FUTURE GENERATION AUSTRALIA LIMITED — Annual Report 2016

Aug 30, 2016

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Future Generation Investment Company Limited

ABN 97 063 935 553

APPENDIX 4E PRELIMINARY FINAL REPORT FOR THE YEAR ENDED 30 JUNE 2016

RESULTS FOR ANNOUNCEMENT TO THE MARKET All comparisons to the year ended 30 June 2015

up/down % mvmt	$’000
Revenue from ordinary activities up 20.3% Profit from ordinary activities before tax attributable to members up 18.2% Net profit from ordinary activities after tax attributable to members up 28.6% Dividend Information Cents per share Franked amount per share	20,356 17,746 14,624
	Tax rate for franking
2016 Interim dividend cents per share 2.0c 2.0c 2016 Final dividend cents per share 2.0c 2.0c Final Dividend Dates	30% 30%
Ex-dividend date 10 October 2016 Record date 11 October 2016 Last election date for the DRP 13 October 2016 Payment date 21 October 2016

Dividend Reinvestment Plan

The Dividend Reinvestment Plan (‘DRP’) is in operation and the recommended fully franked final dividend of 2.0 cents per share qualifies. Participating shareholders will be entitled to be allotted the number of shares (rounded to the nearest whole number) which the cash dividend would purchase at the relevant issue price. The relevant issue price will be at a 2.5% discount to the price (calculated as the VWAP (volume weighted average price) of shares sold on the ASX (on an ex-dividend basis) four trading days from the ex-dividend date inclusive of the ex-dividend date).

Net Tangible Assets(‘NTA’) 30 Jun 16	30 Jun 15
NTA (per share) after tax $1.15	$1.11

*The NTA figures are not adjusted for the 138,486,850 outstanding options on issue which have an exercise price of $1.10.

This report is based on the Annual Report which is in the process of being audited. All the documents comprise the information required by Listing Rule 4.3A.

1 Future Generation Investment Company Limited | ABN 97 063 935 553

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2016

Notes Investment income from ordinary activities Interest income Dividends and distributions received Investment management and performance fee rebates 2 Expenses Charity donation accrual 4 Share registry transaction costs Investor communication fees Audit fees Executive remuneration Insurance Chess fees Other expenses Amortisation expense Tax fees Directors' fees ASX listing fees Share registry fees Accounting fees Profit before income tax Income tax expense 3 Net profit for the year Other comprehensive income/(loss) Items that will not be reclassified to profit or loss Net unrealised gains/(losses) on investments taken to equity, net of tax Net realised losses on investments taken to equity, net of tax Other comprehensive income/(loss) for the year, net of tax Total comprehensive income for the year Earnings per share for profit attributable to the ordinary equity holders of the Company: Basic earnings per share 13(a) Diluted earnings per share 13(b)	2016 2015
	$’000 $’000
	735 986 15,376 14,050 4,245 1,886
	20,356 16,922
	(2,291) (1,644) (157) (73) (43) (2) (36) (39) (28) - (21) (17) (20) (60) (7) (63) (4) (3) (3) - - - - - - - - -
	(2,610) (1,901)
	17,746 15,021 (3,122) (3,649)
	14,624 11,372
	4,711 (6,763) - (3)
	4,711 (6,766)
	19,335 4,606
	Cents Cents
	7.45 7.63 7.35 7.63

The accompanying notes form part of these financial statements.

2 Future Generation Investment Company Limited | ABN 97 063 935 553

STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2016

Notes ASSETS Current assets Cash and cash equivalents 12 Trade and other receivables 7 Other current assets Total current assets Non-current assets Financial assets at fair value through other comprehensive income 8 Deferred tax assets Intangible assets Total non-current assets Total assets LIABILITIES Current liabilities Trade and other payables 9 Charity donation accrual 4 Current tax liabilities Total current liabilities Non-current liabilities Deferred tax liabilities Total non-current liabilities Total liabilities Net assets EQUITY Issued capital 10(c) Reserves 11(a) Accumulated losses 11(b) Total equity	2016 2015
	$’000 $’000
	25,565 23,340 12,380 9,733 8 5
	37,953 33,078
	228,451 172,170 2,305 4,417 7 10
	230,763 176,597
	268,716 209,675
	44 23 2,291 1,644 2,783 3,231
	5,118 4,898
	56 153
	56 153
	5,174 5,051
	263,542 204,624
	248,036 200,248 19,287 4,376 (3,781) -
	263,542 204,624

The accompanying notes form part of these financial statements.

