BKI INVESTMENT
COMPANY LIMITED
2
0
1
Annual Report
for year ended 30 June 2012
ABN 23 106 719 868
2
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
Jaime Perry Pinto
Larina Tcherkezian (Alternate)
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
2012 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
Financial Highlights
Securities held as at 30 June 2012
Group Profile
Chairman’s Address
Directors’ Report
Corporate Governance Statement
Consolidated Income Statement
Consolidated Statement of 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
2012 Annual Report
2
3
6
7
12
22
30
31
32
33
34
35
55
56
57
58
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 Result after Tax but before special
dividend income
Special Dividend Income
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
Up
Up
8.0%
50.3%
0.3%
9.4%
50.3%
0.3%
0.3%
to
to
to
to
to
to
to
29,758
2,266
32,024
27,716
2,266
29,982
29,982
Total Portfolio Value (including cash)
Down
7.1%
to
556,664
(cid:0) Earnings Per Share:
Earnings Per Share before special dividend income
Earnings Per Share after special dividend income
(cid:0) Dividends:
Interim - Ordinary
Final - Ordinary
Full Year Total Ordinary Dividends
(cid:0) Net Tangible Asset (NTA) History:
Up
Down
Up
Up
Up
8.2%
0.8%
6.7%
6.7%
6.7%
to
to
to
to
to
Cents
6.51
7.04
Cents
3.20
3.20
6.40
30/06/04 30/06/05 30/06/06 30/06/07 30/06/08 30/06/09 30/06/10 30/06/11 30/06/12
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
$1.30
$1.26
(cid:0) Dividend History (cents per share):
30/06/04* 30/06/05 30/06/06 30/06/07 30/06/08 30/06/09 30/06/10 30/06/11 30/06/12
Interim
Final
Special
Total
-
2.0
-
2.0
2.1
2.2
-
4.3
2.5
2.5
1.0
6.0
2.6
2.7
-
5.3
3.0
3.0
-
6.0
3.0
3.0
-
6.0
2.5
2.75
1.0
6.25
3.0
3.0
1.0
7.0
3.2
3.2
-
6.4
* The Company was listed on ASX 12 December 2003, no interim dividend is applicable.
2
2012 Annual Report
B K I I n v e s t m e n t C o m p a n y L i m i t e d
FINANCIAL HIGHLIGHTS (continued)
Securities held and their market value as at 30 June 2012
Stock
Financials
Commonwealth Bank of Australia
National Australia Bank Limited
Westpac Banking Corporation
Australia and New Zealand Banking Group Limited
QBE Insurance Group Limited
ASX Limited
Milton Corporation Limited
AMP Limited
Westpac Preference Shares (WBCPB)
Bendigo Bank Limited
Insurance Australia Group Limited
Perpetual Limited
Suncorp-Metway Limited
Bank of Queensland Limited
Macquarie Group Limited
Shares
Held
946,600
2,004,000
1,588,000
669,000
737,000
215,500
410,378
1,314,813
45,000
610,400
1,280,000
166,310
390,000
370,000
85,000
2012 Annual Report
Market
Value
($’000)
50,265
47,174
33,554
14,731
9,846
6,422
6,160
5,049
4,602
4,517
4,429
3,805
3,136
2,442
2,210
Portfolio
Weight
%
9.04%
8.48%
6.03%
2.65%
1.77%
1.15%
1.11%
0.91%
0.83%
0.81%
0.80%
0.68%
0.56%
0.44%
0.40%
198,342
35.66%
3
BKI INVESTMENT
COMPANY LIMITED
FINANCIAL HIGHLIGHTS (continued)
Securities held (continued):
Stock
Energy
New Hope Corporation Limited
Woodside Petroleum Limited
Santos Limited
Caltex Australia Limited
Consumer Staples
Wesfarmers Limited
Woolworths Limited
Coca Cola Amatil Limited
Metcash Limited
Graincorp Limited
Materials
BHP Billiton Limited
Brickworks Limited
Rio Tinto Limited
Arrium Limited (formerly Onesteel)
Industrials
Campbell Brothers Limited
Brambles Limited
UGL Limited
GWA International Limited
QUBE Logistics
Seek Limited
Salmat Limited
Skilled Group Limited
Lindsay Australia Limited
Transurban Group
Telecommunications Services
Telstra Corporation Limited
TPG Telecom Limited
4
Shares
Held
