Preliminary Final Report

Australian Foundation Investment Company Limited Page 1 of 7
Appendix 4E Statement
for the Full Year Ending
30 June 2022
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

Australian Foundation Investment Company Limited Page 2 of 7
Results for Announcement to the Market
The reporting period is the year ended 30 June 2022 with the prior corresponding period being the year
ended 30 June 2021.
This report is based on financial statements that are in the process of being audited.
Results for Announcement to the Market
> Net Profit was $360.6 million, up 53.4% from
the prior year.
> Net Profit attributable to members (excludin
g
mi
nority interests) was $360.5 million,
up 53.6% from the prior year.
> Revenue from operating activities was
$393.4 million, up 49.7% from the prior year.
> The Management Expense Ratio (“MER”)
calculated as the net expenses of managi
ng
t
he Company as a percentage of the averag
e
v
alue of its investments including cash over th
e
y
ear, was 0.16% for the year (2021: 0.14%).
> Net tangible assets per share as at 30 J
une
202
2, before allowing for the final dividend,
were $6.63 per share before allowing for t
he
pr
ovision for deferred tax on unrealised gains
in the investment portfolio (2021: $7.45).
> A fully-franked final dividend of 14 cents per
share, the same as last year’s final dividend,
will be paid on 30 August 2022 to shareholders
on the register on 11 August 2022. The shares
are expected to trade ex-dividend on 10 August
2022. There is no conduit foreign incom
e
c
omponent of the dividend.
> NZ 3.5 cents of the final dividend carries
a
N
ew Zealand imputation credit.
> The Board has elected to source 10 cents per
share of the final dividend from capital gains,
on which the Group has paid or will pay tax.
The amount of this pre-tax attributable gain,
known as an “LIC capital gain”, equals 1 4.
29
c
ents per share. This enables som
e
s
hareholders to claim a tax deduction in their
tax return. Further details will be on t
he
di
vidend statements.
> The interim dividend of 10 cents per share was
paid to shareholders on 25 February 2022.
> The total dividend for the financial year is
therefore 24 cents per share, fully-franked.
Total dividends last year were also 24 cents.
> A Dividend Reinvestment Plan (DRP)
and
D
ividend Substitution Share Plan (DSSP) are
available, the price for both will be set at
a
5.
0% discount to the Volume Weight
ed
A
verage Price of the Company’s shares
traded on the ASX and Cboe automate
d
t
rading systems over the five trading days
after the shares trade ex-dividend. Notices
of participation in the DRP and the DSSP need
to be received by the share registry by 5pm
(AEST) on 12 August 2022. All shares issued
under the DRP and DSSP will rank equally
with existing shares.
> The Company will be providing a briefing
on
t
hese results via a webcast for shareholders
on Tuesday 26 July 2022 at 3.30pm (AEST).
Details are on the website afi.com.au.
> The 2022 AGM will be held at 10.00am
on
T
uesday 4 October. Further details on how
to participate will be sent to shareholders.
2

Australian Foundation Investment Company Limited Page 3 of 7
Long term performance remains sound despite recent
dislocation in markets, final dividend maintained
Full-Year Report to 30 June 2022
AFIC’s investment focus is on a diversified portfolio of Australian equities, seeking to
provide attractive income and capital growth to shareholders over the medium to long
term. This is achieved at a low cost, with lower volatility than the market, and with low
portfolio turnover which produces tax-e ffective outcomes for shareholders. AFIC’s
management expense ratio is 0.16% with no performance fees.
The Full Year Profit was $360.6 million, up from $235.1 million in the previous corresponding period. The
profit to 30 June 2022 includes a dividend of $74.9 million (which was non-cash but carries franking credits
with it) resulting from the BHP Petroleum/Woodside merger. Last year’s figure included a demerger
dividend of $36.5 million resulting from the Endeavour Group demerger from Woolworths. Excluding both
one-offs, t he Full-Year Profit for the financial year to 30 June 2022 was $ 285.7 million, up from $198.6
million in the previous corresponding period. The increase in profit for the 2021/22 financial year was
driven by higher dividends received from investee companies.
Earnings per share for the financial year, excluding the BHP Petroleum/Woodside merger non-cash
dividend, were 23.3 cents per share. The final dividend was maintained at 14 cents per share fully franked
bringing total fully franked dividends applicable for the year to 24 cents per share, the same as last year.
Activity in the portfolio was focused primarily on increasing exposure to existing holdings. These
purchases w ere funded through the sale of positions because of takeovers, where companies in our
assessment face emerging significant structural industry challenges or because competitive intensity has
materially increased.
Short-term portfolio performance was impacted by adjustments in the market resulting from geopolitical
events and rising interest rates which produced a fall in many growth companies trading on high
valuations. These conditions also produced fluctuations in the more cyclical stocks, where AFIC is
generally underweight given its long-term investment focus. Portfolio return for the year was negative
6.8%, including franking. The return for the S&P/ASX 200 Accumulation Index, was negative 5.1%,
including franking. Over 10 years, the corresponding figures are 10.5% per annum for AFIC and 10.9% per
annum for the Index. AFIC’s performance returns are after costs.
Portfolio return (including the full benefit of franking and after costs) – per annum to 30 June 2022


