Annual Report
for year ended 30 June 2005
BRICKWORKS INVESTMENT COMPANY LIMITED
ABN 23 106 719 868
B r i c k w o r k s I n v e s t m e n t C o m p a n y L i m i t e d
Incorporated in Victoria ABN: 23 106 719 868
CORPORATE DIRECTORY
Directors
Non-Executive Director and Chairman
Robert Dobson Millner
David Capp Hall
Non-Executive Director
Alexander James Payne Non Executive Director
Secretary
John de Gouveia
Registered Office
Level 2
160 Pitt Street Mall
Sydney 2000
NSW
Telephone:
Facsimile:
Postal Address:
GPO Box 5015
Sydney 2001
(02) 9210 7000
(02) 9210 7099
Auditors
Travis & Travis
1/114 Longueville Road
Lane Cove 2066
Investment Manager
Souls Funds Management Limited
Level 2
160 Pitt Street Mall
Sydney 2000
Share Registry
Computershare Investor Services Pty Limited
Level 3
60 Carrington Street
Sydney 2000
Australian Stock Exchange Code
Ordinary Shares
BKI
Website
http//:www.brickworksinvestments.com.au
2005 Annual Report
B r i c k w o r k s I n v e s t m e n t C o m p a n y L i m i t e d
Contents
Page No.
Financial Highlights
Company Profile
Chairman’s Address
List of Investments at 30 June 2005
Directors’ Report
Corporate Governance
Statement of Financial Performance
Statement of Financial Position
Statement of Cash Flows
Notes to the Financial Statements
Directors’ Declaration
Independent Audit Report
Auditors’ Independence Declaration
ASX Additional Information
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3
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8
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24
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43
44
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B r i c k w o r k s I n v e s t m e n t C o m p a n y L i m i t e d
FINANCIAL HIGHLIGHTS
■ Consolidated profit after tax of $10.5 million for the year to 30 June 2005 (2004: $3.59 million)
■ Earnings per share for the year of 5.69 cents (2004: 2.10 cents)
■ Fully franked final dividend of 2.2 cents per share. This brings total fully franked dividends for the year
to 4.3 cents per share (2004: 2 cents per share)
■ Net asset backing per share at 30 June 2005 of $1.281 per share before tax (2004: $1.084 per share
before tax)
■ After tax, net asset backing per share at 30 June 2005 of $1.197 (2004: $1.057)
■ Total portfolio value as at 30 June 2005 of $248.3 million (2004: $183.8 million)
■ Successfully acquired PSI, 99.16% held at 30 June 2005 (moving to compulsory acquisition)
■ Composition of assets at 30 June 2005 using the Global Industry Classification Standard (GICS)
CLASSIFICATION
Automobile & Components
Banks
Capital Goods
Commercial Services and Supplies
Consumer Durables & Apparel
Diversified Financials
Energy
Food, Beverage & Tobacco
Food & Staples Retailing
Health Care Equipment & Services
Insurance
Materials
Media
Pharmaceuticals & Biotechnology
Retailing
Software & Services
Telecommunication Services
Transportation
Utilities
Total Investments
Bank Deposits
Total Assets
2
% OF TOTAL ASSETS
0.3
38.1
4.3
1.8
0.3
7.0
2.5
0.6
3.4
0.1
1.8
18.7
4.0
0.3
0.6
0.3
5.0
2.1
1.8
93.0
7.0
100.0
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B r i c k w o r k s I n v e s t m e n t C o m p a n y L i m i t e d
COMPANY PROFILE
Brickworks Investment Company Limited is a Listed Investment Company on the Australian Stock Exchange.
The Company invests in a diversified portfolio of Australian shares, trusts and interest bearing securities.
The Company was formed on 17 October 2003 to take over the investment portfolio of Brickworks Limited.
Shares in the Company were listed on the Australian Stock Exchange Limited commencing 12 December
2003.
At 30 June 2005, market capitalisation of the Company was $211.9 million.
Corporate Objectives
The Company aims to generate an increasing income stream for distribution to its shareholders in the form of
franked dividends, to the extent of its available imputation tax credits, through long-term investment in a
portfolio of assets that are also able to deliver long term capital growth to shareholders.
Investment Strategy
The Company is a long-term investor in companies, trusts and interest bearing securities with a focus on
Australian entities. It primarily seeks to invest in well-managed businesses with a profitable history and with the
expectation of sound dividend and distribution growth.
Dividend Policy
The Company will pay the maximum amount of realised profits after tax to its shareholders in the form of
franked dividends to the extent permitted by the Corporations Act, the Income Tax Assessment Act and
prudent business practices from profits obtained through interest, dividends and other income it receives from
its investments.
Dividends will be declared by the Board of Directors out of realised profit after tax, excluding realised capital
profit from any disposals of long-term investments.
Portfolio Management
The Company has appointed Souls Funds Management Limited to act as Portfolio Manager and provide
investment advisory services to the Board of Directors and its Investment Committee, including the
implementation and execution of investment decisions and the day to day administration of the investment
portfolio.
The Company also engages Corporate and Administrative Services Pty Ltd to provide accounting and
company secretarial services.
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B r i c k w o r k s I n v e s t m e n t C o m p a n y L i m i t e d
CHAIRMAN’S ADDRESS
Dear Shareholders,
I am pleased to enclose the Annual Report of Brickworks Investment Company Limited for the year ended 30
June 2005.
The consolidated profit of the economic entity after providing for income tax and eliminating outside equity
interests amounted to $10,473,587 (2004: $3,589,908)
The strong performance result achieved by the company was also a feature of the S&P/ASX 200 index, which
also reached record levels during the last twelve months.
During the year major investment purchases have included BHP Billiton Limited, Qantas Airways Limited,
Australian Gas Light Company Limited, Insurance Australia Group Limited, Wesfarmers Limited, Rural Press
Limited preferred shares, B Digital Limited, SP Telemedia Limited and Telstra Corporation Limited.
Total purchases during the year amounted to $12.87 million against total sales of $8.65 million represented by
sales in Alesco Corporation Limited, WMC Resources Limited, PaperlinX Limited and Spotless Group Limited.
During the year the company undertook an off-market takeover of Pacific Strategic Investments Limited (“PSI”).
The offer closed in November 2004 with the company acquiring 81.42% of PSI. Since November the company
has acquired a further 17.74% of PSI and now holds 99.16% of PSI. The company has commenced the
compulsory acquisition process to acquire the remaining 0.84% and we expect to complete this process in
approximately 3 months.
The outlook for calendar 2005 and beyond continues to be encouraging and the directors are confident that
the full year reporting season should result in a favourable reporting year with companies at least maintaining
their dividends. In addition, Brickworks Investment Company Limited remains in a strong financial position with
sufficient cash reserves to enable it to continue to look at opportunities should they arise.
Earnings per Share, NTA and Dividends
Earnings per share for the year were 5.69 cents (2004: 2.10 cents). The Net Tangible Asset Backing (NTA) of
the company at 30 June 2005 was $1.281 per share, before tax (2004: $1.084 per share) and the after tax Net
Asset Backing per share was $1.197 (2004: $1.057).
I am also pleased to report that based on the profits earned by the company during the year, the directors have
declared the payment of a final fully franked dividend of 2.2 cents per share which will be paid on 31st August
2005, this brings the total dividend paid for the year ending 30 June 2005 to 4.3 cents per share.
On behalf of my fellow directors I would like to thank shareholders for their support during the year and the
Board, along with its Investment Manager look forward to delivering long term sustainable growth and
performance to its shareholders.
Yours sincerely,
Robert Millner
Chairman
Sydney
3 August 2005
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B r i c k w o r k s I n v e s t m e n t C o m p a n y L i m i t e d
Stock
No. of
Shares
Held
Market
Value
($’000)
Portfolio
Weight
%
List of securities held and their market value at 30 June 2005 were:
Automobile & Components
Coventry Group Limited
140,000
812
0.3%
Banks
Australia and New Zealand Banking Group Limited
Bendigo Bank Limited
Bank of Queensland Limited
Commonwealth Bank of Australia
National Australia Bank Limited
St George Bank Limited
Westpac Banking Corporation
45,457
349,942
95,382
695,674
1,573,690
447,750
123,872
Capital Goods
Alesco Corporation Limited
GWA International Limited
Wesfarmers Limited
Commercial Services & Supplies
Brambles Industries Limited
Coates Hire Limited
Consumer Durables & Apparel
158,980
468,128
200,518
399,952
255,303
989
3,454
1,142
26,401
48,407
11,731
2,471
94,595
1,170
1,367
8,023
10,560
3,268
1,220
4,488
0.4%
1.4%
0.5%
10.6%
19.5%
4.7%
1.0%
38.1%
0.5%
0.6%
3.2%
4.3%
1.3%
0.5%
1.8%
Gazal Corporation Limited
226,865
669
0.3%
Diversified Financials
Choiseul Investments Limited
Macquarie Bank Limited
Milton Corporation Limited
Suncorp-Metway Limited
Huntley Investment Company Limited
1,081,253
109,693
105,557
153,028
1,160,442
5,136
6,554
1,715
3,077
830
17,312
2005 Annual Report
2.1%
2.6%
0.7%
1.2%
0.3%
7.0%
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B r i c k w o r k s I n v e s t m e n t C o m p a n y L i m i t e d
Stock
List of securities (continued)
Energy
Santos Limited
Woodside Petroleum Limited
Food, Beverages & Tobacco
Coca-Cola Amatil Limited
Graincorp Limited
Food & Staples Retailing
AWB Limited
Foodland Associated Limited
Woolworths Limited
No. of
Shares
Held
Market
Value
($’000)
Portfolio
Weight
%
70,000
184,483
65,000
90,535
240,000
37,000
383,700
792
5,396
6,188
513
1,048
1,561
1,106
1,005
6,335
8,446
0.3%
2.2%
2.5%
0.2%
0.4%
0.6%
0.4%
0.4%
2.6%
3.4%
Health Care Equipment & Services
Clover Corporation Limited
858,000
146
0.1%
Insurance
AXA Asia Pacific Holdings Limited
Insurance Australia Group Limited
Materials
Alumina Limited
BHP Billiton Limited
Bluescope Steel Limited
Campbell Bros Limited
Illuka Resources Limited
New Hope Corporation Limited
Onesteel Limited
Wattyl Limited
Media
341,000
482,200
809,013
833,836
137,568
198,000
340,000
14,060,452
125,281
673,881
Fairfax (John) Holdings Limited
Publishing & Broadcasting Limited
215,549
115,000
6
1,494
2,898
4,392
4,506
15,134
1,132
1,861
2,561
19,544
332
1,429
46,499
927
1,708
0.6%
1.2%
1.8%
1.8%
6.1%
0.5%
0.7%
1.0%
7.9%
0.1%
0.6%
18.7%
0.4%
0.7%
2005 Annual Report
B r i c k w o r k s I n v e s t m e n t C o m p a n y L i m i t e d
Stock
List of securities (continued)
Media (continued)
Rural Press Limited
Rural Press Limited - Preferred Shares
Ten Network Holdings Limited
West Australian Newspapers Holdings Limited
No. of
Shares
Held
Market
Value
($’000)
Portfolio
Weight
%
70,000
321,800
407,429
225,052
733
3,395
1,446
1,807
10,016
0.3%
1.4%
0.6%
0.7%
4.0%
Pharmaceuticals & Biotechnology
Australian Pharmaceutical Industries Limited
248,738
856
0.3%
Retailing
Angus & Coote (Holdings) Limited
Colorado Group Limited
Software & Services
HPAL Limited
Telecommunications Services
SP Telemedia Limited
Telstra Corporation Limited
B Digital Limited
Transportation
Lindsay Australia Limited
Macquarie Infrastructure Group
Qantas Airways Limited
Utilities
Australian Gas Light Company
Alinta Limited
Total Investments
Bank Deposit
65,000
200,000
520
912
1,432
0.2%
0.4%
0.6%
480,000
814
0.3%
3,322,223
1,187,000
3,000,000
1,868,000
761,038
512,500
224,200
132,860
5,266
6,006
1,185
12,457
308
3,166
1,727
5,201
3,190
1,295
4,485
2.1%
2.4%
0.5%
5.0%
0.1%
1.3%
0.7%
2.1%
1.3%
0.5%
1.8%
230,929
17,401
93.0%
7.0%
TOTAL PORTFOLIO
248,330
100.0%
The Company is not a substantial shareholder in any of the investee corporation in accordance with the Corporations
Act 2001, as each equity investment represents less than 5% of issued capital of the investee corporation.