Market
Value
($’000)
Portfolio
Weight
%
14,760,452
390,000
130,000
91,950
769,200
751,565
846,000
2,751,000
93,444
1,369,443
436,209
49,562
800,000
389,734
785,576
390,500
1,310,000
1,710,000
400,000
970,100
644,826
5,749,400
134,581
7,280,000
4,420,000
59,189
12,094
1,383
1,241
73,907
22,991
20,142
11,320
9,271
886
64,610
43,055
4,406
2,799
692
50,952
21,092
4,839
4,823
2,738
2,642
2,528
2,183
1,522
891
764
44,022
26,790
7,691
34,481
10.64%
2.17%
0.25%
0.22%
13.29%
4.13%
3.62%
2.04%
1.67%
0.16%
11.62%
7.74%
0.79%
0.50%
0.12%
9.16%
3.79%
0.87%
0.87%
0.49%
0.47%
0.45%
0.39%
0.27%
0.16%
0.14%
7.91%
4.82%
1.38%
6.20%
2012 Annual Report
B K I I n v e s t m e n t C o m p a n y L i m i t e d
FINANCIAL HIGHLIGHTS (continued)
Securities held (continued):
Stock
Consumer Discretionary
ARB Corporation Limited
Invocare Limited
Tatts Group
Fleetwood Corporation Limited
Tabcorp Holdings Limited
Crown Limited
Fairfax Media Limited
Seven West Media
Ten Network Holdings Limited
Gazal Corporation Limited
Utilities
AGL Energy Limited
APA Group
Health Care
Ramsay Health Care Limited
Sonic Healthcare Limited
Clover Corporation Limited
Property Trusts
Westfield Group
TOTAL INVESTMENTS
Cash and dividends receivable
TOTAL PORTFOLIO
Shares
Held
Market
Value
($’000)
Portfolio
Weight
%
845,600
949,000
1,909,000
240,500
438,111
150,574
2,100,000
372,458
1,150,000
211,865
1,141,000
1,024,452
189,000
153,600
858,000
233,157
7,670
7,639
5,002
2,821
1,279
1,278
1,166
648
575
372
28,450
16,853
5,112
21,965
4,264
1,949
326
6,539
2,215
2,215
1.38%
1.37%
0.90%
0.51%
0.23%
0.23%
0.21%
0.12%
0.10%
0.07%
5.11%
3.03%
0.92%
3.95%
0.77%
0.35%
0.06%
1.18%
0.40%
0.40%
525,483
94.47%
30,740
5.53%
556,223
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.
2012 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 Australian Stock Exchange Limited 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 Net Operating Profit for that year to shareholders as 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 Net Operating Profit 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 Group Company Secretary, Mr Jaime Pinto.
6
2012 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 9th Annual Report of BKI Investment Company Limited (BKI) for the year ended 30 June 2012.
The Net Operating Result before special investment revenue increased 9% to $27.7m, while Earnings per Share
before special dividend income increased 8% to 6.51cps.
We are particularly pleased to deliver this positive result given the mixed economic environment we continue to
experience.
It has been another tough year for equity investors with the S&P/ASX 300 Accumulation Index falling 7%. Many
segments of the market still face significant headwinds. Within some industries companies are experiencing
structural changes, many of which appear to be permanent.
The BKI Board and Investment Committee have stood by our investment philosophy of focusing on companies
with a quality balance sheet, strong business model and a reliable dividend yield. By investing for the long term
we again see the Net Operating Result increase enabling us to lift our Ordinary Dividend paid to shareholders.
BKI’s Share Price Performance (including the reinvestment of dividends) for the year to 30 June 2012 was also a
feature. A return of positive 1.5% and outperforming the S&P/ASX 300 Accumulation Index by 8.5% is very
encouraging given the state of the sharemarket. Shareholders also benefited from the distribution of franking
credits, an additional calculation not included in these numbers.
