Preliminary Final Report

Appendix 4E Statement
for the Full-Year ending
30 June 2020
20
20
Contents
• Results for Announcement to the Market
• Media Release
• Appendix 4E Accounts
These documents comprise the preliminary final report given to ASX
under listing rule 4.3A
This announcement was authorised for release by the Board
of Australian Foundation Investment Company Limited
ABN 56 004 147 120
1

RESULTS FOR ANNOUNCEMENT TO THE MARKET
The reporting period is the year ended 30 June 2020 with the prior corresponding period being the
year ended 30 June 2019.
This report is based on financial statements that are in the process of being audited.
Results for announcement to the market
 Net profit was $240.4 million, 40.8% down from the prior year.
 Net profit attributable to members (excluding minority interests) was $239.9 million, 40.9% down
from the prior year.
 Revenue from operating activities was $264.3 million, 40.1% down from the prior year.
 The Management Expense Ratio (“MER”) calculated as the net expenses of managing the
Company as a percentage of the average value of its investments including cash over the year,
was 0.13% for the year (2019: 0.13%).
 Net tangible assets per share as at 30 June 2020, before allowing for the final dividend, were
$5.96 per share before allowing for the provision for deferred tax on unrealised gains in the
investment portfolio (2019: $6.49).
 A fully-franked final dividend of 14 cents per share, the same as last year’s final dividend, will be
paid on 1 September 2020 to shareholders on the register on 12 August 2020. The shares are
expected to trade ex-dividend on 11 August 2020. There is no conduit foreign income
component of the dividend.
 There is no New Zealand imputation credit attached to this dividend.
 5 cents of the final dividend are sourced from capital gains, on which the Group has paid or will
pay tax. The amount of the pre-tax attributable gain, known as an “LIC capital gain”, is therefore
7.14 cents. This enables some shareholders to claim a tax deduction in their tax return. Further
details will be on the dividend statements.
 The interim dividend of 10 cents per share was paid to shareholders on 24 February 2020.
 The total dividend for the financial year is therefore 24 cents per share, fully-franked. Ordinary
dividends last year were also 24 cents, but in addition, a special dividend of 8 cents was paid
with the interim dividend in February 2019. No special dividend was paid or is payable in respect
of the current year.
 A Dividend Reinvestment Plan (DRP) and Dividend Substitution Share Plan (DSSP) are
available, the price for both of which will be set at a nil discount to the Volume Weighted Average
Price of the Company’s shares traded on the ASX and Chi-X automated trading systems over
the five trading days after the shares trade ex-dividend. Notices of participation in the DRP & the
DSSP need to be received by the share registry by 5 pm (AEST) on 13 August 2020. All shares
issued under the DRP and DSSP will rank equally with existing shares.
 The Company will be providing an update on these results via a webcast for shareholders on
Wednesday 29 July 2020 at 4.00 p.m. (AEST). Details are on the website afi.com.au.
 The 2020 AGM will be held by way of a virtual meeting via the internet or telephone conference
at 10.00 AM on Wednesday 14 October.
Further details on how to participate will be sent to
shareholders.
2

Final Dividend maintained in very difficult conditions
Full Year Report to 30 June 2020


 AFIC invests in a diversified portfolio of Australian equities, seeking to provide attractive
income and capital growth over the medium to long term to shareholders at a low cost.
AFIC’s management expense ratio is 0.13%.
 Economic conditions have been extremely challenging for many businesses, as the fallout
from the COVID-19 outbreak negatively impacts many Australians. Equity markets have also
been very volatile following the all-time highs reached in late February, as governments and
central banks try and respond to deteriorating conditions and control of the virus remains
uncertain.
 The Full Year Profit was $240.4 million. The profit for the corresponding period last year was
$406.4 million. Investment income was down, as a number of one-off items were not
repeated this year. This included participation in the Rio Tinto and BHP off-market share
buy-backs, special dividends and the receipt of a dividend because of the Coles demerger
from Wesfarmers ( $134.2 million in total). In addition, several companies reduced or
deferred dividends in the second half of the financial year, which also meant a fall in
dividend income.
 AFIC, as a long-standing listed investment company, has reserves that can be used in
difficult times. Drawing upon these reserves, the final dividend was maintained at 14 cents
per share fully franked despite the fall in income in the second half. Total fully franked
dividends applicable for the year are 24 cents per share. Last financial year total dividends
were 32 cents per share. This included a special interim dividend of 8 cents per share. No
special dividend has been paid or declared this year.
 During the period, AFIC continued to adjust the portfolio and took advantage of the decline in
share prices to increase holdings in companies it wanted to own more of. This included
participation in the recent deeply discounted capital raisings that have occurred.
 The positioning of the portfolio to ensure quality companies with strong industry positions
formed the core of the portfolio has lessened the impact of the negative market. P ortfolio
return for the year, including franking, was negative 3.1%. Including franking, the S&P/ASX
200 Accumulation Index was down 6.6%. Over 10 years, the corresponding figures are 9.3%
for AFIC and 9.4% for the Index. AFIC’s performance numbers are after costs.

Portfolio return (including the full benefit of franking and after costs) – per annum to
30 June 2020


3

Portfolio Performance


The Australian share market was on track for a very strong year until the world was unexpectedly
hit with the COVID-19 virus in the early part of the 2020 calendar year. From the market peak in
February through to the low point for the year in late March, the S&P/ASX 200 price index was
down 36.5%. Surprisingly, despite the significant decline in economic conditions, the S&P/ASX
200 price index increased 29.7% from this low point until the end of the financial year, driven
primarily by an expansion in market valuations. In these volatile market conditions, the S&P/ASX
200 Accumulation Index o ver the year to 30 June 2020, including the benefit of franking,
decreased 6.6%. AFIC’s portfolio outperformed over this period, with a negative return of 3.1%,
which also includes the benefit of franking.
Companies in the portfolio that contributed strongly to relative returns through the 12-month
period were CSL, Wesfarmers, Fisher & Paykel Healthcare, ResMed, James Hardie Industries,
Xero, NEXTDC and Carsales.com. In contrast, the major banks and energy exposures through Oil
Search and Woodside Petroleum significantly underperformed.
The long term performance of the portfolio, which is aligned with the Company’s investment
timeframes, was 9.3% per annum for the 10 years to 30 June 2020. This is in line with the Index
return over the same period of 9.4%. Both of these figures include the benefit of franking. AFIC’s
performance numbers are after costs.

Portfolio Adjustments

A number of purchases were undertaken during the year. This included placements in National
Australia Bank, Cochlear, Auckland International Airport, Oil Search, NEXTDC, Ramsay Health
Care, Reece and Qube Holdings. Major additions included Goodman Group, Telstra (to bring
some income into the portfolio), Macquarie Group, Cleanaway and Sydney Airport. While there
has been a reduction in the number of holdings in the portfolio over the year from 76 to 61, three
new companies were added,
given we consider the long term opportunity for each business to be
attractive: Altium, Netwealth and Ryman Healthcare.

Major sales included the complete disposal of holdings in Treasury Wine Estates, Suncorp Group,
Scentre Group, Adelaide Brighton and Perpetual, as these funds were deployed elsewhere in the
portfolio. There was also some small trimming of the position in James Hardie Industries, although
this remains a major holding in the portfolio.