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B r i c k w o r k s I n v e s t m e n t C o m p a n y L i m i t e d
DIRECTORS’ REPORT
The directors of Brickworks Investment Company Limited (the Company) present the following report for the
year ended 30 June 2005.
1. Directors
The following persons were directors of the Company since incorporation and up to the date of this report:
Robert Dobson Millner – Non-Executive Director and Chairman
Mr Millner has over 20 years experience as a Company Director. During the past three years, Mr Millner has
also served as a director of the following listed companies:
• Milton Corporations Limited*
• Choiseul Investments Limited*
• New Hope Corporation Limited*
• Washington H Soul Pattinson and Company Limited*
• SP Telemedia Limited*
• Brickworks Limited*
• Souls Private Equity Limited*
• Pacific Strategic Investments Limited* (delisted March 2005)
• Australian Pharmaceutic Industries Limited*
• Clover Corporation Limited
• KH Foods Limited
* denotes current directorship
David Capp Hall, FCA, FAICD – Independent Non-Executive Director
Mr Hall is a Chartered Accountant with experience in corporate management and finance. He holds
directorships in other companies and is the Chairman of the audit committee. During the past three years,
Mr Hall also served as a director of the following listed companies:
• Ainsworth Game Technology Limited
• Undercoverwear Limited*
• Pacific Strategic Investments Limited* (delisted March 2005)
* denotes current directorship
Alexander James Payne, B.Comm, Dip Cm, FCPA, FCIS, FCIM - Non-Executive Director
Mr Payne is chief financial officer of Brickworks Limited and has considerable experience in finance and
investment and is a member of the audit committee.
2. Company Secretary
John Paul de Gouveia, B. Bus, M Com, CA
Mr de Gouveia has acted as company secretary of Brickworks Investment Company Limited since
incorporation on 17 October 2003. Mr de Gouveia is a Chartered Accountant with extensive experience in
public practice.
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B r i c k w o r k s I n v e s t m e n t C o m p a n y L i m i t e d
DIRECTORS’ REPORT - Continued
3. Operating and Financial Review
The Company was incorporated on 17 October 2003 with the objective to acquire and manage the investment
portfolio of Brickworks Limited. Acquisition of the investment portfolio was complete at the close of business
on 8 December 2003. Shares in the Company were listed on the Australian Stock Exchange Limited
commencing 12 December 2003.
The Company aims to hold long term investment in companies, trusts and interest bearing securities of well
managed Australian businesses that would grow in value over time, while at the same time, generating an
increasing income stream through dividends, distributions and interest payments.
In August 2004, the Company announced an off-market takeover of the then ASX-listed Pacific Strategic
Investments Limited (PSI) on the basis of 2 new BKI shares for every 7 shares of PSI. The merger closed on
16 November 2004 with the issue of 17,943,561 BKI shares. PSI became a subsidiary of the Company and
subsequently applied for and was granted delisting from the ASX in March 2005. Since November 2004, the
Company acquired further holdings in PSI.
The Company now holds 99.16% of PSI and has commenced compulsory acquisition to acquire the remaining
PSI shares.
Portfolio Performance and Results
The directors are pleased to report a profit after tax for the year of $10,473,587 (2004: $3,589,908).
The investment portfolio has also performed well and has increased in value by $38,230,424 (2004:
$15,405,325).
Corporate Structure
Brickworks Investment Company Limited (“BKI”) is a company limited by shares that is incorporated and
domiciled in Australia. BKI has prepared a consolidated financial report incorporating the entities that it
controlled during the financial year, which are outlined in the following illustration of the group’s corporate
structure:
Brickworks Investment Company
Limited (“BKI”)
100%
99.16%
Brickworks Securities Pty
Ltd (“BSPL”)
Pacific Strategic Investments
Limited (“PSI”)
100%
PSI Securities Limited (“PSL”)
Nature of Operations and Principal Activities
The principle activities during the year of entities within the consolidated entity was investment.
The consolidated entity is a long term equity investor and invests primarily in listed ASX securities. There has
been no significant changes in the nature of those activities during the year.
Employees
The consolidated entity has nil employees as at 30 June 2005 (2004: Nil)
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B r i c k w o r k s I n v e s t m e n t C o m p a n y L i m i t e d
DIRECTORS’ REPORT - Continued
4. Significant Changes in the State of Affairs
Other than as stated above and in the accompanying Financial Report, there were no significant changes in the
state of affairs of the Company during the reporting year.
5. Likely Developments and Expected Results
The operations of the Company will continue with planned investments in Australian equities and fixed interest
securities. No information is included on the expected results of those operations and the strategy for particular
investments, as it is the opinion of the directors that this information would prejudice the interests of the
Company if included in this report.
6. Significant Events after Balance Date
The directors are not aware of any matter or circumstance that has arisen since the end of the year to the date
of this report that has significantly affected or may significantly affect:
i.
ii.
the operations of the Company and the entities that it controls
the results of those operations; or
iii. the state of affairs of the Company in subsequent years
7. Environmental Regulations
The Company’s operations are not materially affected by environment regulations.
8. Dividends
There were two dividend payments during the year ended 30 June 2005.
On 31 August 2004, a final ordinary dividend of $3,424,539 (2 cents per share fully franked) was paid out of
retained profits at 30 June 2004.
On 28 February 2005, an interim ordinary dividend of $3,972,582 (2.1 cents per share fully franked) was paid
out of retained profits at 31 December 2004.
In addition, the directors have declared a final ordinary dividend of $4,276,644 (2.2 cents per share fully
franked) out of retained profits at 30 June 2005 and payable on 31 August 2005.
9. Meetings of Directors
The numbers of meetings of the Company’s Board of Directors and each board committee held during the year
to 30 June 2005, and the numbers of meetings attended by each Director were:
Board
Investment
Audit
Attended
Eligible
to attend
Attended
Eligible
to attend
Attended
Eligible
to attend
10
10
10
10
10
10
11
5
11
11
-
11
2
2
2
2
2
2
RD Millner
DC Hall
AJ Payne
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B r i c k w o r k s I n v e s t m e n t C o m p a n y L i m i t e d
DIRECTORS’ REPORT - Continued
10. Remuneration Report
Payment to non-executive directors is fixed at $150,000 until shareholders, by ordinary resolution, approve
some other fixed sum amount. This amount is to be divided amongst the Directors as they may determine.
These fees exclude any additional fee for any service based agreement which may be agreed from time to
time, and also excludes statutory superannuation and the reimbursement of out of pocket expenses.
Details of the nature and amount of each Non – Executive Director’s emoluments from the Company and
controlled entities in respect of the year to 30 June 2005 were:
Primary
Superannuation
$
46,250
36,250
25,000
$
4,162
3,262
2,250
Equity
Compensation
$
Other
Compensation
$
-
-
-
-
-
-
Total
$
50,412
39,512
27,250
RD Millner
DC Hall
AJ Payne
There were no retirement allowances provided for the retirement of non-executive directors.
11. Beneficial and relevant interest of Directors in Shares of the Company
As at the date of this report, details of Directors who hold shares in the Company for their own benefit or who
have an interest in holdings through a third party and the total number of such shares held are listed as follows:
RD Millner
DC Hall
AJ Payne
No of Shares
1,360,760
147,575
55,581
12. Directors and Officers’ Indemnity
The Constitution of the Company provides indemnity against liability and legal costs incurred by Director and
Officers to the extent permitted by Corporations Act.
During the year to 30 June 2005, the Company has paid premiums in respect of an insurance contract to
insure each of the officers against all liabilities and expenses arising as a result of work performed in their
respective capacities.
13. Non-Audit Services
The board of directors is satisfied that the provision of non-audit services during the year is compatible with the
general standard of independence for auditors imposed by the Corporations Act 2001. The directors are
satisfied that the services disclosed below did not compromise the external auditor’s independence for the
following reasons:
• all non-audit services are reviewed and approved by the board of directors prior to commencement
to ensure they do not adversely affect the integrity and objectivity of the auditor; and
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B r i c k w o r k s I n v e s t m e n t C o m p a n y L i m i t e d
DIRECTORS’ REPORT - Continued
13. Non-Audit Services (continued)
• the nature of the services provided do not compromise the general principles relating to auditor
independence as set out in the Institute of Chartered Accountants in Australia and CPA Australia’s
Professional Statement F1: Professional Independence.
The following fees for non-audit services were paid to the external auditor during the year ended 30 June 2005:
Due diligence investigations
Taxation services
$11,000
$ 2,000
$13,000
14. Auditor’s Independence Declaration
The auditor’s independence declaration for the year ended 30 June 2005 has been received and can be found
on page 44.
This report is made in accordance with a resolution of the directors.
Robert D Millner
Director
Sydney
3 August 2005
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B r i c k w o r k s I n v e s t m e n t C o m p a n y L i m i t e d
CORPORATE GOVERNANCE
Brickworks Investment Company Limited (the Company) was incorporated on 17 October 2003 and since that
date the Board are committed to achieving and demonstrating the highest standards of corporate governance.