Dividends
Directors declared a Final Ordinary Dividend of 3.2cps, up 6.7% on the 3.0cps declared last year. The Final
Ordinary Dividend will be fully franked and will be paid on 30 August 2012.
The total Full Year Ordinary Dividends paid by BKI this year was 6.4cps, up 6.7% from the 6.0cps paid in 2011.
The Dividend Reinvestment Plan (DRP) is maintained, offering shareholders the opportunity to acquire further
ordinary shares in BKI. The DRP will not be offered at a discount.
The DRP price for the Final Ordinary Dividend was calculated using the average of the daily volume weighted
average sale price of BKI’s shares sold in the ordinary course of trading on the ASX during the period of 5 trading
days after, but not including, the Record Date (16 August 2012).
Operating Expenses
Operating expenses for FY2012 were $1.0m, flat on the previous year. BKI’s Management Expense Ratio (MER)
as at 30 June 2012 was 0.18%, steady from 30 June 2011. BKI is internally managed and does not charge
shareholders external portfolio management fees or performance fees, allowing it to maintain one of the more
competitive cost structures in the marketplace.
2012 Annual Report
7
BKI INVESTMENT
COMPANY LIMITED
CHAIRMAN’S ADDRESS (continued)
Performance
Net Portfolio Return (after all operating expenses, provision and payment of both income and capital gains tax
and the reinvestment of dividends) for the year to 30 June 2012 was negative 3.1%, outperforming the S&P/ASX
300 Accumulation Index by 3.9%, which dropped by 7.0% over the same period.
BKI’s Share Price Performance (including the reinvestment of dividends) for the year to 30 June 2012 was positive
1.5%, outperforming the S&P/ASX 300 Accumulation Index over the same period by 8.5%.
It is important to point out that these performance numbers are measured after all operating expenses, provision
and payment of income and capital gains tax. The numbers do not include the added benefit of franking credits
which are attached to dividend distributions.
We believe that as we see general interest rates and term deposit rates fall, dividends and franking credits will
become even more important to many shareholders.
8
2012 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)
Portfolio Movements
BKI made purchases totalling approximately $26.5m during FY2012 with major investments including Westpac
Banking Corporation, National Australia Bank Limited, Commonwealth Bank of Australia, Wesfarmers Limited
and Fleetwood Corporation Limited.
The Company also divested a number of holdings including BlueScope Steel, Echo Entertainment, Transfield
Services, Suncorp Metway Preference Shares, Westpac Preference Shares (WBCPA) and half of the position in
Westpac Preference Shares (WBCPB). Also during the year Orica Step-up Preference Shares were redeemed by
Orica Limited.
Top 20 Investments at 30 June 2012
Stock
Market Value ($’000)
Portfolio Weight %
1
2
3
4
New Hope Corporation Limited
Commonwealth Bank of Australia
National Australia Bank Limited
BHP Billiton Limited
5 Westpac Banking Corporation
6
Telstra Corporation Limited
7 Wesfarmers Limited
8
Campbell Brothers Limited
9 Woolworths Limited
10 AGL Energy Limited
11 Australia and New Zealand Banking Group Limited
12 Woodside Petroleum Limited
13 Coca Cola Amatil Limited
14 QBE Insurance Group Limited
15 Metcash Limited
16
TPG Telecom Limited
17 ARB Corporation Limited
18
InvoCare Limited
19 ASX Limited
20 Milton Corporation Limited
Cash and cash equivalents
Total of Top 20 including cash and cash equivalents
59,189
50,264
47,174
43,055
33,554
26,790
22,991
21,092
20,142
16,853
14,731
12,094
11,319
9,846
9,271
7,691
7,670
7,639
6,422
6,160
30,740
464,687
10.6%
9.0%
8.5%
7.7%
6.0%
4.8%
4.1%
3.8%
3.6%
3.0%
2.6%
2.2%
2.0%
1.8%
1.7%
1.4%
1.4%
1.4%
1.2%
1.1%
5.5%
83.4%
2012 Annual Report
9
BKI INVESTMENT
COMPANY LIMITED
CHAIRMAN’S ADDRESS (continued)
Fund Manager of the Year
As previously announced, BKI received the 2011 Listed Investment Company of the Year award in November
