Half Yearly Report and Accounts as at 31 December 2019

Appendix 4D Statement
for the Half-Year ending
31 December 2019
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
2019 Annual Report.
This announcement was authorised for release by the
Board of Australian Foundation Investment Company Limited.
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 2019 with the previous corresponding
period being the half-year ended 31 December 2018. The results have been reviewed by the
Company’s auditors.
Results for announcement to the market
 Revenue from operating activities was $157.5 million, down $92.8 million or 37.1% from the
previous corresponding period. This excludes capital gains on investments. The decrease
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
in the previous corresponding period, income that was not repeated in the current year.
 Profit after tax was $146.1 million (down 39.1% on the previous corresponding period’s
$239.8 million).
 Profit after tax attributable to members was $145.7 million (down 39.1% on the previous
corresponding period’s $239.4 million).
 The interim dividend is 10 cents per share, fully franked, the same as last year. Last year, 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 was paid. As noted above, this income was not
repeated in the current year, and consequently no special dividend has been declared. The
dividend will be paid on 24 February 2020 to ordinary shareholders on the register on 10
February 2020 and the shares are expected to commence trading on an ex-dividend basis
on 7 February 2020. 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 11 February 2020.
 The final dividend for the 2019 financial year was 14 cents per share (fully franked), and it
was paid to shareholders on 29 August 2019.
 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 2019 were $6.63, up from $5.69 at
the end of the previous corresponding period (both before allowing for any announced
dividends).

2

Half Year Report to 31 December 2019

 AFIC invests in a diversified portfolio of Australian equities, seeking to provide
attractive income and capital growth to shareholders over the medium to long term at a
low cost.
 Half Year Profit was $146.1 million, down from $239.8 million in the corresponding
period last year. Excluding one-off items set out below, the Half Year Profit of $146.1
million was down only 1.6% from the underlying profit of $148.5 million last half year.
 Investment income for the half year was $153.9 million, down from $246.7 million in the
last half year. In the previous corresponding period, a number of one-off items
increased investment income that were not repeated this half year. This included
participation in the Rio Tinto and BHP off-market share buy-backs and the receipt of a
dividend because of the Coles demerger from Wesfarmers.
 Total interim dividend for the half year is 10 cents per share, fully franked, versus 18
cents last half year. The previous corresponding period included a special dividend of 8
cents per share, fully franked, which distributed the proceeds from the Company’s
participation in the Rio Tinto and BHP off-market share buy-backs. There is no special
interim dividend this half year.
 The six-month portfolio return, including franking, was 5.4% compared with the
S&P/ASX 200 Index, including franking, which was up 3.8% over the same period.
 For the 12 months to 31 December 2019, the portfolio return, including franking, was
25.5%. The return from the S&P/ASX 200 Accumulation Index over this period, including
franking, was 25.4%.

 We believe the portfolio is well positioned, including having sufficient funds available
should good buying opportunities arise in the second half of the financial year from any
increased market volatility.


Portfolio Performance (including the full benefit of franking) − to 31 December 2019


Per annum returns other than for 6 months. AFIC’s performance numbers are after costs.
3

Portfolio Performance


The Australian equity market, while slowing, continued to rise over the six months to 31
December 2019, despite concerns about trade tariffs, and low growth in many developed
markets other than the US. AFIC has continued to adjust the portfolio, reducing the number of
companies held to focus further on quality businesses with a competitive advantage, strong
returns on invested capital and resilient balance sheets. This has delivered a very satisfactory
portfolio performance despite not being in some of the more speculative sectors of the market.

AFIC’s portfolio was up 5.4% for the six months to 31 December 2019 compared with the S&P/ASX
200 Accumulation Index, which was up 3.8% over the same period. These figures include the
benefit of franking credits, although AFIC’s performance numbers are after costs.

The portfolio approach has seen a lower proportion of the portfolio devoted to the major banks,
given the competitive and regulatory issues this sector is facing. Significantly over the last four
years, major bank exposure has fallen from approximately 28% to 19% of the portfolio. AFIC has
also reduced the relative exposure of the portfolio to resource companies (primarily from
participation in their share buy-backs), which more recently, had benefited from strong
commodity prices, particularly iron ore. In addition, holdings have been disposed of where the
sustainable competitive advantage of the business has come into question. Over a four-year
period, the number of stocks in the portfolio has been reduced from 95 to 70. This has led to a
reallocation of funds to preferred companies, generally into larger companies in the ASX 200
Index which have better growth prospects.
The more recent effect of this repositioning when
combined with a general upward move in the market has meant that the top 24 largest holdings
in the portfolio (excluding the major banks and resources) have risen from 47.2% to 51.4% over
the six-month period, and their value has gone from $3.5 billion to $4.1 billion.