Unless otherwise stated, the Company has followed best practice recommendations set by the ASX Corporate
Governance Council during the reporting year
The Board of directors (hereinafter referred to as the Board) is responsible for the corporate governance of the
Company and its controlled entities. The directors of the Company and its controlled entities are required to act
honestly, transparently, diligently, independently, and in the best interests of all shareholders in order to increase
shareholder value.
The directors are responsible to the shareholders for the performance of the company in both the short and the
longer term and seek to balance sometimes competing objectives in the best interests of the Company as a
whole. Their focus is to enhance the interests of shareholders and other key stakeholders and to ensure the
Company is properly managed.
The Company’s main corporate governance practices in place throughout the year are discussed in this
section.
The Board of Directors
The Board operates in accordance with the broad principles set out in its charter.
Role of the Board
The responsibilities of the board include:
■ contributing to the development of and approving the corporate strategy
■ reviewing and approving business results, business plans, the annual budget and financial plans
■ authorising and monitoring the investment portfolio
■ ensuring regulatory compliance
■ reviewing internal controls
■ ensuring adequate risk management processes
■ monitoring the Board composition, director selection and Board processes and performance
■ overseeing and monitoring:
- organisational performance and the achievement of the Company’s strategic goals and objectives
-
compliance with the Company’s code of conduct
■ monitoring financial performance including approval of the annual report and half-year financial reports
and liaison with the Company’s auditors
■ appointment and contributing to the performance assessment of the portfolio manager and other
external service providers
■ enhancing and protecting the reputation of the Company
■ reporting to shareholders.
The terms and conditions of appointment and retirement of new directors are set out in a formal letter of
appointment that includes:
■ term of the appointment
■ powers and duties
■ determination of remuneration
■ dealings in the Company securities including notification requirements
■ conflicts of interest and disclosure policies
■ indemnity and insurance arrangements
■ access to independent professional advice
■ review of appointment
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CORPORATE GOVERNANCE - Continued
Board Composition
The key elements of the Board composition include:
■ ensuring, where practicable to do so, that a majority of the Board are independent directors
■ the Board of the Company currently comprises 1 independent non-executive director and 2 non
executive directors
■ non-executive directors bring a fresh perspective to the board’s consideration of strategic, risk and
performance matters and are best placed to exercise independent judgement and review and
constructively challenge the performance of management
■ the Company is to maintain a mix of directors on the Board from different backgrounds with
complementary skills and experience
■ the Board seeks to ensure that:
- at any point in time, its membership represents an appropriate balance between directors with
experience and knowledge of the Company and directors with an external perspective
- the size of the Board is conducive to effective discussion and efficient decision making.
■ in recognition of the importance placed on the investment experience of the directors and the Board’s
role in supervising the activities of the portfolio manager, the majority of the Board are not independent
directors. Refer discussion detailed under “Directors’ Independence” on page 15.
Details of the members of the Board, their experience, expertise, qualifications and independent status are set
out in the directors’ report under the heading “Directors”.
Term of Office
The company’s Constitution specifies that all directors must retire from office no later than the third annual
general meeting (AGM) following their last election. Where eligible, a director may stand for re-election in
accordance with company’s Constitution.
Chairman
The Chairman is a non-executive director who is responsible for leading the Board, ensuring directors are
properly briefed in all matters relevant to their role and responsibilities, facilitating Board discussions and
managing the Board’s relationship with external service providers.
Board Meetings
Details of directors’ attendance at Board meetings are set out in the Directors’ Report on page 8-12.
The Board meets formally at least 6 times a year. In addition, it meets whenever necessary to deal with
specific matters needing attention between the scheduled meetings.
Meeting agendas are established by the Chairman and Company Secretary to ensure adequate coverage of
financial, strategic, compliance and other major areas throughout the year.
Copies of Board papers are circulated in advance of meetings. Directors are always encouraged to participate
with a robust exchange of views and to bring their independent judgment to bear on the issues and decisions
at hand. The Board highly values its relationship with the portfolio manager which is based on openness and
trust.
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2005 Annual Report
B r i c k w o r k s I n v e s t m e n t C o m p a n y L i m i t e d
CORPORATE GOVERNANCE - Continued
Performance Assessment
The Board undertakes an annual self assessment of its collective performance. The results and any action
plans are documented together with specific performance goals which are agreed for the coming year. The self
assessment:
■ compares the performance of the Board with the requirements of it’s Charter
■ sets forth the goals and objectives of the Board for the upcoming year
■ effects any improvements to the Board charter deemed necessary or desirable.
The performance evaluation is conducted in such manner as the Board deems appropriate. In addition, each
Board committee undertakes an annual self assessment on the performance of the committee and
achievement of committee objectives.
The Chairman annually assesses the performance of individual directors and meets privately with each director
to discuss this assessment. The Chairman’s performance is reviewed by the Board.
Directors’ Independence
Assessing the independence of directors is undertaken in accordance with the best practice recommendations
released by the Australian Stock Exchange Corporate Governance Council in March 2003.
When assessing the independence of directors and the Chairman under recommendation 2.1 and 2.2 of the
best practice recommendations released by the Australian Stock Exchange Corporate Governance Council,
both Mr Millner and Mr Payne, although meeting other criteria, and bringing independent judgement to bear on
their respective roles, are both not defined as independent directors, primarily due to the fact that both Messrs
Millner and Payne are officers of Brickworks Limited, who is a substantial shareholder of the company. The
Company has not followed recommendation 2.1 and 2.2 due to the following reasons;
■ The Board are of the opinion that all directors exercise and bring to bear an unfettered and independent
judgement towards their duties. Brickworks Investment Company Limited listed on the Australian Stock
exchange on 12 December 2003 to take over the investment portfolio of Brickworks Limited and the
Board is satisfied that both Messrs Millner and Payne play an important role in the continued success
and performance of the portfolio.
In relation to director independence, materiality is determined on both quantitative and qualitative bases. An
amount of over 5% of annual turnover of the Company is considered material. In addition, a transaction of any
amount or a relationship is deemed material if knowledge of it impacts the shareholders’ understanding of the
director’s performance.
Avoidance of conflicts of interests of Directors
In accordance with the Corporations Act 2001 (Cth), any director with a material personal interest in a matter
being considered by the Board must not be present when the matter is being considered, and may not vote on
the matter.
Independent Professional Advice
Directors and board committees have the right, in connection with their duties and responsibilities, to seek
independent professional advice at the Company’s expense. Prior approval of the Chairman is required, but this
will not be unreasonably withheld.
2005 Annual Report
15
B r i c k w o r k s I n v e s t m e n t C o m p a n y L i m i t e d
CORPORATE GOVERNANCE - Continued
Corporate Reporting
The portfolio manager and the administrative and company secretarial service provider, namely Souls Funds
Management Ltd and Corporate & Administrative Services Pty Ltd have made the following certifications to the
Board:
■ that the Company’s financial reports are complete and present a true and fair view, in all material
respects, of the financial condition and operational results of the Company and its consolidated entities
in accordance with all mandatory professional reporting requirements
■ that the above statement is founded on a sound system of internal control and risk management which
implements the policies adopted by the Board and that the Company’s risk management and internal
control is operating effectively and efficiently in all material respects.
The Company adopted this reporting structure for the year ended 30 June 2005.
Board Committees
The Board has established a number of committees to assist in the execution of its duties and to allow detailed
consideration of complex issues. Current committees of the Board are the investment committee, nomination
committee and the remuneration and audit committees. The committee’s structure and membership is
reviewed on an annual basis. All matters determined by committees are submitted to the full Board as
recommendations for Board decisions.
Investment Committee
The Company has established an Investment Committee effective from 12 December 2003.
The investment committee consists of the following members:
RD Millner (Chairman)
AJ Payne
Details of these directors’ qualifications, experience and attendance at investment committee meetings held
during the year are set out in the Directors’ Report on page 8-12.
The main responsibilities of the committee are to:
■ assess the information and recommendation received by the portfolio manager regarding the present
and future investment needs of the Company
■ assess the performance of the portfolio manager
■ evaluating investment performance.
Nomination Committee
The Company has embraced the best practice recommendations released by the Australian Stock Exchange
Corporate Governance Council in March 2003 and established a Nominations Committee effective from 12
December 2003.
The nomination committee consists of the following members:
RD Millner (Chairman)
DC Hall
AJ Payne
Details of these directors’ qualifications, experience and attendance at nomination committee meetings held
during the year are set out in the Directors’ Report on page 8-12.
16
2005 Annual Report
B r i c k w o r k s I n v e s t m e n t C o m p a n y L i m i t e d
CORPORATE GOVERNANCE - Continued
The main responsibilities of the committee are to:
■ assess the membership of the Board having regard to present and future needs of the Company
■ assess the independence of directors to ensure where practicable to do so, that a majority of the Board
are independent directors
■ propose candidates for Board vacancies in consideration of qualifications, experience and domicile
■ oversee board succession
■ evaluating Board performance.
New directors are provided with a letter of appointment setting out their responsibilities, rights and the terms
and conditions of their employment.
The nominations committee charter provides guidance for the selection and appointment of new directors
Audit Committee
The members of the audit committee at the date of this annual financial report are:
DC Hall (Chairman)
RD Millner
AJ Payne
Details of these directors’ qualification, experience and attendance at audit committee meetings are set out in
the Directors’ Report on page 8-12.
The audit committee operates in accordance with a charter.
The Chairman of the audit committee is an independent, non-executive director. The Chairman of the Audit
Committee is also required to have accounting or related financial expertise, which includes past employment,
professional qualification or other comparable experience. The other members of the audit committee are all
financially literate and have a strong understanding of the industry in which the Company operates.
The audit committee’s role and responsibilities, composition, structure and membership requirements are
documented in an audit committee charter, which has been approved by the Board and is reviewed annually.
The main responsibilities of the committee are to:
■ review, assess and approve the annual report, half-year financial report and all other financial information
published by the Company or released to the market
■ reviewing the effectiveness of the organisation’s internal control environment covering:
- effectiveness and efficiency of operations
- reliability of financial reporting
- compliance with applicable laws and regulations
■ oversee the effective operation of the risk management framework
■ recommend to the Board the appointment, removal and remuneration of the external auditors, and
review the terms of their engagement, the scope and quality of the audit and assess performance and
consider the independence and competence of the external auditor on an ongoing basis. The Audit
Committee receives certified independence assurances from the external auditors
■ review and approve the level of non-audit services provided by the external auditors and ensure it does
not adversely impact on auditor independence. The external auditor will not provide services to the
Company where the auditor would have a mutual or conflicting interest with the Company; be in a
position where they audit their own work; function as management of the Company; or have their
independence impaired or perceived to be impaired in any way.
■ review and monitor related party transactions and assess their priority
■ report to the Board on matters relevant to the committee’s role and responsibilities
2005 Annual Report
17
B r i c k w o r k s I n v e s t m e n t C o m p a n y L i m i t e d
CORPORATE GOVERNANCE - Continued
In accordance with the audit committee charter, the Company requires that the external audit engagement
partner and review partner be rotated very five years.