2011. BKI believes that the future prospects of the LIC sector remain strong.
Through a company structure, LICs can offer shareholders:
• Reliable fully franked dividends,
• A diversified investment portfolio,
• A competitive cost structure,
• Strong Board and Management teams,
• High levels of transparency and compliance by being listed on the ASX,
• A closed end investment structure,
• Solid after tax performance.
Outlook
European, US, and Asian economic activity has seen a further decline over the past quarter, prompting additional
easing from the world’s major central banks. On the back of this poor data, the Australian share market has again
been subdued for the financial year just ended.
The global economic outlook remains challenging, and until appropriate financial reforms are implemented to
resolve sovereign debt issues in Europe, economic data from the US improves and investor confidence within
Asian markets lifts we could see our local sharemarket continue to drift sideways.
Domestically, our multi speed economy still appears to be making it difficult for the Reserve Bank to implement a
high conviction monetary policy. Despite four interest rate cuts since November 2011, parts of our economy
continue to be challenged. Consumer confidence and discretionary spending by mainstream Australia is weighed
down by job security concerns and a higher cost of living.
While the official cash rate is 1.25% lower than a year ago, we haven’t seen a meaningful turnaround in consumer
confidence as yet nor have we seen investors switching from term deposits and cash products to high yielding
investments within the equities market.
We expect further rate cuts over the next 3–6 months which should encourage retail spending, mortgage and
building applications, as well as a lift in sharemarket participation.
We noted in our Half Year Result commentary that many fixed interest products were then offering pre tax rates
of less than 5.0%, while shareholders in BKI were receiving a grossed up yield of approximately 8%. This
continues to be the case and the additional income that an investment in BKI provides should be a significant
boost for investors.
As you can see by the following graph the BKI grossed up dividend yield is offering a significant higher rate than
the 90 day Bank Bill Rate. The 90 day Bank Bill Rate is a key benchmark interest rate for the Australian money
market and is often used as a base for setting rates on term deposit products.
10
2012 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)
BKI continues to be in a strong financial position with no debt and cash and cash equivalents representing 5.5%
of the total portfolio.
We are confident that our current equity portfolio is well positioned for the long term. It is aimed at generating an
increasing income stream from dividends received which in turn should enable us to continue to distribute
attractive fully franked dividends to BKI shareholders.
Yours sincerely,
Robert Millner
Chairman
Sydney
13 August 2012
2012 Annual Report
11
BKI INVESTMENT
COMPANY LIMITED
DIRECTORS’ REPORT
The Directors of BKI Investment Company Limited (“the Company”, or “BKI”) present the following report on the
Company and controlled entities (“the Group”) for the year ended 30 June 2012.
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 was appointed Non-executive Chairman upon the Company’s formation in October 2003. Mr Millner
has over 28 years experience as a Company Director and extensive experience in the investment industry, and
is currently a Director of the following ASX listed companies:
• Milton Corporation Limited
• New Hope Corporation Limited
• Washington H. Soul Pattinson and Company Limited
• TPG Telecom Limited
• Brickworks Limited
• Australian Pharmaceutical Industries Limited
During the past three years Mr Millner has also served as a Director of the following other ASX listed companies:
• Souls Private Equity Limited
• Choiseul Investments Limited
• Northern Energy Corporation Limited
Special Responsibilities:
• Chairman of the Board
• Chairman of the Investment Committee
• Member of the Remuneration Committee
David Capp Hall, FCA, FAICD – Independent Non-Executive Director
A Non-executive Director since October 2003, and Chair of the Audit Committee since this time, Mr Hall is a
Chartered Accountant with experience in corporate management, finance and as a Company Director, holding
Directorships in other companies for more than 30 years.
