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.
Code
Ordinary Shares, Trust Units
or Stapled Securities
Number
Held
’000
Market
Value
$’000
ABCAdelaide Brighton 7,26231,009
AGLAGL Energy 2,57052,942
AIAAuckland International Airport 1,77011,912
ALQALS 7,54251,136
AMCAmcor 12,527165,986
AMPAMP 12,91031,631
ANNAnsell 1,28428,296
ANZAustralia and New Zealand Banking Group 8,488207,609
APAAPA Group 4,04034,340
APEAP Eagers 1,1576,940
ARBARB Corporation 1,92528,875
ASXASX 70942,479
AUBAUB Group 2,02625,181
AWC*Alumina 18,62342,306
BHP*BHP 13,513462,551
BKWBrickworks 1,85430,826
BLDBoral 7,84438,748
BXBBrambles 12,139123,207
CAR*Carsales.com 4,19146,086
CBACommonwealth Bank of Australia 7,900571,881
Holdings of Securities
At 31 December 2018
15
Australian Foundation Investment Company Limited Half-Year Review to 31 December 2018

Holdings of Securities continued
At 31 December 2018
Code
Ordinary Shares, Trust Units
or Stapled Securities
Number
Held
’000
Market
Value
$’000
CGFChallenger 6,41160,841
COHCochlear 13723,779
COLColes Group 6,72378,922
CPUComputershare 4,66080,105
CSLCSL 1,920355,507
CTXCaltex Australia 68217,369
CWYCleanaway 7,73612,881
CYBCYBG PLC12,22840,718
DJWDjerriwarrh Investments 7,50523,642
DLXDuluxGroup 3,02919,869
DUIDiversified United Investment12,03046,316
EQTEQT Holdings 1,32231,772
EVTEvent Hospitality and Entertainment1,03014,012
F LTFlight Centre Travel Group1938,303
FNPFreedom Foods Group 6,26129,114
FPHFisher & Paykel Healthcare Corporation3,80046,968
GMGGoodman Group 2,80029,764
IAG*Insurance Australia Group 4,85733,991
ICQiCar Asia 20,1562,721
ILUIluka Resources 1,66712,703
IREIRESS 4,63751,567
IVCInvoCare 1,32513,648
JHXJames Hardie Industries6,06591,703
LICLifestyle Communities5,47028,829
LNKLink Administration Holdings3,20021,664
MFTMainfreight 2,99087,727
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Australian Foundation Investment Company Limited Half-Year Review to 31 December 2018
16
Australian Foundation Investment Company Limited Half-Year Review to 31 December 2018

Code
Ordinary Shares, Trust Units
or Stapled Securities
Number
Held
’000
Market
Value
$’000
MIRMirrabooka Investments 8,72821,994
M LTMilton Corporation 10,84146,727
MPLMedibank Private 2,0005,140
MQGMacquarie Group 1,783193,703
NABNational Australia Bank 9,735234,316
NVTNavitas 1,7979,094
NXTNEXTDC 4,32526,426
ORAOrora 11,67035,828
ORGOrigin Energy 6,50042,055
ORIOrica 1,97033,983
OSHOil Search 16,483118,015
PPTPerpetual 63520,625
QAN*Qantas Airways 8,50048,381
QUBQube Holdings 34,96288,803
REAREA Group 38428,405
REHReece 4,22642,047
RHC*Ramsay Health Care 1,51086,888
RIORio Tinto 1,946152,665
RMD*ResMed 4,63573,166
RWCReliance Worldwide Corporation13,53660,235
S32South32 15,24151,057
SCGScentre Group 14,45056,355
SEK*Seek 4,02068,002
SHL*Sonic Healthcare 3,70481,672
SOLWashington H. Soul Pattinson 59414,776
SUN*Suncorp Group 4,84061,036
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Australian Foundation Investment Company Limited Half-Year Review to 31 December 2018