In fulfiling its responsibilities, the audit committee requires the portfolio manager and the administrative and
company secretarial service provider, namely Souls Funds Management Ltd and Corporate & Administrative
Services Pty Ltd to state in writing to the Board that the Company’s financial reports presents a true and fair
view, in all material respects, of the Company’s and its consolidated entities financial condition, operational
results and are in accordance with the relevant accounting standards.
The external auditors, the portfolio manager and the administrative and company secretarial service provider,
namely Souls Funds Management Ltd and Corporate & Administrative Services Pty Ltd are invited to attend
meetings at the discretion of the audit committee.
Remuneration Committee & Policies
The Company has embraced the best practice recommendations released by the Australian Stock Exchange
Corporate Governance Council in March 2003 and established a Remuneration Committee effective from 12
December 2003.
The remuneration committee consists of the following members:
RD Millner (Chairman)
DC Hall
AJ Payne
Details of these directors’ qualifications, experience and attendance at remuneration committee meetings are
set out in the Directors’ Report on page 8-12.
The Remuneration Committee oversees and review remuneration packages and other terms of employment for
executive management. In undertaking their roles the Committee members consider reports from external
remuneration experts on recent developments on remuneration and related matters.
The Company does not have any employees due to the nature of its business and the use of external service
providers. If the use of external service providers was to change in the future, any person engaged in an
executive capacity would be required sign a formal employment contract at the time of their appointment
covering a range of matters including their duties, rights, responsibilities, and any entitlements on termination.
In such circumstances, executive remuneration and other terms of employment would also be reviewed
annually by the committee having regard to personal and corporate performance, contribution to long term
growth, relevant comparative information and independent expert advice. As well as a base salary,
remuneration in such circumstances could be expected to include superannuation, performance-related
bonuses and fringe benefits.
Fees for non-executive directors reflect the demands on and responsibilities of our directors. Non-executive
directors are remunerated by way of base fees and statutory superannuation contributions and do not
participate in schemes designed for the remuneration of executives. Non-executive directors do not receive any
options, bonus payments or nor are provided with retirement benefits other than statutory superannuation.
Further information on directors’ and executives’ remuneration is set out in the directors’ report and note 17 to
the financial statements.
The Remuneration Committee’s terms of reference include responsibility for reviewing any transactions between
the organisation and the directors, or any interest associated with the directors, to ensure the structure and
terms of the transaction are in compliance with the Corporations Act 2001 and are appropriately disclosed.
The remuneration committee operates in accordance with a charter.
18
2005 Annual Report
B r i c k w o r k s I n v e s t m e n t C o m p a n y L i m i t e d
CORPORATE GOVERNANCE - Continued
Corporate Governance Framework
The Board is committed to the highest standards of corporate governance, which it requires as fundamental to
all its activities.
External service providers are required to provide a Corporate Governance Declaration (the Declaration) to the
Board on an annual basis.
External service providers are required to confirm in the annual Statements that to the best of their knowledge
and belief and having made appropriate inquiries of their own staff and consultants regarding the Company and
its controlled entities (the Group) that, in the interests of directors, shareholders and other key stakeholders the
service provider has applied corporate governance practices mandated by the Board at all times.
The Declaration covers the following:
■ disclosure of the Groups’ operations in the Board meeting papers.
■ satisfaction of all matters arising from prior Board meetings
■ the maintenance of financial records that correctly record and explain the Group’s transactions and
financial position and performance to enable true and fair financial statements to be prepared and
audited or reviewed in accordance with all applicable Accounting Standards and other mandatory
professional reporting requirements
■ compliance with statutory and prudential obligations and details of all lodgments in accordance with
these obligations
■ maintenance of ethical conduct by execution of duties with the utmost integrity, objectivity and
professionalism at all times
■ notification to the Company Secretary of all purchases and sales of Company securities, directly and
indirectly and disclosure in the Board papers.
Risk Management
The Board is committed to the identification and quantification of risk throughout the Company’s operations.
Considerable importance is placed on maintaining a strong control environment. There is an organisational
structure with clearly drawn lines of accountability. Adherence to the code of conduct is required at all times
and the Board actively promotes a culture of quality and integrity.
Management of investment risk is fundamental to the business of the Company being an investor in Australian
listed securities. Details of investment risk management policies are held by the portfolio manager.
The Board operates to minimise its exposure to investment risk, in part, by the appointment of an external
portfolio manager who has proprietary systems, processes and procedures in place to effectively manage
investment risk.
Code of Conduct
The Company has developed a Code of Conduct (the Code) which has been fully endorsed by the Board and
applies to all directors and external service providers and their employees. The code is regularly reviewed and
updated as necessary to ensure it reflects the highest standards of behaviour and professionalism and the
practices necessary to maintain confidence in the Company’s integrity.
In summary, the Code requires that at all times all company personnel act with the utmost integrity, objectivity
and in compliance with the letter and the spirit of the law and company policies.
2005 Annual Report
19
B r i c k w o r k s I n v e s t m e n t C o m p a n y L i m i t e d
CORPORATE GOVERNANCE - Continued
Share Trading Policy
The Company has developed a Share Trading Policy which has been fully endorsed by the Board and applies
to all directors and employees.
Directors, executives and employees may deal in Company securities, however they may not do so if in
possession of information which is price sensitive or likely to be price sensitive to the security’s market price.
Changes in a Director’s interest is required to be advised to the Company within 3 days for notification to the
ASX”
Continuous Disclosure and Shareholder Communication
The Chairman and Company Secretary have been nominated as being person responsible for communications
with the Australian Stock Exchange (ASX). This role includes the responsibility for ensuring compliance with the
continuous disclosure requirements in the ASX listing rules and overseeing and co-ordinating information
disclosure to ASX. The Chairman is responsible for disclosure to analysts, brokers and shareholders, the
media and the public.
The company has written policies and procedures on information disclosure that focus on continuous
disclosure of any information concerning the Company that a reasonable person would expect to have a
material effect on the price of the Company’s securities.
All information disclosed to the ASX is available on the ASX’s website within 24 hours of the release to the ASX.
Procedures have been established for reviewing whether price sensitive information has been inadvertently
disclosed, and if so, this information is also immediately released to the market.
All shareholders receive a copy of the Company’s full annual report. Shareholders also are updated with the
Company’s operations via monthly ASX announcements of the net tangible asset (NTA) backing of the portfolio
and other disclosure information. All recent ASX announcements and annual reports are available on the ASX
website, or alternatively, by request via email, facsimile or post.
20
2005 Annual Report
B r i c k w o r k s I n v e s t m e n t C o m p a n y L i m i t e d
STATEMENT OF FINANCIAL PERFORMANCE
FOR THE YEAR TO 30 JUNE 2005
Consolidated
Company
Revenue from ordinary activities
Expenses from ordinary activities
Profit from ordinary activities before sales
of capital investment
Revenue from capital investments
Cost of sales
Profit from ordinary activities before
income tax expense
Note
2
2
1 (b)
1 (b)
Income tax expense relating to ordinary activities
3
Profit from ordinary activities after income tax
expense
Profit attributable to outside equity interest
Operating profit after income tax attributable
to members of Brickworks Investment
Company Limited
Increase in capital profits reserve
Increase in asset revaluation reserve
Total changes in equity other than those
resulting from transactions with owners as
owners
13
12
12
Note (a) - refers to the period 9 December 2003 to 30 June 2004
2005
$’000
14,893
(4,184)
10,709
8,651
(8,651)
10,709
(105)
10,604
(130)
10,474
1,444
23,104
35,022
The accompanying notes form part of these financial statements
2005 Annual Report
2004(a)
$’000
2005
$’000
2004(a)
$’000
4,320
(710)
3,610
6,656
(6,656)
3,610
(20)
3,590
12.965
(1,249)
11,716
3,621
(3,621)
11,716
216
11,932
-
-
3,590
11,932
-
10,784
14,374
1,444
32,244
45,620
479
(649)
(170)
-
-
(170)
51
(119)
-
(119)
-
-
(119)
21
B r i c k w o r k s I n v e s t m e n t C o m p a n y L i m i t e d
STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2005
CURRENT ASSETS
Cash assets
Receivables
Prepayments
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Other financial assets
Receivables
Deferred tax assets
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Payables
Current tax liabilities
TOTAL CURRENT LIABILITIES
NON CURRENT LIABILITIES
Payables
Deferred tax liabilities
TOTAL NON CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
SHAREHOLDERS’ EQUITY
Contributed equity
Reserves
Retained profits
Parent entity interest
Outside equity interest
TOTAL EQUITY
Consolidated
Company
Note
2005
$’000
2004(a)
$’000
2005
$’000
2004(a)
$’000
5
6(a)
7
6(b)
8
9
9
10
11
12
13
17,401
2,163
21
12,792
1,989
23
5,539
2,036
21
5,835
4,926
23
19,585
14,804
7,596
10,784
230,929
170,974
300,662
-
844
231,773
251,358
-
1,355
172,329
187,133
-
831
301,493
309,089
73,501
87,000
1,355
161,856
172,640
1,117
173
1,290
-
16,227
16,227
92
-
92
-
4,630
4,630
1,066
53
1,119
64,319
13,933
78,252
92
-
92
-
4,630
4,630
17,517
4,722
79,371
4,722
233,841
182,411
229,718
167,918
191,614
35,332
6,667
233,613
228
168,037
191,614
168,037
10,784
3,590
33,688
4,416
-
(119)
182,411
229,718
167,918
-
-
-
233,841
182,411
229,718
167,918
Note (a) - refers to the period 9 December 2003 to 30 June 2004
The accompanying notes form part of these financial statements
22
2005 Annual Report
B r i c k w o r k s I n v e s t m e n t C o m p a n y L i m i t e d
STATEMENT OF CASH FLOWS
FOR THE YEAR TO 30 JUNE 2005
Consolidated
Company
Note
2005
$’000
2004(a)
$’000
2005
$’000
2004(a)
$’000
Cash flows from operating activities
Payments to suppliers and employees
(1,575)
(615)
(1,275)
(612)
Income tax paid
Other receipts in the course of operations
Proceeds on sale of current investments
Payment for current investments
Dividends received
Interest received
Net Cash Inflow/(Outflow) from
operating activities
Cash flows from investing activities
(306)
40
2,879
(16)
9,513
640
14
11,175
(12)
20
-
-
3,612
597
3,602
-
34
-
-
4
-
19
-
-
-
167
(1,070)
479
(114)
Controlled entities acquired, net of cash acquired 14
(590)
(34,888)
(4,005)
(35,000)
Payment for non current investments
Proceeds on sale of non current investments
Net Cash Inflow/(Outflow) from
investing activities
Cash flows from financing activities
Proceeds from issue of shares
Repayment of borrowings
Dividends paid
Repayment from subsidiary entities
Loan to subsidiary entities
Net Cash Inflow/(Outflow) from
financing activities
(12,865)
8,650
(5,746)
6,656
(1,878)
3,621
-
-
(4,805)
(33,978)
(2,262)
(35,000)
4,960
128,168
4,960
128,168
-
(85,000)
(6,721)
-
-
-
-
-
-
(6,721)
4,797
-
-
-
-
(87,219)
(1,761)
43,168
3,036
40,949
Net increase / (decrease) in cash held
4,609
12,792
(296)
5,835
Cash at the beginning of the year
Cash at the end of the year
5
12,792
17,401
-
12,792
5,835
5,539
-
5,835
Note (a) - refers to the period 9 December 2003 to 30 June 2004
The accompanying notes form part of these financial statements
2005 Annual Report
23
B r i c k w o r k s I n v e s t m e n t C o m p a n y L i m i t e d
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR TO 30 JUNE 2005
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This general purpose financial report has been prepared in accordance with Accounting Standards, other
authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Consensus
Views and the Corporations Act 2001.
