Preliminary Final Report

Australian Foundation Investment Company Limited
1

Australian Foundation Investment Company Limited
Results for Announcement to the Market
The reporting period is the year ended 30 June 2023, with the prior corresponding period being the year
ended 30 June 2022.
This report is based on financial statements that are in the process of being audited.
Results for Announcement to the Market
>Net Profit was $310.2 million, down 14.0% from the
prior year. Last year’s profit included $74.9 million
of dividend arising from the merger of BHP
Petroleum and Woodside. Excluding this item, net
profit was up 8.6% on the prior year’s adjusted
figure.
>Net Profit attributable to members (excluding
minority interests) was $309.8 million,
down 14.1% from the prior year.
>Revenue from operating activities was
$344.0 million, down 12.6% 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
0.14% for the year (2022: 0.16%).
>Net tangible assets as at 30 June 2023, before
allowing for the final dividend and before the
provision for deferred tax on unrealised gains in the
investment portfolio were $7.19 per share (2022:
$6.63).
>A fully-franked final dividend of 14 cents per share,
the same as last year’s final dividend, will be paid
on 1 September 2023 to shareholders on the
register on 14 August 2023. The shares are
expected to trade ex-dividend on 11 August 2023.
There is no conduit foreign income component of
the dividend.
>The final dividend does not carry any New Zealand
imputation credits.
>The Board has elected to source 7 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, equals 10 cents per
share. 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 11 cents per share (up from
10 cents in the previous corresponding period) was
paid to shareholders on 24 February 2023.
>The total dividend for the financial year is therefore
25 cents per share, fully franked, up from 24 cents
last year.
>A Dividend Reinvestment Plan (DRP) and Dividend
Substitution Share Plan (DSSP) are available, the
price will be set at a nil discount to the Volume
Weighted Average Price of the Company’s shares
traded on the ASX and Cboe automated trading
systems over the five trading days after the shares
trade ex-dividend. Notices of participation in the
DRP and DSSP need to be received by the share
registry by 5pm (AEST) on 15 August 2023. All
shares issued under the DRP and DSSP will rank
equally with existing shares.
>The Company will be providing a briefing on these
results via a webcast for shareholders on Thursday
27 July 2023 at 3.30pm (AEST). Details are on the
website afi.com.au.
>The 2023 AGM will be held at 10am on Tuesday 3
October. Further details on how to participate will
be sent to shareholders.
2

Australian Foundation Investment Company Limited
Full Year Report to 30 June 2023
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-effective outcomes for shareholders. AFIC’s
management expense ratio is 0.14% with no additional fees.
The Full Year Profit was $310.2 million, down from $360.6 million in the previous corresponding period. Last
year’s profit included a dividend of $74.9 million (which was non-cash but carries franking credits with it)
resulting from the BHP Petroleum/Woodside merger. Excluding this figure, the Full Year Profit was up 8.6%
from $285.7 million in the corresponding period last year. The increase in the underlying profit from last year
was driven by higher dividends received from investee companies and adjustments made to the portfolio
throughout the year.
Earnings per share for the financial year were 25.1 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 25 cents per share
following the 1 cent per share increase in the interim dividend declared in January 2023.
Activity in the portfolio was focused primarily on recycling capital into existing holdings by trimming some
positions where companies were trading at extreme valuations during the year and selling positions where
companies in our assessment are facing significant structural industry challenges and competition.
The portfolio returned 13.9% in comparison to the S&P/ASX 200 Index return of 16.6% when the benefit of
franking is included for both returns. The Materials sector was up 22.6% over the financial year, significantly
outperforming the broader Industrials sector which was up 11.8% and the S&P/ASX 200 Index over this period.
While our long-term underweight position in Materials (particularly in lithium and gold) detracted from relative
performance, we remain comfortable with the positioning of the portfolio regarding this more cyclical part of the
market.
Note AFIC’s performance returns are after costs. AFIC on occasions incurs realised capital gains tax on the
sale of shares. Not all the of the franking generated from these realised capital gains is paid out as dividends
and is therefore not included in these performance figures.
Portfolio return (including the full benefit of franking) – per annum to 30 June 2023
3