Outlook


As we move into the new financial year, the outlook remains unclear as companies face an
extremely difficult operating environment. While recent fiscal and monetary support has provided
some breathing space for the economy, the environment moving forward is going to be largely
dictated by the progress made on suppressing COVID-19 in Australia and across the globe.

In this environment, it is difficult to reconcile the expansion of market valuations with the pressure
company profits and dividends are likely to remain under. Given the strength of the market since
the lows recorded in March and the further adjustments that have been made to the portfolio
during this market weakness, we are content to be patient. We believe the portfolio is well
positioned to withstand further volatility given the high quality of companies in the portfolio.

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


27 July 2020

4

MAJOR TRANSACTIONS IN THE INVESTMENT PORTFOLIO
Acquisitions
Cost
($’000)
Goodman Group 54,073
Telstra 48,867
Sydney Airport 35,890
Cochlear (includes participation in placement at $140 per share) 31,822
Cleanaway 29,343
Macquarie Group 26,588
* Subject to call options during the period.
Disposals
Proceeds
($’000)
Treasury Wine Estates
#
53,677
Suncorp Group
#
42,046
Dulux Group (Taken over by Nippon Paint)
#
29,683
Scentre Group
#
26,855
Adelaide Brighton
#
23,689
Perpetual
#
23,212
#
Complete disposal from the portfolio.
New Companies Added to the Portfolio
Altium
Netwealth
Ryman Healthcare
5

TOP 25 INVESTMENTS AS AT 30 JUNE 2020
Includes investments held in both the Investment and Trading Portfolios.
T otal Value
% o f
$ million
Portfolio
1CSL 608.58.5%
2Commonwealth Bank of Australia548.47.7%
3 *BHP Gr
oup498.
87.0%
4Wesfarmers 330.54.6%
5Transurban Group 326.94.6%
6Westpac Banking Corporation286.94.0%
7Macquarie Group 257.33.6%
8National Australia Bank 235.33.3%
9Woolworths Group 211.33.0%
10*Rio Tinto 195.82.7%
11Amcor174.62.5%
12Australia and New Zealand Banking Group 171.32.4%
13*Telstra Corporation 170.62.4%
14James Hardie Industries142.82.0%
15Ramsay Health Care 134.41.9%
16Brambles 131.91.9%
17Sonic Healthcare 123.41.7%
18Sydney Airport121.61.7%
19Coles Group 121.31.7%
20Mainfreight 120.41.7%
21Fisher & Paykel Healthcare Corporation 114.41.6%
22Resmed Inc108.41.5%
23Qube Holdings 102.71.4%
24Goodman Group99.31.4%
25Woodside Petroleum 96.61.4%
5,433.4
As % of Total Portfolio Value 76.3%
(excludes Cash)
* Indicates that options were outstanding against part of the holding
Valued at closing prices at 30 June 2020
6

PORTFOLIO PERFORMANCE TO 30 JUNE 2020
PERFORMANCE MEASURES TO 30 JUNE 2020 1 YEAR 5 YEARS
% PA
10 YEARS
% PA
PORTFOLIO RETURN –NET ASSET BACKING RETURN INCLUDING
DIVIDENDS REINVESTED
-4.7%4.8% 7.4%
S&P/ASX 200 ACCUMULATION INDEX
-7.7%6.0% 7.8%
PORTFOLIO RETURN –NET ASSET BACKING GROSS RETURN
I
NCLUDING DIVIDENDS REINVESTED
*
-3.1%6.7% 9.3%
S&P/ASX 200 GROSS ACCUMULATION INDEX*
-6.6%7.5% 9.4%
* I
ncorporates the benefit of franking credits for those who can fully utilise them.
N
ote: 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

Australian
Foundation
Investment
Company Limited
(AFIC)
Consolidated Annual Financial
Statements
30 June 2020
8

FINANCIAL STATEMENTS
Consolidated Income Statement for the Year Ended 30 June 2020




2020

2019

Note $’000 $’000
Dividends and distributions
A3 257,858 433,009
Interest income from deposits A3 1,554 3,615
Other revenue A3
4,895

4,729


Total revenue
264,307

441,353





Net gains/(losses) on trading portfolio A3
9,740

(4,686)




Income from operating activities

274,047 436,667


Finance costs (1,047) (826)
Administration expenses B1 (14,759)
(14,312)


Profit before income tax expense 258,241 421,529
Income tax expense B2, E2 (17,846) (15,156)
Profit for the year 240,395
406,373


Profit is attributable to :


Equity holders of Australian Foundation Investment Company

239,931 405,932
Minority interest
464 441

240,395 406,373





Cents Cents
Basic earnings per share

A5 19.88 34.00

This Income Statement should be read in conjunction with the accompanying notes.
9

Consolidated Statement of Comprehensive Income for the Year Ended 30 June 2020


Year to 30 June 2020 Year to 30 June 2019

Revenue
1
Capital
1
Total Revenue Capital Total

$’000 $’000 $’000 $’000 $’000 $’000


Profit for the year 240,395 - 240,395 406,373 - 406,373


Other Comprehensive
Income


Items that will not be recycled through
the Income Statement

Gains/(losses) for the
period
- (568,806) (568,806)
- 261,984 261,984
Tax on above - 167,602 167,602
- (86,616) (86,616)


Total Other
Comprehensive
Income

- (401,204) (401,204) - 175,368 175,368


Total Comprehensive
Income

240,395 (401,204) (160,809) 406,373 175,368 581,741

1
‘Capital’ includes realised or unrealised gains or losses (and the tax on those) on securities in the investment
portfolio, including non-equity investments held in the investment portfolio. Income in the form of distributions
and dividends is recorded as ‘Revenue’. All other items, including expenses, are included in Profit for the year,
which is categorised under ‘Revenue’.


Total Comprehensive Income is attributable to :
Year to 30 June 2020 Year to 30 June 2019
Revenue Capital Total
Revenue Capital Total
$’000 $’000 $’000
$’000 $’000 $’000
Equity holders of Australian
Foundation Investment
Company Ltd
239,931 (401,204) (161,273) 405,932 175,368 581,300
Minority Interests 464 - 464 441 - 441

240,395 (401,204) (160,809) 406,373 175,368 581,741



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



10

Consolidated Balance Sheet as at 30 June 2020

2020 2019


Note $’000 $’000

Current assets

Cash D1 111,318 206,429

Receivables 17,347 40,128

Trading portfolio 4,304 -

Total current assets 132,969 246,557

Non-current assets

Investment portfolio A2 7,117,970 7,572,640

Deferred tax assets 872 -

Total non-current assets 7,118,842 7,572,640

Total assets 7,251,811 7,819,197




Current liabilities

Payables 884 932

Tax payable 30,771 17,052

Trading portfolio - 7,033

Provisions 4,765 4,114

Total current liabilities 36,420 29,131

Non-current liabilities

Provisions 1,375 1,471

Deferred tax liabilities - 100

Deferred tax liabilities – investment portfolio B2 973,499 1,163,749

Total non-current liabilities 974,874 1,165,320

Total liabilities 1,011,294 1,194,451




Net Assets 6,240,517 6,624,746


Shareholders' equity


Share capital A1, D6 2,947,243 2,888,136

Revaluation reserve A1, D3 2,166,030 2,561,314

Realised capital gains reserve A1, D4 397,712 462,257

General reserve A1 23,637 23,637

Retained profits A1, D5 705,273 688,244

Parent entity interest 6,239,895 6,623,588

Minority interest 622 1,158

Total equity 6,240,517 6,624,746


This Balance Sheet should be read in conjunction with the accompanying notes.
11

Consolidated Statement of Changes in Equity for the Year Ended 30 June 2020



Note
Share
Capital
Revaluation
Reserve
Realised
Capital
Gains
General
Reserve
Retained
Profits
Total
Parent
Entity