Accounting policies are selected and applied in a manner which ensures that the resultant financial information
satisfies the concepts of relevance and reliability, thereby ensuring that the substance of the underlying
transactions and other events is reported.
Except for equity investments, which are at market value, the financial report has been prepared in accordance
with the historical cost convention. Where a choice exists between two or more acceptable accounting
methods, the notes fully explain the method adopted. The cost method of accounting is used for all
acquisitions of assets regardless of whether shares or other assets are acquired. Cost is determined as the fair
value of the purchase consideration at the date of acquisition plus costs incidental to the acquisition.
The following is a summary of the material accounting policies adopted by the economic entity in the preparation
of the financial report. The accounting policies have been consistently applied, unless otherwise stated.
(a)
Principles of consolidation
The consolidated financial statements include the financial statements of Brickworks Investment
Company Limited ("the Company"), being the parent entity, and its controlled entities. All inter-company
balances and transactions between entities in the consolidated financial statements have been
eliminated.
Where controlled entities are acquired during the year, their results are included only from the date
control was obtained.
(b)
Investments
Listed Shares Held for Investment
Investments are initially recorded at cost and are re-valued to their fair value at the reporting date. Fair
value is determined by reference to the last quoted sale price on the Australian Stock Exchange at the
close of the business on the reporting date. Costs in acquiring investments, such as brokerage are
capitalised in the initial cost of the investment.
Revaluation increments and decrements are taken to the Asset Revaluation Reserve after deducting a
provision for potential deferred capital gains tax to the extent that they are able to be offset by credits in
the Asset Revaluation Reserve, otherwise they are included in the Profit from ordinary activities.
Investments are valued continuously. For this reason, cost of sales equals sales revenue when
investments are sold. On the disposal of investments, the balance in the Asset Revaluation Reserve
relating to the disposed asset is transferred to the Capital Profit Reserve.
24
2005 Annual Report
B r i c k w o r k s I n v e s t m e n t C o m p a n y L i m i t e d
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR TO 30 JUNE 2005 (continued)
(c)
Taxes
Income Tax
Current tax for the year is calculated on profit from ordinary activities adjusted for non-assessable and
non-deductible items and is based on tax rates and tax laws that have been enacted or substantively
enacted, at the reporting date.
Deferred tax is accounted for using the comprehensive balance sheet liability method whereby deferred
tax assets and liabilities are recognised on all temporary differences arising from differences between the
carrying amounts of assets and liabilities in the financial statements and their corresponding tax base.
Deferred tax relates to the movement in the net deferred tax asset/liability for the year and is recognised
as an expense or revenue in profit from ordinary activities, unless the deferred tax relates to an amount
that is credited or debited directly to equity, in which case the deferred tax is also recognised in equity.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year
when the asset or liability is recovered or settled.
Deferred tax liabilities have not been recognised on assessable temporary differences arising from
investments in controlled entity where the parent entity can control the timing of distributions and it is
probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax assets are recognised for deductible temporary differences, unused tax losses and unused
tax credits only if it is probable that future taxable amounts will be available against which the deductible
temporary differences, unused tax losses and unused tax credits can be utilised.
Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST except:
i)
ii)
where the GST incurred on a purchase of goods and services is not recoverable from
the taxation authority, in which case the GST is recognised as part of the cost of
acquisition of the asset or as part of the expense item as applicable; and
receivables and payables are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of
receivables or payables in the Statement of Financial Position.
Cash flows are included in the Statement of Cash Flows on a gross basis and the GST component of
cash flows arising from investing and financing activities, which is recoverable from, or payable to, the
taxation authority are classified as operating cash flows.
2005 Annual Report
25
B r i c k w o r k s I n v e s t m e n t C o m p a n y L i m i t e d
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR TO 30 JUNE 2005 (continued)
Tax Consolidation
The Company has formed an income tax consolidated group under the Tax Consolidation Regime with
its wholly owned subsidiary for the financial year ending 30 June 2005. Members of the group have
entered into a tax sharing agreement in order to allocate income tax expense between the Company and
its subsidiary on a pro-rata basis. In addition, the agreement also provides for the allocation of income
tax liabilities should the head entity default on its tax payment obligation. Brickworks Investment
Company Limited is responsible for recognising the current and deferred tax assets and liabilities for the
tax consolidated group.
(d)
Cash
For purposes of the statement of cash flows, cash includes deposits at call which are readily convertible
to cash on hand and which are used in the cash management function on a day-to-day basis, net of
outstanding bank overdrafts.
(e)
Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the entity
and the revenue can be reliably measured. The following specific recognition criteria must also be met
before revenue is recognised:
Sale of Investments
Control of the right to equity has passed to the buyer
Interest
Control of the right to receive the interest proceeds. Interest from cash on deposit is recognised in
accordance with the terms and conditions that apply to the deposit.
Dividend
Control of the right to receive the dividend proceeds. Dividends from listed entities is recognised as
income on the date the shares are traded “ex-dividend”. De-merger dividends arising from company
de-consolidations are treated as a return of capital and not as a dividend.
Cost of Investment
Cost of investment is solely related to the costs incurred in acquiring the equities, including incidental
costs.
(f)
Receivables
Receivables are recognised as amounts to be received in the future for goods and services rendered,
whether or not billed by the consolidated entity. Assets are commonly settled within 30 days for other
debtors. Related party receivables are payable at call.
(g)
Trade creditors and accruals
Liabilities are recognised for amounts to be paid in the future for goods and services received, whether
or not billed to the consolidated entity.
Liabilities are commonly settled:
Within 3 days ( transaction date + 3 days) for equity purchases ; and
Within 30 days for other creditors and accruals.
(i)
(ii)
26
2005 Annual Report
B r i c k w o r k s I n v e s t m e n t C o m p a n y L i m i t e d
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR TO 30 JUNE 2005 (continued)
(h)
Earnings per share
Basic EPS is calculated as net profit attributable to members, adjusted to exclude costs of servicing
equity (other than dividends), divided by the weighted average number of ordinary shares, adjusted for
any bonus element.
Diluted EPS is calculated as net profit attributable to members, adjusted for:
i)
ii)
iii)
Costs of servicing equity (other than dividends);
The after tax effect of dividends and interest associated with dilutive potential ordinary shares that
have been recognised as expenses; and
Other non-discretionary changes in revenues or expenses during the period that would result from
the dilution of potential ordinary shares;
divided by the weighted average number of ordinary shares and dilutive ordinary shares, adjusted for any
bonus element.
(i)
Contributed Equity
Issued and paid up capital is recognised at the fair value of the consideration received by the Company.
Any transaction costs arising from the issue of ordinary shares are recognised directly in equity as a
reduction of the share proceeds received.
(j)
Rounding
The amounts contained in this report and in the half-year financial report have been rounded to the
nearest $1,000 (where rounding is applicable) under the option available to the Company under ASIC
Class Order 98/0100. The Company is an entity to which the Class Order applies.
(k)
Adoption of International Financial Reporting Standards
Refer note 23 and 23.1
2005 Annual Report
27
B r i c k w o r k s I n v e s t m e n t C o m p a n y L i m i t e d
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR TO 30 JUNE 2005 (continued)
2. PROFIT FROM ORDINARY ACTIVITIES
Profit from ordinary activities before income tax
expense includes the following revenues and
expenses whose disclosure is relevant in
explaining the financial performance of the entity:
(i) Operating activities
Proceeds from sale of investments
Rebateable dividends:
- other corporations
- wholly-owned subsidiary
Rebateable dividends – special:
- other corporations
Non – rebateable dividends:
- other corporations
- wholly-owned subsidiary
Trust distributions
Interest received - notes
Interest received – bank deposits
Non-operating activities
Other income
Discount on acquisition of subsidiary
Total Revenue
(ii) Expenses
Carrying costs of investments disposed
Loss on sale of non current investments
Directors fees and related expenses
Management expenses
Professional costs
General expenses
Total Expenses
Note (a) - refers to the period 9 December 2003 to 30 June 2004
Consolidated
Company
2005
$’000
2004(a)
$’000
2005
$’000
2004(a)
$’000
2,879
8,406
-
-
-
3,499
-
1,492
10,782
276
43
-
873
-
105
7
641
13,187
25
1,681
1,706
14,893
2,623
-
188
801
220
352
4,184
181
-
-
55
542
4,320
-
-
-
4,320
-
61
52
360
87
150
710
261
158
105
-
167
12,965
-
-
-
12,965
-
-
104
736
119
290
1,249
-
-
-
-
-
-
-
-
479
479
-
-
-
479
-
-
52
360
87
150
649
28
2005 Annual Report
B r i c k w o r k s I n v e s t m e n t C o m p a n y L i m i t e d
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR TO 30 JUNE 2005 (continued)
3.INCOME TAX
The aggregate amount of income tax expense attributable to the year differs from the amount prima facie
payable on profits from ordinary activities. The difference is reconciled as follows:
Consolidated
Company
Income tax calculated at 30%
Tax effect of permanent differences which
(reduce)/increase tax payable:
- Discount on acquisition of subsidiary
- Dividends from wholly-owned subsidiary
2005
$’000
3,213
(504)
-
- Franked dividends received
Income tax expense
(2,604)
(1,063)
105
20
2004(a)
$’000
1,083
2005
$’000
3,515
2004(a)
$’000
(51)
-
-
-
(3,283)
(448)
(216)
-
-
-
(51)
4. DIVIDENDS
(a) Dividends paid during the year
Final dividend for the year ended 30 June 2004 of
2.00 cents fully franked at the tax rate of 30%, paid
on 31 August 2004.
Interim dividend for the year ended 30 June 2005 of
2.10 cents fully franked at the tax rate of 30%, paid
on 28 February 2005.