Australian Foundation Investment Company Limited
Market Commentary and Portfolio
Performance
Including the benefit of franking credits, the S&P/ASX
200 Accumulation Index rose 16.6% over the financial
year, with all sectors delivering positive returns. Best
performing sectors were Information Technology, up
38.1% and Materials, up 22.6%. The Information
Technology sector has shown similar strength to the
NASDAQ Composite Index over recent months amid
growing interest in the future applications of artificial
intelligence. The strength in the Materials sector was
primarily driven by the re-opening of the Chinese
economy following a period of lockdown during the
COVID-19 pandemic. Materials exposure in the
portfolio is primarily through our holdings in BHP and
Rio Tinto. Sectors that underperformed the broader
market included Healthcare which increased 5.7%.
Consumer Staples up 6.2% and Real Estate up 6.8%.
The portfolio returned 13.9% when franking is
included. Together with the strong rally in Materials
the relative underperformance in the strong market
came from a number of high-quality companies in the
portfolio which trailed the return of the overall market.
These included Transurban Group, Mainfreight and
ASX. However, despite these short-term movements
we still consider the prospects for these companies
remain strong.
Following a strong financial year ended June 2022,
our overweight position in Amcor also had a
meaningful negative impact on relative performance.
Customer demand for its products declined from the
panic buying during the COVID-19 related supply
chain challenges leading to a subsequent period of
customer destocking.
The underweight position in materials, which includes
lithium and gold stocks also negatively impacted
relative performance as these sectors had a
particularly strong year. We maintain our research
efforts in the lithium sector, however high spot
commodity prices in these markets make us cautious
about investing at present for the medium to long
term.
Companies in the portfolio that performed relatively
well against the Index through the 12-month period
included strong returns from Reece, AUB Group,
James Hardie Industries, Carsales.com and Xero.




Portfolio Adjustments
While we endeavour to have low turnover to reduce
the impact of tax paid on returns, recycling capital
from companies trading at extreme valuations to
capture the appropriate buying opportunity remains
fundamental to our approach. In this context, the
portfolio benefitted from trimming several holdings at
appropriate times through the year. This included
holdings in NEXTDC, Brambles, IRESS,
Carsales.com (following participation in recent equity
placements which took the holding to above our
desired portfolio position), Commonwealth Bank of
Australia, Westpac Banking Corporation, ANZ Group
Holdings, Mainfreight, Transurban, Ramsay
Healthcare and Amcor. We exited the position in
Temple & Webster which allowed us to redeploy this
capital in other opportunities.
We also exited our holdings in Orica, InvoCare,
Reliance Worldwide and Ryman Healthcare. 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 the majority of
these companies to be increasingly challenged as a
result.
As a counterbalance to this activity most purchases
during the year were focused on increasing
weightings to existing holdings. This included BHP,
National Australia Bank, Domino’s Pizza, IDP
Education, Santos, CSL, Mirvac, Computershare and
Goodman Group.
In managing the portfolio, we endeavour to hold a
diversified portfolio of quality companies with an
appropriate mix of income and growth attributes to
achieve our long-term investment objectives. As
value across the market during the financial year
became more difficult to observe, we materially
increased activity to enhance income through the
writing of call options over selected holdings.
Pleasingly, this activity provided a meaningful
contribution to an improvement in income for the year.
One new stock was added through the year. We
initiated a position in Breville Group, which is a
kitchen appliance company operating premium
brands in the cooking, beverage and food preparation
categories. The business was founded in 1932,
maintains a heavy focus on product innovation and
has very strong global distribution which should
provide for further profit growth. Breville Group has a
4

Australian Foundation Investment Company Limited
long history of excellent financial discipline delivering
strong returns for shareholders.
International Portfolio
We have continued to trial the management of an
international portfolio over the period. This portfolio
consists of what we have assessed to be high-quality
companies with a strong competitive advantage, good
growth potential and across a broad range of
industries. This portfolio was first initiated in May
2021 as a potential precursor to establishing a
separate low-cost international Listed Investment
Company in the future.
At 30 June 2023 approximately $115.4 million was
invested in 41 companies in this portfolio (which
represents approximately 1.3% of the total AFIC
portfolio).
The performance of the portfolio since its inception is
ahead of its benchmark index which is very pleasing
given the volatile market conditions that have been in
evidence over this period.
Outlook
Medium-term conditions remain unpredictable with a
broad range of potential outcomes. Economic growth
and the employment rate remain sound despite
inflationary pressures, the recent rapid rises in
interest rates and growth in China slowing.
In this context equity markets have surprisingly been
strong despite broad-based expectations of a
significant slowing in many global economies
including Australia.
While aware of the prevailing environment our
research effort remains focused on the fundamentals
of the companies in our investment universe. We
consider the portfolio remains invested in quality
companies forecast to deliver an appropriate mix of
income and growth returns positioning us well to
deliver our long-term investment objectives. As a
result, we can afford to take a patient approach and
use any short-term volatility to our advantage as long
term investors.
Please direct any enquiries to:
Mark Freeman Geoff Driver
Managing Director General Manager
(03) 9225 2101 (03) 9225 2102