Minority
Interest Total
Year Ended 30 June 2020
$’000 $’000 $’000 $’000
$’000 $’000 $’000 $’000
Total equity at the beginning of the year 2,888,136 2,561,314 462,257 23,637 688,244 6,623,588 1,158 6,624,746
Dividends paid to shareholders A4 - - (58,625) - (222,902) (281,527) - (281,527)
- Dividend Reinvestment Plan D6 59,249 - - - - 59,249 - 59,249
Other share capital adjustments (142) - - - - (142) - (142)
Total transactions with shareholders 59,107 - (58,625) - (222,902) (222,420) - (222,420)


Profit for the year - - - - 239,931 239,931 464 240,395
Other Comprehensive Income (net of tax)
Net losses for the period - (401,204) - - - (401,204) - (401,204)
Other Comprehensive Income for the year

- (401,204) - - - (401,204) - (401,204)
Transfer to Realised Capital Gains of cumulative
losses on investments sold

- 5,920 (5,920) - - - - -
Dividend paid to minority interests by AICS - - - - - - (1,000) (1,000)

Total equity at the end of the year 2,947,243 2,166,030 397,712 23,637 705,273 6,239,895 622 6,240,517

This statement of changes in equity should be read in conjunction with the accompanying notes

12

Consolidated Statement of Changes in Equity for the Year Ended 30 June 2020 (continued)



Note
Share
Capital
Revaluation
Reserve
Realised
Capital
Gains
General
Reserve
Retained
Profits
Total
Parent
Entity

Minority
Interest Total
Year Ended 30 June 2019
$’000 $’000 $’000 $’000
$’000 $’000 $’000 $’000
Total equity at the beginning of the year 2,811,721 2,422,568 448,892 23,637 631,725 6,338,543 717 6,339,260
Dividends paid to shareholders A4 - - (23,257) - (349,413) (372,670) - (372,670)
- Dividend Reinvestment Plan D6 76,556 - - - - 76,556 - 76,556
Other share capital adjustments (141) - - - - (141) - (141)
Total transactions with shareholders 76,415 - (23,257) - (349,413) (296,255) - (296,255)

Profit for the year
- - - -
405,932 405,932 441 406,373
Other Comprehensive Income (net of tax)
Net gains for the period - 175,368 - - - 175,368 - 175,368
Other Comprehensive Income for the year

- 175,368 - - - 175,368 - 175,368
Transfer to Realised Capital Gains of cumulative
gains on investments sold

- (36,622) 36,622 - - - - -
Total equity at the end of the year 2,888,136 2,561,314 462,257 23,637 688,244 6,623,588 1,158 6,624,746


This Statement of Changes in Equity should be read in conjunction with the accompanying notes
13

Consolidated Cash Flow Statement for the Year Ended 30 June 2020


2020 2019

$’000 $’000

Inflows/ Inflows/

Note (Outflows) (Outflow)
Cash flows from operating activities
Sales from trading portfolio 39,663 39,599
Purchases for trading portfolio (25,160) (28,964)
Interest received 1,573 3,663
Dividends and distributions received 255,492 366,436

271,568 380,734


Other receipts 5,095 5,117
Administration expenses (14,403) (14,875)
Finance costs paid (1,047) (826)
Taxes paid (6,578) (18,388)
Net cash inflow/(outflow) from operating activities E1 254,635 351,762


Cash flows from investing activities
Sales from investment portfolio 589,059 810,462
Purchases for investment portfolio (694,841) (752,440)
Taxes paid on capital gains (20,394) (6,406)
Net cash inflow/(outflow) from investing activities (126,176) 51,616


Cash flows from financing activities
Net bank borrowings - (100)
Share issue transaction costs (142) (141)
Dividends paid (223,428) (295,891)
Net cash inflow/(outflow) from financing activities (223,570) (296,132)


Net increase/(decrease) in cash held (95,111) 107,246
Cash at the beginning of the year 206,429 99,183
Cash at the end of the year D1 111,318 206,429

For the purpose of the cash flow statement, ‘cash’ includes cash and deposits held at call.

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

14

Notes to the financial statements
A. Understanding AFIC’s financial performance
A1. How AFIC manages its capital
AFIC’s objective is to provide shareholders with attractive investment returns through access to a growing
stream of fully-franked dividends and enhancement of capital invested.
AFIC recognises that its capital will fluctuate with market conditions. In order to manage those fluctuations, the
Board may adjust the amount of dividends paid, issue new shares, buy back the Company’s shares or sell
assets.
AFIC’s capital consists of its shareholders’ equity plus any net borrowings. A summary of the balances in
equity is provided below:

2020
$’000
2019
$’000

Share capital 2,947,243 2,888,136

Revaluation reserve 2,166,030 2,561,314

Realised capital gains reserve 397,712 462,257

General reserve 23,637 23,637

Retained profits 705,273 688,244


6,239,895 6,623,588


Refer to notes D3-D6 for a reconciliation of movement from period to period for each equity account (except the
General Reserve, which is historical, relates to past profits which can be distributed and has had no
movement).
A2. Investments held and how they are measured
AFIC has two portfolios of securities: the investment portfolio and the trading portfolio.
The investment portfolio holds securities which the company intends to retain on a long-term basis, and
includes a small sub-component over which options may be written. The trading portfolio consist of securities
that are held for short-term trading only, including call option contracts written over securities that are held in
the specific sub-component of the investment portfolio and on occasion put options and is relatively small in
size. The Board has therefore focused the information in this section on the investment portfolio. Details of all
holdings (except for the specific option holdings) as at the end of the reporting period can be found at the end
of the Annual Report.
The balance and composition of the investment portfolio was:
2020
$’000
2019
$’000



Equity instruments (excluding below) at market value 6,661,720 7,072,586

Equity instruments (over which options may be written) 456,250 500,054

7,117,970 7,572,640





15

How investments are shown in the financial statements
The accounting standards set out the following hierarchy for fair value measurement:
Level 1: Quoted prices in active markets for identical assets or liabilities
Level 2: Inputs other than quoted prices, which can be observed either directly (as prices) or indirectly (derived
from prices)
Level 3: Inputs for the asset or liabilities that are not based on observable market data
All financial instruments held by AFIC are classified as Level 1 (other than the options sold by the Company
which are Level 2). Their fair values are initially measured at the costs of acquisition and then remeasured
based on quoted market prices at the end of the reporting period.
Net tangible asset backing per share
The Board regularly reviews the net asset backing per share both before and after provision for deferred tax on
the unrealised gains in AFIC’s long-term investment portfolio. Deferred tax is calculated as set out in note B2.
The relevant amounts as at 30 June 2020 and 30 June 2019 were as follows:










