BKI INVESTMENT
COMPANY LIMITED
2
0
Annual Report
for year ended 30 June 2011
ABN 23 106 719 868
1
1
BKI INVESTMENT
COMPANY LIMITED
CORPORATE DIRECTORY
Directors
Robert Dobson Millner
Non-Executive Director and Chairman
David Capp Hall
Non-Executive Director
Alexander James Payne
Non-Executive Director
Ian Thomas Huntley
Non-Executive Director
Chief Executive Officer
Thomas Charles Dobson Millner
Secretary
Richard James Pillinger
Registered Office
Level 2, 160 Pitt Street Mall,
Sydney NSW 2000
Telephone:
(02) 9210 7000
Facsimile:
(02) 9210 7099
Postal Address: GPO Box 5015, Sydney NSW 2001
Auditors
Ruwald & Evans
Level 1, 276 Pitt Street,
Sydney NSW 2000
Share Registry
Advanced Share Registry Services Limited
150 Stirling Highway,
Nedlands, WA 6009
Telephone: (08) 9389 8033
Australian Stock Exchange Code
Ordinary Shares
BKI
Website
www.bkilimited.com.au
2011 Annual Report
B K I 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
List of Securities at 30 June 2011
Group Profile
Chairman’s Address
Directors’ Report
Corporate Governance
Consolidated Income Statement
Statement of Other Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of Changes in Equity
Consolidated Cash Flow Statement
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Auditor’s Independence Declaration
ASX Additional Information
2011 Annual Report
2
3
6
7
11
21
28
29
30
31
32
33
54
55
56
57
1
BKI INVESTMENT
COMPANY LIMITED
FINANCIAL HIGHLIGHTS
(cid:0) Revenue Performance
Total income - Ordinary
Total income - Special
Total revenue from ordinary activities
(cid:0) Profits
Operating profit after tax but before special
dividend income
Dividend income - Special
Net profit from ordinary activities after tax
attributable to shareholders
Net profit attributable to shareholders
(cid:0) Portfolio
% Change
$’000
Up
Down
Down
Up
Down
Down
Down
12.2%
59.1%
10.1%
13.1%
59.1%
4.0%
4.0%
to
to
to
to
to
to
to
27,556
4,557
32,113
25,341
4,557
29,898
29,898
Total Portfolio Value (including cash)
Up
8.1%
to
599,478
(cid:0) Earnings per share
Basic earnings per share before special dividend income
Up
Basic earnings per share after special dividend income
Down
10.6%
6.2%
to
to
(cid:0) Dividends
Interim - Ordinary
Final - Ordinary
Final - Special
Full Year Total
Cents
6.02
7.10
Cents
3.00
3.00
1.00
7.00
30/06/04 30/06/05 30/06/06
30/06/07 30/06/08
30/06/09
30/06/10
30/06/11
(cid:0) Net Tangible Asset (NTA) History
NTA Before Tax
NTA After Tax
$1.08
$1.06
$1.28
$1.20
$1.43
$1.32
$1.69
$1.51
$1.52
$1.41
$1.22
$1.19
$1.32
$1.27
$1.42
$1.34
(cid:0) Dividend History (cents per share)
Interim
Final
Special
Total
-*
2.0
-
2.0
2.1
2.2
-
4.3
2.5
2.5
1.0
6.0
2.6
2.7
-
5.3
3.0
3.0
-
6.0
3.0
3.0
-
6.0
2.5
2.75
1.0
6.25
3.0
3.0
1.0
7.0
* The Company was listed on ASX 12 December 2003, no interim dividend is applicable.
2
2011 Annual Report
B K I I n v e s t m e n t C o m p a n y L i m i t e d
FINANCIAL HIGHLIGHTS (continued)
Chart of
Dividend History
LIST OF SECURITIES HELD AND THEIR MARKET VALUE AT
30 JUNE 2011 WERE:
Stock
Financials
National Australia Bank Limited
Commonwealth Bank of Australia
Westpac Banking Corporation
Australia and New Zealand Banking Group Limited
QBE Insurance Group Limited
Westpac Stapled Preferred Securities (SPS II)
ASX Limited
AMP Limited
Milton Corporation Limited
Bendigo Bank Limited
Insurance Australia Group Limited
Perpetual Limited
Shares
Held
1,841,759
886,100
1,226,000
669,000
737,000
90,165
215,500
1,314,813
410,378
610,400
1,280,000
166,310
Suncorp-Metway Limited Convertible Preference Shares
40,000
Suncorp-Metway Limited
Bank of Queensland Limited
Macquarie Group Limited
Westpac Stapled Preferred Securities (SPS)
390,000
370,000
85,000
20,840
2011 Annual Report
Market
Value
($’000)
Portfolio
Weight
%
47,112
46,254
27,279
14,718
12,706
9,539
6,560
6,416
6,402
5,396
4,339
4,146
4,080
3,159
3,023
2,655
2,109
7.86%
7.72%
4.55%
2.46%
2.12%
1.59%
1.09%
1.07%
1.07%
0.90%
0.72%
0.69%
0.68%
0.53%
0.50%
0.44%
0.35%
205,893
34.35%
3
BKI INVESTMENT
COMPANY LIMITED
List of securities (continued):
Stock
Energy
New Hope Corporation Limited
Woodside Petroleum Limited
Santos Limited
Caltex Australia Limited
Industrials
Campbell Brothers Limited
Brambles Limited
UGL Limited
GWA International Limited
Salmat Limited
Seek Limited
Transfield Services Limited
Qube Logistics
Skilled Group Limited
Lindsay Australia Limited
Transurban Group
Consumer Discretionary
Invocare Limited
ARB Corporation Limited
Tatts Group Limited
Fairfax Media Limited
Echo Entertainment Group Limited
Seven West Media Limited
Tabcorp Holdings Limited
Ten Network Holdings Limited
Crown Limited
Fleetwood Corporation Limited
Gazal Corporation Limited
Consumer Staples
Wesfarmers Limited
Woolworths Limited
Metcash Limited
Coca Cola Amatil Limited
Graincorp Limited
4
Shares
Held
Market
Value
($’000)
Portfolio
Weight
%
14,760,452
390,000
130,000
91,950
389,734
748,167
310,000
1,310,000
970,100
400,000
494,746
1,000,000
644,826
5,749,400
134,581
919,000
845,600
1,581,000
2,100,000
438,111
372,458
438,111
1,150,000
90,574
55,000
211,865
692,570
711,565
2,440,000
846,000
93,444
76,312
15,990
1,755
1,079
95,136
17,807
5,394
4,303
3,589
3,434
2,572
1,652
1,550
1,444
1,035
701
43,481
7,058
6,401
3,779
2,058
1,801
1,505
1,437
1,213
807
622
424
27,105
22,051
19,739
10,126
9,653
775
62,344
12.73%
2.67%
0.29%
0.18%
15.87%
2.97%
0.90%
0.72%
0.60%
0.57%
0.43%
0.28%
0.26%
0.24%
0.17%
0.12%
7.25%
1.18%
1.07%
0.63%
0.34%
0.30%
0.25%
0.24%
0.20%
0.13%
0.10%
0.07%
4.52%
3.68%
3.29%
1.69%
1.61%
0.13%
10.40%
2011 Annual Report
B K I I n v e s t m e n t C o m p a n y L i m i t e d
List of securities (continued):
Stock
Health Care
Ramsay Health Care Limited
Sonic Healthcare Limited
Clover Corporation Limited
Materials
BHP Billiton Limited
Brickworks Limited
Rio Tinto Limited
Onesteel Limited
Orica Limited Step up Preference Securities
Bluescope Steel Limited
Property Trusts
Westfield Group
Telecommunications Services
Telstra Corporation Limited
TPG Telecom Limited
Utilities
AGL Energy Limited
APA Group
Total Investments
Cash and dividends receivable
TOTAL PORTFOLIO
Shares
Held
189,000
153,600
858,000
Market
Value
($’000)
Portfolio
Weight
%
3,432
1,977
236
5,645
0.57%
0.33%
0.04%
0.94%
1,369,443
59,968
10.00%
436,209
49,562
800,000
10,000
233,568
233,157
6,940,000
4,420,000
1,141,000
1,024,452
4,449
4,104
1,476
996
281
71,274
2,017
2,017
20,057
7,426
27,483
16,693
4,159
20,852
561,230
38,248
599,478
0.74%
0.68%
0.25%
0.17%
0.05%
11.89%
0.34%
0.34%
3.35%
1.24%
4.58%
2.78%
0.69%
3.48%
93.62%
6.38%
100.00%
The Group is not a substantial shareholder in accordance with the Corporations Act 2001 in any of the
investee corporations as each equity investment represents less than 5% of the issued capital of the
investee corporation.
2011 Annual Report
5
BKI INVESTMENT
COMPANY LIMITED
GROUP PROFILE
BKI Investment Company Limited (the Group) is a Listed Investment Company on the Australian Stock Exchange.
The Group invests in a diversified portfolio of Australian shares, trusts and interest bearing securities.
Shares were listed on the ASX commencing 12 December 2003.
Corporate Objectives
The Group aims to generate an increasing income stream for distribution to shareholders in the form of fully
franked dividends, to the extent of 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 Group is a research driven, long term manager focusing on well managed companies, with a profitable history
and that offer attractive dividend yields. Stock selection is bottom up, focusing on the merits of individual
companies rather than market and economic trends.
Dividend Policy
The Group will pay the maximum amount of realised profits after tax for that year to shareholders in the form of
fully 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
investments.
Dividends will be declared by the Board of Directors out of realised profit after tax for the relevant year, excluding
realised capital profit from any disposals of long-term investments.
Management
The Group has an internalised portfolio management function headed by the CEO, Mr Tom Millner.
The Group also engages Corporate and Administrative Services Pty Ltd to provide accounting and group
secretarial services. These services are overseen by the BKI Company Secretary, Mr Richard Pillinger.
6
2011 Annual Report
B K I 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 8th Annual Report of BKI Investment Company Limited for the year ended
30 June 2011.
BKI’s Net Operating Profit before special dividend income was $25.3m, an increase of 13.1% on the previous
corresponding period. This strong result was achieved after a majority of the companies held within the BKI
Portfolio lifted dividend payments over the last year. This is the profit figure used by your Board of Directors to
determine the level of ordinary dividends to be declared by BKI.
Net Profit from ordinary activities after tax attributable to shareholders fell 4.0% to $29.9m. This decline was due
to the considerable special dividend received from New Hope Corporation in FY2010. To be only 4.0% behind in
2011 after receiving over $11m in special dividends in 2010 is a great achievement.
Dividends
The strong increase in Operating Profits has enabled the Directors to declare a Final Ordinary Dividend of 3 cents
per share as well as another special dividend of 1 cent per share, both of which will be fully franked. This will be
BKI’s 4th Special Dividend since listing in December 2003. The record date will be the 17 August 2011 with a
payment date of 31 August 2011.
Total dividends paid by BKI during FY2011 equate to 7 cents per share which is an increase of 12% on the
previous corresponding period.
BKI’s Dividend Reinvestment Plan (DRP) will be maintained offering shareholders the opportunity to acquire
further ordinary shares in BKI.
Performance
BKI’s Net Portfolio Return (after all operating expenses, provision and payment of income and capital gains tax
and the reinvestment of dividends) for the year to 30 June 2011 was 12.0% compared to the S&P/ASX 300
Accumulation Index which increased by 11.9%. Chart 1 shows historical Net Portfolio Returns benchmarked to
the S&P/ASX 300 Accumulation Index.
Chart 1
2011 Annual Report
7
BKI INVESTMENT
COMPANY LIMITED
CHAIRMAN’S ADDRESS - Continued
BKI’s Share Price Performance (including the reinvestment of dividends) for the year to 30 June 2011 was 11.2%.
This is compared to the S&P/ASX 300 Accumulation Index which returned 11.9% over the same period.
