Preliminary Final Report

RESULTS FOR ANNOUNCEMENT TO THE MARKET
The reporting period is the year ended 30 June 2021 with the prior corresponding period being the
year ended 30 June 2020.
This report is based on financial statements that are in the process of being audited.
Results for announcement to the market
Net profit was $235.1 million, 2.2% down from the prior ye
ar.

Net profit attributable to members (excluding minority interests) was $234.7 million, 2.2% down
from the prior year.
Revenue from operating activities was $262.8 million, 0.6% down from the prior year
.

The Management Expense Ratio (“MER”) calculated as the net expenses of managing the
Company as a percentage of the average value of its investments including cash over the year
,
wa
s 0.14% for the year (2020: 0.13%).
Net tangible assets per share as at 30 June 2021, before allowing for the final dividend, were
$7.45 per share before allowing for the provision for deferred tax on unrealised gains in t
he
inve
stment portfolio (2020: $5.96).
A fully-franked final dividend of 14 cents per share, the same as last year’s final dividend, will be
paid on 31 August 2021 to shareholders on the register on 12 August 2021. The shares are
expected to trade ex-dividend on 11 August 2021. There is no conduit foreign inco
me
comp
onent of the dividen
d.

There is no New Zealand imputation credit attached to this dividend.
3 cents of the final dividend are sourced from capital gains, on which the Group has paid or wi
ll
p
ay tax. The amount of the pre-tax attributable gain, known as an “LIC capital gain”, is therefore
4.29 cents. This enables some shareholders to claim a tax deduction in their tax return. Furth
er
d
etails will be on the dividend statements.
The interim dividend of 10 cents per share was paid to shareholders on 23 February 2021.
The total dividend for the financial year is therefore 24 cents per share, fully-franked. Tota
l
dividends last
year we
re also 24 cents.

A Dividend Reinvestment Plan (DRP) and Dividend Substitution Share Plan (DSSP) are
available, the price for both of which will be set at a 3.5% discount to the Volume Weighted
Average Price of the Company’s shares traded on the ASX and Chi-X automated trading systems
over the five trading days after the shares trade ex-dividend. Notices of participation in the DRP
& the DSSP need to be received by the share registry by 5 pm (AEST) on 13 August 2021. All
shares issued under the DRP and DSSP will rank equally with existing shares.
The Company will be providing an update on these results via a webcast for shareholders on
Tuesday 27 July 2021 at 3.30 p.m. (AEST). Details are on the website afi.com.au.

The 2021 AGM will be held at 10.00 AM on Tuesday 5 October.
Further details on how to
participate will be sent to shareholde
rs.
2

Portfolio outperforms, final dividend maintained
Full Year Report to 30 June 2021
AFIC invests in a diversified portfolio of Australian equities, seeking to provide attractive
inc
ome and capital growth over the medium to long term to shareholders at a low cost and lo
w
vol
atility. AFIC’s management expense ratio is 0.14% with no performanc
e fees.
The Full Ye
ar Profit was $235.1 million, down from $240.4 million in the
previous
corresponding period.
The profit to 30 June 202
1 includes a demerger dividend of $36.5
mil
lion (which was non-cash and carries no franking) resulting fr
om the Endeavour Group
dem
erger from Woolworths. Excluding this one-off item, the profit figure to 30 June 2021 w
as
$198.6 milli
on. This fall in profit versus the corresponding period last year was
a result of the
dec
line in underlying income as the economic impact of the COVID-19 pandemic conti
nued to
limit div
idends for many ho
ldings in the portfolio.
AFIC, as a long-standing listed in
vestment company, has reserves that can be
used in difficult
times. Drawing upon these reserves, the final dividend
was maintain
ed at 14 cents per share
fully franked despite the fall
in income over the year. Total fully frank
ed dividends applicable
for the year are 24 cents pe
r share, the same as last year. Despite the sign
ificant disruption to
inc
ome arising from COVID-19 over the last two years, AFIC has maintained its div
idends to
sha
reholders through this period
.
Activity in the portfolio w
as focused on consolidating the position around what we
have
assessed to be high-quality companies with
strong industry positions. This co
mprised exiting
some holdi
ngs to fund purchases in existing and selected new holdings, includin
g
participation in the PEXA G
roup IPO.
Portfolio return for the year was 31.9%, including franking. This retu
rn was ahead of the
S&P/ASX 2
00 Accumulation Index, which was up 29.1%, in
cluding franking. Over 10 years, the
corresponding figur
es are 11.0% for AFIC and 10.8% for the Index. AFIC’s perf
ormance returns
are after costs. The sh
ort and long term performance have been achieved with low por
tfolio
turnover, prov
iding very tax effective returns for shareholders. The
se returns have also been
del
ivered with very low volatility, achieving an attractive profile of r
eturn relative to risk for
inv
estor
s.