30 June
2020

30 June
2019
Net tangible asset backing per share $ $
Before tax 5.96 6.49
After tax 5.16 5.52
Equity investments
The shares in the investment portfolio are designated under the accounting standards as financial assets
measured at fair value through ‘other comprehensive income’ (“OCI”), because they are equity instruments held
for long-term capital growth and dividend income, rather than to make a profit from their sale. This means that
changes in the value of these shares during the reporting period are included in OCI in the Consolidated
statement of comprehensive income. The cumulative change in value of the shares over time is then recorded
in the Revaluation Reserve. On disposal, the amounts recorded in the revaluation reserve are transferred to the
realisation reserve.
Securities sold and how they are measured
Where securities are sold, any difference between the sale price and the cost is transferred from the
revaluation reserve to the realisation reserve and the amounts noted in the consolidated statement of changes
in equity. This means the Company is able to identify the realised gains out of which it can pay a ‘Listed
Investment Company’ (LIC) gain as part of the dividend, which conveys certain taxation benefits to many of
AFIC’s shareholders.
During the period $584.6 million (2019: $782.0 million) of equity securities were sold. The cumulative loss on
the sale of securities was $5.9 million for the period after tax (2019: $36.6 million gain). This has been
transferred from the revaluation reserve to the realisation reserve (
see Consolidated statement of changes in
equity). These sales were accounted for at the date of trade.







16

A3. Operating income
The total income received from AFIC’s investments in 2020 is set out below.
Dividends and Distributions
2020
$’000
2019
$’000
Income from securities held in investment portfolio at 30 June
242,790 368,629
Income from investment securities sold during the year
15,068 64,269
Income from securities held in trading portfolio at 30 June
- -
Income from trading securities sold during the year
- 111
257,858 433,009

Interest income

Revenue from deposits and cash management trusts 1,554 3 3,615
Other revenue
Administration fees 4,853 4,729
Other income 42 -
4,895 4,729
Dividend income
Distributions from listed securities are recognised as income when those securities are quoted in the market on
an ex-distribution basis. Capital returns on ordinary shares are treated as an adjustment to the carrying value of
the shares.
Trading income
Net gains on the trading and options portfolio are set out below.

2020


2019

Net gains

$’000

$’000
Net realised gains/(losses) from trading portfolio – shares
1,038 140
- options 8,428 (4,055)
Unrealised gains/(losses) from trading portfolio - shares
243 -
- options 31 (771)
9,740 (4,686)
$108.4 million of shares are lodged with the ASX Clear Pty Ltd as collateral for sold option positions written by
the Group (2019: $131.0 million). These shares are lodged with ASX Clear under the terms of ASX Clear Pty
Ltd which require participants in the Exchange Traded Option market to lodge collateral, and are recorded as
part of the Group’s Investment Portfolio
. If all call options were exercised, this would lead to the sale of $32.0
million worth of securities at an agreed price – the ‘exposure’ (2019: $218.4 million). There were no put options
in the portfolio at 30 June (2019 : $4.0 million exposure).

17

A4. Dividends paid
The dividends paid and payable for the year ended 30 June 2020 are shown below:

2020
$’000
2019
$’000
(a) Dividends paid during the year

Final dividend for the year ended 30 June 2019 of 14 cents fully franked at
30% paid 29 August 2019 ( 2019: 14 cents fully franked at 30% paid on 31
August 2018).
164,150 162,800
Interim dividend for the year ended 30 June 2020 of 10 cents per share
fully franked at 30% paid 24 February 2020 (2019: 10 cents fully franked at
30% paid 25 February 2019)
117,377 116,594
Special dividend of 8 cents per share fully franked at 30% paid 25
February 2019
- 93,276

281,527 372,670
Dividends paid in cash
222,278 296,114
Dividends reinvested in shares
59,249 76,556

281,527 372,670
Dividends forgone via DSSP
7,111 7,946
(b) Franking credits

Opening balance of fr anking account at 1 July
182,607 156,187
Franking credits on dividends received
88,920 165,325
Tax paid during the year
26,234 24,221
Franking credits paid on ordinary dividends paid
(120,654) (159,716)
Franking credits deducted on DSSP shares issued
(3,054) (3,410)
Closing Balance of Franking Account
174,053 182,607
Adjustments for tax payable in respect of the current year’s profits and the
receipt of dividends recognised as receivables
33,803 25,702
Adjusted Closing Balance
207,856 208,309
Impact on the franking account of dividends declared but not recognised
as a liability at the end of the financial year:
(72,622) (72,009)
Net available 135,234 136,300
These franking account balances would allow AFIC to frank additional
dividend payments up to an amount of:
315,546 318,033
AFIC’s ability to continue to pay franked dividends is dependent upon the receipt of franked dividends from
the trading and investment portfolios and on AFIC paying tax.





18

(c) New Zealand imputation account
2020
$’000
2019
$’000
(Figures in A$ at year-end exchange rate : 2020 : $NZ1.071:$A1; 2019 : $NZ1.045:$A1)
Opening balance
14,381 7,356
Imputation credits on dividends received
7,187 7,384
Imputation credits on dividends paid
(13,074) -
Closing balance
8,494 14,740
There will be no NZ imputation credit attached to the proposed dividend payable on 1 September 2020.
(d ) Dividends declared after balance date
Since the end of the year Directors have declared a final dividend of 14 cents per share fully franked at 30%.
The aggregate amount of the final dividend for the year to 30 June 2020 to be paid on 1 September 2020, but
not recognised as a liability at the end of the financial year is:
169,451

(e ) Listed Investment Company capital gain account
2020
$’000
2019
$’000
Balance of the Listed Investment Company (LIC) capital gain account: 62,912 63,335
This equates to an attributable gain of: 89,874 90,478

Distributed LIC capital gains may entitle certain shareholders to a deduction in their tax return, as set out in
the dividend statement. LIC capital gains available for distribution are dependent on the disposal of
investment portfolio holdings that qualify for LIC capital gains, or the receipt of LIC distributions from LIC
securities held in the portfolios. $86.5 million attributable gain is attached to the final dividend to be paid on
1
st
September 2020.

A5. Earnings per share
The table below shows the earnings per share based on the
profit for the year:
2020 2019

Basic Earnings per share Number Number

Weighted average number of ordinary shares used as the
denominator
1,206,707,394 1,193,810,502




$’000 $’000
Profit for the year 239,931 405,932



Cents Cents
Basic earnings per share








19.88 34.00

19

B. Costs, Tax and Risk
B1. Management Costs
The total management expenses for the period are as follows:

2020
$’000
2019
$’000


Rental expense relating to non-cancellable leases (699) (698)
Employee benefit expenses (8,587) (8,039)
Depreciation charge - -
Other administration expenses
(5,473) (5,575)

(14,759) (14,312)
Employee benefit expenses
A major component of employee benefit expenses is Directors’ and Executives’ remuneration. This has been
summarised below:

Short-term


Other Long Term


Post-employment


Share-based


Total

$ $ $ $ $

2020
Non-executive
Directors 716,550 - 63,450 - 780,000
Executives 2,755,048 (100,800) 98,858 166,650 2,919,756
Total 3,471,598 (100,800) 162,308 166,650 3,699,756
2019
Non-executive
Directors 692,379 - 65,776 - 758,155
Executives 2,686,935 (57,025) 96,899 77,662 2,804,471
Total 3,379,314 (57,025) 162,675 77,662 3,562,626

Detailed remuneration disclosures are provided in the Remuneration Report.