3

Australian Foundation Investment Company Limited Page 4 of 7
Market Commentary
The Australian share market enjoyed strong
positive returns in the first six months of the
financial year as interest rates remained low and
valuations for many companies were very high.
These conditions were eventually overwhelmed in
the second half of the financial year as inflation
emerged, eventually driving interest rates higher.
Geopolitical events further exacerbated market
volatility producing a significant divergence of
returns across the market.
Overall, the S&P/ASX 200 Accumulation Index
(including franking) fell 5.1% over the 12 months to
30 June 2022 as there was a rotation away from
quality growth stocks to a focus on short term
value. The previously underperforming Utilities
sector was up 36.0% over the period and Energy,
which responded to rising oil prices resulting from
Russia’s invasion of the Ukraine, was up 30.1%
The portfolio had a negative return of 6.8%
including franking, with the largest drag on
performance being the decline in the valuation of
many high-quality companies from their previous
very high levels. We remain convinced about the
prospects for these companies despite the recent
decline in share prices. The underweight position in
resources, which includes energy stocks also
negatively impacted relative performance.
Companies in the portfolio that performed relatively
well against the Index through the 12-month period
were Amcor, Sydney Airport (now taken over),
Transurban Group, Ramsay Health Care, which is
currently subject to an expression of interest offer,
Macquarie Group and Computershare.
The long-term performance of the portfolio, which
is better aligned with the Company’s investment
timeframes, was 10.5% per annum for the 10 years
to 30 June 2022. The Index return over the same
period was 10.9% per annum. These figures
include the benefit of franking. AFIC’s performance
numbers are after costs.
Portfolio Adjustments
The majority of purchases during the year focused
on increasing weightings to existing holdings
including Transurban Group, CSL, Domino’s Pizza
Enterprises, Coles Group, Goodman Group
Carsales.com and Auckland International Airport.
We also initiated positions in JB Hi-Fi, Mirvac Group
and a small holding in WiseTech Global. JB Hi-Fi is
the largest consumer electronics retailer in Australia
and New Zealand. While primarily providing

attractive income to the portfolio we expect the
consumer electronics category to continue
delivering meaningful growth.
Mirvac Group is a diversified property company
with operations across residential, commercial, and
industrial markets. Mirvac Group’s in-house
property development capability is relatively unique
to the sector and provides a competitive
advantage. The company’s growth is largely
sourced from product generation and less reliant
on acquiring established assets.
During the 12-month period we exited Qube
Holdings, APA Group, Lifestyle Communities,
Origin Energy, Endeavour Group and Altium. We
are observing structural industry challenges for
many of these companies or an environment where
competitive intensity has materially increased. We
consider the growth prospects for all these
companies to be increasingly challenged as a
result. Additionally, we exited our holding in Milton
Corporation and Sydney Airport as a result of
takeovers.
The ability to reinvest the cash from these takeovers
was important during the year as these funds were
deployed elsewhere in the portfolio in companies with
good long-term growth opportunities.
Outlook
During the year strengthening demand produced
supply chain challenges in many industries, which
contributed to a meaningful increase in reported
inflation. In endeavouring to achieve price stability,
central banks signalled the end of stimulatory
policy settings. Equity markets are now facing
challenges on multiple fronts, slowing economic
growth, inflation and interest rate hikes. As a
result, the uncertain environment that produced a
fall in equity markets during the financial year is
unlikely to be materially different in the short term.
In this environment we are comfortable with the
current portfolio settings and can afford to be
patient with our capital until attractive opportunities
present themselves.
Please direct any enquiries to:

Mark Freeman Geoff Driver
Managing Director General Manager
(03) 9225 2102 (03) 9225 2102

25 July 2022
4

Australian Foundation Investment Company Limited Page 5 of 7
Major Transactions in the Investment Portfolio
Acquisitions
Cost
($’000)
Woodside Energy (merger with BHP Oil and Gas) 74,888
Santos (merger with Oil Search) 72,660
Transurban Group (includes $35.5 million in entitlement offer @13 per share) 65,548
Mirvac Group 54,111
JB Hi-Fi 52,191
CSL (includes $30.2 million in placement offer @$273 per share) 50,109
Domino’s Pizza Enterprises 46,376
Goodman Group 45,103

Disposals
Proceeds
($’000)
Sydney Airport* 221,802
Oil Search* (merger with Santos) 72,660
Qube Holdings* 68,985
APA Group* 57,159
Milton Corporation* 50,443
Lifestyle Communities* 36,760
*Complete disposal from the portfolio.