Total
Dividends paid in cash or reinvested in shares under
the dividend reinvestment plan (“DRP”)
Paid in cash
Reinvested in shares via DRP
Total
Franking Account Balance
Balance of franking account after allowing for payment
of income tax provided for in the financial statements
and receipt of dividends recognised as receivables and
deducting franking credits used in the payment of
dividends recognised as a liability at the reporting date.
30% Class C franking credits
3,425
3,973
7,397
6,723
674
7,397
-
-
-
-
-
-
3,425
3,973
7,397
6,723
674
7,397
-
-
-
-
-
2,646
2,305
2,646
2,305
(b) Dividends declared after balance date
Since the end of the financial year the directors have declared a final dividend for the year ended 30 June
2005 of 2.20 cents fully franked at the tax rate of 30% payable on 31 August 2005, but not recognised as
a liability at the end of the financial year.
2005 Annual Report
29
B r i c k w o r k s I n v e s t m e n t C o m p a n y L i m i t e d
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR TO 30 JUNE 2005 (continued)
5. CASH ASSETS
Cash at bank
6. RECEIVABLES
(a) Current
Dividends receivable
Distributions receivable
Interest receivable
Receivable from related entities
Sundry debtors
(b) Non-current
Loans to related entity – unsecured
7. OTHER FINANCIAL ASSETS
Listed securities at fair value:
- Shares in other corporations
- Converting and convertible notes and other
interest bearing securities
Shares in subsidiary entities at cost
Consolidated
Company
2005
$’000
2004(a)
$’000
17,401
12,792
2,011
105
11
-
36
2,163
1,973
-
-
-
16
1,989
2005
$’000
5,539
1,907
105
-
-
24
2,036
2004(a)
$’000
5,835
-
-
-
4,912
14
4,926
-
-
-
87,000
230,929
169,754
205,528
-
-
230,929
1,220
-
170,974
-
95,134
300,662
-
-
73,501
73,501
Acquisition of controlled entities:
The Company acquired voting shares in the following entities during the year with the consideration made
up of the issue of shares and cash.
Controlled entities at 30 June 2005
Brickworks Securities Pty Limited Australia
Pacific Strategic Investments Limited Australia
Country of Incorporation Date of acquisition 2005
Percentage Owned
2004
8 December 2003 100% 100%
-
1 November 2004
99.16%
The operating results of all controlled entities from the date of acquisition have been included in the
consolidated statements of financial performance. Assets and liabilities of all controlled entities have been
included in the consolidated statements of financial position.
The main activity of Brickworks Securities Pty Limited and Pacific Strategic Investments Limited is the same
as the Company, being a long-term investor in companies, trusts and interest bearing securities with a
focus on Australian entities.
Note (a) - refers to the period 9 December 2003 to 30 June 2004
30
2005 Annual Report
B r i c k w o r k s I n v e s t m e n t C o m p a n y L i m i t e d
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR TO 30 JUNE 2005 (continued)
8. DEFERRED TAX ASSETS
The deferred tax asset balance comprises the following
timing differences and unused tax losses:
Share issuing costs
Formation expenses
Accrued expenses
Current year capital losses
Current year income losses
Deferred tax asset recognised directly in equity
9. PAYABLES
Current liabilities:
Creditors and accruals
Non current liabilities:
Consolidated
Company
2005
$’000
2004(a)
$’000
2005
$’000
2004(a)
$’000
824
1,094
824
1,094
1
19
-
-
844
4
2
-
18
241
1,355
1,367
1
6
-
-
831
4
1,117
92
1,066
2
-
18
241
1,355
1,367
92
-
Amount due to controlled entities
-
-
64,319
10.DEFERRED TAX LIABILITIES
The deferred tax liability balance comprises the following
timing differences:
Revaluation of investments held
16,110
4,622
13,819
4,622
Non rebateable dividend receivable
Interest receivable
Deferred tax liability recognised directly in equity
11.CONTRIBUTED EQUITY
(a) Issued and Paid-Up Capital
114
3
16,227
11,488
8
-
4,630
4,622
114
-
13,933
9,197
8
-
4,630
4,622
194,392,926 Ordinary shares fully paid
191,614
168,037
191,614
168,037
(2004: 171,226,981)
Note (a) - refers to the period 9 December 2003 to 30 June 2004
2005 Annual Report
31
B r i c k w o r k s I n v e s t m e n t C o m p a n y L i m i t e d
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR TO 30 JUNE 2005 (continued)
11.CONTRIBUTED EQUITY (continued)
(b) Movement in Ordinary Shares
Beginning of the financial year
171,226,981
168,037
-
2005
2004
Number of
Shares
$’000
Number of
Shares
$’000
-
Issued during the year:
- public equity raising
- less net transaction costs
-
-
-
-
132,725,502
132,726
-
(3,190)
- purchase of controlled equity
17,943,561
17,939
38,501,479
38,501
- dividend reinvestment plan
- share purchase plan
- less net transaction costs
End of the financial year
596,479
4,625,905
-
674
4,973
(9)
-
-
-
-
-
-
194,392,926
191,614
171,226,981
168,037
Ordinary shares participate in dividends and the proceeds on winding up of the parent entity in proportion to
the number of shares held.
At shareholders meetings each ordinary share is entitled to one vote when a poll is called, otherwise each
shareholder has one vote on a show of hands.
12.RESERVES
Consolidated
Company
2004(a)
$’000
2005
$’000
2004(a)
$’000
Asset revaluation:
Balance at the beginning of the year
Revaluation of investments
Transfer to capital profits reserve on sale of investments
Balance at the end of the year
Capital profits:
Balance at the beginning of the year
Capital profits distribution from subsidiary
Transfer from asset revaluation reserve on sale
of investments
Balance at the end of the year
Total reserves
Note (a) - refers to the period 9 December 2003 to 30 June 2004
32
2005
$’000
10,784
24,548
(1,444)
33,888
-
-
1,444
-
10,784
-
10,784
-
-
-
-
33,108
(864)
32,244
-
580
864
1,444
35,332
-
10,784
1,444
33,688
-
-
-
-
-
-
-
-
-
2005 Annual Report
B r i c k w o r k s I n v e s t m e n t C o m p a n y L i m i t e d
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR TO 30 JUNE 2005 (continued)
13.RETAINED PROFITS
Consolidated
Company
Retained profits at the beginning of the year
Net profit attributable to members of the Company
Dividends provided for or paid
Retained profits at the end of the year
14.CASH FLOW RECONCILIATION
(a) Reconciliation of cash flow from operations with
profits from ordinary activities after income tax
Net profit / (loss) after income tax
(Profit) / loss on disposal of non current investment
Dividends from subsidiary entities
Non cash item - discount on acquisition
Change in assets and liabilities, net of the effects of
purchase of subsidiaries
(Increase) / Decrease in current investments
(Increase) / Decrease in receivables and prepayments
Increase / (Decrease) in creditors and accruals
Increase / (Decrease) in deferred tax liabilities
Increase / (Decrease) in provision for current
investments revaluation
Increase / (Decrease) in provision for tax
(Increase) / Decrease in future tax benefit
Net cash (outflow) / inflow from operating activities
2005
$’000
3,590
10,474
(7,397)
6,667
10,604
-
-
(1,681)
2,974
(110)
(32)
(213)
(537)
(120)
290
11,175
Note (a) - refers to the period 9 December 2003 to 30 June 2004
2005 Annual Report
2004(a)
$’000
-
3,590
-
3,590
2005
$’000
(119)
11,932
(7,397)
4,416
2004(a)
$’000
-
(119)
-
(119)
3,590
61
-
-
-
(150)
92
9
-
(12)
12
3,602
11,932
-
(10,940)
-
-
(2,020)
14
110
-
53
(219)
(1,070)
(119)
-
-
-
-
(36)
92
-
-
-
(51)
(114)
33
B r i c k w o r k s I n v e s t m e n t C o m p a n y L i m i t e d
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR TO 30 JUNE 2005 (continued)
14.CASH FLOW RECONCILIATION (continued)
(b) Acquisition of subsidiary entities
During the year to 30 June 2005, the Company
acquired 99.16% of the controlled entity, Pacific Strategic
Investments Limited (“PSI”) (2004: 100% of Brickworks
Securities Pty Limited (“BSPL”))
Details of the transaction are:
Consolidated
Company
2005
$’000
2004(a)
$’000
2005
$’000
2004(a)
$’000
Purchase consideration:
Acquisition
% holdings
Shares issued 19,943,561 (2004: 38,501,479)
Share issuing costs
Cash consideration
Total consideration
Fair value of identifiable net assets of controlled
entities acquired:
Cash
Receivables
Repayments
Deferred tax assets
Fixed assets
Listed securities
Creditors
Current tax liabilities
Deferred tax liabilities
Discount on consideration
Total consideration
Net cash effect:
Cash paid
Share issuing costs
Cash balance acquired
Total cash outflows on acquisition of controlled entities
Note (a) - refers to the period 9 December 2003 to 30 June 2004
34
PSI
99.16%
17,939
285
4,680
22,904
3,482
47
25
42
1
23,026
(87)
(260)
(1,691)
(1,681)
22,904
(3,720)
(285)
3,415
(590)
PSI
99.16%
17,939
285
4,680
22,904
BSPL
100%
38,501
-
35,000
73,501
BSPL
100%
38,501
-
35,000
73,501
112
1,862
-
-
-
156,539
(85,012)
-
-
-
73,501
(35,000)
-
112
(34,888)
(3,720)
(285)
-
(4,005)
(35,000)
-
-
(35,000)
2005 Annual Report
B r i c k w o r k s I n v e s t m e n t C o m p a n y L i m i t e d
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR TO 30 JUNE 2005 (continued)
14.CASH FLOW RECONCILIATION (continued)
(c) Non-cash financing and investing activities
(i) Share issue on acquiring controlled entities
17,943,561 ordinary shares were issued on acquiring 81.42% of the issued share capital of PSI.
(ii) Dividend reinvestment plan
Under the terms of the dividend reinvestment plan, $674,021 (2004: nil) of dividends were paid via the
issue of 596,479 shares (2004: nil).
(iii) Dividend payment
During the year ended 30 June 2005, the Company received dividends of $12,210,432 (2004: nil) and
a capital profit distribution of $580,011 (2004: nil) from its wholly owned subsidiary entity, Brickworks
Securities Pty Limited (“BSPL”). $1,271,276 of dividends received from BSPL relates to profits of the
subsidiary prior to acquisition in December 2003 and accordingly the cost of the investment in BSPL
has been reduced by the same amount.
The dividend was settled against the balance due via an inter-company loan.
(iv) Transfer of investment portfolio to parent entity
During the year, the Company transferred all of the investment portfolio previously held by its wholly
owned subsidiary entity, Brickworks Securities Pty Limited, at cost. The transfer consideration was
$159,974,678 and was settled against the balance due via an inter-company loan.