26 July 2023
5

Australian Foundation Investment Company Limited
Major Transactions in the Investment Portfolio
Acquisitions
Cost
($m)
BHP 148.1
National Australia Bank 50.4
IDP Education 39.4
Domino’s Pizza Group 23.4
Santos 19.1

Disposals
Proceeds
($m)
NEXTDC 69.9
Brambles 40.2
Orica* 39.0
IRESS 38.3
InvoCare* 38.3
*Complete disposal from the portfolio.

New Companies Added to the Portfolio
Breville Group


6

Australian Foundation Investment Company Limited
Top 25 Investments Valued at Closing Prices at 30 June 2023
Includes investments held in both the investment and trading portfolios.
Value at Closing Prices at 30 June 2023

Total Value
$ Million
% of the
Portfolio
1 BHP Group 793.3 9.1%
2 Commonwealth Bank of Australia 783.0 8.9%
3 CSL 674.3 7.7%
4 Macquarie Group * 397.7 4.5%
5 Transurban Group * 386.3 4.4%
6 Wesfarmers 363.7 4.2%
7 National Australia Bank * 341.3 3.9%
8 Westpac Banking Corporation 322.8 3.7%
9 Woolworths Group * 292.2 3.3%
10 James Hardie Industries * 215.1 2.5%
11 Rio Tinto 213.6 2.4%
12 Telstra Group 209.3 2.4%
13 Woodside Energy Group * 200.1 2.3%
14 Goodman Group 193.8 2.2%
15 ANZ Group Holdings 192.0 2.2%
16 Mainfreight 186.8 2.1%
17 Coles Group * 179.0 2.0%
18 Carsales.com * 161.2 1.8%
19 Amcor 154.8 1.8%
20 ResMed 144.0 1.6%
21 Reece 134.9 1.5%
22 Sonic Healthcare 118.1 1.3%
23 Xero 105.9 1.2%
24 Santos * 104.5 1.2%
25 ARB Corporation 104.1 1.2%
Total 6,971.8
As percentage of total portfolio value (excludes cash)

79.6%
* Indicates that options were outstanding against part of the holding.


7

Australian Foundation Investment Company Limited
Portfolio Performance to 30 June 2023
Performance Measures to 30 June 2023 1 Year
3 Years
% pa
5 Years
% pa
10 Years
% pa
Portfolio Return – Net Asset Backing Return
Including Dividends Reinvested

12.2%

10.2%

6.8%

7.5%
S&P/ASX 200 Accumulation Index 14.8% 11.1% 7.2% 8.6%

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

13.9%

11.9%

8.6%

9.3%
S&P/ASX 200 Gross Accumulation Index* 16.6% 12.6% 8.6% 10.1%
* 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.
Past performance is not indicative of future performance.

8

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



30 June 2023

9

FINANCIAL STATEMENTS
Consolidated Income Statement for the Year Ended 30 June 2023




2023

2022

Note $’000 $’000
Dividends and distributions A3 334,740 388,492
Interest income from deposits A3 3,714 61
Other revenue A3
5,553

4,871


Total revenue
344,007

393,424





Net gains/(losses) on trading portfolio A3
6,000

629




Income from operating activities

350,007 394,053


Finance costs (1,265) (845)
Administration expenses B1 (17,987) (19,165)

Profit before income tax expense 330,755 374,043
Income tax expense B2, E2 (20,544) (13,486)
Profit for the year 310,211 360,557


Profit is attributable to :

Equity holders of Australian Foundation Investment Company
Ltd
309,763 360,537
Minority interest
448 20

310,211 360,557





Cents Cents
Basic earnings per share

A5 25.06 29.40

This Income Statement should be read in conjunction with the accompanying notes.
10