Holdings of Securities continued
At 31 December 2018
Code
Ordinary Shares, Trust Units
or Stapled Securities
Number
Held
’000
Market
Value
$’000
SYD*Sydney Airport 17,924120,448
TCL*Transurban Group 23,299270,577
TGGTempleton Global Growth Fund5,5007,068
TLSTelstra Corporation 40,175114,499
TPMTPG Telecom 6,50041,860
TWETreasury Wine Estates5,45080,660
URWUnibail-Rodamco-Westfield 2,47226,449
WBCWestpac Banking Corporation15,545389,247
WESWesfarmers 6,723216,599
WOW *Woolworths 6,062178,065
WPL*Woodside Petroleum 4,210131,636
XROXero 74131,116
Total6,607,989
* Indicates that options were outstanding against part of the holding.
Code
Convertible Notes, Preference Shares
and Other Interest Bearing Securities
Number
Held
’000
Market
Value
$’000
RHCPARamsay Health Care Pref 495,084
Total5,084
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Australian Foundation Investment Company Limited Half-Year Review to 31 December 2018
18
Australian Foundation Investment Company Limited Half-Year Review to 31 December 2018

Major Transactions in the Investment Portfolio
Acquisitions
Cost
$’000
Coles Group (Demerger from Wesfarmers)73,544
James Hardie Industries37,665
Transurban Group (10 for 57 share issue at $10.80 per share)37,557
Adelaide Brighton35,208
Qantas Airways* 34,841
CYBG PLC (Clydesdale Bank)*27,025
Reliance Worldwide Corporation25,633
Woolworths Group22,027
Sydney Airport20,167
* 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 Energy37,371
Washington H. Soul Pattinson31,516
Bega Cheese
#
21,191
Perpetual18,387
BHP (participation in off-market share buy-back)15,970
# Complete disposal from the portfolio.
19
Australian Foundation Investment Company Limited Half-Year Review to 31 December 2018

Company Particulars
Australian Foundation Investment
Company Limited (AFIC)
ABN 56 004 147 120
Directors
John Paterson, Chairman
R Mark Freeman, Managing Director
Ross E Barker
Graeme R Liebelt
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
Contact Details
Telephone (03) 9650 9911
Facsimile (03) 9650 9100
Website afi.com.au
Email invest@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
Australia
Computershare Investor Services Pty Ltd
Yarra Falls, 452 Johnston Street
Abbotsford Victoria 3067
New Zealand
Computershare Investor Services Limited
159 Hurstmere Road
Takapuna Auckland 0622
Shareholder
Enquiry Lines 1300 662 270 (Australia)
0800 333 501
(within New Zealand)
+61 3 9415 4373
(from overseas)
Facsimile (03) 9473 2500
Website investorcentre.com/au/contact
For all enquiries relating to shareholdings,
noteholdings, dividends and related matters,
please contact the share registrar as above.
Australian and New Zealand Securities
Exchange Codes
AFI Ordinary shares (ASX and NZX)
21
Australian Foundation Investment Company Limited Half-Year Review to 31 December 2018
20
Australian Foundation Investment Company Limited Half-Year Review to 31 December 2018

Melbourne Shareholder Meeting
Time 10.00am
Date Monday 18 March 2019
Venue Sofitel
Location 25 Collins Street
Melbourne

Sydney Shareholder Meeting
Time 10.00am
Date Tuesday 19 March 2019
Venue Wesley Conference Centre
Location 220 Pitt Street
Sydney

Canberra Shareholder Meeting
Time 10.00am
Date Friday 22 March 2019
Venue Hyatt Hotel Canberra
Location 120 Commonwealth Avenue, Yarralumla
Canberra

Adelaide Shareholder Meeting
Time 10.00am
Date Monday 25 March 2019
Venue Adelaide Convention Centre
Location Panorama Rooms, North Terrace
Adelaide
Perth Shareholder Meeting
Time 10.00am
Date Monday 1 April 2019
Venue Pan Pacific Perth
Location 207 Adelaide Terrace
Perth
Shareholder Meetings
21
Australian Foundation Investment Company Limited Half-Year Review to 31 December 2018