New Companies Added to the Portfolio
Santos
(merger with Oil Search)
Mirvac Group
JB Hi-Fi
WiseTech Global


5

Australian Foundation Investment Company Limited Page 6 of 7
Top 25 Investments at 30 June 2022
Includes investments held in both the investment and trading portfolios.
Value at Closing Prices at 30 June 2022

Total Value
$ Million
% of the
Portfolio
1 Commonwealth Bank of Australia 714.0
8.8%
2 CSL 638.1
7.9%
3 BHP Group 574.4
7.1%
4 Transurban Group 414.0
5.1%
5 Macquarie Group 363.0
4.5%
6 Wesfarmers 309.0
3.8%
7 National Australia Bank 305.5
3.8%
8 Westpac Banking Corporation 303.1
3.7%
9 Woolworths Group 255.4
3.2%
10 Amcor 209.3
2.6%
11 Mainfreight 206.5
2.6%
12 Rio Tinto 191.2
2.4%
13 Telstra Corporation 187.4
2.3%
14 Australia and New Zealand Banking Group 187.0
2.3%
15 Woodside Energy Group* 184.9
2.3%
16 James Hardie Industries 166.6
2.1%
17 Coles Group 160.7
2.0%
18 Goodman Group 157.6
1.9%
19 Carsales.com 147.6
1.8%
20 ResMed 145.8
1.8%
21 ASX 117.0
1.4%
22 Ramsay Health Care 115.9
1.4%
23 Sonic Healthcare 109.6
1.4%
24 Computershare 99.6
1.2%
25 Brambles 99.4
1.2%
Total 6,362.7
As percentage of total portfolio value (excludes cash)

78.7%
* Indicates that options were outstanding against part of the holding.


6

Australian Foundation Investment Company Limited Page 7 of 7
Portfolio Performance to 30 June 2022
Performance Measures to 30 June 2022 1 Year
3 Years
% pa
5 Years
% pa
10 Years
% pa
Portfolio Return – Net Asset Backing Return
Including Dividends Reinvested

-8.0%

4.4%

6.6%

8.6%
S&P/ASX 200 Accumulation Index -6.5% 3.3% 6.8% 9.3%

Portfolio Return – Net Asset Backing Gross
Return Including Dividends Reinvested*

-6.8%

6.0%

8.4%

10.5%
S&P/ASX 200 Gross Accumulation Index* -5.1% 4.6% 8.3% 10.9%
* Incorporates the benefit of franking credits for those who can 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

Australian
Foundation
Investment
Company Limited
(AFIC)
Consolidated Annual Financial
Statements



30 June 2022

8

FINANCIAL STATEMENTS
Consolidated Income Statement for the Year Ended 30 June 2022




2022

2021

Note $’000 $’000
Dividends and distributions
A3 388,492 257,874
Interest income from deposits A3 61 116
Other revenue A3
4,871

4,831


Total revenue
393,424

262,821





Net gains/(losses) on trading portfolio A3
629

2,472




Income from operating activities

394,053 265,293


Finance costs (845) (1,831)
Administration expenses B1 (19,165)
(15,509)


Profit before income tax expense 374,043 247,953
Income tax expense B2, E2 (13,486) (12,858)
Profit for the year 360,557
235,095


Profit is attributable to :


Equity holders of Australian Foundation Investment Company

360,537 234,651
Minority interest
20 444

360,557 235,095





Cents Cents
Basic earnings per share

A5 29.40 19.28

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

Consolidated Statement of Comprehensive Income for the Year Ended 30 June 2022


Year to 30 June 2022 Year to 30 June 2021

Revenue
1
Capital
1
Total Revenue
1
Capital
1
Total

$’000 $’000 $’000 $’000 $’000 $’000


Profit for the year 360,557 - 360,557 235,095 - 235,095


Other
Comprehensive
Income


Items that will not be recycled through
the Income Statement

Gains/(losses) for
the period
- (1,008,188)
(1,008,188) - 1,881,261 1,881,261
Tax on above - 300,219 300,219 - (575,865) (575,865)