3 Future Generation Investment Company Limited | ABN 97 063 935 553

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2016

TATEMENT OF CHANGES IN EQUITY OR THE YEAR ENDED 30 JUNE 2016
Notes Balance at 1 July 2014 Net profit for the year Other comprehensive loss, net of tax Transactions with owners: Contributions of equity, net of transaction costs and tax Buy-back of ordinary shares Transfer to profits reserve 11(a) Balance at 30 June 2015 Net profit for the year Other comprehensive income, net of tax Transactions with owners: Contributions of equity, net of transaction costs and tax Dividends paid 5(a) Transfer of security-based payment reserve 11(b) Transfer to profits reserve 11(a) Balance at 30 June 2016	Issued capital Reserves Accumulated losses Total equity
	$'000 $'000 $'000 $'000
	3,528 (3,781) 3,551 3,298 - - 11,372 11,372 - (6,766) - (6,766) 198,809 - - 198,809 (2,089) - - (2,089) - 14,923 (14,923) -
	200,248 4,376 - 204,624
	- - 14,624 14,624 - 4,711 - 4,711 47,788 - - 47,788 - (8,205) - (8,205) - 3,781 (3,781) - - 14,624 (14,624) -
	248,036 19,287 (3,781) 263,542

The accompanying notes form part of these financial statements.

4 Future Generation Investment Company Limited | ABN 97 063 935 553

STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2016

Notes Cash flows from operating activities Interest received Other income received Income taxes paid Payments for other expenses Net cash (used in)/provided by operating activities Cash flows from investing activities Payments for financial assets Payments for intangible assets Proceeds from sale of financial assets Net cash used in investing activities Cash flows from financing activities Proceeds from issue of shares and options exercised Payments for shares bought back Share issue and buy-back transaction costs Dividends paid to the Company's shareholders Net cash provided by financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year 12 Non-cash transactions Shares issued via dividend reinvestment plan	2016 2015
	$’000 $’000
	766 916 375 262 (3,622) (386) (1,938) (501)
	(4,419) 291
	(32,925) (191,800) - (14) - 15,939
	(32,925) (175,875)
	47,230 201,433 - (2,089) (47) (3,750) (7,614) -
	39,569 195,594
	2,225 20,010 23,340 3,330
	25,565 23,340
	591 -

The accompanying notes form part of these financial statements.

5 Future Generation Investment Company Limited | ABN 97 063 935 553

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016

1 Summary of significant accounting policies

The financial statements are general purpose financial statements that have been prepared in accordance with Australian Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001.

Future Generation Investment Company Limited (‘the Company’) is a listed public company, incorporated and domiciled in Australia.

Australian Accounting Standards set out the accounting policies that the Australian Accounting Standards Board has concluded would result in financial statements containing relevant and reliable information about transactions, events and conditions to which they apply. Compliance with Australian Accounting Standards ensures that the Company’s financial statements and notes also comply with International Financial Reporting Standards (IFRS) as issued by the IASB. Material accounting policies adopted in the preparation of these financial statements have been consistently applied unless stated otherwise.

Except for cash flow information, the financial statements have been prepared on an accruals basis and are based on historical costs with the exception of financial assets and certain other financial assets and liabilities which have been measured at fair value. All amounts are presented in Australian dollars.

The accounting policies are consistent with those applied in the 30 June 2015 Annual Report.

2 Investment income from ordinary activities

The Company has invested in 19 unlisted unit trusts and where available, has invested in unit classes that have zero management and performance fees. The unit trusts with a zero fee unit class are: Bennelong Long Short Fund, Discovery Australian Small Companies Fund, Optimal Australia Absolute Trust and LHC Capital Australia High Conviction Fund.

The remaining investments are in unit classes that charge management and performance fees. These fund managers have rebated the fees charged. The aggregate management and performance fees rebated to the Company were $4.24 million for the year ended 30 June 2016 (2015: $1.89 million).

The total management and performance fees foregone by the unit trusts with a zero fee unit class for the financial year amounted to $1.41 million.

The estimated value of the pro bono services provided to the Company for the financial year was $630,240.

3 Income tax expense

The prima facie tax on profit before income tax is reconciled to the income tax expense as follows:

The prima facie tax on profit before income tax is reconciled to the income tax expense as follows:
	2016 2015
	$’000 $’000
Prima facie tax on profit before income tax at 30% (2015: 30%)	5,324 4,506 (2,151) (779) 645 234 (107) (317) (589) 5
Franking credits on dividends received
Imputation credit gross up
Other non-assessable income
(Over)/under provision in prior year
Income tax expense	3,122 3,649

The applicable weighted average effective tax rates are as follows: 17.59% 24.29%

The effective tax rate reflects the benefit to the Company of franking credits received on trust distribution income during the year.