Chart 2 shows historical Share Price Returns benchmarked to the S&P/ASX 300 Accumulation Index.
Chart 2
Portfolio Movements
Over the last quarter many active fund managers have fled to cash to protect performance, significantly reducing
their exposure to Australian equities. For a fund that has a bias towards generating income, BKI believes that the
market continues to offer the long term investor attractive opportunities.
Deploying funds into cash is defensive; however we feel that this is more an action of running for cover than taking
the opportunity to buy stocks representing significant long term value.
During FY2011 the BKI Investment Committee has invested $38m into the market with major purchases including
ANZ Banking Corporation, Milton Corporation, Telstra Corporation, Commonwealth Bank, Coca Cola Amatil,
AMP Limited, QUBE Logistics, UGL Limited, QBE Insurance Group and Woolworths Limited.
The holding in Milton Corporation was increased due to the acquisition of Choiseul Investments as was the
holding in AMP Limited due to the acquisition of AXA Asia Pacific Holdings.
Major divestments from the BKI Investment Portfolio totalled $16m and included Westfield Retail Trust, Boral
Limited, GPT Group, Consolidated Media Holdings and Fosters Group. Divestments from the portfolio as a result
of corporate activity were Choiseul Investments, Intoll Group, The Mac Services Group, AXA Asia Pacific Holdings
and AWB Limited.
Small parcels of BHP Billiton and Woolworths Limited were sold through participation of their off market buybacks.
8
2011 Annual Report
B K I I n v e s t m e n t C o m p a n y L i m i t e d
CHAIRMAN’S ADDRESS - Continued
Top 20 Investments at 30 June 2011
Stock
Amount ($’000)
% of total portfolio
Campbell Brothers Limited
Telstra Corporation Limited
New Hope Corporation
BHP Billiton Limited
National Australia Bank
Commonwealth Bank
1
2
3
4
5 Westpac Banking Corporation
6 Wesfarmers Limited
7
8 Woolworths Limited
9
10 AGL Energy Limited
11 Woodside Petroleum Limited
12 ANZ Banking Group
13 QBE Insurance Group
14 Metcash Limited
15 Coca Cola Amatil Limited
16 Westpac Preference Shares
TPG Telecom Limited
17
18
InvoCare Limited
19 ASX Limited
20 AMP Limited
Cash and dividends receivable
Operating Expenses
76,312
59,968
47,112
46,254
27,279
22,051
20,057
19,739
17,807
16,693
15,990
14,718
12,706
10,126
9,653
9,539
7,426
7,058
6,560
6,416
38,248
491,712
12.7%
10.0%
7.9%
7.7%
4.6%
3.7%
3.3%
3.3%
3.0%
2.8%
2.7%
2.5%
2.1%
1.7%
1.6%
1.6%
1.2%
1.2%
1.1%
1.1%
6.4%
82.2%
Operating Expenses have again been kept low over the year resulting in BKI’s MER as at 30 June 2011 dropping
from 0.19% to 0.18%, a 5.3% reduction over the previous corresponding period.
As can be seen from Chart 3, BKI has been successful in significantly reducing the Company’s MER since listing
in 2003. We will continue to pursue cost cutting initiatives to help increase value for BKI shareholders.
Chart 3
2011 Annual Report
9
BKI INVESTMENT
COMPANY LIMITED
CHAIRMAN’S ADDRESS - Continued
Outlook
Retail investors continue to be bombarded with negativity surrounding weak global economies, high local interest
rates and pressure on household affordability. As a defensive reaction to these circumstances we have seen
household savings increase as the uncertainty on the future cost of living escalates.
This is therefore having a negative impact on the local stock market as many individuals reduce their exposure to
Australian shares. Offshore investors have also fled our market due to the high Australian Dollar and uncertainty
surrounding federal government policies.
We can understand the caution that many investors have shown, in particular over the past 3 months. As a long
term investor, however, we can’t get caught up with the continual pessimism and stress seen in our marketplace.
We need to continue to act upon these opportunities and invest for the future.
Focusing on the merits of individual companies rather than market and economic trends has placed the BKI
Portfolio in a good position for the future. We have been investing in good quality companies for many years and
through many cycles. This period is no different. The quality BKI portfolio continues to produce the results and
enables us to then offer BKI shareholders an attractive fully franked dividend yield.
Shares in BKI are currently yielding 5.8% (based on a share price of $1.21 as at 30 June 2011). The franking
credits that BKI pass on to shareholders enables this yield to gross up to 8.3%.
On a post tax basis, this compares very favourably to many cash products currently in the market. Investing in
BKI at this point and under these economic conditions offers shareholders a defensive market exposure to a high
quality investment portfolio. BKI has a strong dividend payout ability and the cost of running such a portfolio is
one of the most competitive cost structures in the marketplace.
Balance sheets of quality companies appear more robust than ever. With this in mind, BKI remains confident that
dividend distributions will continue to improve during the FY2011 reporting season and into FY2012. BKI will,
however, be cautious of companies whose earnings are exposed to the high Australian Dollar and consumer
activity in the upcoming reporting season.
We continue to be very comfortable with our exposure to the resource sector and in particular with our position
in New Hope Corporation (NHC). Having NHC in the BKI portfolio gives a clear point of difference to many other
investment products. The Australian mining sector continues to underpin the strength of the Australian economy
and BKI’s exposure to the resource industry through holdings in NHC, BHP Billiton, Woodside Petroleum and
Campbell Brothers places the company in a strong position.
Yours sincerely,
Robert Millner
Chairman
Sydney, 2 August 2011
10
2011 Annual Report
B K I 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 BKI Investment Company Limited present the following report on the Company and controlled
entities (the Group) for the year ended 30 June 2011.
1. Directors
The following persons were Directors since the start of the financial year and up to the date of this report unless
otherwise stated:
Robert Dobson Millner, FAICD – Non-Executive Director and Chairman
Mr Millner has over 27 years experience as a Company Director. During the past three years, Mr Millner has also
served as a Director of the following other listed companies:
• Milton Corporation Limited*
• New Hope Corporation Limited*
• Washington H Soul Pattinson and Company Limited*
• TPG Telecom Limited* (formerly SP Telemedia Limited)
• Brickworks Limited*
• Souls Private Equity Limited*
• Australian Pharmaceutical Industries Limited*
• Choiseul Investments Limited
* denotes current Directorship
Special Responsibilities:
• Chairman of the Board
• Chairman of the Nomination Committee
• Chairman of the Investment Committee
• Member of the Remuneration Committee
David Capp Hall, FCA, FAICD – Independent Non-Executive Director
Mr Hall is a Chartered Accountant with experience in corporate management, finance and as a Company
Director. He has held Directorships in other companies for more than 30 years and is the Chairman of the
Audit Committee.
Special Responsibilities:
• Chairman of the Audit Committee
• Member of the Remuneration Committee
2011 Annual Report
11
BKI INVESTMENT
COMPANY LIMITED
DIRECTORS’ REPORT - Continued
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.
Special Responsibilities:
• Member of the Audit Committee
• Member of the Investment Committee
• Chairman of the Remuneration Committee
• Member of the Nomination Committee
Ian Thomas Huntley, BA – Independent Non-Executive Director
After a career in financial journalism Mr Huntley acquired “Your Money Weekly” newsletter in 1973. Over the
following 33 years, Mr Huntley built the Your Money Weekly newsletter into one of Australia’s best known
investment advice publications. He and partners sold the business to Morningstar Inc of the USA in mid 2006.
Mr. Huntley continues an active role as Editor, Huntley’s Your Money Weekly.
During the past three years, Mr Huntley has served as a Director of the following listed companies:
• Huntley Investment Company Limited (taken over by BKI Investment Company Limited in January 2009)
Special Responsibilities:
• Member of the Investment Committee
• Member of the Remuneration Committee
• Member of the Nomination Committee
• Member of the Audit Committee
2. Key Management Personnel
Thomas Charles Dobson Millner, B.Des (Industrial), GDipAppFin (Finsia), F Fin – Chief Executive Officer
Mr Millner Joined the Company in December 2008. Mr Millner was previously with Souls Funds Management
(SFM) and held various roles covering research, analysis and business development. Whilst at SFM Mr Millner was
responsible for the Investment Portfolio of BKI Investment Company Limited. Prior to this Mr Millner was an
investment analyst with Republic Securities Limited, manager of the Investment Portfolio of Pacific Strategic
Investments. Mr Millner is also a Director of Washington H. Soul Pattinson and Company Limited.
Special Responsibilities:
• Member of the Investment Committee
Richard Pillinger, BSc, CA - Company Secretary
Mr Pillinger is a Chartered Accountant with over 15 years experience in public practice and commercial financial
roles. Mr Pillinger is also Company Secretary of CBD Energy Limited and Souls Private Equity Limited.
12
2011 Annual Report
B K I 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. Principal Activities
The principal activities of the Group during the financial year were that of a Listed Investment Company (LIC)
primarily focused on long term investment in ASX listed securities. There have been no significant changes in the
nature of those activities during the year.
4. Operating Results
BKI’s Net Operating Profit before special dividend income increased 13.1% to $25.3m. This strong result was
achieved after a majority of the companies held within the BKI Portfolio lifted dividend payments over the last year.
Net Profit attributable to shareholders fell 4% to $29.9m due to the considerable special dividend received from
New Hope Corporation in 2010.
5. Review of Operations
Operating expenses have been kept low resulting in BKI’s MER as at 30 June 2011 dropping from 0.19% to
0.18%, 5.3% lower than in the previous corresponding period.
BKI’s Net Portfolio Return (after all operating expenses, provision and payment of income and capital gains tax
and the reinvestment of dividends) for the year to 30 June 2011 was 12.0% compared to the S&P/ASX 300
Accumulation Index which increased by 11.9%.
BKI’s Share Price Performance (including the reinvestment of dividends) for the year to 30 June 2011 was 11.2%.
This compares to the S&P/ASX 300 Accumulation Index which returned 11.9% over the same period.
During FY2011 the BKI Investment Committee has invested $38m into the market with major purchases including
ANZ Banking Corporation, Milton Corporation, Telstra Corporation, Commonwealth Bank, Coca Cola Amatil,
AMP Limited, QUBE Logistics, UGL Limited, QBE Insurance Group and Woolworths Limited.
The holding in Milton Corporation was increased due to the acquisition of Choiseul Investments as was the
holding in AMP Limited due to the acquisition of AXA Asia Pacific Holdings.
Major divestments from the BKI Investment Portfolio totalled $16m and included Westfield Retail Trust, Boral
Limited, GPT Group, Consolidated Media Holdings and Fosters Group. Divestments from the portfolio as a result
of corporate activity were Choiseul Investments, Intoll Group, The Mac Services Group, AXA Asia Pacific Holdings
and AWB Limited. Small parcels of BHP Billiton and Woolworths Limited were sold through participation of their
off market buybacks.
6. Financial Position
The net assets of the Group increased during the financial year by $34.0 million to $568.4 million.
This movement has largely resulted from the increase in the market value of the investment portfolio of
$25.4 million net of tax.
7. Employees
The Group has one employee as at 30 June 2011 (2010: 1).
2011 Annual Report
13
BKI INVESTMENT
COMPANY LIMITED
DIRECTORS’ REPORT - Continued
8. 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 Group during the reporting year.
9. Likely Developments and Expected Results
The operations of the Group 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 Group
if included in this report.
10. 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. the operations of the Parent and the entities that it controls;
ii. the results of those operations; or
iii. the state of affairs of the Group in subsequent years.
11. Dividends
There were two dividend payments during the year ended 30 June 2011.
On 9 September 2010, a final total dividend of $13,603,400 (2.75 cents per share, ordinary dividend and
0.5 cents per share special dividend, both fully franked) was paid out of retained profits at 30 June 2010.