Total Other
Comprehensive
Income

- (707,969) (707,969) - 1,305,396 1,305,396


Total
Comprehensive
Income

360,557 (707,969) (347,412) 235,095 1,305,396 1,540,491

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 2022 Year to 30 June 2021
Revenue Capital Total
Revenue Capital Total
$’000 $’000 $’000
$’000 $’000 $’000
Equity holders of Australian
Foundation Investment
Company Ltd
360,537 (707,969) (347,432) 234,651 1,305,396 1,540,047
Minority Interests 20 - 20 444 - 444

360,557 (707,969) (347,412) 235,095 1,305,396 1,540,491



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

10

Consolidated Balance Sheet as at 30 June 2022

2022 2021


Note $’000 $’000

Current assets

Cash D1 144,619 97,122

Receivables 36,598 40,011

Trading portfolio 4,979 4,745

Total current assets 186,196 141,878

Non-current assets

Investment portfolio A2 8,082,513 8,973,080

Deferred tax assets - 59

Total non-current assets 8,082,513 8,973,139

Total assets 8,268,709 9,115,017




Current liabilities

Payables 28,688 1,020

Borrowings – bank debt 10,000 -

Tax payable 62,567 12,621

Provisions 6,114 5,235

Total current liabilities 107,369 18,876

Non-current liabilities

Provisions 896 888

Deferred tax liabilities - other 503 -

Deferred tax liabilities – investment portfolio B2 1,169,452 1,536,231

Total non-current liabilities 1,170,851 1,537,119

Total liabilities 1,278,220 1,555,995




Net Assets 6,990,489 7,559,022


Shareholders' equity


Share capital A1, D6 3,070,163 3,007,730

Revaluation reserve A1, D3 2,556,466 3,394,297

Realised capital gains reserve A1, D4 510,503 416,071

General reserve A1 23,637 23,637

Retained profits A1, D5 828,634 716,221

Parent entity interest 6,989,403 7,557,956

Minority interest 1,086 1,066

Total equity 6,990,489 7,559,022


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 2022



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

Minority
Interest Total
Year Ended 30 June 2022
$’000 $’000 $’000 $’000
$’000 $’000 $’000 $’000
Total equity at the beginning of the year 3,007,730 3,394,297 416,071 23,637 716,221 7,557,956 1,066 7,559,022
Dividends paid to shareholders A4 - - (35,430) - (248,124) (283,554) - (283,554)
- Dividend Reinvestment Plan D6 62,584 - - - - 62,584 - 62,584
Other share capital adjustments (151) - - - - (151) - (151)
Total transactions with shareholders 62,433 - (35,430) - (248,124) (221,121) - (221,121)


Profit for the year - - - - 360,537 360,537 20 360,557
Other Comprehensive Income (net of tax)
Net losses for the period - (707,969) - - - (707,969) - (707,969)
Other Comprehensive Income for the year

- (707,969) - - - (707,969) - (707,969)
Transfer to Realised Capital Gains of cumulative
gains on investments sold

- (129,862) 129,862 - - - - -
Total equity at the end of the year 3,070,163 2,556,466 510,503 23,637 828,634 6,989,403 1,086 6,990,489

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 2022 (continued)



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

Minority
Interest Total
Year Ended 30 June 2021
$’000 $’000 $’000 $’000
$’000 $’000 $’000 $’000
Total equity at the beginning of the year 2,947,243 2,166,030 397,712 23,637 705,273 6,239,895 622 6,240,517
Dividends paid to shareholders A4 - - (58,770) - (223,703) (282,473) - (282,473)
- Dividend Reinvestment Plan D6 60,632 - - - - 60,632 - 60,632
Other share capital adjustments (145) - - - - (145) - (145)
Total transactions with shareholders 60,487 - (58,770) - (223,703) (221,986) - (221,986)

Profit for the year
- - - -
234,651 234,651 444 235,095
Other Comprehensive Income (net of tax)
Net gains for the period - 1,305,396 - - - 1,305,396 - 1,305,396
Other Comprehensive Income for the year

- 1,305,396 - - - 1,305,396 - 1,305,396
Transfer to Realised Capital Gains of cumulative
gains on investments sold

- (77,129) 77,129 - - - - -
Total equity at the end of the year 3,007,730 3,394,297 416,071 23,637 716,221 7,557,956 1,066 7,559,022


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 2022


2022 2021

$’000 $’000

Inflows/ Inflows/

Note (Outflows) (Outflow)
Cash flows from operating activities
Sales from trading portfolio 20,888 14,776
Purchases for trading portfolio (1,860) (1,297)
Interest received 61 116
Dividends and distributions received 287,431 196,351

306,520 209,946


Other receipts 4,962 4,878
Administration expenses (18,383) (15,445)
Finance costs paid (845) (1,831)
Taxes paid (14,489) (18,781)
Net cash inflow/(outflow) from operating activities E1 277,765 178,767