Portfolio re
turn (including the full benefit of franking and after costs) – per annum to 30 June 2021
3

Portfolio Performance

The Australian share market delivered a very strong performance for the financial year as concerns
about the lingering effects of COVID-19 were put aside by the positive stimulus provided by
government and central banks, and better than expected company earnings. The positive mood of
investors was also reinforced by the efficacy of vaccines and their deployment in a number of major
markets.
The S&P/ASX 200 Accumulation Index delivered a positive performance in 11 of the 12 months for the
financial year, culminating in a 12-month return of 29.1%, including franking – one of the strongest
returns on record. AFIC’s portfolio outperformed over this period, with a return of 31.9%, which also
includes the benefit of franking.
Companies in the portfolio that contributed strongly to the positive relative return to the Index through
the 12-month period were Reece, Mainfreight, ARB Corporation, James Hardie Industries and ALS.
The long term performance of the portfolio, which is better aligned with the Company’s investment
timeframes, was 11.0% per annum for the 10 years to 30 June 2021. This is slightly ahead of the
Index return over the same period of 10.8%. Both of these figures include the benefit of franking.
AFIC’s performance numbers are after costs.

Portfolio Adjustments

A number of purchases were undertaken during the financial year. The largest was participation in the
IPO of PEXA Group. While the pricing reflected the strong market conditions towards the end of the
period, the company appears well positioned as a good long-term investment. Other new holdings
added to the portfolio were Endeavour Group, due to its demerger from Woolworths, FINEOS
Corporation (including participation in its placement), Domino’s Pizza Enterprises, Temple & Webster,
Nanosonics and IDP Education. Periods of volatility throughout the year also provided opportunities to
add to holdings with strong market positions such as Woolworths and ASX.
Major sales included the complete disposal of holdings in South32, Alumina and Brickworks, and
these funds were deployed elsewhere in the portfolio. There was also some trimming of the positions
in Qube Holdings, Brambles and Oil Search.

International Portfolio

As first signalled at the AGM in October 2020, a small part of our funds, $48 million (which represents
approximately 0.5% of the portfolio) was invested into a diversified global equities portfolio during the
latter half of the financial year. This 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 activity is potentially a precursor to establishing a separate low-cost international Listed
Investment Company in the future.

Outlook

Equity markets delivered near-record growth over the year with valuations recovering from the effects
of COVID-19 as interest rates remain very low. However, the outlook for corporate earnings remains
uncertain, as supportive government stimulus measures are unlikely to be repeated and underlying
economic conditions remain variable. Cost inflation is also starting to percolate, and companies are
facing disruption to their supply chains which may lead to rising costs for many companies. In this
environment, it is our expectation that market volatility will increase over the coming 12 months.
In recent years we have increased the weighting of holdings in the portfolio that meet our definition of
quality companies. In an economy where input costs may be rising, we believe the companies in the
portfolio are generally well positioned given their market strength and ability to further leverage their
efficiencies. Any pressure on valuations because of these conditions may result in purchases in more
of our preferred companies at attractive prices. At present, we are looking to remain patient with our
capital until these opportunities present themselves.
Please direct any enquiries to:
Mark Freeman Geoff Driver
Managing Director General Manager
(03) 9225 2122 (03) 9225 2102

26 July 2021

4

MAJOR TRANSACTIONS IN THE INVESTMENT PORTFOLIO


Acquisitions
Cost
($’000)


PEXA Group 50,000
Endeavour Group
(demerger from Woolworths Group) 39,713
FINEOS Corporation
(includes participation in placement at $4.26 per share) 30,981
ASX 28,444
Woolworths Group 28,184
Domino’s Pizza Enterprises 24,743
Temple & Webster 24,547
Nanosonics 21,520


Disposals
Proceeds
($’000)

Qube Holdings 41,399
South 32
#
35,848
National Australia Bank
(because of the exercise of call options) 35,413
Alumina
#
34,778
Brickworks
#
32,698
Brambles 28,973
Oil Search 26,537
#
Complete disposal from the portfolio.
New Companies Added to the Portfolio

PEXA Group
Endeavour Group
FINEOS Corporation
Domino’s Pizza Enterprises
Temple & Webster
Nanosonics
IDP Education


5

TOP 25 INVESTMENTS AS AT 30 JUNE 2021

Includes investments held in both the Investment and Trading Portfolios.