Special Responsibilities:
• Chairman of the Audit Committee
• Member of the Remuneration Committee
• Member of the Nomination Committee
12
2012 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)
Alexander James Payne, B.Comm, Dip Cm, FCPA, FCIS, FCIM – Non-Executive Director
A Non-executive Director since October 2003, and a member of the Audit Committee since this time, Mr Payne
is Chief Financial Officer of Brickworks Limited and has considerable experience in finance and investment.
Special Responsibilities:
• Member of the Audit Committee
• Member of the Investment Committee
• Chairman of the Remuneration Committee
• Chairman of the Nomination Committee
Ian Thomas Huntley, BA – Independent Non-Executive Director
Mr Huntley joined the Board as a Non-executive Director in February 2009. 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.
During the past three years Mr. Huntley has served as a Director of the following other ASX listed companies:
• Huntley Investment Company Limited
Special Responsibilities:
• Member of the Audit Committee
• Member of the Investment Committee
• Member of the Remuneration Committee
2. Key Management Personnel
Thomas Charles Dobson Millner, B.Des (Industrial), GDipAppFin, F Fin, GAICD – Chief Executive Officer
Mr Millner joined the Company in December 2008 from Souls Funds Management (SFM). Mr Millner held various
roles with SFM covering research, analysis and business development, and during this time 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 currently a Director of Washington H. Soul Pattinson and Company Limited.
Special Responsibilities:
• Member of the Investment Committee
Jaime Pinto, BComm, CA - Company Secretary (appointed 2 November 2011)
Mr Pinto is a Chartered Accountant with over 20 years experience in both professional practice and in senior
commercial roles across a broad range of industries. Jaime is currently Company Secretary and CFO of a number
of unlisted investment and industrial companies.
2012 Annual Report
13
BKI INVESTMENT
COMPANY LIMITED
DIRECTORS’ REPORT (continued)
3. Principal Activities
Principal activities of the Group are 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 Result before special dividend income increased 9.4% to $27.7m. This strong result was
achieved despite a mixed economic environment over the last year. Net Profit attributable to shareholders rose
marginally to $30.0m, which included $2.3m of special dividends. The 8% increase in ordinary revenue was offset
by a decrease in special dividends in 2012 due to a number of one-off special dividends being received in 2011
including Milton Corporation, Tatts Group, Mac Services, AWB Limited and Choiseul Investments Limited.
5. Review of Operations
Operating expenses in 2012 were $1.0m, in line with the previous year, allowing BKI to maintain a Management
Expense Ratio (MER) of 0.18% (2011: 0.18%).
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 2012 was negative 3.1%, comparing favourably to the
S&P/ASX 300 Accumulation Index which dropped by 7.0% over the same period.
BKI’s Share Price Performance (including the reinvestment of dividends) for the year to 30 June 2012 was 1.5%,
outperforming the S&P/ASX 300 Accumulation Index by 8.5%.
During FY2012 BKI invested approximately $26.5m into the market with major purchases including Westpac
Banking Corporation, National Australia Bank, Wesfarmers Limited and Fleetwood Corporation.
Major divestments from the BKI Investment Portfolio included Bluescope Steel, Echo Entertainment, Transfield
Services, Suncorp Metway Preference Shares, Westpac Preference Shares (WBCPA) and half the position in
Westpac Preference Shares (WBCPB). Additionally, the Orica Step-up Preference Shares were redeemed by
Orica during the year.
6. Financial Position
The net assets of the Group decreased during the financial year by $28.8m to $539.6m.
This movement was driven by a $32.7m decrease (net of tax) in the market value of the investment portfolio.
7. Employees
The Group had one employee as at 30 June 2012 (2011: one).
14
2012 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)
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 Company and the entities that it controls;
ii.
iii.
the results of those operations; or
the state of affairs of the Group in subsequent years.
11. Dividends
There were two dividend payments during the year ended 30 June 2012.
On 31 August 2011, a final total dividend of $16,914,536 (ordinary dividend of 3.0 cents per share and special
dividend of 1.0 cents per share, both fully franked) was paid out of retained profits at 30 June 2011.