Cash flows from investing activities
Sales from investment portfolio 657,117 469,102
Purchases for investment portfolio (662,366) (416,321)
Taxes paid on sales from investment portfolio (13,945) (23,798)
Net cash inflow/(outflow) from investing activities (19,194) 28,983


Cash flows from financing activities
Net bank borrowings 10,000 -
Share issue transaction costs (151) (145)
Dividends paid (220,923) (221,801)
Net cash inflow/(outflow) from financing activities (211,074) (221,946)


Net increase/(decrease) in cash held 47,497 (14,196)
Cash at the beginning of the year 97,122 111,318
Cash at the end of the year D1 144,619 97,122

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:

2022
$’000
2021
$’000

Share capital 3,070,163 3,007,730

Revaluation reserve 2,556,466 3,394,297

Realised capital gains reserve 510,503 416,071

General reserve 23,637 23,637

Retained profits 828,634 716,221


6,989,403 7,557,956


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 and an additional small sub-component of
international (i.e. non-Australian/New Zealand listed stocks). 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 (all at market value) was:

2022
$’000
2021
$’000



Equity instruments (excluding below) 7,492,259 8,502,224

Equity instruments (over which options may be written) 501,059 423,249

Equity instruments (listed on non-Australian/NZ Exchanges) 89,195 47,607

8,082,513 8,973,080




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 2022 and 30 June 2021 were as follows:










30 June
2022

30 June
2021
Net tangible asset backing per share $ $
Before tax 6.63 7.45
After tax 5.68 6.19
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 from the investment portfolio, 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 $729.0 million (2021: $511.1 million) of equity securities were sold. The cumulative gain on
the sale of securities was $129.9 million for the period after tax (2021: $77.1 million). 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 2022 is set out below.
Dividends and Distributions
2022
$’000
2021
$’000
Income from securities held in investment portfolio at 30 June
383,115 251,687
Income from investment securities sold during the year
5,166 5,976
Income from securities held in trading portfolio at 30 June
211 211
Income from trading securities sold during the year
- -
388,492 257,874

Interest income

Revenue from deposits and cash management trusts 61 3 116
Other revenue
Administration fees 4,871 4,831
Other income - -
4,871 4,831
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.

2022


2021

Net gains

$’000

$’000
Net realised gains/(losses) from trading portfolio – shares
224 149
- options 1,008 1,724
Unrealised gains/(losses) from trading portfolio - shares
(641) 897
- options 38 (298)
629 2,472
$131.6 million of shares are lodged with the ASX Clear Pty Ltd as collateral for sold option positions written by
the Group (2021: $152.3 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 $21.4
million worth of securities at an agreed price – the ‘exposure’ (2021: $44.5 million). There were no put options
in the portfolio at 30 June 2022 (2021 : $nil ).

17

A4. Dividends paid
The dividends paid and payable for the year ended 30 June 2022 are shown below:

2022
$’000
2021
$’000
(a) Dividends paid during the year

Final dividend for the year ended 30 June 2021 of 14 cents fully franked at
30% paid 31 August 2021 ( 2021: 14 cents fully franked at 30% paid on 1
September 2020).
165,339 164,556
Interim dividend for the year ended 30 June 2022 of 10 cents per share
fully franked at 30% paid 25 February 2022 (2021: 10 cents fully franked at
30% paid 23 February 2021)
118,215 117,917

283,554 282,473
Dividends paid in cash
220,970 221,841
Dividends reinvested in shares
62,584 60,632

283,554 282,473
Dividends forgone via DSSP
9,767 8,635
(b) Franking credits

Opening balance of fr anking account at 1 July
158,009 174,053
Franking credits on dividends received
138,158 67,295
Tax paid during the year
27,561 41,428
Franking credits paid on ordinary dividends paid
(121,523) (121,060)
Franking credits deducted on DSSP shares issued
(4,272) (3,707)
Closing Balance of Franking Account
197,933 158,009
Adjustments for tax payable in respect of the current year’s profits and the
receipt of dividends recognised as receivables
69,967 19,610
Adjusted Closing Balance
267,900 177,619
Impact on the franking account of dividends declared but not recognised
as a liability at the end of the financial year:
(73,794) (73,250)
Net available 194,106 104,369
These franking account balances would allow AFIC to frank additional
dividend payments up to an amount of:
452,914 243,528
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
2022
$’000
2021
$’000
(Figures in A$ at year-end exchange rate : 2022 : $NZ1.073:$A1; 2021 : $NZ1.074:$A1)
Opening balance
13,261 8,470
Imputation credits on dividends received
5,848 4,779
Imputation credits on dividends paid
- -
Closing balance
19,109 13,249
There will be NZ imputation credit on NZ 3.5 cents of the final dividend attached to the proposed dividend
payable on 30 August 2022.This will utilise, on the above exchange rates, $15.6 million of the above balance.
(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 2022 to be paid on 30 August 2022, but not
recognised as a liability at the end of the financial year is: 172,187