Total Value
$ million
1Commonwealth Bank of Australia789.08.8%
2BHP Group 651.57.3%
3CSL 623.26.9%
4Wesfarmers 435.74.9%
5Westpac Banking Corporation401.24.5%
6Macquarie Group 345.23.8%
7Transurban Group 339.63.8%
8National Australia Bank 292.53.3%
9Woolworths Group 244.62.7%
10Australia and New Zealand Banking Group 238.92.7%
11Rio Tinto 235.82.6%
12Mainfreight 234.02.6%
13 * James Hardie Industries207.62.3%
14 * Telstra Corporation 204.32.3%
15Amcor175.52.0%
16Reece 170.01.9%
17ARB Corporation 151.31.7%
18Sydney Airport148.31.7%
19Sonic Healthcare 142.21.6%
20Goodman Group141.51.6%
21ResMed139.21.6%
22Coles Group 120.81.3%
23Seek 120.71.3%
24Ramsay Health Care 120.51.3%
25Carsales.com 119.61.3%
6,792.9
As % of Total Portfolio Value 75.7%
(excludes Cash)
* Indicates options were written against part of the holding
% of
Portfolio
Valued at closing prices at 30 June 2021
6

P
ORTFOLIO
P
ERFORMANCE TO
30

J
UNE
2021


P
ERFORMANCE
M
EASURES TO
30

J
UNE
2021
1
YEAR

3
YEARS

%

PA
5
YEARS

%

PA
10
YEARS

%

PA
P
ORTFOLIO
R
ETURN
–
N
ET
A
SSET
B
ACKING
R
ETURN INCLUDING
DIVIDENDS REINVESTED

29.8% 10.5% 10.8% 9.0%
S&P/ASX

200

A
CCUMULATION
I
NDEX

27.8% 9.6% 11.2% 9.3%


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

31.9% 12.5% 12.8% 11.0%
S&P/ASX

200

G
ROSS
A
CCUMULATION
I
NDEX
*
29.1% 11.0% 12.6% 10.8%

* 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 ga
ins
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 2021

8

FINANCIAL STATEMENTS
Consolidated Income Statement for the Year Ended 30 June 2021




2021

2020

Note $’000 $’000
Dividends and distributions
A3 257,874 257,858
Interest income from deposits A3 116 1,554
Other revenue A3
4,831

4,895
Total revenue
262,821

264,307





Net gains/(losses) on trading portfolio A3
2,472

9,740




Income from operating activities 265,293 274,047
Finance costs (1,831) (1,047)
Administration expenses B1 (15,509) (14,759)

Profit before income tax expense 247,953 258,241
Income tax expense B2, E2 (12,858) (17,846)
Profit for the year 235,095 240,395
Profit is attributable to :

Equity holders of Australian Foundation Investment Company
234,651 239,931
Minority interest
444 464

235,095 240,395



Cents Cents
Basic earnings per share A5 19.28 19.88

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

Consolidated Statement of Comprehensive Income for the Year Ended 30 June 2021


Year to 30 June 2021 Year to 30 June 2020
Revenue
1
Capital
1
Total Revenue
1
Capital
1
Total

$’000 $’000 $’000 $’000 $’000 $’000
Profit for the year 235,095 - 235,095 240,395 - 240,395


Other Comprehensive
Income

Items that will not be recycled through
the Income Statement

Gains/(losses) for the
period
- 1,881,261 1,881,261 - (568,806) (568,806)
Tax on above - (575,865) (575,865) - 167,602 167,602


Total Other
Comprehensive
Income

- 1,305,396 1,305,396 - (401,204) (401,204)


Total Comprehensive
Income

235,095 1,305,396 1,540,491 240,395 (401,204) (160,809)