On 7 March 2011, an interim ordinary and special dividend of $12,650,930 (3.0 cents per share fully franked) was
paid out of retained profits at 31 December 2010.
In addition, the Directors have declared a final ordinary dividend of $16,914,536 (3.0 cents per share fully franked
ordinary dividend plus 1.0 cents per share fully franked special dividend) payable on 31 August 2011.
At 30 June 2011 there are $10,752,000 of franking credits available to the Group (2010: $13,981,000) after
allowing for payment of the final, fully franked dividend.
12. Environmental Regulations
The Group’s operations are not materially affected by environmental regulations.
14
2011 Annual Report
B K I 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. Meetings of Directors
The numbers of meetings of the Board of Directors and each Board Committee held during the year to
30 June 2011, and the numbers of meetings attended by each Director were:
Board
Investment
Audit
Remuneration
Nomination
Attended
Eligible
to attend
Attended
Eligible
to attend
Attended
Eligible
to attend
Attended
Eligible
to attend
Attended
Eligible
to attend
RD Millner
AJ Payne
DC Hall
IT Huntley
10
10
10
9
10
10
10
10
16
16
-
15
16
16
-
16
-
3
3
3
-
3
3
3
2
2
2
2
2
2
2
2
1
-
1
1
1
-
1
1
14. Remuneration Report (Audited)
This remuneration report outlines the Director and Executive remuneration arrangements of the Group in
accordance with the requirements of the Corporations Act 2001 and its Regulations. For the purposes of this
report, Key Management Personnel of the Group are defined as those persons having authority and responsibility
for planning, directing and controlling the major activities of the Group, directly or indirectly.
Remuneration Policy
The Board is responsible for determining and reviewing remuneration arrangements for the Directors themselves
and the Chief Executive Officer. It is the Group’s objective to provide maximum shareholder benefit from the
retention of a high quality Board and Executive team by remunerating Directors and Key Executives fairly and
appropriately with reference to relevant employment market conditions, their performance, experience and
expertise.
Elements of director and executive remuneration
The Board’s policy for determining the nature and amount of remuneration for Key Management Personnel of the
Group is as follows:
• The remuneration policy is developed by the Remuneration Committee and approved by the Board after
professional advice is sought from independent external consultants.
• All Key Management Personnel receive a base salary or fee, superannuation and performance incentives.
• Performance incentives are only paid once predetermined key performance indicators have been met.
• Incentives paid in the form of rights are intended to align the interests of the Key Management Personnel with
those of the shareholders.
• The Remuneration Committee reviews Key Management Personnel packages annually by reference to the
Group’s performance, Executive performance and comparable information from industry sectors.
The performance of Key Management Personnel is measured against criteria as agreed with each Executive and
is based predominantly on the growth of shareholder and portfolio returns. The Board may exercise discretion in
relation to approving incentives and can recommend changes to the Committee’s recommendations. Any
changes must be justified by reference to measurable performance criteria. The policy is designed to attract the
highest calibre of executives and reward them for performance results leading to long-term growth in shareholder
wealth.
2011 Annual Report
15
BKI INVESTMENT
COMPANY LIMITED
DIRECTORS’ REPORT - Continued
14. Remuneration Report (Audited) (continued)
All remuneration paid to Key Management Personnel is valued at the cost to the Group and expensed.
The Board’s policy is to remunerate Non-Executive Directors at market rates for time, commitment and
responsibilities. The Remuneration Committee determines payments to the Non-Executive Directors and reviews
their remuneration annually, based on market practice, duties and accountability. Independent external advice is
sought when required. The maximum aggregate amount of fees that can be paid to Non-Executive Directors is
subject to approval by shareholders at the Annual General Meeting.
Performance-based Remuneration
BKI has established a Short Term and a Long Term Incentive Scheme. The participants in this scheme are the
CEO, Mr Tom Millner and the Company Secretary, Mr Richard Pillinger.
The aims of the BKI Incentive Scheme are:
1. To promote superior performance at BKI over both the short term and, more importantly, long term.
2. To ensure remuneration is fair and reasonable market remuneration to reward staff.
3. To promote long term staff retention and alignment.
To achieve the objectives of BKI, the Incentive Scheme is required to include several components with separate
measurement criteria.
Short Term Incentive
The Short Term Incentive is determined by reference to annual Total Portfolio Return; compared to the S&P ASX
300 Accumulation Index. BKI’s Total Portfolio Returns are measured by the change in pre tax NTA and are after
all operating expenses, payment of both income and capital gains tax and the reinvestment of dividends.
The Short Term Incentive is paid by way of BKI shares which will be purchased on market by the Company.
The value of the Short Term Incentive for the CEO is calculated as 15% of CEO base salary. The Short Term
Incentive for the Company Secretary is to be set at 40% of the CEO Incentive.
100% of the Short Term Incentive would initially be based on the Total Portfolio Returns as follows:
BKI Total Portfolio Return Compared
to S&P ASX 300 Acc Index
% of Eligible Bonus
Less than Index
Equal to Index
Plus 1%
Plus 2%
Plus 3%
Plus 4%
Plus 5% or more
0%
100%
110%
120%
130%
140%
150%
The Short Term Incentive is subject to discretionary Board adjustment for the achievement of improved
Management Expense Ratio and promotion of BKI.
16
2011 Annual Report
B K I 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
The following table summarises current year performance against the Short Term Incentive measurement criteria:
1 Year BKI Total
Portfolio Return
S&P ASX 300 Acc
Index over 1 Year
Over / (Under)
Performance
% Entitlement to
Eligible Bonus
12.0%
11.9%
0.1%
100%
Long Term Incentive
The Long Term Incentive is determined by reference to annual Total Shareholder Returns; compared to the S&P
ASX 300 Accumulation Index. Total Shareholder Returns are based on change in BKI Share Price and include the
reinvestment of dividends.
For the CEO, the Long Term Incentive is calculated on 25% of base salary and vested in the CEO at 3 years,
provided that the 3 year Total Shareholder Returns exceed the S&P/ASX 300 Accumulation Index. Should that
test fail on the day it will be tested in Year 4 and 5 to reflect the longer term success of previous decisions. For
the Company Secretary, the Long Term Incentive is to be set at 40% of the CEO Incentive and subject to the
same vesting conditions.
The Long Term Incentive Scheme is to be paid by way of BKI shares which will be purchased on market by
the Company should the incentive targets be met. The first date on which the test will be applied will be
30 June 2013. As such, no rights or shares have yet been assigned under the Long Term Incentive Plan.
The company has accrued the appropriate portion of these future costs in the current year, however, these costs
will not be included in the disclosed remuneration of the CEO or Company Secretary until such time that the rights
or shares are assigned to them.
Remuneration Details for the Year Ended 30 June 2011
The following disclosures detail the remuneration of the Directors and the highest remunerated Executives of the
Group.
The names of and positions held by group Directors and Key Management Personnel in office at any time during
the financial year are:
Name
RD Millner
DC Hall
AJ Payne
IT Huntley
Position
Non-Executive Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director
TCD Millner
Chief Executive Officer
RJ Pillinger
Company Secretary (services provided under contract through Corporate and
Administrative Services Pty Limited)
There are no other employees of the group.
2011 Annual Report
17
BKI INVESTMENT
COMPANY LIMITED
DIRECTORS’ REPORT - Continued
Details of the nature and amount of each Non – Executive Director’s and Key Management Personnel’s
emoluments from the Parent and controlled entities in respect of the year to 30 June were:
Directors
2011
RD Millner
DC Hall
AJ Payne
IT Huntley
Total
2010
RD Millner
DC Hall
AJ Payne
IT Huntley
GG Hill 1
Total
Primary
Superannuation
$
56,500
43,500
36,000
39,240
$
5,085
3,915
3,240
-
175,240
12,240
47,500
36,000
30,000
32,700
4,167
150,367
4,275
3,240
2,700
-
375
10,590
Equity
Compensation
$
Other
Compensation
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
$
61,585
47,415
39,240
39,240
187,480
51,775
39,240
32,700
32,700
4,542
160,957
1 – Resigned 8 September 2009
Payment to Non-Executive Directors is fixed at $300,000 until shareholders, by ordinary resolution, approve
some other fixed sum amount. This amount is to be divided amongst the Directors as they may determine.
Key Management Primary
Personnel
2011
$
Superannuation Bonus - Equity
Compensation
$
$
Other
Compensation
$
TCD Millner
RJ Pillinger
Total
2010
TCD Millner
RJ Pillinger
Total
260,867
-
260,867
240,826
-
240,826
19,633
-
19,633
21,674
-
21,674
42,900
17,160
60,060
41,250
16,500
57,750
-
-
-
-
-
-
Total
$
323,400
17,160
340,560
303,750
16,500
320,250
There were no retirement allowances provided for the retirement of Non-Executive Directors or Key Management
Personnel.
18
2011 Annual Report
B K I 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
Contract of Employment
Mr T Millner is employed by the Company under a contract of employment. This is an open ended contract with
a notice period of one month required to terminate employment. Remuneration is fixed at $286,000 per annum
inclusive of superannuation.
Remuneration is reviewed annually by the Remuneration Committee.
Mr R Pillinger provides Company Secretarial services under contract through Corporate and Administrative
Services Pty Limited. This is an open ended contract with a notice period of one month required to terminate.
15. Beneficial and relevant interest of Directors and Key Management
Personnel in Shares
As at the date of this report, details of Directors and Key Management Personnel who hold shares 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
IT Huntley
TCD Millner *
RJ Pillinger
Number of Shares
7,047,972
236,965
226,665
11,063,445
6,114,698
28,669
*Common to RD Millner and TCD Millner are 6,030,540 shares held in related companies and trusts in which both
hold beneficial interests.
16. Directors and Officers’ Indemnity
The Constitution of the Parent provides indemnity against liability and legal costs incurred by Directors and
Officers to the extent permitted by Corporations Act.
During the year to 30 June 2011, the Group has paid premiums of $36,355 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.
17. Proceedings on Behalf of Group
No person has applied for leave of the Court to bring proceedings on behalf of the Group or intervene in any
proceedings to which the Group is a party for the purpose of taking responsibility on behalf of the Group for all
or any part of those proceedings.
The Group was not a party to any such proceedings during the year.
2011 Annual Report
19
BKI INVESTMENT
COMPANY LIMITED
DIRECTORS’ REPORT - Continued
18. 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
• 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.
No fees for non-audit services were paid to the external auditor, Ruwald & Evans, during the year ended
30 June 2011.
19. Auditor’s Independence Declaration
The Auditor’s Independence Declaration for the year ended 30 June 2011 has been received and can be found
on page 56.
This report is made in accordance with a resolution of the Directors.
Robert D Millner
Director
Sydney, 2 August 2011
20
2011 Annual Report
B K I 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
The Board of BKI Investment Company Limited (the Group) are committed to achieving and demonstrating the
highest standards of corporate governance. Unless otherwise stated, the Group has followed the revised best
practice recommendations effective from 1 January 2008 set by the ASX Corporate Governance Council during
the reporting year.
This report summarises the Group’s application of the 8 Corporate Governance Principles and
Recommendations.
Principle 1 – Lay solid foundations for management and oversight
Recommendation 1.1: Companies should establish the functions reserved to the Board and those delegated
to Senior Executives and disclose those functions.
The Board of Directors (hereinafter referred to as the Board) are responsible for the corporate governance of the
Parent and controlled entities. The Directors of the Group 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 Group in both the short and the
longer term and seek to balance sometimes competing objectives in the best interests of the Group as a whole.
Their focus is to enhance the interests of shareholders and other key stakeholders and to ensure the Group is
properly managed.