(e ) Listed Investment Company capital gain account
2022
$’000
2021
$’000
Balance of the Listed Investment Company (LIC) capital gain account at 1
July:
43,793 62,912
Capital gains (incl LIC gains received from dividends) 150,256 39,651
LIC gains paid as part of dividend (35,430) (58,770)
Balance at 30 June 158,619 43,793
This equates to an attributable gain of: 226,599 62,562

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. $175.7 million attributable gain is attached to the final dividend to be paid on
30 August 2022.
A5. Earnings per share
The table below shows the earnings per share based on the
profit for the year:
2022 2021

Basic Earnings per share Number Number

Weighted average number of ordinary shares used as the
denominator
1,226,476,015 1,217,056,577




$’000 $’000
Profit for the year 360,537 234,651



Cents Cents
Basic earnings per share








29.40 19.28
Excluding the Woodside/BHP Petroleum merger dividend for the year ended 30 June 2022, and the Endeavour
demerger dividend for the previous corresponding period, the basic earnings per share figure would be 23.3
cents (2021 : 16.3 cents)
19

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

2022
$’000
2021
$’000


Rental expense relating to non-cancellable leases (760) (747)
Employee benefit expenses (12,819) (9,304)
Depreciation charge - -
Other administration expenses
(5,586) (5,458)

(19,165) (15,509)
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

$ $ $ $ $

2022
Non-executive
Directors 843,182 - 56,818 - 900,000
Executives 3,208,522 - 110,000 531,275 3,849,797
Total 4,051,704 - 166,818 531,275 4,749,797
2021
Non-executive
Directors 749,363 - 54,867 - 804,230
Executives 3,191,746 (120,224) 99,524 526,834 3,697,880
Total 3,941,109 (120,224) 154,391 526,834 4,502,110

Detailed remuneration disclosures are provided in the Remuneration Report.

The Group (i.e. AFIC and its subsidiary, Australian Investment Company Services Ltd (”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


2022
$’000
2021
$’000
Profit before income tax expense 374,073 247,953
Tax at the Australian tax rate of 30% (2021: 30%) 112,222 74,386
Tax offset for franked dividends received (96,709) (47,106)
Demerger dividend non-taxable - (10,952)
Sundry items whose tax treatment differs from accounting treatment (403) (1,234)

15,110 15,094
Over provision in prior years (1,624) (2,236)


Total tax expense 13,486 12,858

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.

2022
$’000
2021
$’000
Deferred tax liabilities on unrealised gains in the investment portfolio 1,169,452 1,536,231
Opening balance at 1 July 1,536,231 973,499
Tax on realised gains (66,560) (13,133)
Charged to OCI for ordinary securities on gains or losses for the period (300,219) 575,865
1,169,452 1,536,231

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 $282.9 million and $565.8 million
respectively, at a tax rate of 30% (2021: $314.1 million & $628.1 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:

2022 2021

% %
Energy 3.26 1.96
Materials 14.29 14.32
Industrials 12.68 14.40
Consumer Discretionary 7.07 7.83
Consumer Staples 5.19 4.42
Banks 18.36 18.97
Other Financials 9.14 8.88
Real Estate 2.97 2.47
Telecommunications 5.87 5.99
Health Care 14.77 14.40
Info Technology 4.61 4.63
Utilities 0.03 0.66
Cash 1.76 1.07

Securities representing over 5% of the investment portfolio at 30 June
were
Commonwealth Bank 8.8 8.8
CSL 7.9 6.9
BHP 7.1 7.3
Transurban 5.1 3.8

AFIC is also not directly exposed to material currency risk as most of its investments are quoted in Australian
dollars. The international portfolio is a minor (1.1%) part of the total portfolio (2021 : 0.5%).

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 (including with a custodian) are invested in short-t erm
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 balance 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. As at 30 June 2022, no such investments are held (2021 : Nil). AFIC engages a custodian,
Northern Trust, to hold the shares that are in the sub-component of the investment portfolio that contains
international shares. AFIC receives a GS007 report on Internal Controls for Custody, Investment
Administration, Registry Monitoring and Related Information Technology Services from Northern Trust every 6
months.
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 2022
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
28,688
- - 28,688 28,688
Borrowings
10,000
- - 10,000 10,000

38,688 - - 38,688 38,688
Derivatives
Options in trading portfolio* - - - - -
- - - - -

30 June 2021 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 1,020 - - 1,020 1,020
1,020 - - 1,020 1,020
Derivatives
Options in trading portfolio* - - - - -
- - - - -
* 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 the purpose of the above disclosure that all options will be exercised (i.e. maximum cash outflow).
There were no put options outstanding at 30
th
June 2022.