It is also worth making some observations on the effect of the change in profile of the portfolio on
AFIC’s more immediate income streams. The dividend cuts from three of the four major banks,
combined with a reduction in the proportion of our portfolio in financials, has put a short term drag on
our dividend income streams as many of our new investments have lower yields. We believe the
move to stocks with a better growth profile should enhance the potential for dividend growth in the
medium to long term, particularly as bank dividends are expected to remain stagnant.

Portfolio Adjustments

As part of the move to build larger positions in quality companies with a strong competitive
advantage, further shares were purchased in Goodman Group, Macquarie Group and CSL.

Major sales to fund these acquisitions included a small proportion of the holding in National Australia
Bank (due to the exercise of call options through the six-month period at higher than current prices)
and the complete sale of Perpetual, Boral, Orora, Link Administration, AMP and Iluka Resources.
Dulux Group was sold because of a takeover.


Going Forward


The US and Australian equity markets are either at or close to all-time highs. With the price for many
other asset classes also at or near extremes, we remain alert to the potential for increased volatility
that is a reflection of the inherent risks in the market. These risks include equity market valuations
that are pricing in very low interest rates, strong earnings growth and the apparent disregard of
geopolitical events, such as trade disputes and potential conflict in the Middle East. We believe the
portfolio is well positioned, including having sufficient funds available should good buying
opportunities arise in the second half of the financial year from any increased market volatility.

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

20 January 2020
4

MAJOR TRANSACTIONS IN THE INVESTMENT PORTFOLIO


Acquisitions
Cost
($’000)



Goodman Group 45,608
Macquarie Group 26,588
Cleanaway Waste Management 25,885
Lendlease Group
* 21,624
CSL 17,737

*New holding


Disposals
Proceeds
($’000)

National Australia Bank
(due to the exercise of call options) 52,680
Dulux Group
(taken over by Nippon Paint)
#
29,683
Perpetual
#
23,212
Boral
#
21,989
Orora
#
19,322
Link Administration
#
17,958
Lifestyle Communities 17,028
AMP
#
15,913
Iluka Resources
#
15,788
#
Complete disposal from the portfolio.
New Companies Added to the Investment Portfolio

Lendlease Group

Ryman Healthcare

5

TOP 25 INVESTMENTS AS AT 31 DECEMBER 2019

Includes investments held in both the Investment and Trading Portfolios.

Total Value
$ million
1 Commonwealth Bank of Australia631.28.0%
2 CSL 584.77.5%
3 * BHP Group 524.76.7%
4 * Westpac Banking Corporation387.34.9%
5 Transurban Group 341.24.3%
6 Macquarie Group 299.13.8%
7 Wesfarmers 285.63.6%
8 * National Australia Bank 267.93.4%
9 Australia and New Zealand Banking Group 226.32.9%
10 Woolworths Group 204.92.6%
11 Rio Tinto 195.32.5%
12 Amcor 195.02.5%
13 James Hardie Industries169.02.2%
14 Sydney Airport167.72.1%
15 * Telstra Corporation 156.02.0%
16 * Woodside Petroleum 153.01.9%
17 Brambles 142.31.8%
18 Mainfreight 133.31.7%
19 * Oil Search 132.91.7%
20 Ramsay Health Care 129.11.6%
21 Sonic Healthcare 116.61.5%
22 Qube Holdings 115.01.5%
23 * Coles Group 105.61.3%
24 Seek 99.71.3%
25 Treasury Wine Estates 88.51.1%
5,851.9
As % of Total Portfolio Value 74.6%
(excludes Cash)
*Indicates that options were outstanding against part of the holding
Valued at closing prices at 31 December 2019
% of the
portfolio




6

P
ORTFOLIO
P
ERFORMANCE TO
31

D
ECEMBER
2019






P
ERFORMANCE
M
EASURES TO
31

D
ECEMBER
2019
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

4.5% 22.8% 7.2% 7.3%
S&P/ASX

200

A
CCUMULATION
I
NDEX

3.1%
23.4%
9.0%
7.9%


P
ORTFOLIO
R
ETURN
–

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

5.4% 25.5% 9.2% 9.2%
S&P/ASX

200
GROSS
A
CCUMULATION
I
NDEX
*
3.8%
25.4% 10.6%
9.5%

* 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 2019




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
Rebecca P. Dee-Bradbury
Graeme R. Liebelt
David A. Peever
Catherine M. Walter AM
Peter J. Williams
R. Mark Freeman, 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
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)