15.EARNINGS PER SHARE
The following reflects the income and share data
used in the calculation of basic and diluted
earnings per share:
Net Profit / (Loss)
Earnings used in calculating basic and diluted
earnings per share
Weighted average number of ordinary shares used in
the calculation of basic & diluted earnings per share
Basic earnings per share (cents)
Diluted earnings per share (cents)
Note (a) - refers to the period 9 December 2003 to 30 June 2004
Consolidated
2005
$’000
2004(a)
$’000
10,474
3,590
10,474
3,590
No.
(‘000)
No.
(‘000)
184,063
171,227
5.69
5.69
2.10
2.10
2005 Annual Report
35
B r i c k w o r k s I n v e s t m e n t C o m p a n y L i m i t e d
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR TO 30 JUNE 2005 (continued)
16.AUDITORS’ REMUNERATION
Remuneration of the auditor of the parent entity for:
(a) Auditing the financial report of the Company and
the controlled entity
(b) Other services
Remuneration of other auditors of subsidiary for:
Auditing the financial report of a controlled entity
(Pacific Strategic Investments Ltd)
17.DIRECTORS REMUNERATION
Income paid or payable, or otherwise made available to
Non-Executive Directors of the consolidated entity in
connection with managing the affairs of the Company and
controlled entities
Fees
Superannuation Guarantee amounts
Consolidated
Company
2005
$’000
2004(a)
$’000
2005
$’000
2004(a)
$’000
29
13
42
28
26
-
26
-
29
13
42
-
26
-
26
-
2005
2004(a)
$
107,500
9,675
117,175
$
47,500
4,275
51,775
The number of Directors whose total remuneration from the Company and its controlled entities was within the
following bands:
$10,000 - $19,999
$20,000 - $29,999
$30,000 - $39,999
$40,000 - $49,999
$50,000 - $59,999
Number of Directors
2
1
-
-
-
-
1
1
-
1
The Company had no employees during the period to 30 June 2004.
18.SUPERANNUATION COMMITMENTS
The Company contributes superannuation payments on behalf of directors of the consolidated entity in
accordance with relevant legislation. Superannuation funds are nominated by the individual directors and are
independent of the Company.
Note (a) - refers to the period 9 December 2003 to 30 June 2004
36
2005 Annual Report
B r i c k w o r k s I n v e s t m e n t C o m p a n y L i m i t e d
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR TO 30 JUNE 2005 (continued)
19.RELATED PARTY TRANSACTIONS
Related parties of the Company fall into the following categories:
(i) Controlled Entities
Brickworks Securities Pty Limited is 100% owned by the Company and is incorporated in Australia.
Pacific Strategic Investments Limited is 99.16% owned by the Company and is incorporated in Australia.
Transactions between the Company and its controlled entity consist of loan balance from the Company to its
controlled entities. No interest is charged on the loan balance to the controlled entities and no repayment
period is fixed for the loan.
(a) Dividend payment
During the year ended 30 June 2005, the Company received dividends of $12,210,432 (2004: nil) and a
capital profits distribution of $580,011 (2004: nil) from its wholly owned subsidiary entity, Brickworks Securities
Pty Limited (BSPL). $1,271,276 of dividends received relates to profits of the subsidiary prior to
acquisition in December 2003 and accordingly the cost of the investment in BSPL has been reduced by the
same amount.
The dividend was settled against the balance due via an inter-company loan.
(b) Transfer of investment portfolio to parent entity
During the year, the Company transferred all of the investment portfolio previously held by its wholly owned
subsidiary entity, Brickworks Securities Pty Limited, at cost. The transfer consideration was $159,974,678
and was settled against the balance due via an inter-company loan.
(ii) Directors/Officers Related Entities
Persons who were Directors/Officers of Brickworks Investment Company Limited for part or all of the year
ended 30 June 2005 were:
Directors:
RD Millner
DC Hall
AJ Payne
Company Secretary: JP de Gouveia
Pitt Capital Partners Limited
The Company has appointed Pitt Capital Partners Limited, an entity in which Mr. RD Millner has an indirect
interest, to act as financial adviser in respect of the merger of the Company’s shares with that of Pacific
Strategic Investments Limited. Total fees paid to Pitt Capital Partners Limited were $165,000 (2004: $788,811)
including GST.
Souls Funds Management Limited
The Company has appointed Souls Funds Management Limited, an entity in which Mr. RD Millner has an
indirect interest, to act as investment manager for a period of 5 years from 24 October 2003. Under the
agreement between the two parties, the Company agrees to pay Souls Funds Management Limited a monthly
management fee equal to one-twelfth of 0.35% of the total assets of the Company in the preceding month.
2005 Annual Report
37
B r i c k w o r k s I n v e s t m e n t C o m p a n y L i m i t e d
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR TO 30 JUNE 2005 (continued)
19.RELATED PARTY TRANSACTIONS (continued)
Souls Funds Management Limited also acts as investment manager for the controlled entity Pacific Strategic
Investments Limited on a quarterly management fee equal to one-quarter of 0.35% of the net asset of PSI at
each quarter.
The management fee paid for the year to 30 June 2005 was $801,411 (2004: $359,549); and the management
fee owed by the Company to Souls Funds Management Limited at 30 June 2005 was $78,810 (2004:
$59,950).
Corporate and Administrative Services Pty Limited
The Company has appointed Corporate & Administrative Services Pty Limited, an entity in which Mr RD Millner
has an indirect interest and Mr JP de Gouveia has a direct interest, to provide the Company with
administration, company secretarial services and preparation of all financial accounts.
Administration fees paid for services provided to the company and its controlled entities for the year to 30 June
2005 were $176,880 (2004: $60,866) including GST and are at standard market rates.
No administration fees were owed by the Company to Corporate & Administrative Services Pty Limited at 30
June 2005.
(iii) Transactions in securities of the Company
Aggregate number of securities of the Company acquired or disposed of by Directors or their Director-related
entities:
Acquisition - Shares
Disposal - Shares
2005
2004
No. of Shares No. of Shares
549,914
-
1,014,002
-
During the year ended 30 June 2005, entities related to Directors acquired, under normal commercial terms,
shares in the Company as follows:
(i) Entities related to Mr RD Millner: 446,760 shares (2004: 914,000)
(ii) Entities related to Mr DC Hall: 97,574 shares (2004: 50,001)
(iii) Entities related to Mr AJ Payne: 5,580 shares (2004: 50,001)
Directors acquired shares through the initial public offering, dividend reinvestment plan, share purchase plan or
on-market purchase.
There has been no other change to Directors’ shareholdings in the Company during the year ended 30 June 2005.
Messrs RD Millner, DC Hall and AJ Payne, or their associated entities, being shareholders of the Company are
entitled to receive dividends from the Company.
20.FINANCIAL REPORTING BY SEGMENTS
The Company operates predominately in the securities industry in Australia.
38
2005 Annual Report
B r i c k w o r k s I n v e s t m e n t C o m p a n y L i m i t e d
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR TO 30 JUNE 2005 (continued)
21.FINANCIAL INSTRUMENTS
a) Interest Rate Risk
The Company’s exposure to interest rate risk as at the reporting date is as follows:
Weighted
Average
Interest Rate
%
Variable
Interest Rate
$’000
Non-Interest
Bearing
$’000
Total
$’000
2005
2004(a)
2005
2004(a)
2005
2004(a)
2005
2004(a)
Financial Assets
Cash
Converting
preference shares
Notes
Listed securities
Receivables and
prepayments
Financial Liabilities
Payables
4.05
3.95
17,401
12,792
-
-
17,401
12,792
-
-
-
-
-
7.27
6.75
-
-
-
-
-
-
797
423
-
-
-
230,929
-
-
-
-
169,754 230,929
797
423
169,754
-
17,401
-
14,012
2,184
233,113
2,012
2,184
171,766 250,514
2,012
185,778
-
-
1,117
92
1,117
92
Note (a) - refers to the period 9 December 2003 to 30 June 2004
b) Credit Risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial
loss to the Company. The Company has adopted the policy of only dealing with credit-worthy counterparties
and obtaining sufficient collateral or other security where appropriate, as a means of mitigating the risk of
financial loss from defaults. The Group measures credit risk on a fair value basis. The Group does not have any
significant credit risk exposure to any single counterparty or any group of counterparties having similar
characteristics. The carrying amount of financial assets recorded in the financial statements, net of any
provisions for losses, represents the Group’s maximum exposure to credit risk without taking account of the
value of any collateral or other security obtained.
c) Concentration of investment risk
The Company minimises concentration of risk in relation to investments by spreading across different sectors.
Spread of investments in the following sectors:
Percentage of total investment
Amount
Sector
Banks
Capital goods
Diversified financials
Materials
Media
Telecommunication services
Other non concentrated
Bank deposits
2005 Annual Report
2005
%
38.1
4.3
7.0
18.7
4.0
5.0
15.9
7.0
100.0
2004
%
46.7
3.2
6.2
20.5
2.3
3.4
10.7
7.0
100.0
2005
($’000)
94,595
10,560
17,312
46,499
10,016
12,457
39,490
17,401
248,330
2004
($’000)
85,809
5,811
11,428
37,578
4,260
6,308
19,780
12,792
183,766
39
B r i c k w o r k s I n v e s t m e n t C o m p a n y L i m i t e d
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR TO 30 JUNE 2005 (continued)
21.FINANCIAL INSTRUMENTS (continued)
The Company traded all investment transactions through a number of major broking firms with trades evenly
placed amongst those firms.
d) Net Fair Value
The carrying amount of financial assets and financial liabilities recorded in the financial statements represents
their respective net fair values, determined in accordance with the accounting policies disclosed in note 1 to
the accounts.
22.COMPARATIVE INFORMATION
The Company was incorporated on 17 October 2003 and the comparative information for 2004 refers to the
period from October 2003 to 30 June 2004.
23. IMPACT OF ADOPTING AUSTRALIAN EQUIVALENTS TO IFRS
Brickworks Investment Company Limited is in the process of transitioning its accounting policies and financial
reporting from current Australian Accounting Standards (AGAAP) to Australian equivalents of International
Financial Reporting Standards (AIFRS) which will be applicable for the financial year ended 30 June 2006. The
company has prepared an opening balance sheet in accordance with AIFRS as at 1 July 2004, being the
company’s transition date to AIFRS. This will form the basis of accounting for AIFRS in the future, and is
required when the company prepares its first fully AIFRS compliant financial report for the year ended 30 June
2006.
Set out below is the key area where the accounting policies are expected to change on adoption of AIFRS and
our best estimate of the quantitative impact of the changes on total equity as at the date of transition and 30
June 2005 and on net profit for the year ended 30 June 2005.
The figures disclosed are best estimates of the quantitative impact of the changes as at the date of preparing
the 30 June 2005 financial report. The actual effects of transition to AIFRS may differ from the estimates
disclosed due to (a) ongoing work being undertaken by the AIFRS project team; (b) potential amendments to
AIFRSs and Interpretations thereof being issued by the standard-setters and IFRIC; and (c) emerging accepted
practice in the interpretation and application of AIFRS and UIG Interpretations.