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 2021 Year to 30 June 2020
Revenue Capital Total Revenue Capital Total
$’000 $’000 $’000 $’000 $’000 $’000
Equity holders of Australian
Foundation Investment
Company Ltd
234,651 1,305,396 1,540,047 239,931 (401,204) (161,273)
Minority Interests 444 - 444 464 - 464

235,095 1,305,396 1,540,491 240,395 (401,204) (160,809)



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



10

Consolidated Balance Sheet as at 30 June 2021

2021 2020


Note $’000 $’000

Current assets

Cash D1 97,122 111,318

Receivables 40,011 17,347

Trading portfolio 4,745 4,304

Total current assets 141,878 132,969

Non-current assets

Investment portfolio A2 8,973,080 7,117,970

Deferred tax assets 59 872

Total non-current assets 8,973,139 7,118,842

Total assets 9,115,017 7,251,811




Current liabilities

Payables 1,020 884

Tax payable 12,621 30,771

Provisions 5,235 4,765

Total current liabilities 18,876 36,420

Non-current liabilities

Provisions 888 1,375

Deferred tax liabilities – investment portfolio B2 1,536,231 973,499

Total non-current liabilities 1,537,119 974,874

Total liabilities 1,555,995 1,011,294




Net Assets 7,559,022 6,240,517


Shareholders' equity


Share capital A1, D6 3,007,730 2,947,243

Revaluation reserve A1, D3 3,394,297 2,166,030

Realised capital gains reserve A1, D4 416,071 397,712

General reserve A1 23,637 23,637

Retained profits A1, D5 716,221 705,273

Parent entity interest 7,557,956 6,239,895

Minority interest 1,066 622

Total equity 7,559,022 6,240,517


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 2021



Note
Share
Capital
Revaluation
Reserve
Realised
Capital
Gains
General
Reserve
Retaine
d
Profit
s
Total
Parent
Entity
Minority
Interest Total
Y
ear 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


12

Consolidated Statement of Changes in Equity for the Year Ended 30 June 2021 (continued)




Note
Share
Capital
Revaluation
Reserve
Realised
Capital
Gains
General
Reserve
Retaine
d
Profit
s
Total
Parent
Entity
Minority
Interest Total
Y
ear Ended 30 June 2020
$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000
Total equity at the beginning of th
e year

2,888,136
2,561,314
462,257
23,637
688,244
6,623,588
1,158
6,624,746
Dividends paid to shareholders
A4
-
-
(58,625)
-
(222,902)
(281,527) - (281,527)
- Dividend Reinvestment Plan
D6
59,249
-
-
-
-
59,249 - 59,249
Other share capital adjustments

(142)
-
-
-
-
(142) - (142)
Total transactions with shareholders
59,107

-

(58,625)

-

(222,902)

(222,420) - (222,420)









Profit for the year

- - - - 239,931
239,931 464 240,395
Other Comprehensive Income (net of tax)




Net losses for the period

- (401,204)
-
-
-
(401,204) - (401,204)
Other Comprehensive Income for the year

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

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

- - - - -
- (1,000)
(1,000)





Total equity at the end of the year
2,947,243

2,166,030

397,712

23,637

705,273

6,239,895 622 6,240,517







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

13

Consolidated Cash Flow Statement for the Year Ended 30 June 2021


2021 2020

$’000 $’000

Inflows/ Inflows/

Note (Outflows) (Outflow)
Cash flows from operating activities
Sales from trading portfolio 14,776 39,663
Purchases for trading portfolio (1,297) (25,160)
Interest received 116 1,573
Dividends and distributions received 196,351 255,492

209,946 271,568


Other receipts 4,878 5,095
Administration expenses (15,445) (14,403)
Finance costs paid (1,831) (1,047)
Taxes paid (18,781) (6,578)
Net cash inflow/(outflow) from operating activities E1 178,767 254,635


Cash flows from investing activities
Sales from investment portfolio 469,102 589,059
Purchases for investment portfolio (416,321) (694,841)
Taxes paid on capital gains (23,798) (20,394)
Net cash inflow/(outflow) from investing activities 28,983 (126,176)


Cash flows from financing activities
Net bank borrowings - -
Share issue transaction costs (145) (142)
Dividends paid (221,801) (223,428)
Net cash inflow/(outflow) from financing activities (221,946) (223,570)