Role of the Board
The responsibilities of the Board include:
(cid:0) contributing to the development of and approving the corporate strategy
(cid:0) reviewing and approving business results, business plans, the annual budget and financial plans
(cid:0) ensuring regulatory compliance
(cid:0) ensuring adequate risk management processes
(cid:0) monitoring the Board composition, Director’s selection and Board processes and performance
(cid:0) overseeing and monitoring:
- organisational performance and the achievement of the Group’s strategic goals and objectives
- compliance with the Group’s code of conduct
(cid:0) monitoring financial performance including approval of the annual report and half-year financial reports and
liaison with the Group’s auditors
(cid:0) appointment and contributing to the performance assessment of the Chief Executive Officer and external
service providers
(cid:0) enhancing and protecting the reputation of the Group
(cid:0) reporting to shareholders.
Role of Senior Executives
The responsibilities of Senior Executives include:
(cid:0) organisation and monitoring of the investment portfolio
(cid:0) managing organisational performance and the achievement of the Group’s strategic goals and objectives
(cid:0) management of financial performance
(cid:0) management of internal controls
2011 Annual Report
21
BKI INVESTMENT
COMPANY LIMITED
CORPORATE GOVERNANCE - Continued
Recommendation 1.2: Companies should disclose the process for evaluating the performance of Senior
Executives.
Performance of Senior Executives is measured against relative market indices and financial and strategic goals
approved by the Board. Performance is measured on an ongoing basis using management reporting tools.
Principle 2 – Structure the Board to add value
The key elements of the Board composition include:
(cid:0) ensuring, where practicable to do so, that a majority of the Board are Independent Directors
(cid:0) 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
(cid:0) the Group is to maintain a mix of Directors on the Board from different backgrounds with complimentary
skills and experience
(cid:0) 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 Group and Directors with an external perspective
- the size of the Board is conducive to effective discussion and efficient decision making.
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”.
Recommendation 2.1: A majority of the Board should be Independent Directors
Recommendation 2.2: The Chair should be an Independent Director
The Group has not followed recommendation 2.1 or recommendation 2.2 as the Board currently comprises two
independent Non-Executive Directors and two Non-Executive Directors and the Chair is not an Independent
Director.
Of the members of the Board, Mr Hall and Mr Huntley are considered independent. Mr Huntley is defined as
independent as his shareholding in the Group at less than 5% of issued capital is not considered substantial.
Mr Millner although meeting other criteria, and bringing independent judgement to bear on his role, is not defined
as independent, primarily due to the fact that he is an officer of Washington H. Soul Pattinson and Company
Limited, which is a substantial shareholder of the Parent.
Mr Payne although meeting other criteria, and bringing independent judgement to bear on his role, is not defined
as independent, primarily due to the fact that he is an officer of Brickworks Limited, which is an associated entity
of Washington H. Soul Pattinson and Company Limited, a substantial shareholder of the Parent.
In relation to Directors independence, materiality is determined on both quantitative and qualitative bases. An
amount of over 5% of annual turnover of the Group 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.
Recommendations 2.1 and 2.2 have not been followed because the Board are of the opinion that all Directors
exercise and bring to bear an unfettered and independent judgement towards their duties. BKI Investment
Company Limited listed on the Australian Stock exchange on 12 December 2003 to take over the investment
portfolio of Brickworks Limited and the given their long standing association with the portfolio the Board is
satisfied that Mr Millner and Mr Payne play an important role in the continued success and performance of
the Group.
22
2011 Annual Report
B K I 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 Corporations Act 2001, any member of the Board who has an interest that could conflict
with those of the Group must inform the Board. Where the Board considers that a significant conflict exists it may
exercise discretion to determine whether the Director concerned may be present at any meeting while the item
is considered.
Mr Millner and Mr Payne do not meet the criteria for independence in accordance with the ASX Corporate
Governance Principles and Recommendations, however, for the reasons stated above they can be considered
to be acting independently and in the best interest of the Group in the execution of their duties.
Recommendation 2.3: The roles of Chair and Chief Executive Officer should not be exercised by the same
individual
The role of Chair and Chief Executive Officer is not occupied by the same individual.
Recommendation 2.4: The Board should establish a Nomination Committee
The Group established a Nominations Committee effective from 12 December 2003.
The Nomination Committee consists of Directors who are not up for re-election during the year:
RD Millner (Chairman)
AJ Payne
IT Huntley
The main responsibilities of the Committee are to:
(cid:0) assess the membership of the Board having regard to present and future needs of the Group
(cid:0) assess the independence of Directors to ensure the majority of the Board are Independent Directors
(cid:0) propose candidates for Board vacancies in consideration of qualifications, experience and domicile
(cid:0) oversee Board succession
(cid:0) evaluate Board performance.
Recommendation 2.5: Companies should disclose the process for evaluating the performance of the Board, its
Committees and Individual Directors
The Board undertakes an annual self assessment of its collective performance. The self assessment:
(cid:0) compares the performance of the Board with goals and objectives
(cid:0) sets forth the goals and objectives of the Board for the upcoming year
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 each Committee and
achievement of Committee objectives.
The Chairman annually assesses the performance of individual Directors, where necessary and meets privately
with each Director to discuss this assessment. The Chairman’s performance is reviewed by the Board.
Principle 3 – Promote ethical and responsible decision-making
Recommendation 3.1: Companies should establish a Code of Conduct
The Group has developed a Code of Conduct (the Code) which has been fully endorsed by the Board and applies
to all Directors, employees and external service providers. The Code is regularly reviewed to ensure it reflects the
highest standards of behaviour and professionalism and the practices necessary to maintain confidence in the
Group’s integrity.
2011 Annual Report
23
BKI INVESTMENT
COMPANY LIMITED
CORPORATE GOVERNANCE - Continued
A signed Code has been received from the CEO, Mr T Millner and from Mr R Pillinger as a representative of
Corporate and Administrative Services Pty Limited. No diversions from the Code were noted during the year.
In summary, the Code requires that at all times all Group personnel act with the utmost integrity, objectivity and
in compliance with the letter and the spirit of the law and company policies. This includes taking into account:
(cid:0) their legal obligations and the reasonable expectations of their stakeholders
(cid:0) their responsibility and accountability for reporting and investigating reports of unethical practices.
Recommendation 3.2: Companies should establish a policy concerning trading in company securities by
Directors, Senior Executives and employees, and disclose the policy or a summary of that policy
The Group has developed a Share Trading Policy which has been fully endorsed by the Board and applies to all
Directors and employees.
BKI Limited’s policy regarding allowable dealings by Directors, Officers and employees in BKI shares, options and
other securities require each person to:
(cid:0) never engage in short term trading of the Company’s securities;
(cid:0) not deal in the Company’s securities while in possession of price sensitive information;
(cid:0) notify the Company Secretary of any material intended transactions involving the Company’s securities;
and
(cid:0) restrict their buying and selling of the corporation’s securities to the following Trading Windows:-
- during the currency of a prospectus;
- for a new issue while rights are being traded;
- where shares are offered pursuant to an approved employee share scheme;
- to 14 days after the release of the company’s half yearly announcement;
- to 14 days after the release of the company’s annual results announcements;
- to 14 days after the annual general meeting; and
- to 14 days after release of an NTA announcement.
Any request to trade outside of the Trading Window must be made in writing to the Company Secretary who will
record the request in a register of all relevant details of such dealings and the current interests held by Directors.
Any such requests will be subject to approval by the Chairman. No requests were made during the current year
to trade outside of the Trading Window.
The Directors are satisfied that the Group has complied with its policies on ethical standards, including trading in
securities.
Principle 4 – Safeguard integrity in financial reporting
Recommendation 4.1: The Board should establish an Audit Committee
The members of the Audit Committee at the date of this annual financial report are:
DC Hall (Chairman)
AJ Payne
IT Huntley
24
2011 Annual Report
B K I 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
Recommendation 4.2: The Audit Committee should be structured so that it:
(cid:0) consists only of Non-Executive Directors
(cid:0) consists of a majority of Independent Directors
(cid:0) is chaired by an Independent Chair, who is not Chair of the Board
(cid:0) has at least three members
The Audit Committee consists only of Non-Executive Directors. The majority of members are independent.
The Chairman of the Audit Committee is an Independent, Non-Executive Director who is not Chairman of the Board.
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 Group operates.
Recommendation 4.3: The Audit Committee should have a formal charter
The main responsibilities of the Audit Committee as defined in the Audit Committee Charter are to:
(cid:0) review, assess and approve the annual report, half-year financial report and all other financial information
published by the Group or released to the market
(cid:0) 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
(cid:0) oversee the effective operation of the risk management framework
(cid:0) 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
(cid:0) 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 Group
where the auditor would have a mutual or conflicting interest with the Group; be in a position where they
audit their own work; function as management of the Group; or have their independence impaired or
perceived to be impaired in any way
(cid:0) review and monitor related party transactions and assess their priority
(cid:0) report to the Board on matters relevant to the Committee’s role and responsibilities.
The external auditor will attend the Annual General Meeting and be available to answer shareholder questions
about the conduct of the audit and the preparation and content of the audit report.
Principle 5 – Make timely and balanced disclosure
Recommendation 5.1: Companies should establish written policies designed to ensure compliance with ASX
Listing Rule disclosure requirements and to ensure accountability at a senior executive level for that compliance
and disclose those policies or a summary of those policies
The Chairman and Company Secretary have been nominated as being the persons 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.
2011 Annual Report
25
BKI INVESTMENT
COMPANY LIMITED
CORPORATE GOVERNANCE - Continued
The Parent has written policies and procedures on information disclosure that focus on continuous disclosure of
any information concerning the Group that a reasonable person would expect to have a material effect on the
price of the Company’s securities.
Principle 6 – Respect the rights of shareholders
Recommendation 6.1: Companies should design a communications policy for promoting effective
communication with shareholders and encouraging their participation at general meetings and disclose their
policy or a summary of that policy
The Board aims to ensure that shareholders are informed of all major developments affecting the Group.
Shareholders are updated with the Group’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. In addition, a copy of the
annual report is distributed to all shareholders who elect to receive it, and is available on the Group’s website.
The Board encourages participation by shareholders at the Annual General Meeting to ensure a high level of
accountability and to ensure that shareholders remain informed about the Group’s performance and goals.
Principle 7 – Recognise and manage risk
Recommendation 7.1: Companies should establish policies for the oversight and management of material
business risks and disclose a summary of those policies
The Board is committed to the identification and quantification of risk throughout the Group’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.
Recommendation 7.2: The Board should require management to design and implement the risk management
and internal control system to manage the company’s material business risks and report to it on whether those
risks are being managed effectively. The Board should disclose that management has reported to it as to the
effectiveness of the Company’s management of its material business risks.
The Board operates to minimise exposure to investment risk, in part, by implementing stringent processes and
procedures to effectively manage investment risk.
Management of investment risk is fundamental to the business of the Group being an investor in Australian listed
securities. An Investment Committee has been established to perform, among other roles, investment risk mitigation.
The Investment Committee consists of the following members:
RD Millner (Chairman)
AJ Payne
IT Huntley
TCD Millner
The main responsibilities of the Committee are to:
(cid:0) assess the information and recommendations received from the Chief Executive Officer in his role as
portfolio manager regarding the present and future investment needs of the Group
(cid:0) assess the performance of the Chief Executive Officer in his role as portfolio manager
(cid:0) evaluate investment performance.
26
2011 Annual Report
B K I 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
Recommendation 7.3: The Board should disclose whether it has received assurance from the Chief Executive
Officer (or equivalent) and the Chief Financial Officer (or equivalent) that the declaration provided in accordance
with section 295A of the Corporations Act is founded on a sound system of risk management and internal
control and that the system is operating effectively in all material respects in relation to financial reporting risks.
The Chief Executive Officer and the administrative and company secretarial service provider, namely Mr T Millner
and Mr R Pillinger of Corporate & Administrative Services Pty Ltd have made the following certifications to the
Board in accordance with Section 295A of the Corporations Act:
(cid:0) that the Group’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 Parent and consolidated entities in accordance with
all mandatory professional reporting requirements
(cid:0) 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 Group’s risk management and internal control
is operating effectively and efficiently in all material respects in relation to financial reporting risks.