(a) Reconciliation of equity as presented under AGAAP to that under AIFRS
Consolidated
Company
30 June
2005**
$’000
1 July
2004*
$’000
30 June
2005**
$’000
1 July
2004*
$’000
Total equity under AGAAP
233,841
182,411
229,718
167,918
Adjustments to retained earning (net of tax)
-
-
-
Adjustments to other reserves (net of tax)
Asset revaluation reserve (refer note 23.1)
(321)
(1,014)
(282)
-
-
Total equity under AIFRS
233,520
181,397
229,436
167,918
* This column represents the adjustment as at the date of transition to AIFRS.
** This column represents the cumulative adjustments as at the date of transition to AIFRS and those for the
year ended 30 June 2005.
40
2005 Annual Report
B r i c k w o r k s I n v e s t m e n t C o m p a n y L i m i t e d
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR TO 30 JUNE 2005 (continued)
23. IMPACT OF ADOPTING AUSTRALIAN EQUIVALENTS TO IFRS (continued)
(b) Reconciliation of net profit under AGAAP to that under AIFRS
Year Ended 30 June 2005
Net profit as reported under AGAAP
Capital profit on disposal of investment
Net profit under AIFRS
Consolidated
$’000
10,474
1,444
11,918
Company
$’000
3,590
1,444
5,034
23.1 VALUATION OF INVESTMENT PORTFOLIO
The securities held in the investment portfolio are initially brought to account at cost. Subsequent to acquisition,
securities are revalued to fair market value with increments and decrements taken to the Asset Revaluation
Reserve.
When disposal of securities takes place, the cumulative gain or loss relating to them is transferred from Asset
Revaluation Reserve directly to Capital Profits Reserve. Under AIFRS, the cumulative gain or loss on disposal of
securities will be taken to profit and loss account and then transferred to the Capital Profits Reserve.
Determination of Fair Value
Under AGAAP, fair value for the purpose of valuing holdings of securities that are listed or traded on an
exchange are based on the last quoted sale prices for securities prevailing at balance date. Under AIFRS, fair
vale is based on the “bid” price for securities prevailing at balance date.
Under AIFRS, the change in the method of calculating fair value from “last quoted sales price” to the “bid price”
results in a consolidated reduction in the carrying value of the investment portfolio of $321,000.
2005 Annual Report
41
B r i c k w o r k s I n v e s t m e n t C o m p a n y L i m i t e d
DIRECTORS’ DECLARATION
The directors of Brickworks Investment Company Limited declare that:
1. the financial statements and notes of the Company and consolidated entity as set out on pages 21 to 41,
are in accordance with the Corporations Act 2001:
(a) give a true and fair view of the financial position as at 30 June 2005 and the performance for the year
ended on that date of the Company and consolidated entity; and
(b) comply with Accounting Standards and the Corporations Regulations 2001;
2.
in the directors’ opinion there are reasonable grounds to believe that the Company will be able to pay its
debts as and when they become due and payable.
3. this declaration has been made after receiving the declaration required to be made to the directors in
accordance with section 295A of the Corporations Act 2001 for the financial year ending 30 June 2005.
This declaration is made in accordance with a resolution of the Board of Directors.
Robert D Millner
Director
Sydney
3 August 2005
42
2005 Annual Report
B r i c k w o r k s I n v e s t m e n t C o m p a n y L i m i t e d
TRAVIS & TRAVIS CHARTERED ACCOUNTANTS
P.O. BOX 429
LANE COVE, AUSTRALIA
TELEPHONE: +61 2 9427 6555
FACSIMILE:+61 2 9427 5127
EMAIL: info@travisntravis.com.au
SCOPE
INDEPENDENT AUDIT REPORT
TO THE MEMBERS OF
BRICKWORKS INVESTMENT COMPANY LIMITED
The financial report and director’s responsibility
The Financial report comprises the statement of financial position, statement of financial performance, statement of cash flows,
accompanying notes to the financial statements, and the directors’ declaration for Brickworks Investment Company Limited (The Company)
and the consolidated entity for the year ended 30 June 2005 The consolidated entity comprises both the company and the entities it
controlled during that year.
The directors of the company are responsible for the preparation and true and fair presentation of the financial report in accordance with
the Corporations Act 2001. This includes responsibility for the maintenance of adequate accounting records and internal controls that are
designed to prevent and detect fraud and error, and for the accounting policies and accounting estimates inherent in the financial report.
Audit approach
We conducted an independent audit in order to express an opinion to the members of the company. Our audit was conducted in
accordance with Australian Auditing Standards, in order to provide reasonable assurance as to whether the financial report is free of
material misstatement. The nature of an audit is influenced by factors such as the use of professional judgment, selective testing, the
inherent limitations of internal control, and the availability of persuasive rather than conclusive evidence. Therefore, an audit cannot
guarantee that all material misstatements have been detected.
We performed procedures to assess whether in all material respects the financial report presents fairly, in accordance with the Corporations
Act 2001, including compliance with Accounting Standards and other mandatory financial reporting requirements in Australia, a view which
is consistent with our understanding of the company’s and the consolidated entity’s financial position, and of their performance as
represented by the results of their operations and cash flows.
We formed our audit opinion on the basis of these procedures, which included:
- examining, on a test basis, information to provide evidence supporting the amounts and disclosures in the financial report; and
- assessing the appropriateness of the accounting policies and disclosures used and the reasonableness of significant
accounting estimates made by the directors.
While we considered the effectiveness of management’s internal controls over financial reporting when determining the nature and extent of
our procedures, our audit was not designed to provide assurance on internal controls.
INDEPENDENCE
In conducting our audit, we followed applicable independence requirements of Australian professional ethical pronouncements and the
Corporations Act 2001.
In accordance with ASIC Class Order 05/83, we declare to the best of our knowledge and belief that the auditor’s independence
declaration set out on page 44 of the financial report has not changed as at the date of providing our audit opinion.
AUDIT OPINION
In our opinion, the financial report of Brickworks Investment Company Limited is in accordance with:
(a) the Corporations Act 2001, including:
(i) giving a true and fair view of the company’s and consolidated entity’s financial position as at 30 June 2005 and of their
performance for the year ended on that date; and
(ii) complying with Accounting Standards in Australia and the Corporations Regulations 2001; and
(b) other mandatory financial reporting requirements in Australia.
TRAVIS & TRAVIS
A.J. FAIRALL
Partner
Dated: 3 August 2005
Liability is limited by the Accountant’s Scheme under the Professional Standards act 1994 (NSW)
2005 Annual Report
1/114 Longueville Road
LANE COVE NSW 2066
43
B r i c k w o r k s I n v e s t m e n t C o m p a n y L i m i t e d
TRAVIS & TRAVIS CHARTERED ACCOUNTANTS
P.O. BOX 429
LANE COVE, AUSTRALIA
TELEPHONE: +61 2 9427 6555
FACSIMILE:+61 2 9427 5127
EMAIL: info@travisntravis.com.au
Auditors’ Independence Declaration to the Directors of Brickworks Investment Company Limited
I declare that, to the best of my knowledge and belief, during the year ended 30 June 2005 there have been:
(i) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the
audit; and
(ii) no contraventions of any applicable code of professional conduct in relation to the audit.
TRAVIS & TRAVIS
A.J. FAIRALL
Partner
Dated: 3 August 2005
1/114 Longueville Road, Lane Cove NSW
Liability is limited by the Accountant’s Scheme under the Professional Standards act 1994 (NSW)
44
2005 Annual Report
B r i c k w o r k s I n v e s t m e n t C o m p a n y L i m i t e d
ASX Additional Information
1) Equity Holders
At 29 July 2005, there were 7,773 holders of ordinary shares in the capital of the Company. These holders
were distributed as follow:
No. of Shares held
1
– 1,000
1,001
– 5,000
5,001
– 10,000
10,001 – 100,000
100,001 and over
Holding less than a marketable parcel of 428 shares
Votes of Members
Article 5.12 of the Company’s Constitution provides
No. of Shareholders
179
2,476
2,032
2,893
143
46
a) Subject to this Constitution and any rights or restrictions attached to a class of Shares, on a show of
hands at a meeting of Members, every Eligible Member present has one vote.
b) Subject to this Constitution and any rights or restrictions attached to a class of Shares, on a poll at a
meeting of Members, every Eligible Member present has :
(i) one vote for each fully paid up Share (whether the issue price of the Share was paid up or credited or
both) that the Eligible Member holds; and
(ii) a fraction of one vote for each partly paid up Share that the Eligible Member holds. The fraction is
equal to the proportion which the amount paid up on that Share (excluding amounts credited) is to
the total amounts paid up and payable (excluding amounts credited on that Share).
2005 Annual Report
45
B r i c k w o r k s I n v e s t m e n t C o m p a n y L i m i t e d
ASX Additional Information (continued)
The 20 largest holdings of the Company’s share as at 29 July 2005 are listed below:
Name
Shares Held
Brickworks Limited
Washington H Soul Pattinson & Co Ltd
Bougainville Copper Limited
Argo Investments Limited
UBS Private Clients Australia Nominees Pty Ltd
Bougainville Copper Limited
Australia Republic Investment Pty Ltd
Tothemill Pty Ltd
Trephant Pty Ltd
HFT Nominees Pty Ltd
Mr Richard Hamilton Bartlett
Mr David McKee & Mrs Pamela McKee
Mr James Sinclair Millner
Australian Executor Trustees Limited
Mr Peter Edward Goodeve
Dr Russell Kay Hancock
H F T Nominees Pty Ltd
J S Millner Holdings Pty Limited
RBC Global Services Australia Nominees Pty Ltd
Janivan Investments Pty Ltd
Total top 20 security holders
Total number of shares on Issue
2) Substantial Shareholders
43,101,479
5,894,102
5,000,000
3,253,893
2,304,367
2,100,000
1,142,858
771,429
700,000
637,625
560,000
547,433
545,318
540,579
500,000
500,000
482,572
478,651
461,749
450,000
69,972,055
194,392,926
%
22.17
3.03
2.57
1.67
1.19
1.08
0.59
0.40
0.36
0.33
0.29
0.28
0.28
0.28
0.26
0.26
0.25
0.25
0.24
0.23
36.01
As at 29 July 2005 the name and holding of substantial shareholder as disclosed in a notice received by the
company is:
Substantial Shareholders
Brickworks Limited
3) Other Information:
No. of Shares
43,101,479
% of Total
22.17
■ There is no current on-market buy-back in place.
■ There were 100 (2004: 41) transactions in securities undertaken by the Company and the total
brokerage paid or accrued during the year was $73,450 (2004: $46,335).
4) Management Fees
Management fees paid and accrued during the year ended 30 June 2005 was $801,411 (2004: $359,549).
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