Consolidated Statement of Comprehensive Income for the Year Ended 30 June 2023


Year to 30 June 2023 Year to 30 June 2022

Revenue
1
Capital
1
Total Revenue
1
Capital
1
Total

$’000 $’000 $’000 $’000 $’000 $’000


Profit for the year 310,211 - 310,211 360,557 - 360,557


Other
Comprehensive
Income

Items that will not be recycled through
the Income Statement

Gains/(losses) for
the period
- 697,758 697,758 - (1,008,188) (1,008,188)
Tax on above - (210,319) (210,319) - 300,219 300,219


Total Other
Comprehensive
Income

- 487,439 487,439 - (707,969) (707,969)


Total
Comprehensive
Income

310,211 487,439 797,650 360,557 (707,969) (347,412)

1
‘Capital’ includes realised or unrealised gains or losses (and the tax on those) on securities 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 2023 Year to 30 June 2022
Revenue Capital Total Revenue Capital Total
$’000 $’000 $’000 $’000 $’000 $’000
Equity holders of Australian
Foundation Investment
Company
309,763 487,439 797,202 360,537 (707,969) (347,432)
Minority Interests 448 - 448 20 - 20

310,211 487,439 797,650 360,557 (707,969) (347,412)



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


11

Consolidated Balance Sheet as at 30 June 2023

2023 2022


Note $’000 $’000

Current assets

Cash D1 165,385 144,619

Receivables 44,709 36,598

Trading portfolio 3,837 4,979

Total current assets 213,931 186,196

Non-current assets

Investment portfolio A2 8,749,226 8,082,513

Total non-current assets 8,749,226 8,082,513

Total assets 8,963,157 8,268,709




Current liabilities

Payables 1,268 28,688

Borrowings – bank debt 10,000 10,000

Tax payable 32,156 62,567

Provisions 6,057 6,114

Total current liabilities 49,481 107,369

Non-current liabilities

Provisions 90 896

Deferred tax liabilities - other 830 503

Deferred tax liabilities – investment portfolio B2 1,355,200 1,169,452

Total non-current liabilities 1,356,120 1,170,851

Total liabilities 1,405,601 1,278,220




Net Assets 7,557,556 6,990,489


Shareholders' equity


Share capital A1, D6 3,136,282 3,070,163

Revaluation reserve A1, D3 2,926,191 2,556,466

Realised capital gains reserve A1, D4 509,741 510,503

General reserve A1 23,637 23,637

Retained profits A1, D5 960,171 828,634

Parent entity interest 7,556,022 6,989,403

Minority interest 1,534 1,086

Total equity 7,557,556 6,990,489


This Balance Sheet should be read in conjunction with the accompanying notes.
12

Consolidated Statement of Changes in Equity for the Year Ended 30 June 2023



Note
Share
Capital
Revaluation
Reserve
Realised
Capital
Gains
General
Reserve
Retained
Profits
Total
Parent
Entity
Minority
Interest Total
Year Ended 30 June 2023
$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000
Total equity at the beginning of the year 3,070,163 2,556,466 510,503 23,637 828,634 6,989,403 1,086 6,990,489
Dividends paid to shareholders A4 - - (118,476) - (178,226) (296,702) - (296,702)
- Dividend Reinvestment Plan D6 66,268 - - - - 66,268 - 66,268
Other share capital adjustments (149) - - - - (149) - (149)
Total transactions with shareholders 66,119 - (118,476) - (178,226) (230,583) - (230,583)


Profit for the year - - - - 309,763 309,763 448 310,211
Other Comprehensive Income (net of tax)
Net gains for the period - 487,439 - - - 487,439 - 487,439
Other Comprehensive Income for the year

- 487,439 - - - 487,439 - 487,439
Transfer to Realised Capital Gains of cumulative
gains on investments sold

- (117,714) 117,714 - - - - -
Total equity at the end of the year 3,136,282 2,926,191 509,741 23,637 960,171 7,556,022 1,534 7,557,556

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

Consolidated Statement of Changes in Equity for the Year Ended 30 June 2023 (continued)