Net increase/(decrease) in cash held (14,196) (95,111)
Cash at the beginning of the year 111,318 206,429
Cash at the end of the year D1 97,122 111,318

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:

2021
$’000
2020
$’000

Share capital 3,007,730 2,947,243

Revaluation reserve 3,394,297 2,166,030

Realised capital gains reserve 416,071 397,712

General reserve 23,637 23,637

Retained profits 716,221 705,273


7,557,956 6,239,895


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:
2021
$’000
2020
$’000



Equity instruments (excluding below) 8,502,224 6,661,720

Equity instruments (over which options may be written) 423,249 456,250

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

8,973,080 7,117,970




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 and the investment in Pexa which is also Level 2 as it did not start trading until 1 July 2021).
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 2021 and 30 June 2020 were as follows:

30 June
2021
30 June
2020
Net tangible asset backing per share $ $
Before tax 7.45 5.96
After tax 6.19 5.16
Equity investments
The shares in the investment portfolio are designated under the accounting standards as financial assets
measured at fair value through ‘other comprehensive income’ (“OCI”), because they are equity instruments held
for long-term capital growth and dividend income, rather than to make a profit from their sale. This means that
changes in the value of these shares during the reporting period are included in OCI in the Consolidated
statement of comprehensive income. The cumulative change in value of the shares over time is then recorded
in the Revaluation Reserve. On disposal, the amounts recorded in the revaluation reserve are transferred to the
realisation reserve.
Securities sold and how they are measured
Where securities are sold, any difference between the sale price and the cost is transferred from the
revaluation reserve to the realisation reserve and the amounts noted in the consolidated statement of changes
in equity. This means the Company is able to identify the realised gains out of which it can pay a ‘Listed
Investment Company’ (LIC) gain as part of the dividend, which conveys certain taxation benefits to many of
AFIC’s shareholders.
During the period $511.1 million (2020: $584.6 million) of equity securities were sold. The cumulative gain on
the sale of securities was $77.1 million for the period after tax (2020: $5.9 million loss). 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 2021 is set out below.
Dividends and Distributions
2021
$’000

2020
$’000
Income from securities held in investment portfolio at 30 June
251,687 242,790
Income from investment securities sold during the year
5,976 15,068
Income from securities held in trading portfolio at 30 June
211 -
Income from trading securities sold during the year
- -
257,874 257,858

Interest income

Revenue from deposits and cash management trusts 116 31,554
Other revenue
Administration fees 4,831 4,853
Other income - 42
4,831 4,895
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.

2021

2020
Net gains
$’000

$’000
Net realised
gains/(losses) from trading portfolio – shares
149 1,038
- options 1,724 8,428
Unrealised
gains/(losses) from trading portfolio - shares
897 243
- options (298) 31
2,472 9,740
$152.3 million of shares are lodged with the ASX Clear Pty Ltd as collateral for sold option positions written by
the Group (2020: $108.4 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 $44.5
million worth of securities at an agreed price – the ‘exposure’ (2020: $32.0 million). There were no put options
in the portfolio at 30 June 2021 (2020 : $nil).

17

A4. Dividends paid
The dividends paid and payable for the year ended 30 June 2021 are shown below:

2021
$’000
2020
$’000
(a) Dividends paid during the year

Final dividend for the year ended 30 June 2020 of 14 cents fully franked at
30% paid 1 September 2020 (2020: 14 cents fully franked at 30% paid on
29 August 2019).
164,556 164,150
Interim dividend for the year ended 30 June 2021 of 10 cents per share
fully franked at 30% paid 23 February 2021 (2020: 10 cents fully franked at
30% paid 24 February 2020)
117,917 117,377

282,473 281,527
Dividends paid in cash
221,841 222,278
Dividends reinvested in shares
60,632 59,249

282,473 281,527
Dividends forgone via DSSP
8,635 7,111
(b) Franking credits

Opening balance of franking account at 1 July
174,053 182,607
Franking credits on dividends received
67,295 88,920
Tax paid during the year
41,428 26,234
Franking credits paid on ordinary dividends paid
(121,060) (120,654)
Franking credits deducted on DSSP shares issued
(3,707) (3,054)
Closing Balance of Franking Account
158,009 174,053
Adjustments for tax payable in respect of the current year’s profits and the
receipt of dividends recognised as receivables
19,610 33,803
Adjusted Closing Balance 177,619 207,856
Impact on the franking account of dividends declared but not recognised
as a liability at the end of the financial year:
(73,250) (72,622)
Net available 104,369