Principle 8 – Remunerate fairly and responsibly
Recommendation 8.1: The Board should establish a Remuneration Committee.
The Group has established a Remuneration Committee consisting of the following members:
AJ Payne (Chairman)
DC Hall
RD Millner
IT Huntley
The Remuneration Committee oversees and reviews 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.
Mr RD Millner abstains from any discussions or votes in relation to the remuneration of the CEO, Mr TCD Millner
in order to avoid any conflict of interest.
Executive remuneration and other terms of employment are reviewed annually by the Remuneration Committee
having regard to personal and corporate performance, contribution to long term growth, relevant comparative
information and independent expert advice. Performance is measured against relative market indices.
Any person engaged in an executive capacity is required to 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.
As well as a base salary, remuneration in such circumstances could be expected to include superannuation,
performance-related bonuses and fringe benefits.
Recommendation 8.2: Companies should clearly distinguish the structure of Non-Executive Directors’
remuneration from that of Executive Directors and Senior Executives.
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 nor are provided with retirement benefits other than statutory superannuation.
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.
2011 Annual Report
27
BKI INVESTMENT
COMPANY LIMITED
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 30 JUNE 2011
Revenue from investment portfolio
Revenue from bank deposits
Other income
Other gains
Income from operating activities before special investment revenue
and net gains / (losses) on investment portfolio
Operating expenses
Operating profit before income tax expense, special investment
revenue and net gains / (losses) on investment portfolio
Income tax expense
Net operating profit before special investment revenue and
net gains / (losses) on investment portfolio
Special investment revenue
Net operating profit before net gains / (losses) on
investment portfolio
Realised (losses) / gains on investment portfolio sold before
31 December 2009 *
Tax credit / (expense) relating to net realised (losses) / gains on
investment portfolio*
Net realised (losses) / gains on investment portfolio sold before
31 December 2009*
Discount on acquisition of controlled entity
Profit for the year attributable to members of the Company
Basic and diluted earnings per share before special
dividend income
Basic and diluted earnings per share after special
dividend income
Consolidated
2011
$’000
25,414
2,138
4
-
2010
$’000
21,599
2,303
16
648
27,556
24,566
(1,046)
(1,008)
26,510
23,558
(1,169)
(1,157)
Note
2 (a)
2 (c)
2 (d)
2 (e)
3
4
25,341
22,401
2 (b)
4,557
11,155
29,898
33,556
-
-
-
-
(3,369)
1,011
(2,358)
(46)
29,898
31,152
2011
Cents
2010
Cents
6.02
5.44
7.10
7.57
4
21
21
* Due to a change in accounting standards during the year ended 30 June 2010, all realised gains and losses on investment
portfolio sales after 31 December 2009 are now reflected in the Statement of Other Comprehensive income.
This Income Statement should be read in conjunction with the accompanying notes
28
2011 Annual Report
B K I 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 OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2011
Profit for the year attributable to members of the Company
Other Comprehensive Income / (Loss)
Unrealised gains on investment portfolio
Deferred tax expense on unrealised gains on investment portfolio
Realised (losses) / gains on investment portfolio since 1 January 2010
Tax expense relating to net realised (losses) / gains on investment portfolio
since 1 January 2010
Total Other Comprehensive Income
Total Comprehensive Income
Consolidated
2011
$’000
2010
$’000
29,898
31,152
36,313
39,414
(10,894)
(11,824)
(109)
(85)
86
(26)
25,225
27,650
55,123
58,802
This Statement of Other Comprehensive Income should be read in conjunction with the accompanying notes
29
2011 Annual Report
BKI INVESTMENT
COMPANY LIMITED
CONSOLIDATED BALANCE SHEET
AS AT 30 JUNE 2011
Current Assets
Cash and cash equivalents
Trade and other receivables
Prepayments
Total Current Assets
Non-Current Assets
Investment Portfolio
Property, Plant & Equipment
Deferred tax assets
Total Non-Current Assets
Total Assets
Current Liabilities
Trade and other payables
Current tax liabilities
Employee Benefits
Total Current Liabilities
Non-Current Liabilities
Deferred tax liabilities
Total Non-Current Liabilities
Total Liabilities
Net Assets
Equity
Share capital
Revaluation reserve
Realised capital gains reserve
Retained profits
Total Equity
Consolidated
2011
$’000
2010
$’000
Note
6
7
8
9
10
11
12
13
14
15
16
17
18
33,900
4,347
19
47,324
3,810
21
38,266
51,155
561,230
503,679
6
9
4,050
4,233
565,286
507,921
603,552
559,076
233
509
18
760
1,077
204
13
1,294
34,395
34,395
23,380
23,380
35,155
24,674
568,397
534,402
454,833
449,707
79,451
1,250
32,863
54,032
1,444
29,219
568,397
534,402
This Balance Sheet should be read in conjunction with the accompanying notes
30
2011 Annual Report
B K I I n v e s t m e n t C o m p a n y L i m i t e d
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2011
CONSOLIDATED ENTITY
Share
Capital
$’000
Revaluation
Reserve
$’000
Realised
Capital
Gains
Reserve
$’000
Retained
Profits
$’000
Total
Equity
$’000
Total equity at 1 July 2009
420,925
26,442
3,742
20,030
471,139
Issue of shares, net of cost
28,782
Dividends paid or provided for
Revaluation of investment portfolio
Provision for tax on unrealised losses
Profit / (Loss) for the year
Net realised gains post 1 January 2010
through other comprehensive income
-
-
-
-
-
-
-
39,414
(11,824)
-
-
-
-
-
-
-
28,782
(24,321)
(24,321)
-
-
39,414
(11,824)
(2,358)
33,510
31,152
60
-
60
Total equity at 30 June 2010
449,707
54,032
1,444
29,219
534,402
Total equity at 1 July 2010
449,707
54,032
1,444
29,219
534,402
Issue of shares, net of cost
5,126
Dividends paid or provided for
Revaluation of investment portfolio
Provision for tax on unrealised losses
Profit / (Loss) for the year
Net realised gains post 1 January 2010
through other comprehensive income
-
-
-
-
-
-
-
36,313
(10,894)
-
-
Total equity at 30 June 2011
454,833
79,451
-
-
-
-
-
-
5,126
(26,254)
(26,254)
-
-
36,313
(10,894)
29,898
29,898
(194)
1,250
-
(194)
32,863
568,397
This Statement of Changes in Equity should be read in conjunction with the accompanying notes
2011 Annual Report
31
BKI INVESTMENT
COMPANY LIMITED
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 30 JUNE 2011
Cash flows from operating activities
Payments to suppliers and employees
Other receipts in the course of operations
Dividends and distributions received
Payments for trading portfolio
Proceeds from sale of trading portfolio
Interest received
Income tax paid
Consolidated
2011
$’000
2010
$’000
Note
(1,019)
4
29,240
-
-
2,338
(633)
(915)
16
32,279
(1,375)
2,380
1,858
(2,583)
Net cash inflows from operating activities
19(a)
29,930
31,660
Cash flows from investing activities
Purchase costs for acquisition of controlled entity
Payment for investment portfolio
Proceeds from sale of investment portfolio
-
(46)
(31,956)
(35,284)
9,730
10,715
Net cash outflow from investing activities
(22,226)
(24,615)
Cash flows from financing activities
Proceeds from issues of ordinary shares less issue costs
Dividends paid
-
24,023
5(a)
(21,128)
(19,562)
Net cash (outflow) / inflow from financing activities
(21,128)
4,461
Net (decrease) / increase in cash held
Cash at the beginning of the year
Cash at the end of the year
(13,424)
47,324
11,506
35,818
33,900
47,324
This Cash Flow Statement should be read in conjunction with the accompanying notes
32
2011 Annual Report
B K I 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 ENDED 30 JUNE 2011
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial report is a general purpose financial report that has been prepared in accordance with Australian
Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the
Australian Accounting Standards Board and the Corporations Act 2001.
The financial report covers the parent entity of BKI Investment Company Limited and controlled entities, and BKI
Investment Company Limited as an individual parent entity. Following recent changes to corporate reporting
requirements, parent company information is summarised in Note 27. BKI Investment Company Limited is a listed
public company, incorporated and domiciled in Australia.
The financial report of BKI Investment Company Limited and controlled entities, and BKI Investment Company
Limited as an individual parent entity comply with all International Financial Reporting Standards (IFRS) in their
entirety.
The following is a summary of the material accounting policies adopted by the Group in the preparation of the
financial report. The accounting policies have been consistently applied, unless otherwise stated.
Basis of Preparation
The accounting policies set out below have been consistently applied to all years presented .
The Group has attempted to improve the transparency of its reporting by adopting ‘plain English’ where possible.
Key ‘plain English’ phrases and their equivalent AASB terminology are as follows:
Phrase
Market Value
Cash
Share Capital
AASB Terminology
Fair Value for Actively Traded Securities
Cash and Cash Equivalents
Contributed Equity
Reporting Basis and Conventions
The financial report has been prepared on an accruals basis and is based on historical costs modified by the
revaluation of selected non-current assets, financial assets and financial liabilities for which the fair value basis of
accounting has been applied.
Accounting Policies
a.
Principles of Consolidation
A controlled entity is any entity BKI Investment Company Limited has the power to control the financial and
operating policies of so as to obtain benefits from its activities.
A list of controlled entities is contained in Note 24 to the financial statements. All controlled entities have a
June financial year-end.
All inter-company balances and transactions between entities in the group, including any unrealised profits
or losses, have been eliminated on consolidation. Accounting policies of subsidiaries have been changed
where necessary to ensure consistencies with those policies applied by the parent entity.
Where controlled entities have entered or left the group during the year, their operating results have been
included/excluded from the date control was obtained or until the date control ceased.
Minority equity interests in the equity and results of the entities that are controlled are shown as a separate
item in the consolidated financial report.
2011 Annual Report
33
BKI INVESTMENT
COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2011 (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
b.
Income Tax
The charge for current income tax expense is based on the profit for the year adjusted for any
non-assessable or disallowed items. It is calculated using the tax rates that have been enacted or are
substantially enacted by the balance sheet date.
Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences
arising between the tax bases of assets and liabilities and their carrying amounts in the financial
statements. No deferred income tax will be recognised from the initial recognition of an asset or liability,
excluding a business combination, where there is no effect on accounting or taxable profit or loss.
Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised
or liability is settled. Deferred tax is credited in the income statement except where it relates
to items that may be credited directly to equity, in which case the deferred tax is adjusted directly
against equity.
Deferred income tax assets are recognised to the extent that it is probable that future tax profits will be
available against which deductible temporary differences can be utilised.
The amount of benefits brought to account or which may be realised in the future is based on the
assumption that no adverse change will occur in income taxation legislation and the anticipation that the
group will derive sufficient future assessable income to enable the benefit to be realised and comply with
the conditions of deductibility imposed by the law.
BKI Investment Company Limited and its wholly-owned Australian subsidiaries have formed an income tax
consolidated group under the tax consolidation regime. Each entity in the group recognises its own current
and deferred tax liabilities, except for any deferred tax balances resulting from unused tax losses and tax
credits, which are immediately assumed by the parent entity. The current tax liability of each group entity is
then subsequently assumed by the parent entity. The group notified the Australian Tax Office that it had
formed an income tax consolidated group to apply from 12 December 2003. The tax consolidated group
has entered a tax sharing agreement whereby each group in the group contributes to the income tax
payable in proportion to their contribution to the net profit before tax of the tax consolidated group.
c.
Financial Instruments
Recognition
Financial instruments are initially measured at cost on trade date, which includes transaction costs, when
the related contractual rights or obligations exist. Subsequent to initial recognition these instruments are
measured as set out below.