6 Future Generation Investment Company Limited | ABN 97 063 935 553

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016

4 Charity donation accrual

The Company has a commitment to accrue and pay a charity donation to support Australian charities with a focus on children and youth at risk. The charity donation commitment is calculated and accrued monthly and paid annually in arrears and is based on 1.0% of the Company's average monthly net tangible assets.

tangible assets.
	2016 2015
	$'000 $'000
Charity donation accrual	2,291 1,644
5 Dividends
	2016 2015
a) Ordinary dividends paid during the year	$'000 $'000
Final dividend FY2015: 2.0 cents per share fully franked at 30% paid 23 October	3,692 4,513 - 8,205 -
2015
Interim dividend FY2016: 2.0 cents per share fully franked at 30% paid 29 April
2016
	2016 2015
b) Dividends not recognised at year end	$'000 $'000
In addition to the above dividends, since the end of the year, the Directors declared a 2.0 cents per share fully franked dividend which has not been recognised as a liability at the end of the financial year.	4,551 3,681
	2016 2015
c) Dividend franking account	$'000 $'000
	1,680 538 2,089 756 3,627 386 (3,515) -
Opening balance of franking account
Franking credits on dividends received
Tax paid during the year
Franking credits on dividends paid
	3,881 1,680
Closing balance of franking account
Adjustments for tax payable in respect of the current year's profits, receipt of	833 2,575
distributions and dividends declared
	4,714 4,255
Adjusted franking account balance

The above amounts are calculated from the balance of the franking account as at the end of the reporting period, adjusted for franking credits and debits that will arise from the settlement of liabilities or receivables for income tax and dividends paid after the end of the year.

7 Future Generation Investment Company Limited | ABN 97 063 935 553

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016

6 Remuneration of auditors

During the year the following fees were paid or payable for services provided by the auditor of the Company, its related practices and non-related audit firms:

Company, its related practices and non-related audit firms:
	2016 2015
Audit and other assurance services	$’000 $’000
Review of financial statements - PricewaterhouseCoopers	- 17 14 - 22 22
Review of financial statements – Pitcher Partners
Audit of financial statements – Pitcher Partners
Total remuneration for audit and other assurance services	36 39

The Company’s Audit and Risk Committee oversees the relationship with the Company’s external auditors. The Audit and Risk Committee reviews the scope of the audit and the proposed fee.

7 Trade and other receivables

7 Trade and other receivables
	2016 2015
	$’000 $’000
Dividends and distributions receivable	10,816 8,801 45 76 9 2 1,510 854
Interest receivable
GST receivable
Rebate income receivable
	12,380 9,733

Risk exposure

The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of receivables mentioned above.

8 Financial assets at fair value through other comprehensive income

	2016 2015
	$'000 $'000
Financial assets at fair value through other comprehensive income	228,451 172,170

9 Trade and other payables

9 Trade and other payables
	2016 2015
	$'000 $'000
Other payables	44 23

Trade and other payables are unsecured and are usually paid within 30 days of recognition. The carrying amounts of trade and other payables are assumed to be the same as their fair values, due to their short-term nature.

8 Future Generation Investment Company Limited | ABN 97 063 935 553

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016

10 Issued capital

(a) Paid-up capital

(a) Paid-up capital
	2016 2015
	$'000 $'000
227,534,045 ordinary shares fully paid (2015: 184,047,404)	248,036 200,248
(b) Other equity securities
	2016 2015
	Number Number
	‘000 ‘000
Options outstanding	138,487 181,424
(c) Movements in ordinary share capital
	2016 2015
	$'000 $'000
Balance at the beginning of the year	200,248 3,528 - 1,000 - (2,089) - 200,000 - 434 47,230 - 252 - 339 - (33) (2,625)
Issue of shares - Wilson Foundation Pty Limited
Share buyback - off market
Issue of shares
393,995 ordinary shares issued from the exercise of options
42,937,337 ordinary shares issued from the exercise of options
236,065 ordinary shares issued on 23 October 2015 under a
Dividend Reinvestment Plan
313,239 ordinary shares issued on 29 April 2016 under a Dividend
Reinvestment Plan
Cost of raising capital, net of tax
At reporting date	248,036 200,248
	2016 Number '000 181,424 (42,937) 138,487
(d) Movements in other equity securities
Balance at the beginning of the year
Options exercised
At reporting date

(e) Options

The options issued on 8 September 2014 as a result of the capital raising via the prospectus dated 7 July 2014, are exercisable at $1.10 each and can be exercised at anytime on or before 16 September 2016. These options trade on the ASX under the code FGXO.

As at June 2016, 43,331,332 options had been exercised for a total consideration of $47,664,465, with the remaining balance of outstanding options being 138,486,850.

(f) Placement capacity

During the Annual General Meeting on 28 November 2014, shareholders approved an additional 10% placement capacity.