  
9

DIRECTORS' REPORT

The Directors present their report in relation to the half-year to 31 December 2019 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)
R.P. Dee-Bradbury (appointed May 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 $146.1 million, down 39.1% from the previous corresponding period.
The decrease was predominantly due to the inclusion last year of the 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 2019 was 12.1 cents per share with an
interim dividend declared of 10 cents per share fully-franked, the same as last year. In the
previous year an additional 8 cents per share fully-franked special dividend was also declared, as
a consequence of the participation in the aforementioned buy-backs. As these were not repeated
in the current period, no special dividend has been declared.
The portfolio return for the 6 months (measured by change in net asset backing per share plus
dividends reinvested) was 4.5% compared to the return of the S&P/ASX 200 Accumulation Index
for the same period which was 3.1%. 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 6.2 million shares were issued under the DRP and the DSSP resulting in an
additional $34.3 million of capital (after costs).
10

11

12

CONSOLIDATED INCOME STATEMENT FOR THE HALF-YEAR ENDED 31
DECEMBER 2019
Note Half-year
2019
Half-year
2018
$’000 $’000
Dividends and distributions 153,929 246,708
Revenue from deposits and bank bills 1,109 1,136
Other revenue 2,423 2,430
Total revenue
157,461 250,274
Net gains on trading portfolio and non-equity investments
6,628 4,187
Income from operating activities 3 164,089 254,461
Finance & related costs (462)(400)
Administration expenses (6,276) (6,280)
Profit before income tax expense 157,351 247,781
Income tax expense(11,250) (7,977)
Profit for the half-year 146,101 239,804
Profit is attributable to :
Equity holders (members) of Australian Foundation
Investment Company Ltd
145,709 239,430
Minority Interest 392 374
146,101 239,804
Cent
s Cents
Basic earnings per share 8 12.10 20.11
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 2019
Half-Year to 31 December 2019
Half-Year to 31 December 2018
Revenue Capital Total
Revenue Capital Total
$’000 $’000 $’000
$’000 $’000 $’000
Profit for the half-year 146,101 - 146,101239,804 - 239,804
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
- 219,411
219,411
- (745,125)
(745,125)
Deferred tax on above - (68,366)
(68,366)
- 215,197
215,197
Total other comprehensive income
1
- 151,045 151,045- (529,928) (529,928)
Total comprehensiv
e income
2
146,101 151,045 297,146 239,804 (529,928) (290,124)
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 2019
Half-Year to 31 December 2018
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
145,709 151,045
296,754
239,430 (529,928)
(290,498)
Minority Interest 392 -
392
374 -
374
146,101 151,045 297,146 239,804 (529,928) (290,124)
This Statement of Comprehensive Income should be read in conjunction
with the accompanying

notes.
14

CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2019
31 Dec 30 June
2019 2019
Note $’000 $’000
Current assets
Cash 179,024 206,429
Receivables 13,276 40,128
Total current assets 192,300 246,557
Non-current assets
Investment portfolio 7,847,853 7,572,640
Deferred tax assets 1,076 -
Total non-current assets 7,848,929 7,572,640
Total assets 8,041,229 7,819,197
Current liabilities
Payables 4,777 932
Tax payable 27,024 17,052
Borrowings – bank debt - -
Trading portfolio
4
2,810 7,033
Provisions 3,412 4,114
Total current liabilities 38,023 29,131
Non-current liabilities
Provisions 1,064 1,471
Deferred tax liabilities -100
Deferred tax liabilities - investment portfolio
5
1,210,069 1,163,749
Total non-current liabilities 1,211,133 1,165,320
Total liabilities 1,249,156 1,194,451
Net Assets 6,792,073 6,624,746
Shareholders' equity
Share Capital
6
2,922,467 2,888,136
Revaluation Reserve 2,717,547 2,561,314
Realised Capital Gains Reserve 398,444 462,257
General Reserve 23,637 23,637
Retained Profits 728,428 688,244
Parent Entity Interest 6,790,523 6,623,588
Minority Interest 1,550 1,158
Total equity 6,792,073 6,624,746
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
2019

Attributable to members of Australian Foundation Investment Company
Ltd
Half-Year to 31 December 2019
Note
Shar
e
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
2,888,136 2,561,314 462,257 23,637 688,244 6,623,588 1,158 6,624,746
Dividends paid
7
-
- (58,625)
- (105,525)
(164,150)
-
(164,150)
Shares issued - Dividend Reinvestment Plan
6
34,407 - - - -
34,407
-
34,407
Other Share Capital Adjustments
6
(76) - - - -
(76)
-
(76)
Total transactions with shareholders
34,331
- (58,625)
- (105,
525) (129,819)
- (129,819)
Profit for the half-year
-
-
-
- 145,709
145,709
392
146,101
Net gains for the period on equity securities in the investment portfolio
-
151,045
-
-
-
151,045
-
151,045
Other Comprehensive Income for the half-year
151,045
-
-
- 151,045
- 151,045
Transfer to Realised Capital Gains Reserve of net cumulative losses on investments sold
-
5,188 (5,188)
-
-
-
-
-
Total equity at the end of the half-year
2,922,467 2,717,547 3
98,444 23,637 728,428 6,790,523 1,550 6,792,073
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 2018