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
14

Consolidated Cash Flow Statement for the Year Ended 30 June 2023


2023 2022

$’000 $’000

Inflows/ Inflows/

Note (Outflows) (Outflow)
Cash flows from operating activities
Sales from trading portfolio 20,042 20,888
Purchases for trading portfolio (5,178) (1,860)
Interest received 3,714 61
Dividends and distributions received 320,485 287,431

339,063 306,520


Other revenue 5,877 4,962
Administration expenses (18,909) (18,383)
Finance costs paid (1,265) (845)
Taxes paid (7,083) (14,489)
Net cash inflow/(outflow) from operating activities E1 317,683 277,765


Cash flows from investing activities
Sales from investment portfolio 491,219 657,117
Purchases for investment portfolio (490,993) (662,366)
Taxes paid on sales from investment portfolio (66,560) (13,945)
Net cash inflow/(outflow) from investing activities (66,334) (19,194)


Cash flows from financing activities
Net bank borrowings - 10,000
Share issue transaction costs (149) (151)
Dividends paid (230,434) (220,923)
Net cash inflow/(outflow) from financing activities (230,583) (211,074)


Net increase/(decrease) in cash held 20,766 47,497
Cash at the beginning of the year 144,619 97,122
Cash at the end of the year D1 165,385 144,619

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.

15

Notes to the consolidated 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:

2023
$’000
2022
$’000

Share capital 3,136,282 3,070,163

Revaluation reserve 2,926,191 2,556,466

Realised capital gains reserve 509,741 510,503

General reserve 23,637 23,637

Retained profits 960,171 828,634


7,556,022 6,989,403


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:
2023
$’000
2022
$’000



Equity instruments (excluding below) 7,834,313 7,492,259

Equity instruments (over which options may be written) 799,527 501,059

Equity instruments (listed on non-Australian/NZ Exchanges) 115,386 89,195

8,749,226 8,082,513





16

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 2023 and 30 June 2022 were as follows:





In addition, the Investment Committee regularly reviews the net asset value per share both before and
after provision for deferred tax on the unrealised gains in the Group’s long
term investment portfolio. Deferred tax is calculated as set out in notes 1(d) and 2. The relevant
amounts as at 30 June 2022 and 30 June 2013 were as follows:

30 June
2023

30 June
2022
Net tangible asset backing per share $ $
Before tax 7.19 6.63
After tax 6.09 5.68
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 $538.7 million (2022: $729.0 million) of equity securities were sold. The cumulative gain on the
sale of securities was $117.7 million for the period after tax (2022: $129.9 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.







17

A3. Operating income
The total income received from AFIC’s investments in 2023 is set out below.
Dividends and Distributions
2023
$’000
2022
$’000
Income from securities held in investment portfolio at 30 June
328,188 383,115
Income from investment securities sold during the year
6,552 5,166
Income from securities held in trading portfolio at 30 June
- 211
Income from trading securities sold during the year
- -
334,740 388,492

Interest income

Revenue from deposits and cash management trusts 3,714 3 61
Other revenue
Administration fees 5,553 4,871
Other income - -
5,553 4,871
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.

2023


2022

Net gains

$’000

$’000
Net realised gains/(losses) from trading portfolio – shares
48 224
- options 4,542 1,008
Unrealised gains/(losses) from trading portfolio - shares
1,010 (641)
- options 400 38
6,000 629
$145.3 million of shares are lodged with the ASX Clear Pty Ltd as collateral for sold option positions written by
the Group (2022: $131.6 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 $155.8 million
worth of securities at an agreed price – the ‘exposure’ (2022: $21.4 million). There were no put options in the
portfolio at 30 June 2023 (2022 : $nil).
18

A4. Dividends paid
The dividends paid and payable for the year ended 30 June 2023 are shown below:

2023
$’000
2022
$’000
(a) Dividends paid during the year

Final dividend for the year ended 30 June 2022 of 14 cents fully franked at
30% paid 30 August 2022 (2022: 14 cents fully franked at 30% paid on 31
August 2021).
165,866 165,339
Interim dividend for the year ended 30 June 2023 of 11 cents per share fully
franked at 30% paid 24 February 2023 (2022: 10 cents fully franked at 30%
paid 25 February 2022)
130,836 118,215

296,702 283,554
Dividends paid in cash
230,434 220,970
Dividends reinvested in shares
66,268 62,584