(g) Capital management

The Board's policy is to maintain an appropriate level of liquidity in the Company's shares. To achieve this, the Board of Directors monitor the monthly Net Tangible Asset (‘NTA’) results and investment portfolio performance. The Company may undertake capital management initiatives which may involve the issue of other shares and/or the buy-back of its shares. The Company is not subject to any externally imposed capital requirements.

9 Future Generation Investment Company Limited | ABN 97 063 935 553

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016

11 Reserves and accumulated losses

(a) Reserves

(a) Reserves
	2016 2015
	$'000 $'000
Investment portfolio revaluation reserve	(2,052) (6,763)
Investment portfolio realised losses reserve	(3) (3)
Profits reserve	21,342 14,923
Security based-payment reserve	- (3,781)
	19,287 4,376
	2016 2015
Movements:	$'000 $'000
Investment portfolio revaluation reserve	(6,763) - 4,711 (6,763)
Opening balance
Net unrealised – net of tax
At reporting date	(2,052) (6,763)
	(3) - - (4) - 1
Investment portfolio realised gains/(losses) reserve
Opening balance
Net realised losses on investments
Income tax on net realised losses on investments
At reporting date	(3) (3)
	14,923 - 14,624 14,923 (4,513) - (3,692) -
Profits reserve
Opening balance
Transfer from retained earnings
Interim dividend paid (refer Note 5a)
Final dividend paid (refer Note 5a)
At reporting date	21,342 14,923

(b) Accumulated losses

Movements in accumulated losses were as follows:

	2016 2015
	$'000 $'000
Opening balance	- 3,551 14,624 11,372 (14,624) (14,923) (3,781) -
Net profit for the year
Transfer to profits reserve
Transfer of security-based payment reserve
At reporting date	(3,781) -

12 Cash and cash equivalents

Cash at the end of the financial year as shown in the Statement of Cash Flows is reconciled to the related items in the Statement of Financial Position as follows:

	2016 2015
	$’000 $’000
Cash at bank	8,222 280 17,343 23,060
Term deposits
	25,565 23,340

Future Generation Investment Company Limited | ABN 97 063 935 553

10

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016

12 Cash and cash equivalents (continued)

(i) Classification as cash equivalents

The term deposits have a maturity of three months or less.

(ii) Risk exposure

The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of cash and cash equivalents mentioned above.

The term deposits are invested with major Australian banks and their 100% owned banking subsidiaries that have a Standard & Poor’s A-A+ rating.

13 Earnings per share

13 Earnings per share
	2016 2015
	$'000 $'000
Profit after income tax used in the calculation of basic and diluted earnings per	14,624 11,372
share
a) Basic earnings per share
	Cents Cents
Basic earnings per share attributable to the ordinary equity holders of the	7.45 7.63
Company
b) Diluted earnings per share
	Cents Cents
Diluted earnings per share attributable to the ordinary equity holders of the	7.35 7.63
Company

Options outstanding are considered to be potential ordinary shares and have been included in the determination of diluted earnings per share to the extent to which they are dilutive in nature and amount.

As the average share price of the Company exceeded the exercise price of the options outstanding, they are considered dilutive and have therefore been considered for the diluted earnings per share calculation.

c) Weighted average number of shares used as denominator

c) Weighted average number of shares used as denominator
	Number	Number
	‘000	'000
Weighted average number of ordinary shares outstanding during the year used in
calculating basic earnings per share.	196,376	149,076
Weighted average number of dilutive options outstanding	2,689	-
Weighted average number of ordinary shares outstanding during the year
used in calculating diluted earnings per share.	199,065	149,076

11 Future Generation Investment Company Limited | ABN 97 063 935 553

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016

14 Segment information

The Company has only one reportable segment as at 30 June 2016. As at 30 June 2016, the Company’s reportable operating segment was investments in unlisted unit trusts and cash and/or cash equivalents.

15 Contingencies

The Company had no contingent liabilities at 30 June 2016 (2015: nil).

16 Commitments

The Company has committed to accrue and pay a charity donation to support Australian charities with a focus on children and youth at risk. The charity donation commitment is calculated and accrued monthly and paid annually in arrears and is based on 1.0% of the Company's average monthly net tangible assets. The current year commitment was $2,291,392 (2015: $1,644,015).

17 Events occurring after the reporting period

Since year end, the Board declared a final dividend of 2.0 cents per share fully franked to be paid on 21 October 2016.

No other matters or circumstances has occurred subsequent to year end that has significantly affected, or may significantly affect, the operations of the Company, the results of those operations or the state of affairs of the Company in subsequent financial years.

12 Future Generation Investment Company Limited | ABN 97 063 935 553