135,234
These franking account balances would allow AFIC to frank additional
dividend payments up to an amount of:
243,528 315,546
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
2021
$’000
2020
$’000
(Figures in A$ at year-end exchange rate : 2021 : $NZ1.074:$A1; 2020 : $NZ1.071:$A1)
Opening balance
8,470 14,381
Imputation credits on dividends received
4,779 7,187
Imputation credits on dividends paid
- (13,074)
Closing balance
13,249 8,494
There will be no NZ imputation credit attached to the proposed dividend payable on 31 August 2021.
(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 2021 to be paid on 31 August 2021, but not
recognised as a liability at the end of the financial year is:
170,917

(e) Listed Investment Company capital gain account
2021
$’000

2020
$’000
Balance of the Listed Investment Company (LIC) capital gain account at 1
July:
62,912 63,335
Capital gains (incl LIC gains received from dividends) 39,651 58,202
LIC gains paid as part of dividend (58,770) (58,625)
Balance at 30 June 43,793 62,912
This equates to an attributable gain of: 62,562 89,874

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. $52.3 million attributable gain is attached to the final dividend to be paid on
31 August 2021.
A5. Earnings per share
The table below shows the earnings per share based on the
profit for the year:
2021 2020

Basic Earnings per share Number Number

Weighted average number of ordinary shares used as the
denominato
r
1,217,056,577 1,206,707,394



$’000 $’000
Profit for the year 234,651 239,931
Cents Cents
Basic earnings per share


19.28 19.88
19

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

2021
$’000
2020
$’000


Rental expense relating to non-cancellable leases (747) (699)
Employee benefit expenses (9,304) (8,587)
Depreciation charge - -
Other administration expenses
(5,458) (5,473)

(15,509) (14,759)
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

$ $ $ $ $
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
2020
Non-executive
Directors 716,550 - 63,450 - 780,000
Executives 2,755,048 (100,800) 98,858 166,650 2,919,756
Total 3,471,598 (100,800) 162,308 166,650 3,699,756

Detailed remuneration disclosures are provided in the Remuneration Report.

The above figures include share-based expenses incurred in respect of Ross Barker, former Managing
Director, who was eligible for vesting under these plans during the year. This is the final year for which Mr
Barker is eligible for awards under these plans.

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




20

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


2021
$’000
2020
$’000
Profit before income tax expense 247,953 258,241
Tax at the Australian tax rate of 30% (2020: 30%) 74,386 77,472
Tax offset for franked dividends received (47,106) (61,344)
Demerger dividend non-taxable (10,952) -
Sundry items whose tax treatment differs from accounting treatment (1,234) 4,171

15,094 20,299
Over provision in prior years (2,236) (2,453)
Total tax expense 12,858 17,846

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.

2021
$’000
2020
$’000
Deferred tax liabilities on unrealised gains in the investment portfolio 1,536,231 973,499
Opening balance at 1 July 973,499 1,163,749
Tax on realised gains (13,133) (22,648)
Charged to OCI for ordinary securities on gains or losses for the period 575,865 (167,602)
1,536,231 973,499
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 $314.1 million and $628.1 million
respectively, at a tax rate of 30% (2020: $249.1 million & $498.3 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:

2021 2020

% %
Energy 1.96 3.01
Materials 14.32 15.76
Industrials 14.40 15.88
Consumer Discretionary 7.83 5.98
Consumer Staples 4.42 4.60
Banks 18.97 17.16
Other Financials 8.88 8.26
Real Estate 2.47 1.74
Telecommunications 5.99 4.42
Health Care 14.40 16.62
Info Technology 4.63 4.00
Utilities 0.66 1.03
Cash 1.07 1.54

Securities representing over 5% of the investment portfolio at 30 June
were
Commonwealth Bank 8.8 7.7
BHP 7.3 7.0
CSL 6.9 8.5

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 (0.5%) part of the total portfolio.

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-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. 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 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* - - - - -

- - - - -

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

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

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

- - - - -
* 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 2021.