The Group has two portfolios of securities, the investment portfolio and the trading portfolio. The
investment portfolio relates to holdings of securities which the Directors intend to retain on a long-term
basis and the trading portfolio comprises securities held for short term trading purposes.
Securities within the investment portfolio are classified as ‘financial assets measured at fair value through
other comprehensive income’, and are designated as such upon initial recognition. Securities held within
the trading portfolio are classified as ‘mandatorily measured at fair value through profit or loss in
accordance with AASB 9’.
34
2011 Annual Report
B K I 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 ENDED 30 JUNE 2011 (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
c.
Financial Instruments (continued)
Valuation of investment portfolio
Listed securities are initially brought to account at market value, which is the cost of acquisition, and are
revalued to market values continuously. Movements in carrying values of securities are recognised as Other
Comprehensive Income and taken to the Revaluation Reserve.
Where disposal of an investment occurs, any revaluation increment or decrement relating to it is transferred
from the Revaluation Reserve to the Realised Capital Gains Reserve.
Valuation of trading portfolio
Listed securities are initially brought to account at market value, which is the cost of acquisition and are
revalued to market values continuously.
Movements in carrying values of securities in the trading portfolio are taken to Profit or Loss through the
Income Statement.
Fair value
Fair value is determined based on current bid prices for all quoted investments.
d.
Employee Benefits
(i) Wages, salaries and annual leave
Liabilities for wages and salaries, including annual leave, expected to be settled within 12 months of
balance date are recognised as current provisions in respect of employees’ services up to balance date
and are measured at the amounts expected to be paid when the liabilities are settled.
(ii) Long service leave
In calculating the value of long service leave, consideration is given to expected future wage and salary
levels, experience of employee departures and periods of service. Expected future payments are
discounted using market yields at balance date on national government bonds with terms to maturity and
currency that match, as closely as possible, the estimated future cash outflows.
(iv) Share incentives
Share incentives are provided under the Short and Long Term Incentive Plans. The Short and Long Term
Incentive Plans are settled in shares, but based on a cash amount. A provision for the amount payable
under the Short Term Incentive plan is recognised on the Balance Sheet.
For the Long Term Incentive Plan, the incentives are based on the performance of the Group over a
minimum three year period. The incentives are settled in shares (but based on a cash amount). Expenses
are recognised over the assessment period based on the amount expected to be payable under this plan,
resulting in a provision for incentive payable being built up on the balance sheet over the assessment period.
In the event that the executive does not complete the period of service, the cumulative expense is reversed.
2011 Annual Report
35
BKI INVESTMENT
COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2011 (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
e.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly
liquid investments with original maturities of 12 months or less, and bank overdrafts. Bank overdrafts are
shown within short-term borrowings in current liabilities on the balance sheet.
f.
Revenue
Sale of investments occurs when the control of the right to equity has passed to the buyer.
Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to
the financial assets.
Dividend revenue is recognised when the right to receive a dividend has been established.
Revenue from the rendering of a service is recognised upon the delivery of the service to the customers.
All revenue is stated net of the amount of goods and services tax (GST).
g.
Plant and Equipment
Plant and equipment represents the costs of furniture and computer equipment and is depreciated over
its useful life, a period of between 3 and 5 years.
h.
Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of
GST incurred is not recoverable from the Australian Tax Office. In these circumstances the GST is
recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables
and payables in the balance sheet are shown inclusive of GST.
Cash flows are presented in the cash flow statement on a gross basis, except for the GST component of
investing and financing activities, which are disclosed as operating cash flows.
i.
Segment Reporting
Operating segments are reported in a manner consistent with the internal reporting used by the chief
operating decision-maker. The Board has been identified as the chief operating decision-maker, as it is
responsible for allocating resources and assessing performance of the operating segments.
j.
Comparative Figures
When required by Accounting Standards, comparative figures have been adjusted to conform to changes
in presentation for the current financial year. Where a retrospective restatement of items in the statement
of financial position has occurred, presentation of the statement as at the beginning of the earliest
comparative period has been included.
k.
Rounding of Amounts
The parent has applied the relief available to it under ASIC Class Order 98/100 and accordingly, amounts
in the financial report and Directors’ report have been rounded off to the nearest $1,000.
36
2011 Annual Report
B K I 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 ENDED 30 JUNE 2011 (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
l.
Critical Accounting Estimates and Judgments
Deferred Tax Balances
The preparation of this financial report requires the use of certain critical estimates based on historical
knowledge and best available current information. This requires the Directors and management to exercise
their judgement in the process of applying the Group’s accounting policies.
The carrying amounts of certain assets and liabilities are often determined based on estimates and
assumptions of future events. In accordance with AASB 112: Income Taxes deferred tax liabilities have been
recognised for Capital Gains Tax on unrealised gains in the investment portfolio at the current tax rate of 30%.
As the Group does not intend to dispose of the portfolio, this tax liability may not be crystallised at the
amount disclosed in Note 14. In addition, the tax liability that arises on disposal of those securities may
be impacted by changes in tax legislation relating to treatment of capital gains and the rate of taxation
applicable to such gains at the time of disposal.
Apart from this, there are no other key assumptions or sources of estimation uncertainty that have a risk
of causing a material adjustment to the carrying amount of certain assets and liabilities within the next
reporting period.
m.
Australian Accounting Standards not yet effective
The Group has not applied any Australian Accounting Standards or UIG interpretations that have been
issued as at balance date but are not yet operative for the year ended 30 June 2011 (“the inoperative
standards”). The impact of the inoperative standards has been assessed and the impact has been
identified as not being material. The Group only intends to adopt inoperative standards at the date at which
their adoption becomes mandatory.
2011 Annual Report
37
BKI INVESTMENT
COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2011 (continued)
2. REVENUES
(a) Revenue from investment portfolio
Rebateable dividends:
- other corporations
Non - rebateable dividends:
- other corporations
Distributions:
- other corporations
Interest received - notes
(b) Special investment revenue
Rebateable dividends - special:
- other corporations
(c) Revenue from bank deposits
Interest received
(d) Other income
Other revenue
(e) Other gains / losses
Net gain on sale of investments held for trading
Total Income
3. OPERATING EXPENSES
Administration expenses
Occupancy costs
Employment expense
Professional fees
Depreciation
Total Expenditure
Consolidated
2011
$’000
2010
$’000
22,308
19,062
2,589
1,526
517
-
25,414
959
52
21,599
4,557
11,155
2,138
2,303
4
-
16
648
32,113
35,721
301
8
578
156
3
1,046
372
8
489
137
2
1,008
38
2011 Annual Report
B K I 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 ENDED 30 JUNE 2011 (continued)
4. TAX EXPENSE
The aggregated amount of income tax expense attributable to the year differs from the amounts prima facie
payable on profits from ordinary activities. The difference is reconciled as follows:
(a) Operating profit before income tax expense and net gains
on investment portfolio
Tax calculated at 30% (2010: 30%)
Tax effect of amounts which are not deductible (taxable) in calculating
taxable income:
- Franked dividends and distributions received
- (Over) / Under provision in prior year
Net tax expense on operating profit before net gains on investments
Net gains on investments prior to 31 December 2009
Tax calculated at 30% (2010: 30%)
Net (losses) / gains on investments post 31 December 2009
Tax calculated at 30% (2010: 30%)
Tax effect of:
- difference between accounting and tax cost bases for capital gains purposes
Total tax expense
(b) The components of tax expense comprise
Current tax
Deferred tax
(Over) / Under provision in prior year
5. DIVIDENDS
(a) Dividends paid during the year
Final dividend for the year ended 30 June 2010 of 2.75 cents per
share (2009 final: 3.0 cents per share) fully franked at the tax rate
of 30%, paid on 10 September 2010
Final special dividend for the year ended 30 June 2010 of 0.5 cents
per share (2009 final special: 0 cents per share) fully franked at the
tax rate 30%, paid on 10 September 2010
Interim dividend for the year ended 30 June 2011 of 3.0 cents per
share (2010 interim: 2.5 cents per share) fully franked at the tax
rate 30%, paid on 7 March 2011
Interim special dividend for the year ended 30 June 2010 0.5 cents
per share fully franked at the tax rate 30%
Total
2011 Annual Report
Consolidated
2011
$’000
2010
$’000
31,067
9,320
34,713
10,414
(8,060)
(91)
1,169
-
-
(109)
(33)
118
1,254
31,067
1,281
64
(91)
1,254
(9,065)
(192)
1,157
(3,369)
(1,011)
86
26
-
172
34,713
1,016
(652)
(192)
172
11,511
11,824
2,093
-
12,650
10,414
-
26,254
2,083
24,321
39
BKI INVESTMENT
COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2011 (continued)
5. DIVIDENDS (continued)
Dividends paid in cash or invested in shares under the
dividend reinvestment plan ("DRP")
Paid in cash
Reinvested in shares via DRP
Total
Franking Account Balance
Balance of the franking account after allowing for tax payable in
respect of the current year's profits and the receipt of dividends
recognised as receivables
Impact on the franking account of dividends declared but not
recognised as a liability at the end of the financial year
Net available
(b) Dividends declared after balance date
Consolidated
2011
$’000
2010
$’000
21,128
5,126
26,254
19,562
4,759
24,321
18,001
19,811
(7,249)
(5,830)
10,752
13,981
Since the end of the year the Directors have declared a final dividend for the year ended 30 June 2011 of
3.0 cents per share (2010: final 2.75 cents per share) fully franked at the tax rate of 30% and a special
dividend of 1.0 cents per share (2010: 0.5 cents per share) fully franked at the tax rate of 30%, payable on
31 August 2011, but not recognised as a liability at the year end.
6. CURRENT ASSETS - CASH AND CASH EQUIVALENTS
Cash at bank
Short term bank deposits
7. CURRENT ASSETS - TRADE AND OTHER RECEIVABLES
Dividends and distributions receivable
Interest receivable
Other receivable
1,654
32,246
33,900
237
47,087
47,324
3,877
464
6
4,347
3,146
664
-
3,810
40
2011 Annual Report
B K I 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 ENDED 30 JUNE 2011 (continued)
8. FINANCIAL ASSETS - INVESTMENT PORTFOLIO
Investment Portfolio - Non-Current
Listed securities at fair value available for sale:
- Shares in other corporations
Total Investment Portfolio
9. PROPERTY, PLANT AND EQUIPMENT
Office equipment, furniture & fittings at cost
Accumulated depreciation
Total
Reconciliation of the carrying amounts of each class of asset
at the beginning and end of the financial year:
Office equipment, furniture & fittings at cost
Carrying value at 1 July
Additions
Depreciation expense
Carrying value at 30 June
10. NON CURRENT ASSETS - DEFERRED TAX ASSETS
The deferred tax asset balance comprises the following
timing differences and unused tax losses:
Transaction costs on equity issues
Accrued expenses
Tax losses
Consolidated
2011
$’000
2010
$’000
561,230
503,679
561,230
503,679
19
(13)
6
9
-
(3)
6
19
(10)
9
11
-
(2)
9
211
39
3,800
4,050
419
55
3,759
4,233
2011 Annual Report
41
BKI INVESTMENT
COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2011 (continued)
10. NON CURRENT ASSETS - DEFERRED TAX ASSETS (continued)
Credited/
(Charged) to
Statement of
Opening
Balance
$'000
Comprehensive Closing
Balance
$'000
Income
$'000
Consolidated
Transaction costs on equity issues
Accrued expenses
Tax losses
Balance as at 30 June 2010
Transaction costs on equity issues
Accrued expenses
Tax losses
Balance as at 30 June 2011
553
19
2,728
3,300
419
55
3,759
4,233
11. TRADE AND OTHER PAYABLES
Current Liabilities
Creditors and accruals
12. CURRENT TAX LIABILITIES
Provision for income tax
13. EMPLOYEE BENEFITS
Aggregate employee benefits
Analysis of provisions:
Current
Total
42
(134)
36
1,031
933
(208)
(16)
41
(183)
419
55
3,759
4,233
211
39
3,800
4,050
Consolidated
2011
$’000
2010
$’000
233
1,077
509
204
18
18
18
13
13
13
2011 Annual Report
B K I 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 ENDED 30 JUNE 2011 (continued)
14. NON CURRENT LIABILITIES - DEFERRED TAX LIABILITIES
The deferred tax liability balance comprises the following timing differences:
Revaluation of investments held
Non rebateable dividends receivable and interest receivable
Movements in deferred tax liabilities
Consolidated
2011
$’000
2010
$’000
34,207
23,073
188
307
34,395
23,380
Credited/
(Charged) to
Statement of
Comprehensive
Income
$'000
Credited/
(Charged)
to Equity
$'000
Closing
Balance
$'000
8
273
281
-
(119)
(119)
11,824
23,073
-
307
11,824
23,380
11,134
34,207
-
188
11,134
34,395
Opening
Balance
$'000
11,241
34
11,275
23,073
307
23,380
Consolidated
Revaluation of investment portfolio
Non rebateable dividends and interest receivable
Balance as at 30 June 2010
Revaluation of investment portfolio
Non rebateable dividends and interest receivable
Balance as at 30 June 2011
2011 Annual Report
43
BKI INVESTMENT
COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2011 (continued)
15. SHARE CAPITAL
(a) Issued and paid-up capital
(a) Issued and paid-up capital 422,863,407 ordinary shares
fully paid (2010: 418,566,158)
(b) Movement in ordinary shares
Consolidated
2011
$’000
2010
$’000
454,833
449,707
Beginning of the financial year
Issued during the year:
- dividend reinvestment plan
- share purchase plan
- less net transaction costs
2011
$’000
Number of
Shares
2010
$’000
Number of
Shares
418,566,158
449,707
394,143,000
420,925
4,297,249
5,126
3,999,346
4,759
-
-
-
20,423,812
24,100
(77)
End of the financial year
422,863,407
454,833
418,566,158
449,707
The Parent does not have an authorised share capital and the ordinary shares on issue have no par value.