C. Unrecognised items

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

2022
$’000
2021
$’000

Cash at bank and in hand (including on-call) 144,619 97,122


144,619 97,122

Cash holdings yielded an average floating interest rate of 0.08% (2021: 0.14%). All cash investments are held
in a transactional account, with a custodian or in 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


2022
$’000

2021
$’000

Commonwealth Bank of Australia – cash advance facility 110,000 50,000

Amount drawn down at 30 June 0 0

Undrawn facilities at 30 June 110,000 50,000



National Australia Bank- cash advance facility 20,000 0

Amount drawn down at 30 June 10,000 0

Undrawn facilities at 30 June 10,000 0



Total short-term loan facilities 130,000 50,000

Total drawn down at 30 June 10,000 0

Total undrawn facilities at 30 June 120,000 50,000


The above borrowings, with the exception of the NAB facility, 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 and hence are classified as
current liabilities when drawn.
The debt facility with National Australia Bank is structured in the form of a securities lending arrangement. The
terms of the agreement require that securities be pledged as collateral for the drawn secured borrowings under
that facility and that such securities currently satisfy a minimum value of $11 million (110% of the total drawn
facility). These securities are held by the National Australia Bank but included as part of the Company’s
investment portfolio. As at 30 June 2022 the market value of the securities pledged as collateral was $12.2
million (2021 : n/a).

25

D3. Revaluation reserve

2022
$’000
2021
$’000

Opening balance at 1 July 3,394,297 2,166,030

Gains/(losses) on investment portfolio

- Equity Instruments (1,008,188) 1,881,261

Provision for tax on above 300,219 (575,865)

Cumulative taxable realised (gains)/losses (net of tax) (129,862) (77,129)

2,556,466 3,394,297


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 416,071 397,712

Dividends paid (35,430) (58,770)
Cumulative taxable realised gains/(losses) (net of tax) 129,862 77,129
510,503 416,071

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 716,221

705,273

Dividends paid (248,124) (223,703)

Profit for the year 360,537 234,651

828,634 716,221

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
1/07/2020 Balance 1,210,364
2,947,243
01/09/2020 Dividend Reinvestment Plan i 5,583 6.30 35,165
01/09/2020
Dividend Substitution Share
Plan
ii 776
6.30 n/a
23/02/2021 Dividend Reinvestment Plan i 3,587
7.10 25,467
23/02/2021
Dividend Substitution Share
Plan
ii 527
7.10 n/a
Various Costs of issue -
- (145)
30/06/2021 Balance 1,220,837
3,007,730
31/08/2021 Dividend Reinvestment Plan i 4,507 8.10 36,511
31/08/2021
Dividend Substitution Share
Plan
ii 687 8.10 n/a
25/02/2022 Dividend Reinvestment Plan i 3,317
7.86 26,073
25/02/2022
Dividend Substitution Share
Plan
ii 558
7.86 n/a
Various Costs of issue -
- (151)
30/06/2022 Balance 1,229,906
3,070,163
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 & Cboe 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 (2021: 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

2022
$’000
2021
$’000
Profit for the year 360,557
235,095
Net decrease/(increase) in trading portfolio (234) (441)
Dividends received as securities under DRP investments (74,888)
-
Demerger dividend – non-cash item -
(36,505)
Decrease/(increase) in current receivables 3,413
(22,664)
- Less increase/(decrease) in receivables for investment portfolio (9,875)
9,875
Increase/(decrease) in deferred tax liabilities (366,217)
563,545
- Less (increase)/decrease in deferred tax liability on investment portfolio 366,779
(562,732)
Increase/(decrease) in current payables 27,668
136
- Less increase/(decrease) in dividends payable (46)
(40)
- Less (increase) in payables for investment portfolio (27,610)
-
Increase/(decrease) in provision for tax payable 49,946
(18,150)
Capital gains tax charge taken through equity (66,560)
(13,133)
Prior year taxes paid relating to capital gains 13,945
23,798
Increase/(decrease) in other provisions/non-cash items 887
(17)
Net cash flows from operating activities 277,765
178,767

E2. Tax reconciliations

Tax expense composition

Charge for tax payable relating to the current year 14,548 14,281
Over provision in prior years (1,624) (2,236)
(Increase)/Decrease in deferred tax assets 562 813