On 12 March 2012, an interim ordinary dividend of $13,617,586 (3.2 cents per share fully franked) was paid out
of retained profits at 31 December 2011.
In addition, the Directors have declared a final ordinary dividend of $13,680,523 (3.2 cents per share fully franked)
payable on 30 August 2012.
At 30 June 2012 there are $11,679,000 of franking credits available to the Group (2011: $10,752,000) after
allowing for payment of the final, fully franked ordinary dividend.
12. Environmental Regulations
The Group’s operations are not materially affected by environmental regulations.
2012 Annual Report
15
BKI INVESTMENT
COMPANY LIMITED
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
2012, 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
7
7
7
6
7
7
7
7
14
14
-
13
14
14
-
14
-
3
3
3
-
3
3
3
3
3
3
3
3
3
3
3
1
1
-
1
1
1
-
1
* The sole meeting of the Nomination Committee was held in July 2011. Mr DC Hall was not a member of the Committee at
this time as he was scheduled for re-election as a Director under the Company’s director rotation policy. Subsequent to being
re-elected as a Director at the 2011 AGM Mr Hall was reappointed to the Nomination Committee, and Mr RD Millner and Mr
IT Huntley resigned from the Committee as they are due for re-election as Directors at the 2012 AGM.
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 shares 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.
16
2012 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)
14. Remuneration Report (Audited) (continued)
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.
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 Jaime Pinto.
The aims of the BKI Incentive Scheme are:
1. To promote superior performance at BKI over both the short 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 the 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 Remuneration. The Short
Term Incentive for the Company Secretary is set at 40% of the CEO Incentive.
100% of the Short Term Incentive is initially 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%
2012 Annual Report
17
BKI INVESTMENT
COMPANY LIMITED
DIRECTORS’ REPORT (continued)
14. Remuneration Report (Audited) (continued)
The Short Term Incentive is subject to discretionary Board adjustment for the achievement of an improved MER
and promotion of BKI.
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
(3.1%)
(7.0%)
3.9%
130%
Long Term Incentive
The Long Term Incentive is determined by reference to the 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 Remuneration. Incentives granted prior to
30 September 2011 will be awarded to the CEO after 3 years, provided that BKI’s 3 year Total Shareholder
Returns exceed the S&P/ASX 300 Accumulation Index over the same period. Should that test fail on the day it
will be retested in Years 4 and 5 to reflect the longer term success of previous decisions. Incentives granted after
30 September 2011 will be awarded to the CEO after 4 years, provided that BKI’s 4 year Total Shareholder
Returns exceed the S&P/ASX 300 Accumulation Index over the same period. Should that test fail on the day it
will be retested in Year 5.
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 shares have yet been awarded under the Long Term Incentive Plan. The Company has
accrued the appropriate portion of these future costs in the current year, but will not include the costs in the
disclosed remuneration of the CEO or Company Secretary until the year in which the shares are issued to them.
18
2012 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)
Remuneration Details for the Year Ended 30 June 2012
The following disclosures detail the remuneration of the Directors and the highest remunerated Executives of the Group.
The names and positions held of group Directors and Other 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 Secretary1 (resigned 2 November 2011)
JP Pinto
Company Secretary1 (appointed 2 November 2011)
1 Services provided under contract through Corporate and Administrative Services Pty Limited
There are no other employees of the Group, with Ms L Tcherkezian of Corporate and Administrative Services Pty
Limited appointed an alternate Company Secretary.
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:
Primary
Superannuation
2012
RD Millner
DC Hall
AJ Payne
IT Huntley
Total
2011
RD Millner
DC Hall
AJ Payne
IT Huntley
Total
$
$
58,000
45,000
37,000
40,330
5,220
4,050
3,330
-
180,330
12,600
56,500
43,500
36,000
39,240
5,085
3,915
3,240
-
175,240
12,240
Equity
Compensation
$
Other
Compensation
$
Total
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
63,220
49,050
40,330
40,330
192,930
61,585
47,415
39,240
39,240
187,480
The combined annual payment to all Non-Executive Directors is capped 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.