The above figures include share-based expenses incurred in respect of Ross Barker, former Managing
Director, who is still eligible for vesting under these plans.

The Group (i.e. AFIC and its subsidiary, Australian Investment Company Services (”AICS”) – see Note F8)
does not make loans to Directors or Executives.






20

B2. Tax
AFIC’s tax position, and how it accounts for tax, is explained here. Detailed reconciliations of tax accounting to
the financial statements can be found in note E2.
The income tax expense for the period is the tax payable on this financial year’s taxable income, adjusted for
any changes in deferred tax assets and liabilities attributable to temporary differences and for any unused tax
losses. Deferred tax assets and liabilities (except for those related to the unrealised gains or losses in the
investment portfolio) are offset, as all current and deferred taxes relate to the Australian Taxation Office and
can legally be settled on a net basis.
A provision has been made for taxes on any unrealised gains or losses on securities valued at fair value
through the Income Statement – i.e. the trading portfolio, puttable instruments and convertible notes that are
classified as debt.
A provision also has to be made for any taxes that could arise on sale of securities in the investment portfolio,
even though there is no intention to dispose of them. Where AFIC disposes of such securities, tax is calculated
according to the particular parcels allocated to the sale for tax purposes, offset against any capital losses
carried forward.
Tax expense
The income tax expense for the period is shown below:
(a) Reconciliation of income tax expense to prima facie tax payable


2020
$’000
2019
$’000
Profit before income tax expense 258,241 421,529
Tax at the Australian tax rate of 30% (2019: 30%) 77,472 126,459
Tax offset for franked dividends received (61,344) (115,510)
Off-market buy-back income not included in profit - 15,097
Demerger dividend non-taxable - (13,089)
Sundry items whose tax treatment differs from accounting treatment 4,171 4,331

20,299 17,288
Over provision in prior years (2,453) (2,132)


Total tax expense 17,846 15,156

Deferred tax liabilities – investment portfolio
The accounting standards require us to recognise a deferred tax liability for the potential capital gains tax on
the unrealised gain in the investment portfolio. This amount is shown in the Balance Sheet. However, the
Board does not intend to sell the investment portfolio, so this tax liability is unlikely to arise at this amount. Any
sale of securities would also be affected by any changes in capital gains tax legislation or tax rate applicable to
such gains when they are sold.

2020
$’000
2019
$’000
Deferred tax liabilities on unrealised gains in the investment portfolio 973,499 1,163,749
Opening balance at 1 July 1,163,749 1,097,527
Tax on realised gains (22,648) (20,394)
Charged to OCI for ordinary securities on gains or losses for the period (167,602) 86,616
973,499 1,163,749
21

B3. Risk
Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of
changes in market prices.
As a Listed Investment Company that invests in tradeable securities, AFIC can never be free of market risk as it
invests its capital in securities which are not risk free – the market price of these securities will fluctuate.
A general fall in market prices of 5% and 10%, if spread equally over all assets in the investment portfolio,
would have led to a reduction in AFIC’s comprehensive income of $249.1 million and $498.3 million
respectively, at a tax rate of 30% (2019: $265.0 million & $530.1 million).
AFIC seeks to reduce market risk at the investment portfolio level by ensuring that it is not, in the opinion of the
Investment Committee, overly exposed to one company or one particular sector of the market. The relative
weightings of the individual securities and the relevant market sectors are reviewed by the Investment
Committee and risk can be managed by reducing exposure where necessary. AFIC does not have a minimum
or maximum amount of the portfolio that can be invested in a single company or sector.

AFIC’s total investment exposure by sector is as below:

2020 2019

% %
Energy 3.01 4.28
Materials 15.76 17.50
Industrials 15.88 15.17
Consumer Discretionary 5.98 4.37
Consumer Staples 4.60 5.06
Banks 17.16 21.80
Other Financials 8.26 9.73
Property Trusts 1.74 0.71
Telecommunications 4.42 3.61
Health Care 16.62 10.86
Info Technology 4.00 3.01
Utilities 1.03 1.25
Cash 1.54 2.65

Securities representing over 5% of the investment portfolio at 30 June
were
CSL 8.5 5.8
Commonwealth Bank 7.7 8.6
BHP 7.0 7.3

AFIC is also not directly exposed to material currency risk as most of its investments are quoted in Australian
dollars.

The writing of call options provides some protection against a fall in market prices as it generates income to
partially compensate for a fall in capital values. Options are only written against securities that are held in the
trading or the specific sub-section of the investment portfolio.




22

Interest Rate Risk

The Group is not currently materially exposed to interest rate risk as all its cash investments and borrowings
are short term for a fixed interest rate.

Credit risk
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by
failing to discharge an obligation. AFIC is exposed to credit risk from cash, receivables, securities in the trading
portfolio and securities in the investment portfolio respectively. None of these assets are overdue. The risk in
relation to each of these items is set out below.
Cash
All cash investments not held in a transactional account are invested in short-term deposits with Australia’s “Big
4” commercial banks or in cash management trusts which invest predominantly in short-term securities with an
A1+ rating. In the unlikely event of a bank default or default on the underlying securities in the cash trust, there
is a risk of losing the cash deposits and any accrued unpaid interest.
Receivables
Outstanding settlements are on the terms operating in the securities industry, which usually require settlement
within two days of the date of a transaction. Receivables are non-interest bearing and unsecured. In the event
of a payment default, there is a risk of losing any difference between the price of the securities sold and the
price of the recovered securities from the discontinued sale. Receivables also include dividends from securities
that have passed the record date for the distribution but have not paid as at the current date.
Trading and investment portfolios
Converting and convertible notes or other interest-bearing securities that are not equity securities carry credit
risk to the extent of their carrying value. This risk will be realised in the event of a shortfall on winding-up of the
issuing companies.
Liquidity risk
Liquidity risk is the risk that an entity will not be able to meet its financial liabilities.
AFIC monitors its cash-flow requirements daily. The Investment Committee also monitors the level of
contingent payments on a regular basis by reference to known sales and purchases of securities, dividends
and distributions to be paid or received, put options that may require AFIC to purchase securities, and facilities
that need to be repaid. AFIC ensures that it has either cash or access to short-term borrowing facilities
sufficient to meet these contingent payments.
AFIC’s inward cash flows depend upon the dividends received. Should these drop by a material amount, AFIC
would amend its outward cash-flows accordingly. AFIC’s major cash outflows are the purchase of securities
and dividends paid to shareholders, and both of these can be adjusted by the Board and management.
Furthermore, the assets of AFIC are largely in the form of readily tradeable securities which can be sold on-
market if necessary.
The table below analyses AFIC’s financial liabilities into relevant maturity groupings. The amounts disclosed in
the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying
amounts as the impact of discounting is not significant.