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

2021
$’000
2020
$’000

Cash at bank and in hand (including on-call) 97,122 111,318


97,122 111,318

Cash holdings yielded an average floating interest rate of 0.14% (2020: 1.02%). 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
2021
$’000
2020
$’000

Commonwealth Bank of Australia – cash advance facilities 50,000 250,000
Amount drawn down - -
Undrawn facilities 50,000 250,000

The above borrowings are unsecured. Repayment of facilities is done either through the use of cash received
from distributions or the sale of securities, or by rolling existing facilities into new ones. Facilities are usually
drawn down for no more than three months.
After 30
th
June 2021, additional facilities have been written with Commonwealth Bank for an additional $60
million.
During the previous year, the Group had an additional facility available of $120 million in order to take
advantage of any potential opportunities that may have arisen due to the circumstances surrounding COVID-19
and the responses to it. This facility was not renewed during the current year.







25

D3. Revaluation reserve

2021
$’000
2020
$’000

Opening balance at 1 July 2,166,030 2,561,314

Gains/(losses) on investment portfolio

- Equity Instruments 1,881,261 (568,806)

Provision for tax on above (575,865) 167,602

Cumulative taxable realised (gains)/losses (net of tax) (77,129) 5,920

3,394,297 2,166,030



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 397,712 462,257

Dividends paid (58,770) (58,625)
Cumulative taxable realised gains/(losses) for period through OCI (net
of tax)
77,129

(5,920)
416,071 397,712

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 705,273

688,244

Dividends paid (223,703) (222,902)

Profit for the year 234,651 239,931

716,221 705,273

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
1/07/2019 Balance 1,200,148 2,888,136
29/08/2019 Dividend Reinvestment Plan i 5,541 6.21 34,407
29/08/2019 Dividend Substitution Share
Plan
ii 622 6.21 n/a
24/02/2020 Dividend Reinvestment Plan i 3,585 6.93 24,842
24/02/2020 Dividend Substitution Share
Plan
ii 468 6.93 n/a
Various Costs of issue - - (142)
30/06/2020 Balance 1,210,364 2,947,243
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
i. Shareholders elect to have all or part of their dividend payment reinvested in new ordinary shares under
the Dividend Reinvestment Plan (DRP). The price of the new DRP shares is based on the average selling
price of shares traded on the Australian Securities Exchange & Chi-X in the five days after the shares
begin trading on an ex-dividend basis.
ii. The Group has a Dividend Substitution Share Plan (DSSP) whereby shareholders may elect to forgo a
dividend and receive shares instead. Pricing for the DSSP shares is done as per the DRP shares.
iii. The Group has an on-market share buy-back programme. During the financial year, no shares were
bought back (2020: 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

2021
$’000
2020
$’000
Profit for the year 235,095 240,395
Net decrease/(increase) in trading portfolio (441) (11,337)
Dividends received as securities under DRP investments - (8,355)
Demerger dividend – non-cash item (36,505) -
Decrease/(increase) in current receivables (22,664) 22,781
- Less increase/(decrease) in receivables for investment portfolio 9,875 -
Increase/(decrease) in deferred tax liabilities 563,545 (191,222)
- Less (increase)/decrease in deferred tax liability on investment portfolio (562,732) 190,250
Increase/(decrease) in current payables 136 (48)
- Less increase/(decrease) in dividends payable (40) 151
Increase/(decrease) in provision for tax payable (18,150) 13,719
Capital gains tax charge taken through equity (13,133) (22,648)
Prior year taxes paid relating to capital gains 23,798 20,394
Increase/(decrease) in other provisions/non-cash items (17) 555
Net cash flows from operating activities 178,767 254,635

E2. Tax reconciliations

Tax expense composition

Charge for tax payable relating to the current year 14,281 21,271
Over provision in prior years (2,236) (2,453)
(Increase)/Decrease in deferred tax assets 813 (972)

12,858 17,846

Amounts recognised directly through Other Comprehensive Income

Net movement in deferred tax liabilities relating to capital gains tax
on the movement in gains in the investment portfolio 575,865 (167,602)

575,865 (167,602)





28

Deferred tax assets & liabilities
The deferred tax balances are attributable to:
2021
$’000
2020
$’000

(a) Tax on unrealised gains or losses in the trading portfolio (253) (82)

(b) Provisions and expenses charged to the accounting profit
which are not yet tax deductible
1,851 1,849