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
2,811,721 2,422,568 448,892 23,637 631,725 6,338,543
717 6,339
,260
Dividends
p
aid
7
-
-
(
23
,
257
)
-
(
139
,
543
)

(
162
,
800
)

-
(162,800)
Shares issued - Dividend Reinvestment Plan

33,099
-
-
-
-
33,099
-
33,099
Other Share Capital Adjustments

(65) - - - -
(65)
-
(65)
Total transactions with shareholders

33,034
- (23,257)
- (139,543) (129,766)
- (129,766)
Profit for the half-year

-
-
-
- 239,430
239,430
374
239,804






Other Comprehensive Income for the half-year



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

- (529,928)
-
-
-
(529,928)
-
(529,928)
Other Comprehensive Income for the half-year

- (529,928)
-
-
- (529,928)
- (529,928)
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

17

CONSOLIDATED CASH FLOW STATEMENT FOR THE HALF-YEAR
ENDED 31 DECEMBER 2019
Half-yearHalf-year
2019 2018
$’000$’000
INFLOWS/ INFLOWS/
(OUTFLOWS) (OUTFLOWS)
Cash flows from operating activities
Sales from trading portfolio 34,371 11,511
Purchases for trading portfolio (19,572) (9,485)
Interest received 1,117 1,184
Dividends and distributions received 159,880 222,626
175,796 225,836
Oth
er receipts 2,419 2,434
Administration expenses (7,230) (7,792)
Finance costs paid (462)(400)
Taxes paid (3,723) (9,272)
Net cash inflow/(outflow) from operating activities 166,800 210,806
Cash flows from investing activities
Sales from investment portfolio 249,671 434,560
Purchases for investment portfolio (294,272) (430,281)
Taxes paid on capital gains (20,101) (6,653)
Net cash inflow/(outflow) from investing activities (64,702) (2,374)
Cash flows from financing activities
Share issue costs (76)(65)
Repayment of borrowings -(100)
Dividends paid (129,427) (129,184)
Net cash inflow/(outflow) from financing activities (129,503) (129,349)
Net increase/(decrease) in cash held (27,405) 79,083
Cash at the beginning of the half-year 206,429 99,183
Cash at the end of the half-year 179,024 178,266
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 2019
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 2019 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
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 2019 and 31 December 2018 were as follows:
2019
$
2018
$
Net tangible asset backing per share
Before Tax 6.63 5.69
After Tax 5.63 4.97
(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 comprising
more than 10% of the Group’s income (including trading portfolio) for the half-year ending 31
December 2019 – 11.1% (2018 : 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%).
19

3. Income from operating activities
Half-year
2019
$'000
Half-year
2018
$'000
Income from operating activities is comprised of the following:
Dividends & distributions
securities held in investment portfolio
153,929 155,314
demerger dividend from Wesfarmers/Coles
-43,629
off-market buy-back dividends
-47,654
securities held in trading portfolio
-111
153,929 246,708
Interest income
deposits and income from bank bills
1,109 1,136
1,109 1,136
Net gains/(losses) and write downs
net gains from trading portfolio sales
4,827 4,166
unrealised gains/(losses) in trading portfolio
1,801 21
6,628 4,187
Administrat
ion fees received from other Listed Investment
Companies
2,201 2,179
Expenses recovered from other Listed Investment
Companies
136 189
Other expenses recovered 65 62
Sundry Income 21 -
164,089 254,461
4. Cur
rent 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 $185.9 million (30 June 2019: $218.4
million).
As at balance date the Company had no outstanding put options which at the option of the
purchaser may have required the Company to buy securities prior to the respective expiry dates if
they were all exercised (30 June 2019 :$4.0 million potential exposure ).
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 $1,210.1 million (30 June 2019 : $1,163.7 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
01/07/2019 Opening Balance

1,200,148 2,888,136
29/08/2019 Dividend Reinvestment Plan
i
5,541
6.21
34,407
29/08/2019 Dividend Substitution Share Plan ii 622 6.21 n/a
Various Other Share Capital adjustments

-

(76)
31/12/2019 Balance 1,206,311 2,922,467

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
2019
$’000
Half-year
2018
$’000




Dividends (fully franked) paid during the period 164,150 162,800
(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 2020, but not recognised as a liability at
the end of the half-year is 120,631







21

8. Earnings per Share
Half-year
2019

Half-year
2018


Number

Number
Weighted average number of ordinary shares used as the
denominator
1,204,301,645 1,190,047,001

$’000 $’000
Profit after tax for the half-year attributable to members of the
Company 145,709 239,430


Cents

Cents
Basic earnings per share 12.10 20.11

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 2019 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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