Holders of ordinary shares participate in dividends and the proceeds on a 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.
(c) Capital Management
The Group’s objective in managing capital is to continue to provide shareholders with attractive investment returns
through access to a steady stream of fully-franked dividends and enhancement of capital invested,
with goals of paying an enhanced level of dividends and providing attractive total returns over the medium to long
term.
The Group recognises that its capital will fluctuate in accordance with market conditions and in order to maintain
or adjust the capital structure, may adjust the amount of dividends paid, issue new shares from
time-to-time or return capital to shareholders.
The Group’s capital consists of shareholders equity plus net debt. The movement in equity is shown in the
Consolidated Statement of Changes in Equity. At 30 June 2011 net debt was $ Nil (2010: $Nil).
44
2011 Annual Report
B K I 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 ENDED 30 JUNE 2011 (continued)
16. REVALUATION RESERVE
The Revaluation reserve is used to record increments and decrements
on the revaluation of the investment portfolio.
Balance at the beginning of the year
Revaluation of investment portfolio
Balance at the end of the year
17. REALISED CAPITAL GAINS RESERVE
The Realised capital gains reserve records gains or losses after
applicable taxation arising from the disposal of securities in the
investment portfolio.
Balance at the beginning of the year
Net (losses) / gains on investment portfolio transferred from retained profits
Net (losses) / gains on investment portfolio transferred from
Statement of Comprehensive Income
Balance at the end of the year
18. RETAINED PROFITS
Retained profits at the beginning of the year
Net profit attributable to members of the company
Net losses / (gains) on investment portfolio transferred to realised
capital gains reserve
Dividends provided for or paid
Retained profits at the end of the year
Consolidated
2011
$’000
2010
$’000
54,032
25,419
79,451
26,442
27,590
54,032
1,444
3,742
-
(2,358)
(194)
1,250
60
1,444
29,219
29,898
20,030
31,152
-
2,358
(26,254)
(24,321)
32,863
29,219
2011 Annual Report
45
BKI INVESTMENT
COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2011 (continued)
19. RECONCILIATION OF CASH FLOW
(a) Reconciliation of cash flow from operating activities to operating profit
Net Profit from ordinary activities
Non cash item :
- net losses on investment portfolio
- discount on acquisition of controlled entity
- depreciation expense
Change in assets and liabilities, net of the effects of purchase of subsidiaries
Decrease in available for sale financial assets
Increase in receivables and prepayments
Decrease in deferred tax assets
Increase in payables
Increase in employee entitlements
Increase in deferred tax liabilities
Increase / (Decrease) in current tax liabilities
Net cash inflow from operating activities
(b) Non-cash financing and investing activities
(i) Dividend reinvestment plan
Under the terms of the dividend reinvestment plan, $5,126,000
(2010: $4,759,000) of dividends were paid via the issue of
4,297,249 shares (2010: 3,999,346).
(c) Acquisition of controlled entities
No controlled entities were acquired in 2011 or 2010.
20. AUDITOR’S REMUNERATION
Remuneration of the auditor of the parent entity for:
Auditing the financial report of the Parent and the controlled entities
46
Consolidated
2011
$’000
2010
$’000
29,898
31,152
-
-
3
-
(535)
98
35
5
121
305
29,930
2,358
46
2
357
(873)
52
114
10
281
(1,839)
31,660
19
19
21
21
2011 Annual Report
B K I 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 ENDED 30 JUNE 2011 (continued)
21. EARNINGS PER SHARE
Profit for the year
Earnings used in calculating basic and diluted earnings per share
Weighted average number of ordinary shares used in the calculation
of basic and diluted earnings per share
Basic earnings per share (cents)
Diluted earnings per share (cents)
Consolidated
2011
$’000
2010
$’000
29,898
29,898
31,152
31,152
2011
2010
No. ('000)
No. ('000)
421,079
411,636
6.02
7.10
5.44
7.57
22. KEY MANAGEMENT PERSONNEL REMUNERATION
The names and positions held of Group Directors and Key Management Personnel in office at any time during
the financial year are:
Name
RD Millner
DC Hall
AJ Payne
IT Huntley
TCD Millner
RJ Pillinger
Position
Non-Executive Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director
Chief Executive Officer
Company Secretary (services provided under contract through Corporate and
Administrative Services Pty Limited)
There are no other employees of the Group.
Details of the nature and amount of each Non – Executive Director’s and Key Management Personnel’s
emoluments from the Group in respect of the year to 30 June 2011 have been included in the Remuneration
Report section of the Directors’ Report.
Payment to Non-Executive Directors is fixed at $300,000 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 the reimbursement of out of pocket expenses.
2011 Annual Report
47
BKI INVESTMENT
COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2011 (continued)
23. SUPERANNUATION COMMITMENTS
The Group contributes superannuation payments on behalf of Directors and employees in accordance with
relevant legislation. Superannuation funds are nominated by the individual Directors and employees and are
independent of the Group.
24. RELATED PARTY TRANSACTIONS
Related parties of the Group fall into the following categories:
(i) Controlled Entities
At 30 June 2011, subsidiaries of the Parent were:
Country of Incorporation
Percentage Owned (%)
Brickworks Securities Pty Limited
Pacific Strategic Investments Pty Limited
Huntley Investment Company Limited
Australia
Australia
Australia
2011
100
100
100
2010
100
100
100
Transactions between the Parent and controlled entities consist of loan balance due from the Parent to controlled
entities. No interest is charged on the loan balance by the controlled entities and no repayment period is fixed for
the loan.
(ii) Directors / Officers Related Entities
Persons who were Directors / Officers of BKI Investment Company Limited for part or all of the year ended
30 June 2011 were:
Directors:
RD Millner
DC Hall
AJ Payne
IT Huntley
Chief Executive Officer
TCD Millner
Company Secretary:
RJ Pillinger (services provided under contract through Corporate and
Administrative Services Pty Limited)
Corporate and Administrative Services Pty Limited
The Group has appointed Corporate & Administrative Services Pty Limited, an entity in which Mr. RD Millner has
an indirect interest to provide the Group with administration, company secretarial services and preparation of all
financial accounts.
Administration and secretarial fees paid for services provided to the Parent and controlled entities for the year
ending 30 June 2011 were $119,405 (2010: $117,480, including GST) and are at standard market rates.
No administration fees were owed by the Group to Corporate & Administrative Services Pty Limited as at
30 June 2011.
48
2011 Annual Report
B K I 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 ENDED 30 JUNE 2011 (continued)
24. RELATED PARTY TRANSACTIONS (continued)
(iii) Transactions in Securities
Share and Option Holdings
Aggregate number of listed securities of the Company held by Key Management Personnel or their related
entities:
Shares
2011
RD Millner *
DC Hall
AJ Payne
IT Huntley
TCD Millner *
RJ Pillinger
Total
2010
RD Millner
DC Hall
AJ Payne
IT Huntley
TCD Millner
RJ Pillinger
Total
Balance at
1/07/10
6,252,078
234,460
191,305
11,063,445
10,068
-
17,751,356
Balance at
1/07/09
5,621,223
221,749
169,612
11,004,901
1,500
-
17,018,985
Granted as
compensation
Net Change
Other
Balance at
30/6/11
-
-
-
-
35,652
14,261
49,913
522,465
6,774,543
2,505
35,360
236,965
226,665
-
11,063,445
5,782,958
5,828,678
-
14,261
6,343,288
24,144,557
Granted as
compensation
Net Change
Other
Balance at
30/6/10
-
-
-
-
-
-
-
630,855
6,252,078
12,711
21,693
234,460
191,305
58,544
11,063,445
8,568
-
10,068
-
732,371
17,751,356
* Common to RD Millner and TCD Millner are 5,780,540 shares held in related companies and trusts in which
both hold beneficial interests. TCD Millner’s beneficial interest in these companies and trusts became effective
during the year ended 30 June 2011 and this change is reflected in the “Net Change Other” movement in the
above table.
Directors acquired shares through Dividend Reinvestment Plan or on-market purchase.
There has been no other change to Directors’ shareholdings during the year ended 30 June 2011.
All Key Management Personnel or their associated entities, being shareholders are entitled to receive dividends.
25. FINANCIAL REPORTING BY SEGMENTS
The Group operates solely in the securities industry in Australia and has no reportable segments.
2011 Annual Report
49
BKI INVESTMENT
COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2011 (continued)
26. MANAGEMENT OF FINANCIAL RISK
The risks associated with the holding of financial instruments such as investments, cash, bank bills and
borrowings include market risk, credit risk and liquidity risk. The Audit Committee has approved the policies and
procedures that have been established to manage these risks. The effectiveness of these policies and procedures
is reviewed by the Audit Committee.
a) Financial instruments’ terms, conditions and accounting policies
The Group’s accounting policies are included in note 1, while the terms and conditions of each class of financial
asset, financial liability and equity instrument, both recognised and unrecognised at the balance date, are
included under the appropriate note for that instrument.
b) Net fair values
The carrying amounts of financial instruments in the balance sheets approximate their net fair value determined
in accordance with the accounting policies disclosed in note 1 to the accounts.
c) Credit risk
The risk that a financial loss will occur because counterparty to a financial instrument fails to discharge an
obligation is known as credit risk.
The credit risk on the Group’s financial assets, excluding investments, is the carrying amount of those assets. The
Group’s principal credit risk exposures arise from the investment in liquid assets, such as cash and bank bills, and
income receivable.
The spread of cash and bank bills between banks is reviewed monthly by the Board to determine if it is within
agreed limits. Income receivable is comprised of accrued interest and dividends and distributions which were
brought to account on the date the shares or units traded ex-dividend.