23

30 June 2020
Less than
6 months
6- 12
months
Greater
than 1
year
Total
contractual
cash flows
Carrying
Amount

$’000 $’000 $’000 $’000 $’000
Non-derivatives
Payables
884
- - 884 884

884 - - 884 884
Derivatives
Options in trading portfolio* - - - - -
- - - - -

30 June 2019 Less than 6
months
6- 12
months
Greater
than 1
year
Total
contractual
cash flows
Carrying
Amount

$’000 $’000 $’000 $’000 $’000
Non-derivatives
Payables 932 - - 932 932
932 - - 932 932
Derivatives
Options in trading portfolio* 3,963 - - 3,963 7,033

3,963 - - 3,963 7,033
* In the case of call options, there are no contractual cash flows as if the option is exercised the contract will be
settled in the securities over which the option is written. The contractual cash flows for put options written are
the cash sums the Company will pay to acquire securities over which the options have been written, and it is
assumed for purpose of the above disclosure that all options will be exercised (i.e. maximum cash outflow).

C. Unrecognised items
Unrecognised items, such as contingencies, do not appear in the financial statements, usually because they
don’t meet the requirements for recognition. However, they have the potential to have a significant impact on
the group’s financial position and performance.
C1. Contingencies
Directors are not aware of any material contingent liabilities or contingent assets other than those already
disclosed elsewhere in the financial report.

24

Further information that shareholder may find useful is included here. It is grouped into three sections:

D Balance sheet reconciliations
E Income statement reconciliations
F Further information

D. Balance sheet reconciliations
These Notes provide further information about the basis of calculation of line items in the financial statements.
D1. Current assets – cash

2020
$’000
2019
$’000

Cash at bank and in hand (including on-call) 111,318 201,429

Fixed term deposits - 5,000


111,318 206,429

Cash holdings yielded an average floating interest rate of 1.02% (2019: 2.07%). All cash investments are held
in a transactional account or an over-night ‘at call’ account invested in cash management trusts which invest
predominantly in short-term securities with an A1+ rating.

D2. Credit Facilities
2020
$’000
2019
$’000

Commonwealth Bank of Australia – cash advance facilities 250,000 140,000
Amount drawn down - -
Undrawn facilities
250,000 140,000

The above borrowings are unsecured. Repayment of facilities is done either through the use of cash received
from distributions or the sale of securities, or by rolling existing facilities into new ones. Facilities are usually
drawn down for no more than three months.










25

D3. Revaluation reserve

2020
$’000
2019
$’000

Opening balance at 1 July 2,561,314 2,422,568

Gains/(losses) on investment portfolio

- Equity Instruments (568,806) 261,984

Provision for tax on above 167,602 (86,616)

Cumulative taxable realised (gains)/losses (net of tax) 5,920 (36,622)

2,166,030 2,561,314


This reserve is used to record increments and decrements on the revaluation of the investment portfolio
as described in accounting policy note A2.


D4. Realised capital gains reserve




Opening balance at 1 July 462,257 448,892

Dividends paid (58,625) (23,257)
Cumulative taxable realised gains/(losses) for period through OCI (net
of tax) (5,920)

36,622

397,712 462,257

This reserve records gains or losses after applicable taxation arising from disposal of securities in the
investment portfolio as described in A2.

D5. Retained profits




Opening balance at 1 July 688,244

631,725

Dividends paid (222,902) (349,413)

Profit for the year 239,931 405,932

705,273 688,244

This reserve relates to past profits.










26

D6. Share capital


Movements in Share Capital

Date Details Notes Number
of shares

Issue
price
Paid-up
Capital

’000 $ $’000
1/07/2018 Balance 1,186,147
2,811,721
31/08/2018 Dividend Reinvestment Plan i 5,356 6.18 33,100
31/08/2018
Dividend Substitution Share
Plan
ii 526
6.18 n/a
25/02/2019 Dividend Reinvestment Plan i 7,328
5.93 43,456
25/02/2019
Dividend Substitution Share
Plan
ii 791
5.93 n/a
Various Costs of issue -
- (141)
30/06/2019 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
24/02/2020 Dividend Reinvestment Plan i 3,585
6.93 24,842
24/02/2020
Dividend Substitution Share
Plan
ii 468
6.93 n/a
Various Costs of issue -
- (142)
30/06/2020 Balance 1,210,364
2,947,243
i. Shareholders elect to have all or part of their dividend payment reinvested in new ordinary shares under
the Dividend Reinvestment Plan (DRP). The price of the new DRP shares is based on the average selling
price of shares traded on the Australian Securities Exchange & Chi-X in the five days after the shares
begin trading on an ex-dividend basis.
ii. The Group has a Dividend Substitution Share Plan (DSSP) whereby shareholders may elect to forgo a
dividend and receive shares instead. Pricing for the DSSP shares is done as per the DRP shares.
iii. The Group has an on-market share buy-back programme. During the financial year, no shares were
bought back (2019: Nil).
All shares have been fully paid, rank pari passu and have no par value.












27

E. Income statement reconciliations
E1. Reconciliation of net cash flows from operating activities to profit

2020
$’000
2019
$’000
Profit for the year 240,395
406,373
Net decrease/(increase) in trading portfolio (11,337) 276
Dividends received as securities under DRP investments (8,355)
(16,848)
Coles demerger dividend – non-cash item -
(43,629)
Decrease/(increase) in current receivables 22,781
37,106
- Less increase/(decrease) in receivables for investment portfolio -
(27,495)
Increase/(decrease) in deferred tax liabilities (191,222)
67,579
- Less (increase)/decrease in deferred tax liability on investment portfolio 190,250
(66,222)
Increase/(decrease) in current payables (48)
220
- Less increase/(decrease) in dividends payable 151
(223)
Increase/(decrease) in provision for tax payable 13,719
8,807
Capital gains tax charge taken through equity (22,648)
(20,394)
Prior year taxes paid relating to capital gains 20,394
6,406
Increase/(decrease) in other provisions/non-cash items 555
(194)
Net cash flows from operating activities 254,635
351,762

E2. Tax reconciliations

Tax expense composition

Charge for tax payable relating to the current year 21,271 15,931
Over provision in prior years (2,453) (2,132)
(Increase)/Decrease in deferred tax assets (972) 1,357

17,846 15,156

Amounts recognised directly through Other Comprehensive Income

Net movement in deferred tax liabilities relating to capital gains tax
on the movement in gains in the investment portfolio
(167,602) 86,616

(167,602) 86,616







28

Deferred tax assets & liabilities
The deferred tax balances are attributable to:
2020
$’000
2019
$’000

(a) Tax on unrealised gains or losses in the trading portfolio (82) 231

(b)
Provisions and expenses charged to the accounting profit
which are not yet tax deductible
1,849 1,680

(c)
Interest and dividend income receivable which is not
assessable for tax until receipt
(895) (2,011)


872 (100)


Movements:

Opening balance at 1 July (100) 1,257

Credited/(charged) to Income statement 972 (1,357)


872 (100)

Deferred tax assets arise when provisions and expenses have been charged but are not yet tax deductible.
These assets are realised when the relevant items become tax deductible, as long as enough taxable income
has been generated to claim the assets against, and as long as there are no changes to the tax legislation that
affect AFIC’s ability to claim the deduction.

29

F. Further information
This section covers information that is not directly related to specific line items in the financial statements,
including information about related party transactions, share-based payments, assets pledged as security and
other statutory information.
F1. Related parties
All transactions with deemed related parties were made on normal commercial terms and conditions and
approved by independent Directors.
(a) Arrangements with non-executive directors
Non-Executive Directors R Barker, J Paterson and C Walter have rented office space and, for R Barker and J
Paterson, a parking space from the Group at commercial rates during the year. Sub-lease rental income
(included in revenue) received or receivable by the Group, excluding GST, during the year was $ 62,265 (2019:
$61,275).
(b) AICS transactions with minority interests
The below transactions were with Djerriwarrh Investments Ltd as a minority interest holder in the Company’s subsidiary.