296,702 283,554
Dividends forgone via DSSP
11,400 9,767
(b) Franking credits

Opening balance of franking account at 1 July
197,933 158,009
Franking credits on dividends received
109,312 138,158
Tax paid during the year
73,512 27,561
Franking credits paid on ordinary dividends paid
(127,158) (121,523)
Franking credits deducted on DSSP shares issued
(4,887) (4,272)
Closing Balance of Franking Account
248,712 197,933
Adjustments for tax payable in respect of the current year’s profits and the
receipt of dividends recognised as receivables
41,364 69,967
Adjusted Closing Balance
290,076 267,900
Impact on the franking account of dividends declared but not recognised as
a liability at the end of the financial year:
(74,421) (73,794)
Net available 215,655 194,106
These franking account balances would allow AFIC to frank additional
dividend payments up to an amount of:
503,195 452,914
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.













19

(c) New Zealand imputation account
2023
$’000
2022
$’000
(Figures in A$ at year-end exchange rate : 2023 : $NZ$1.085:$A1; 2022 : $NZ1.073:$A1)
Opening balance
18,898 13,261
Imputation credits on dividends received
6,970 5,848
Imputation credits on dividends paid
(15,429) -
Closing balance
10,439 19,109
A NZ imputation credit on NZ 3.5 cents of the dividend was attached to the final dividend paid on 30 August
2022. There is no NZ imputation credit attached to the proposed final dividend for the year ended 30 June 2023.
(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 2023 to be paid on 1 September 2023, but not
recognised as a liability at the end of the financial year is: 173,649

(e) Listed Investment Company capital gain account
2023
$’000

2022
$’000
Balance of the Listed Investment Company (LIC) capital gain
account at 1 July:
158,619

43,793
Capital gains (incl LIC gains received from dividends) 52,670 150,256
LIC gains paid as part of dividend (118,476) (35,430)
Balance at 30 June 92,813 158,619
This equates to an attributable gain of: 132,590 226,599

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. $124.0 million attributable gain is attached to the final dividend to be paid on 1 September 2023.
A5. Earnings per share
The table below shows the earnings per share based on the
profit for the year:
2023 2022

Basic Earnings per share Number Number

Weighted average number of ordinary shares used as the
denominator
1,236,299,822 1,226,476,015




$’000 $’000
Profit for the year 309,763 360,537



Cents Cents
Basic earnings per share








25.06 29.40
Excluding the Woodside/BHP Petroleum merger dividend for the year ended 30 June 2022, the basic earnings
per share figure was 23.3 cents.

20

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

2023
$’000
2022
$’000


Rental expense relating to non-cancellable leases (648) (760)
Employee benefit expenses (11,093) (12,819)
Depreciation charge - -
Other administration expenses
(6,246) (5,586)

(17,987) (19,165)
Employee benefit expenses
A major component of employee benefit expenses is Directors’ and Executives’ remuneration. This has been
summarised below:

Short-term
benefits

Post-employment
benefits

Share-based
payments

Total

$ $ $ $
$
2023
Non-executive
Directors 801,828 49,042 - 850,870
Executives 3,595,245 110,000 - 3,705,245
Total 4,397,073 159,042 4,556,115
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

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.








21

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


2023
$’000
2022
$’000
Profit before income tax expense 330,755 374,073
Tax at the Australian tax rate of 30% (2022: 30%) 99,226 112,222
Tax offset for franked dividends received (76,518) (96,709)
Sundry items whose tax treatment differs from accounting treatment (665) (403)

22,043 15,110
Over provision in prior years (1,499) (1,624)


Total tax expense 20,544 13,486

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.

2023
$’000
2022
$’000
Deferred tax liabilities on unrealised gains in the investment portfolio 1,355,200 1,169,452
Opening balance at 1 July 1,169,452 1,536,231
Tax on realised gains (24,571) (66,560)
Charged to OCI for ordinary securities on gains or losses for the period 210,319 (300,219)
1,355,200 1,169,452


22

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 $306.2 million and $612.4 million respectively, at a
tax rate of 30% (2022: $282.9 million & $565.8 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:

2023 2022

% %
Energy 3.41 3.26
Materials 15.46 14.29
Industrials 12.58 12.68
Consumer Discretionary 7.41 7.07
Consumer Staples 5.42 5.19
Banks 18.42 18.36
Other Financials 9.00 9.14
Real Estate 3.44 2.97
Telecommunications 6.25 5.87
Health Care 14.00 14.77
Info Technology 2.73 4.61
Utilities 0.03 0.03
Cash 1.85 1.76

Securities representing over 5% of the investment portfolio at 30 June
were
BHP 9.1 7.1
Commonwealth Bank 8.9 8.8
CSL 7.7 7.9
Transurban 4.4 5.1

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 (1.3%) part of the total portfolio (2022 : 1.1%).