13,486 12,858

Amounts recognised directly through Other Comprehensive Income

Net movement in deferred tax liabilities relating to capital gains tax
on the movement in gains/losses in the investment portfolio (300,219) 575,865

(300,219) 575,865







28

Deferred tax assets & liabilities
The deferred tax balances are attributable to:
2022
$’000
2021
$’000

(a) Tax on unrealised gains or losses in the trading portfolio (161) (253)

(b)
Provisions and expenses charged to the accounting profit
which are not yet tax deductible
2,111 1,851

(c)
Interest and dividend income receivable which is not
assessable for tax until receipt
(2,453) (1,539)


(503) 59


Movements:

Opening balance at 1 July 59 872

Credited/(charged) to Income statement (562) (813)


(503) 59

Deferred tax assets and liabilities 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 J Paterson, C Drummond and C Walter have rented office space and, for 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 $ 51,824 ( 2021: $62,608).
(b) AICS transactions with minority interests
The below transactions were with Djerriwarrh Investments Ltd as a minority interest holder in the Company’s subsidiary.

2022
$’000
2021
$’000
Administration expenses charged for the year 2,262 2,528
(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 1,702 1,467
Administration expenses charged for the year to AMCIL Ltd 1,021
916
F2. Remuneration of auditors
For the year the auditor earned or will earn the following remuneration:

2022
$

2021
$
PricewaterhouseCoopers
Audit Services
Audit or review of financial reports 214,834 210,050
Audit r
elated Services
AFSL compliance audit and review 8,707 8,331
Non-A
udit Services
Preparation and lodgement of tax returns 34,370 32,940

Assistance with ATO Combined Assurance Review 41,800 -

Total remuneration 299,711 251,321



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 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 (noting that the investment portfolio contains sub-components for ease of administration).
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 1 investment comprising
more than 10% of AFIC’s income – BHP (35.6% including the Woodside/BHP Petroleum merger dividend)
(2021 2 investments : Woolworths (16.1% as a consequence of the Endeavour Group demerger) and BHP
(11.0%)).
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 25 July 2022 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 2022 (“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
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. 45,680 shares vested
during the year ended 30 June 2022.

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 25% of the pre-tax amount being used by the
executive to purchase shares in AFIC and/or the other LICs. All remuneration under the plan, is paid in the
financial year following the year of assessment.
33

The executive agrees to the shares being subject to being held for four 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.
27,429 shares for both LTIP and Annual Incentive (2021: 21,736 shares) were purchased by executives in the
year (in relation to the prior year) with a fair value (being the acquisition price) of $220,476 (2021: $149,306).
(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.
54,569 rights were awarded under the plan during the year ended 30 June 2022 (2021: 6 7,777). An expense
of $537,943 (2021: $826,722) was incurred for the 2018/19, 2019/20, 2020/21 and 2021/22 plans. 8,212 rights
under the 2017/18 plan were forfeited during the year ( 12.1%).
Note that it is currently proposed that the Executive Long Term Incentive Plan be incorporated within the
existing Annual Incentive Plan.
(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 needs 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, 92% of the possible maximum was awarded, and 50% of this was used
to buy shares in Djerriwarrh Investments Limited, as part of the Group’s policy of rotating these purchases
amongst the LICs other than AFIC to which AICS provides services.
(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:

2022
$’000
2021
$’000
Share-based payment expense 599 879

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

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
34

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
2022 2021

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.

F9. Lease Commitments
The Group has entered into a non-cancellable operating lease for the use of its premises for 6 years with effect
from 1 July 2022 (prior year comparatives represent the former lease). Current commitments relating to leases
at balance date, for the current lease (incl. GST), is:

2022
$’000
2021
$’000
Due within one year 508 667
Later than one year but less than five 2,302 -
Greater than five years 648 -
3,458 667

The lease will be accounted for under the provisions of AASB 16 Leases when it commences.

35

F10. Parent Entity Financial Information

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

2022 2021
$'000 $'000
Balance sheet

Current assets 177,347 133,183
Total assets 8,257,705 9,106,106

Current liabilities 101,688 13,271
Total liabilities 1,271,402 1,551,348

Shareholders’ equity

Issued capital 3,070,313 3,007,730

Reserves
Revaluation reserve 2,556,466 3,394,297
Realised capital gains reserve 510,503 416,071
General reserve 23,637 23,637
Retained earnings 825,384 713,023
3,915,990 4,547,028

Total shareholders’ equity 6,986,303 7,554,758

Profit or loss for the year 360,477 233,319

Total comprehensive income (347,472) 1,538,715

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