2020
$’000
2019
$’000
Administration expenses charged for the year 2,634 2,515
(c) AICS transactions with other Listed Investment Companies
AICS had the following transactions with other Listed Investment Companies to which it provides services :

Administration expenses charged for the year to Mirrabooka Investments Ltd 1,454 1,382
Administration expenses charged for the year to AMCIL Ltd 839
906
F2. Remuneration of auditors
For the year the auditor earned or will earn the following remuneration:

2020
$

2019
$
PricewaterhouseCoopers
Audit Services
Audit or review of financial reports 202,815 195,987
Audit related Services
AFSL compliance audit and review 8,168 7,998
Non-Audit Services
Taxation compliance services 32,293 30,670

Total remuneration 243,276 234,655



30

F3. Segment reporting
Operating segments are reported in a manner consistent with the internal reporting used by the chief operating
decision-maker. The Board, through its sub-committees, has been identified as the chief operating decision-
maker, as it is responsible for allocating resources and assessing performance of the operating segments.
Description of segments
The Board makes the strategic resource allocations for AFIC. AFIC has therefore determined the operating
segments based on the reports reviewed by the Board, which are used to make strategic decisions.
The Board is responsible for AFIC’s entire portfolio of investments and considers the business to have a single
operating segment. The Board’s asset allocation decisions are based on a single, integrated investment
strategy, and AFIC’s performance is evaluated on an overall basis.
Segment information provided to the Board
The internal reporting provided to the Board for AFIC’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
AFIC’s Net Tangible Asset announcements to the ASX).
Other segment information
Revenues from external parties are derived from the receipt of dividend, distribution and interest income, and
income arising on the trading portfolio and realised income from the options portfolio.
AFIC is domiciled in Australia and most of AFIC’s income is derived from Australian entities or entities that
maintain a listing in Australia. AFIC has a diversified portfolio of investments, with only 2 investments
comprising more than 10% of AFIC’s income , including realised income from the trading and options written
portfolios – Commonwealth Bank ( 12.4%) and BHP (10.5%) ( 2019 as a consequence of buy-backs and
demerger dividends 3 investments : Wesfarmers (14.9%), Rio Tinto (13.1%) and BHP (11.9%)).
F4. Summary of other accounting policies
This general purpose financial report has been prepared in accordance with Australian Accounting Standards,
Interpretations issued by the Australian Accounting Standards Board and the Corporations Act 2001. This
financial report has been authorised for issue on 27 July 2020 in accordance with a resolution of the Board and
is presented in the Australian currency. The Directors of the Company have the power to amend and reissue
the financial report.
AFIC has attempted to improve the transparency of its reporting by adopting ‘plain English’ where possible. Key
‘plain English’ phrases and their equivalent AASB terminology are as follows:
Phrase AASB Terminology
Market Value Fair Value for Actively Traded Securities
Cash Cash & Cash Equivalents
Share Capital Contributed Equity
Options

Hybrids
Derivatives written over equity instruments that are
valued at fair value through Profit or Loss
Equity instruments that have some of the
characteristics of debt


AFIC complies with International Financial Reporting Standards (IFRS). AFIC is a ‘for profit’ entity.
AFIC has not applied any Australian Accounting Standards or AASB Interpretations that have been issued as at
balance date but are not yet operative for the year ended 30 June 2020 (“the inoperative standards”). The
impact of the inoperative standards has been assessed and the impact has been identified as not being
material. AFIC only intends to adopt other inoperative standards at the date at which their adoption becomes
mandatory.

31

Basis of accounting
The financial statements are prepared using the valuation methods described in A2. All other items have been
treated in accordance with the historical cost convention.
Fair value of financial assets and liabilities
The fair value of cash and non-interest bearing monetary financial assets and liabilities of AFIC approximates
their carrying value.
Convertible Notes
On the issue of convertible notes, the Group estimates the fair value of the liability component of the convertible
notes, being the obligation to make future payments of principal and interest to holders, using a market interest
rate for a non-convertible note of similar terms and conditions. The residual amount is included in equity as
other equity securities with no recognition of any change in the value of the option in subsequent periods. The
liability component is then included in borrowings. Expenses incurred in connection with the issue of the notes
are deducted from the total face value and the expense is then incurred over the life of the notes.
The total liability is subsequently carried on an amortised cost basis with interest on the notes recognised as
finance costs on an effective yield basis until the liability is extinguished on conversion or maturity of the notes.
Employee benefits
(i) Wages, salaries and annual leave
Liabilities for wages and salaries, including annual leave, expected to be settled within 12 months of balance
date are recognised as current provisions in respect of employees’ services up to balance date and are
measured at the amounts expected to be paid when the liabilities are settled.
(ii) Long service leave
In calculating the value of long service leave, consideration is given to expected future wage and salary levels,
experience of employee departures and periods of service. Expected future payments are discounted using
market yields at balance date on national government bonds with terms to maturity and currency that match, as
closely as possible, the estimated future cash outflows.
(iii) Cash incentives
Cash incentives are provided under the Executive Annual Incentive Plan and are dependent upon the
performance of the Group. A provision is made for the cost of unsettled cash incentives at balance date. The
Investment Team Annual Incentive plans are also settled on a cash basis.
(iv) Share incentives
Share incentives are provided under the Executive Annual Incentive Plan, Executive Long Term Incentive Plan,
Investment Team Long Term Incentive Plan and the Employee Share Acquisition Scheme.
For the Employee Share Acquisition Scheme and the Executive Annual Incentive Plan, the incentives are
based on the performance of the individual, the Group and investment companies to which the group provides
administration services, for the financial year. For the Employee Share Acquisition Scheme and a portion of
the Executive Annual Incentive, the recipient agrees to purchase (or have purchased for them) shares on-
market, but receives a cash amount. A provision for the amount payable under the Annual Incentive Plans is
recognised on the Balance Sheet.
For the Investment Team Long Term Incentive Plan, the incentives are based on the performance of the Group
and investment companies to which the group provides administration services over a four year period. The
incentives may be settled in shares (but based on a cash amount) or cash. Historically, all awards have been
cash. Expenses are recognised over the four year assessment period based on the amount expected to be
payable under this plan, resulting in a provision for incentive payable being built up on the balance sheet over
the assessment period.
Under the Executive Long Term Incentive Plan which was introduced for the year ended 30 June 2013, the
amount awarded is represented by Performance Shares. The 30 day Volume Weighted Average Price (VWAP)
of AFIC shares up to but not including 1 July is calculated. The amount of ELTIP available is then divided by
32

this 30-day VWAP price to determine the number of Performance Shares that may vest at the vesting point in 4
years’ time. The value of each Performance Shares will be adjusted by the accumulation return on the AFI
share price (being the movement in the share price assuming the reinvestment of any dividends) up to vesting
date, based on a final share price calculated on the 30-day VWAP price up to 30 June. No shares vested
during the year ended 30 June 2020.