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.


23

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-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 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 2023, no such investments are held (2022 : 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.




24

30 June 2023
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
1,268
- - 1,268 1,268
Borrowings
10,000
- - 10,000 10,000
11,268 - - 11,268 11,268
Derivatives
Options in trading portfolio* - - - - -
- - - - -

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* - - - - -
- - - - -
* 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 2023 or 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.
25

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

2023
$’000
2022
$’000

Cash at bank 755 747

Cash with custodian 4,359 5,660

Cash Management Trusts 160,271 138,212


165,385 144,619

Cash holdings yielded an average floating interest rate of 2.97% (2022: 0.08%). 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


2023
$’000

2022
$’000

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

Amount drawn down at 30 June 0 0

Undrawn facilities at 30 June 110,000 110,000



National Australia Bank- cash advance facility 20,000 20,000

Amount drawn down at 30 June 10,000 10,000

Undrawn facilities at 30 June 10,000 10,000



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

Total drawn down at 30 June 10,000 10,000

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


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 2023 the market value of the securities pledged as collateral was $14.6
million (2022 : $12.2 million).
26

D3. Revaluation reserve

2023
$’000
2022
$’000

Opening balance at 1 July 2,556,466 3,394,297

Gains/(losses) on investment portfolio

- Equity Instruments 697,758 (1,008,188)

Provision for tax on above (210,319) 300,219

Cumulative taxable realised (gains)/losses (net of tax) (117,714) (129,862)

2,926,191 2,556,466



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 510,503 416,071

Dividends paid (118,476) (35,430)
Cumulative taxable realised gains/(losses) (net of tax) 117,714 129,862
509,741 510,503

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 828,634

716,221

Dividends paid (178,226) (248,124)

Profit for the year 309,763 360,537

960,171 828,634

This reserve relates to past profits.










27

D6. Share capital

Movements in Share Capital

Date Details Notes Number
of shares

Issue
price
Paid-up
Capital

’000 $ $’000
1/07/2021 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
30/08/2022 Dividend Reinvestment Plan i 4,883 7.56 36,914
30/08/2022
Dividend Substitution Share
Plan
ii 836 7.56 n/a
24/02/2023 Dividend Reinvestment Plan i 4,027 7.29 29,354
24/02/2023
Dividend Substitution Share
Plan
ii 697 7.29 n/a
Various Costs of issue - - (149)
30/06/2023 Balance 1,240,349 3,136,282
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 (2022: Nil).
All shares have been fully paid, rank pari passu and have no par value.












28

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

2023
$’000
2022
$’000
Profit for the year 310,211 360,557
Net decrease/(increase) in trading portfolio 1,142 (234)
Dividends received as securities under DRP investments (16) (74,888)
Decrease/(increase) in current receivables (8,111) 3,413
- Less increase/(decrease) in receivables for investment portfolio 3,223 (9,875)
Increase/(decrease) in deferred tax liabilities 186,075 (366,217)
- Less (increase)/decrease in deferred tax liability on investment portfolio (185,748) 366,779
Increase/(decrease) in current payables (27,420) 27,668
- Less increase/(decrease) in dividends payable 2 (46)
- Less (increase)/decrease in payables for investment portfolio 27,610 (27,610)
Increase/(decrease) in provision for tax payable (30,411) 49,946
Capital gains tax charge taken through equity (24,571) (66,560)
Prior year taxes paid relating to capital gains 66,560 13,945
Increase/(decrease) in other provisions/non-cash items (863) 887
Net cash flows from operating activities 317,683 277,765

E2. Tax reconciliations

Tax expense composition

Charge for tax payable relating to the current year 21,716 14,548
Over provision in prior years (1,499) (1,624)
Increase/(decrease) in deferred tax liabilities 327 562

20,544 13,486

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
210,319 (300,219)

210,319 (300,219)







29

Deferred tax assets & liabilities
The deferred tax balances are attributable to:
2023
$’000
2022
$’000

(a) Tax on unrealised gains or losses in the trading portfolio (423) (161)

(b)
Provisions and expenses charged to the accounting profit
which are not yet tax deductible
1,929 2,111

(c)
Interest and dividend income receivable which is not
assessable for tax until receipt
(2,336) (2,453)


(830) (503)


Movements:

Opening balance at 1 July (503) 59

Credited/(charged) to Income statement (327) (562)


(830) (503)

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.