(c) Interest and dividend income receivable which is not
assessable for tax until receipt
(1,539) (895)


59 872


Movements:

Opening balance at 1 July 872 (100)

Credited/(charged) to Income statement (813) 972


59 872

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

29

F. Further information
This section covers information that is not directly related to specific line items in the financial statements,
including information about related party transactions, share-based payments, assets pledged as security and
other statutory information.
F1. Related parties
All transactions with deemed related parties were made on normal commercial terms and conditions and
approved by independent Directors.
(a) Arrangements with non-executive directors
Non-Executive Directors R Barker (who retired on 30 June 2021), J Paterson and C Walter have rented office
space and, for R Barker and J Paterson, a parking space from the Group at commercial rates during the year.
Sub-lease rental income (included in revenue) received or receivable by the Group, excluding GST, during the
year was $62,608 (2020: $62,565).
(b) AICS transactions with minority interests
The below transactions were with Djerriwarrh Investments Ltd as a minority interest holder in the Company’s subsidiary.

2021
$’000
2020
$’000
Administration expenses charged for the year 2,528 2,634
(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 1,467 1,454
Administration expenses charged for the year to AMCIL Ltd 916 839
F2. Remuneration of auditors
For the year the auditor earned or will earn the following remuneration:

2021
$
2020
$
PricewaterhouseCoopers
Audit Services
Audit or review of financial reports 210,050 202,815
Audit related Services

AFSL compliance audit and review 8,331 8,168
Permitted Non-Audit Services

Preparation and lodgement of tax returns 32,940 32,293

Total remuneration 251,321 243,276



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 2 investments
comprising more than 10% of AFIC’s income , including realised income from the trading and options written
portfolios – Woolworths (16.1% as a result of the demerger dividend received in conjunction with the
Endeavour Group demerger) and BHP (11.0%) (2020 2 investments : Commonwealth Bank (12.4%) and BHP
(10.5%)).
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 2021 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 2021 (“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)
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of AFIC shares up to but not including 1 July is calculated. The amount of ELTIP available is then divided by
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. 17,763 shares vested
during the year ended 30 June 2021.

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. 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 Annual Incentive Plan
Each financial year, the Remuneration Committee sets the target (cash) amount of remuneration that could be
paid should all performance targets and measures be achieved. If all are achieved, 100% of the remuneration
will be awarded. If stretch levels of performance are achieved above target, then higher amounts may be paid.
On the other hand there is no set minimum that will be paid regardless of performance.
The performance measures are a combination of the performance of the Group, the investment companies to
which the Group provides administration services, and personal objectives.
All of the incentive remuneration awarded is paid in cash, with 50% of the after-tax amount being used by the
executive to purchase shares. All remuneration under the plan, is paid in the financial year following the year of
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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.
21,736 shares for both LTIP and Annual Incentive (2020: 12,565 shares) were purchased by executives in the
year (in relation to the prior year) with a fair value (being the acquisition price) of $149,306 (2020: $81,835).
(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.
67,777 rights were awarded under the plan during the year ended 30 June 2021 (2020: 65,198). An expense
of $826,722 (2020: $462,267) was incurred for the 2017/18, 2018/19, 2019/20 and 2020/21 plans. 51,941 rights
under the 2016/17 plan were forfeited during the year (74.5%).
(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, 28% of the possible maximum was awarded, and 50% of this was used
to buy shares in AMCIL 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:

2021
$’000
2020
$’000
Share-based payment expense 879 507

(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.
34

The financial information for the parent entity, disclosed in F9 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
2021 2020

Australian Investment Company Services
Ltd

Australia

Ordinary

75%

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

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

2021 2020
$'000 $'000
Balance sheet

Current assets 133,183 125,705
Total assets 9,106,106 7,243,674

Current liabilities 13,271 30,965
Total liabilities 1,551,348 1,005,486

Shareholders’ equity

Issued capital 3,007,730 2,947,243

Reserves
Revaluation reserve 3,394,297 2,166,030
Realised capital gains reserve 416,071 397,712
General reserve 23,637 23,637
Retained earnings 713,023 703,566
4,547,028 3,290,945

Total shareholders’ equity 7,554,758 6,238,188

Profit or loss for the year 233,319 238,539

Total comprehensive income 1,538,715 (162,665)

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