The expense will be charged directly through the Income Statement in the following manner – 25% of the total
estimated cost in Year 1, 50% of the total estimated cost in Year 2 less the expense charged in Year 1, 75% of
the total estimated cost in Year 3 less the expense charged in Years 1 and 2 and 100% of the total estimated
cost in Year 4 less the expense charged in Years 1, 2 and 3.
Directors’ retirement allowances
The Group recognises as ‘amounts payable’ Directors’ retirement allowances that have been crystallised. No
further amounts will be expensed as retirement allowances.
Administration fees
The Group currently provides administrative services to other Listed Investment Companies. The associated
fees are recognised on an accruals basis as income throughout the year. Any amounts outstanding at balance
date are recognised as receivable, subject to the assessment of recoverability by the Directors.
Operating leases
The Group currently has an operating lease in respect of its premises. Payments made under operating leases
are charged to the Income Statement on a straight-line basis over the period of the lease.
Rounding of amounts
AFIC is a company of the kind referred to in the ASIC Corporations (Rounding in Financial/Directors’ Reports)
Instrument 2016/191, relating to the ‘rounding off’ of amounts in the financial report. Amounts in the financial
report have been rounded off in accordance with that Instrument, to the nearest thousand dollars, or in certain
cases, to the nearest dollar.

F5. Performance Bond
The Group’s subsidiary, AICS, has under the terms of its Australian Financial Services License in place a
performance bond to the sum of $20,000 underwritten by the Commonwealth Bank of Australia in favour of the
Australian Securities and Investments Commission (“ASIC”), payable on demand to ASIC.

F6. Share Based Payments
Share based payments
The Group has a number of share incentive arrangements. T hese are accounted for in accordance with note
F4. Where shares are issued to employees of AICS, AICS compensates AFIC for the fair value of the shares.

(a) Executive Incentive Plans
The executives’ remuneration arrangements incorporate an ‘at risk’ component as set out in the remuneration
report. Part of this ‘at risk’ component is paid in shares in the Group.
(i) Executive Annual Incentive Plan
Each financial year, the Remuneration Committee sets the target (cash) amount of remuneration that could be
paid should all performance targets and measures be achieved. If all are achieved, 100% of the remuneration
will be awarded. If stretch levels of performance are achieved above target, then higher amounts may be paid.
On the other hand there is no set minimum that will be paid regardless of performance.
The performance measures are a combination of the performance of the Group, the investment companies to
which the Group provides administration services, and personal objectives.
All of the incentive remuneration awarded is paid in cash, with 50% of the after-tax amount being used by the
executive to purchase shares. All remuneration under the plan, is paid in the financial year following the year of
assessment.
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The executive agrees to the shares being subject to being held for two years (holding term), during which they
cannot be sold. Dividends are paid to executives on these shares prior to the expiry of the holding term.
Should an executive leave the Group before the holding term expires, the restriction will be lifted.
9,609 shares (2019: 13,619 shares) were purchased by executives in the year (in relation to the prior year) with
a fair value (being the acquisition price) of $81,835 (2019: $84,147).
(ii) Executive Long Term Incentive Plan
Under the Executive Long Term Incentive Plan, the amount awarded will be represented by Performance
Rights. The 30 day Volume Weighted Average Price (VWAP) of AFIC shares up to but not including 1 July will
be calculated. The amount of ELTIP available will then be divided by this 30-day VWAP price to determine the
number of Performance Rights that may vest at the vesting point in four years’ time. The value of each
Performance Right will be adjusted by the accumulation return on the AFI share price (being the movement in
the share price assuming the reinvestment of any dividends) up to vesting date, based on a final share price
calculated on the 30-day VWAP price up to 30 June.
The estimated fair value of the award will be calculated in accordance with AASB 2 – Share Based Payments
at the end of each year until the final year of vesting. The liability shown after the final year of vesting will
represent the actual amount being paid to eligible employees as a cash-settled share-based payment.
65,198 rights were awarded under the plan during the year ended 30 June 2020 (2019: 6 4,201). An expense
of $462,267 (2019: $494,042) was incurred for the 2016/17, 2017/18, 2018/19 and 2019/20 plans. 57,089 rights
under the 2015/16 plan were forfeited during the year (100%).
(iii) Investment Team Long Term Incentive Plan
Similar to the Annual Incentive Plans, a target cash amount of long term incentive is set each year in respect of
that year, which will vest in four years’ time. The percentage of this target that ultimately vests four years after
the award depends on the gross return of the group and the investment companies it provides administration
services to.
The amount that vests will be paid in cash or shares (purchased on market at that time, based on the cash
amount that vests) at the discretion of the Group.
No LTIP vested in the period (2019 $Nil).
(b) Employee Share Acquisition Scheme
Under the current Employee Share Acquisition Scheme, each employee who is not a participant in the
executive or investment team incentive plans is awarded $5,000 per annum. After PAYG is deducted, $2,500
is used to buy shares in the Company which need to be held for three years. After three years, or the
departure of the employee from employment with the Group, the shares come out of the holding lock.
In addition, each employee is eligible for an additional award of up to $5,000. 50% of the amount awarded is
used to buy shares in one of the other LICs that AICS provides services to. The amount that is awarded is
dependent on the metrics used for the vesting of the Investment Team’s Short Term Incentive (excluding
personal measures). During the year, 28% of the possible maximum was awarded, and 50% of this was used
to buy shares in Mirrabooka Investments Limited.
(c) Expenses arising from share based payment transactions
Total expenses arising from share based payment transactions recognised during the period as part of the
employee benefit expense (excluding any reversals and the Investment Team Long Term Incentive Plan) were
as follows:

2020
$’000
2019
$’000
Share-based payment expense 507 542

(d) Liability
The total liability arising from share based payment transactions is included in the current and non-current
liabilities for ‘provisions’.


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F7. Principles of consolidation
AFIC’s consolidated financial statements consist of the financial statements of AFIC, the parent, and its
subsidiary, Australian Investment Company Services Ltd (“AICS”). 25% of AICS is owned by Djerriwarrh
Investments Ltd, another investment company for which AICS performs operational and investment
administration services, and for which it is paid monthly.
No subsidiaries were acquired or disposed of during the year. Intercompany transactions and balances
between AFIC and AICS are eliminated on consolidation.
The financial information for the parent entity, disclosed in F10 below, has been prepared on the same basis as
the consolidated financial statements. All notes are for the consolidated group unless specifically noted
otherwise.

F8. Subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries:
Name of entity Country of
Incorporation
Class of
shares
Equity holding
2020 2019

Australian Investment Company Services
Ltd

Australia

Ordinary

75%

75%
The investment in AICS is accounted for at cost in the individual financial statements of AFIC.
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F9. Parent Entity Financial Information

Summary financial information
The individual financial statements for the parent entity show the following aggregate amounts:

2020 2019
$'000 $'000
Balance sheet

Current assets 125,705 230,698
Total assets 7,243,674 7,803,337

Current liabilities 30,965 17,487
Total liabilities 1,005,486 1,183,065

Shareholders’ equity

Issued capital 2,947,243 2,888,136

Reserves
Revaluation reserve 2,166,030 2,561,314
Realised capital gains reserve 397,712 462,257
General reserve 23,637 23,637
Retained earnings 703,566 684,928
3,290,945 3,732,136

Total shareholders’ equity 6,238,188 6,620,272

Profit or loss for the year 238,539 404,609

Total comprehensive income (162,665) 579,977

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