There are no financial instruments overdue or considered to be impaired.
d) Market risk
Market risk is the risk that changes in market prices will affect the fair value of the financial instrument.
The Group is a long term investor in companies and trusts and is therefore exposed to market risk through the
movement of the share prices of the companies and trusts in which it is invested.
As the market value of individual companies fluctuates throughout the day, the market value of the portfolio
changes continuously. The change in the market value of the portfolio is recognised through the Revaluation
Reserve. Listed Investments represent 93% (2010: 90%) of total assets.
A 5% movement in the market value of each of the companies and trusts within the portfolio would result
in a 5% (2010: 5%) movement in the net assets before provision for tax on unrealised capital gains at
30 June 2011.
The net asset backing before provision for tax on unrealised capital gains would move by 6.6 cents per share at
30 June 2011 (2010: 6.0 cents).
The performance of the companies within the portfolio is monitored by the Investment Committee and the Board
as a whole.
The Group seeks to reduce market risk at the investment portfolio level by ensuring that it is not, in the opinion
of the Investment Committee, overly exposed to one Group or one particular sector of the market.
50
2011 Annual Report
B K I 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 ENDED 30 JUNE 2011 (continued)
26. MANAGEMENT OF FINANCIAL RISK (continued)
d) Market risk (continued)
At 30 June 2011, the spread of investments is in the following sectors:
Percentage of total investment
Amount
Sector
Financials
Energy
Materials
Consumer Staples
Cash and dividends receivable
Industrials
Telecommunications Services
Consumer Discretionary
Utilities
Health Care
Property Trusts
2011
%
34.35%
15.87%
11.89%
10.40%
6.38%
7.25%
4.58%
4.52%
3.48%
0.94%
0.34%
2010
%
34.01%
15.19%
11.80%
10.24%
8.59%
6.38%
4.89%
4.18%
3.44%
0.65%
0.63%
2011
$’000
2010
$’000
205,893
187,414
95,136
71,274
62,344
38,248
43,481
27,483
27,105
20,852
5,645
2,017
83,702
65,011
56,420
47,324
35,148
26,964
23,057
18,977
3,588
3,398
100.00%
100.00%
599,478
551,003
Securities representing over 5% of the investment portfolio at 30 June 2011 were:
Company
New Hope Corporation Limited
BHP Billiton Limited
National Australia Bank Limited
Commonwealth Bank
12.7%
10.0%
7.9%
7.7%
38.3%
12.9%
10.4%
8.3%
8.0%
39.6%
76,312
59,968
47,112
46,254
64,946
52,155
41,830
40,416
229,646
199,347
The relative weightings of the individual securities and relevant market sectors are reviewed at each meeting of
the Investment Committee and the Board, and risk can be managed by reducing exposure where necessary.
There are no set parameters as to a minimum or maximum amount of the portfolio that can be invested in a single
company or sector.
The Group is not exposed to foreign currency risk as all investments are quoted in Australian dollars. The fair
value of the Group’s other financial instruments is unlikely to be materially affected by a movement in interest rates
as they generally have short dated maturities and fixed interest rates.
2011 Annual Report
51
BKI INVESTMENT
COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2011 (continued)
26. MANAGEMENT OF FINANCIAL RISK (continued)
e) Liquidity risk
Liquidity risk is the risk that the Group is unable to meet financial obligations as they fall due.
The Group has a zero level of gearing, and sufficient cash reserves to meet operating cash requirements at
current levels for well in excess of 5 years.
The Group’s other major cash outflows are the purchase of securities and dividends paid to shareholders and the
level of both of these is fully controllable by the Board.
Furthermore, the majority of the assets of the Group in the form of readily tradable securities which can be sold
on-market if necessary.
f) Capital risk management
The Group invests its equity in a diversified portfolio of assets that aim to generate a growing income stream for
distribution to shareholders in the form of fully franked dividends.
The capital base is managed to ensure there are funds available for investment as opportunities arise. Capital is
increased annually through the issue of shares under the Dividend Reinvestment Plan. Other means of increasing
capital include Rights Issues, Share Placements and Share Purchase Plans.
27. PARENT COMPANY INFORMATION
Information relating to the parent entity of the Group, BKI Investment Company Limited:
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Issued capital
Reserves
Total shareholders’ equity
Profit or loss
Total Other Comprehensive Income / (Loss)
The parent company has no contingent liabilities at 30 June 2011.
2011
$’000
2010
$’000
38,266
51,155
762,663
705,298
800,929
756,453
681
1,214
239,898
228,883
240,579
230,097
454,833
449,707
105,517
76,649
560,350
526,356
29,898
29,898
30,949
30,949
52
2011 Annual Report
B K I 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 ENDED 30 JUNE 2011 (continued)
28. CAPITAL AND LEASING COMMITMENTS
The Group has no capital and leasing commitments at 30 June 2011.
29. CONTINGENT LIABILITIES
The Group has no contingent liabilities at 30 June 2011.
30. AUTHORISATION
The financial report was authorised for issue on 2 August 2011 by the Board of Directors.
2011 Annual Report
53
BKI INVESTMENT
COMPANY LIMITED
DIRECTORS’ DECLARATION
The Directors of BKI Investment Company Limited declare that:
1.
The financial statements and notes, as set out on pages 28 to 53, are in accordance with the
Corporations Act 2001 and:
a.
b.
c.
comply with Accounting Standards and the Corporations Regulations; and
comply with International Financial Reporting Standards, as stated in note 1 to the financial
statements
give a true and fair view of the financial position as at 30 June 2011 and of the performance for
the year ended on that date of the consolidated entity;
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.
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 2011.
2.
3.
This declaration is made in accordance with a resolution of the Board of Directors.
Robert D Millner
Director
Sydney
2 August 2011
54
2011 Annual Report
B K I I n v e s t m e n t C o m p a n y L i m i t e d
INDEPENDENT AUDITOR’S REPORT
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BKI INVESTMENT COMPANY LIMITED
Report on the Financial Report
We have audited the accompanying financial report of BKI Investment Company Limited (the company) and BKI Investment Company Limited and
Controlled Entities (the consolidated entity), which comprises the statement of financial position as at 30 June 2011, the statement of comprehensive
income, statement of changes in equity and statement of cash flows for the year ended on that date, notes comprising a summary of significant
accounting policies, other explanatory information and the directors' declaration for the consolidated entity comprising the company and the entities it
controlled at the year’s end or from time to time during the financial year.
Directors’ Responsibility for the Financial Report
The directors of the company are responsible for the preparation and fair presentation of the financial report that gives a true and fair view in accordance
with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable
the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In Note 1, the directors also state, in
accordance with AASB 101: Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards
(IFRS).
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing
Standards. Those standards require that we comply with relevant ethical requirements relating to auditing engagements and plan and perform the audit
to obtain reasonable assurance as to whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected
depend on the auditor’s judgement, including the assessment of risks of material misstatement of the financial report, whether due to fraud or error. In
making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial report in
order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of
the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by directors, as well as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
In conducting our review, we have complied with the independence requirements of the Corporations Act 2001. We confirm that the independence
declaration required by the Corporations Act 2001, which has been given to the directors of BKI Investment Company Limited, would be in the same
terms if provided to the directors as at the date of this audit report.
Auditor’s Opinion
In our opinion:
(a) The financial report of BKI Investment Company Limited is in accordance with the Corporations Act 2001, including:
i.
ii.
giving a true and fair view of the company and consolidated entity’s financial position as at 30 June 2011 and of their performance for the
year ended on that date; and
complying with Australian Accounting Standards(including the Australian Accounting Interpretations) and the Corporations Regulations
2001;
(b) The financial report also complies with International Financial Reporting Standards as disclosed in Note 1.
Report on the Remuneration Report
We have audited the remuneration Report included in the directors’ report for the year ended 30 June 2011. The directors of the company are
responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
Auditor’s Opinion
In our opinion the Remuneration Report of BKI Investment Company Limited for the year ended 30 June 2011, complies with section 300A of the
Corporations Act 2001.
RUWALD & EVANS
Martin Bocxe
Partner
Level 1, 276 Pitt Street, SYDNEY NSW 2000
2 August 2011
2011 Annual Report
Liability limited by a scheme approved under Professional Standards Legislation
55
BKI INVESTMENT
COMPANY LIMITED
AUDITOR’S INDEPENDENCE DECLARATION
Auditors’ Independence Declaration under Section 307C of the Corporations Act 2001 to the directors
of BKI Investment Company Limited and Controlled Entities
I declare that to the best of my knowledge and belief, during the review for the year ended 30 June 2011, there
have been:
(a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to
the audit; and
(b) no contraventions of any applicable code of professional conduct in relation to the audit.
RUWALD & EVANS
Martin Bocxe
Partner
Level 1, 276 Pitt Street,
SYDNEY NSW 2000
2 August 2011
56
Liability limited by a scheme approved under Professional Standards Legislation
2011 Annual Report
B K I 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 2011, there were 11,158 holders of ordinary shares in the capital of the Parent. 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
Total
Holding less than a marketable parcel of 406 shares
Votes of Members
Article 5.12 of the Company’s Constitution provides:
No. of Shareholders
821
1,806
1,728
6,227
576
11,158
522
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).
2011 Annual Report
57
BKI INVESTMENT
COMPANY LIMITED
ASX Additional Information (continued)
The 20 largest holdings of the Parent’s share as at 29 July 2011 are listed below:
Name
Shares Held
%
Washington H Soul Pattinson & Company Limited
57,870,223
13.68%
Huntley Group Investments Pty Limited
8,523,274
Argo Investments Limited
Bougainville Copper Limited
J S Millner Holdings Pty Limited
National Nominees Limited
HSBC Custody Nominees (Australia) Limited
UBS Wealth Management Australia Nominees Pty Ltd
Lunicash Super Pty Ltd
Huntley Group Investments Pty Limited
Willpower Investments Pty Ltd
T G Millner Holdings Pty Limited
Milton Corporation Limited
RBC Dexia Investor Services Australia Nominees Pty Limited
KC Perks Investments Pty Ltd
D E C Investments Pty Limited
The Miller Foundation Ltd
Farjoy Pty Ltd
Mrs Patricia Roberta Huntley
One 428 Pty Ltd
8,311,237
4,716,674
3,915,288
2,077,701
1,835,005
1,756,231
1,623,963
1,529,360
1,384,960
1,153,442
1,147,375
1,097,868
1,095,187
1,093,408
1,000,000
937,655
902,763
900,000
2.02%
1.97%
1.12%
0.93%
0.49%
0.43%
0.42%
0.38%
0.36%
0.33%
0.27%
0.27%
0.26%
0.26%
0.26%
0.24%
0.22%
0.21%
0.21%
Total top 20 security holders
Total number of shares on issue
102,871,614
24.33%
422,863,407
58
2011 Annual Report
B K I 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)
2) Substantial Shareholders
As at 21 July 2011 the name and holding of substantial shareholder as disclosed in a notice received by the
Parent is:
Substantial Shareholders
No. of Shares
% of Total
Washington H Soul Pattinson & Company Limited
53,561,922
13.68%
3) Other Information:
• There is no current on-market buy-back in place.
• There were 135 (2010: 296) transactions in securities undertaken by the Group and the total brokerage paid
or accrued during the year was $120,510 (2010: $164,240)
4) Management Expense Ratio:
The Management Expense Ratio (“MER”) is the total expenses of the Group for the financial year, as shown in the
income statement, expressed as a percentage of the average total assets of the Group for the financial year.
30/06/04
30/06/05
30/06/06
30/06/07
30/06/08
30/06/09
30/06/10
30/06/11
0.69%
0.71%
0.56%
0.46%
0.46%
0.31%
0.19%
0.18%
Chart showing MER by year:
2011 Annual Report
59
BKI INVESTMENT
COMPANY LIMITED
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60
2011 Annual Report
BKI INVESTMENT
COMPANY LIMITED