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Australian FoundationAustralian Foundation
Investment Company LimitedInvestment Company Limited
ABN 56 004 147 120ABN 56 004 147 120
Level 21, 101 Collins StLevel 21, 101 Collins St
Melbourne VIC 3000Melbourne VIC 3000
T 03 9650 9911T 03 9650 9911
F 03 9650 9100F 03 9650 9100
investinvest
@@
afi .com.auafi .com.au
afi .com.auafi .com.au
Dear Shareholder,
Proposal to Remove the Refundability of Excess Franking Credits
You may be aware of policy changes proposed by the Federal Labor Party to remove the
refundability of excess franking credits for certain investors.
The proposed policy will mean many shareholders who have a marginal tax rate below 30 per cent
will no longer receive a cash refund from franking credits. We believe this change will negaƟ vely
impact many of our shareholders.
We’re wriƟ ng to you to:
ensure you are aware of the proposed changes;
explain our posiƟ on; and
invite you to share your views on the issue.
We will conƟ nue to campaign to highlight our serious concerns on behalf of our shareholders
regarding this proposed policy to ensure the adverse impact of these changes is well understood
by all members of Parliament and policymakers. We hope to do this with your support.
What can you do?
If this issue is important to you, you can help us advocate on your behalf by:
compleƟ ng the enclosed survey and returning it to us via the reply paid envelope included
with this leƩ er; and
sending through a more detailed example of what the proposed change will mean to you in
the space provided on the survey form.
We are aiming to collect and review all responses by 8 March 2019
Keeping you informed
If you have not already done so, we strongly encourage you to share your email address with us by
adding it to the boƩ om of your survey response. It will help us to keep you informed about what we
are doing and, importantly, what you can do over the ensuing months to ensure your voice is heard.
Thank you for your Ɵ me and we look forward to receiving your response to the survey.
Yours sincerely,
Yours sincerely,
John Paterson
Chairman
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22 February 2019

Further InformaƟ on
Why are franking credits benefi cial to you?
Franking credits are eff ecƟ vely a credit to investors for the corporate tax that has already been paid
by the Australian companies they are invested in. The current system avoids double taxaƟ on of
your dividend income.
We pass franking credits from the dividends AFIC receives from its investments directly to you, as
our shareholder. The dividend amount, as well as the amount of franking credits you are eligible
for, is outlined in each dividend statement we provide to you.
Under the current policy, if your marginal tax rate is below the company tax rate of 30 per cent,
you may receive a cash refund for some or all the franking credits received, depending on your
individual circumstances. This refund is received once you complete your tax return.
What will the proposed changes to franking credits mean?
The proposed policy will mean many shareholders who have a marginal tax rate below 30 per cent
will no longer receive a cash refund from franking credits. This could negaƟ vely impact any income
you might rely on from invesƟ ng in Australian shares that pay fully franked income.
We’re concerned low income earners and reƟ rees will be hit especially hard by the proposed
changes, parƟ cularly those who have self-managed super funds (SMSFs) in pension phase. An
SMSF with an annual fully franked income of $35,000 could realisƟ cally receive an addiƟ onal
$15,000 from the refund of the franking credits (producing an annual income of $50,000). Labor’s
proposed changes would mean the loss of the $15,000 refund received from the ATO, a reducƟ on
of 30 per cent in annual income.
What are we doing to fi ght the proposed removal of franking credits?
We believe the proposed policy is an aƩ ack on one of the cornerstones of Australia’s reƟ rement
systems – that of voluntary savings for reƟ rement. The inequitable structure of the policy will have
a negaƟ ve fi nancial impact on many of our shareholders and, as such, we’ve taken proacƟ ve steps
to support you.
Since Labor proposed the changes in March 2018, we’ve worked hard to communicate with our
shareholders via our shareholder meeƟ ngs and our website, and we’ve encouraged and supported
you in voicing your opinions to your Federal parliamentary representaƟ ve by providing you with a
template leƩ er on our website.
We have joined the public debate in opposiƟ on to the change, raising the profi le of the impact
to investors via signifi cant media commentary. AddiƟ onally, we have lobbied on your behalf with
various industry groups and provided a submission and briefi ng to the House of RepresentaƟ ves
Economics CommiƩ ee Inquiry regarding this policy.
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