30

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 $45,369 (2022: $51,824).
(b) AICS transactions with minority interests
The below transactions were with Djerriwarrh Investments Ltd as a minority interest holder in the Company’s subsidiary.

2023
$’000
2022
$’000
Administration expenses charged for the year 2,442 2,262
(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 2,058 1,702
Administration expenses charged for the year to AMCIL Ltd 1,216 1,021
F2. Remuneration of auditors
For the year the auditor earned or will earn the following remuneration:

2023
$

2022
$
PricewaterhouseCoopers
Audit Services
Audit or review of financial reports 176,496 163,106
Audit related Services
AFSL compliance audit and review 9,098 8,707
Permitted Non-Audit Services
Review of realised CGT balances 63,702 51,728
Preparation and lodgement of tax returns 35,864 34,370

Assistance with ATO Combined Assurance Review - 41,800

Total remuneration 285,160 299,711


31

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 17.3% (2022 1 investment : BHP (35.6% including the Woodside/BHP
Petroleum merger dividend)).
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 26 July 2023 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 2023 (“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.
32

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.
The Group had no convertible notes on issue for the years ended 30 June 2023 or 30 June 2022.
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 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 Incentive Plan and the Employee Share Acquisition
Scheme.
For the Employee Share Acquisition Scheme and the Executive 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 and, in the case of performance of the Group and other investment companies,
longer term performance of up to 10 years. For the Employee Share Acquisition Scheme and a portion of the
Executive Incentive Plan, 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 both the Executive Incentive Plan and the
Investment Team Incentive Plan is recognised on the Balance Sheet.
The Executive Long Term Incentive Plan was discontinued during the year and the Executive Incentive Plan
was modified to take this into account. No further awards will be made under the Executive Long Term
Incentive Plan – the 2019/20, 2020/21 and 2021/22 Plans have all been cancelled.
62,569 shares vested during the year in respect of the 2018/19 plan (2022 : 45,680). No further shares are
eligible for vesting.

33

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 Incentive Arrangements
Share Incentive arrangements
The Group has a number of share incentive arrangements. These 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 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.
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.
37,897 shares for both the former Executive Long Term Incentive and former Annual Incentive Plans (2022:
27,429 shares) were purchased by executives in the year (in relation to the prior year) with a fair value (being
the acquisition price) of $276,813 (2022: $220,476).

34

(ii) Executive Long Term Incentive Plan (discontinued)
An amount of $798,000 was written back as a result of the discontinuation of the 2019/20, 2020/21 and
2021/22 Plans.
1,632 rights under the 2018/19 plan were forfeited during the year (2.5%).
(b) Employee Share Acquisition Scheme (ESAS)
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, 58% of the possible maximum was awarded, and 50% of this was used
to buy shares in Mirrabooka 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:

2023
$’000
2022
$’000
Share-based payment expense (ESAS only in 2023) 55 599

(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
between AFIC and AICS are eliminated on consolidation.
The financial information for the parent entity, disclosed in note 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
2023 2022

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.
35

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:

2023
$’000
2022
$’000
Due within one year 534 508
Later than one year but less than five 2,416 2,302
Greater than five years - 648
2,950 3,458


36

F10. Parent Entity Financial Information

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

2023 2022
$'000 $'000
Balance sheet

Current assets 203,360 177,347
Total assets 8,952,645 8,257,705

Current liabilities 43,607 101,688
Total liabilities 1,401,070 1,271,402

Shareholders’ equity

Issued capital 3,136,432 3,070,313

Reserves
Revaluation reserve 2,926,191 2,556,466
Realised capital gains reserve 509,741 510,503
General reserve 23,637 23,637
Retained earnings 955,574 825,384
4,415,143 3,915,990

Total shareholders’ equity 7,551,575 6,986,303

Profit or loss for the year 308,418 360,477

Total comprehensive income 795,857 (347,492)

37