2012 Annual Report
19
BKI INVESTMENT
COMPANY LIMITED
DIRECTORS’ REPORT (continued)
Other Key Management Personnel:
Primary
$
Superannuation Bonus - Equity
Compensation
$
$
Other
Compensation
$
Total
$
275,725
15,775
-
-
-
-
275,725
15,775
260,867
-
260,867
19,633
-
19,633
57,915
17,375
-
75,290
42,900
17,160
60,060
-
-
-
-
-
-
-
349,415
17,375
-
366,790
323,400
17,160
340,560
2012
TCD Millner
RJ Pillinger
JP Pinto
Total
2011
TCD Millner
RJ Pillinger
Total
There were no retirement allowances provided for the retirement of Non-Executive Directors or Other Key
Management Personnel.
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. Base Remuneration is currently $297,000 per
annum inclusive of superannuation.
Remuneration is reviewed annually by the Remuneration Committee.
Mr J Pinto 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 Other Key
Management Personnel in Shares
As at the date of this report, details of Directors and Other 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
JP Pinto
Number of Shares
7,283,659
240,473
226,665
11,063,445
6,399,797
28,669
15,029
*Common to RD Millner and TCD Millner are 6,230,540 shares held in related companies and trusts in which both
hold beneficial interests.
20
2012 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)
16. Directors and Officers’ Indemnity
The Constitution of the Company provides indemnity against liability and legal costs incurred by Directors and
Officers to the extent permitted by the Corporations Act.
During the year to 30 June 2012, the Group has paid premiums of $38,154 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.
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 2012.
19. Auditor’s Independence Declaration
The Auditor’s Independence Declaration for the year ended 30 June 2012 has been received and can be found
on page 57.
This report is made in accordance with a resolution of the Directors.
Robert D Millner
Director
Sydney
13 August 2012
2012 Annual Report
21
BKI INVESTMENT
COMPANY LIMITED
CORPORATE GOVERNANCE STATEMENT
The Board of BKI Investment Company Limited (the Company, BKI) are committed to achieving and
demonstrating the highest standards of corporate governance. Unless otherwise stated, during the reporting year
the Company has followed the Corporate Governance Principles and Recommendations with 2010 Amendments
(2nd Edition) set by the ASX Corporate Governance Council.
This report summarises the Company’s application of the 8 Corporate Governance Principles and
Recommendations, together with an explanation of the Company’s policy concerning trading in company
securities.
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
Company and controlled entities. The Directors of the Company 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 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.
22
2012 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 STATEMENT (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 Company is to maintain a mix of Directors on the Board from different backgrounds with
complementary 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 Company 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 Company 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 Company.
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 Company.
In relation to Director 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 given their long standing association with the BKI Portfolio the Board
is satisfied that Mr Millner and Mr Payne play an important role in the continued success and performance of
the Group.
2012 Annual Report
23
BKI INVESTMENT
COMPANY LIMITED
CORPORATE GOVERNANCE STATEMENT (continued)
In accordance with the Corporations Act 2001, any member of the Board who has an interest that could conflict
with those of the Company 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 roles of Chair and Chief Executive Officer are not occupied by the same individual.
Recommendation 2.4: The Board should establish a Nomination Committee
The Nomination Committee consists of Directors who are not up for re-election during the year. Below are the
current members of the Committee, effective from the Company’s 2011 Annual General Meeting:
AJ Payne (Chairman)
DC Hall
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 determine whether the majority of the Board act independently
(cid:0) propose candidates for Board vacancies, with consideration given to qualifications, experience, domicile,
and diversity of background
(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 Company 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.
24
2012 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 STATEMENT (continued)
A signed Code has been received from the CEO, Mr TCD Millner and from Mr JP Pinto 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 diversity and disclose the policy or a
summary of that policy. The policy should include requirements for the Board to establish measurable
objectives for achieving gender diversity and for the Board to assess annually both the objectives and progress
in achieving them
The Company has established and disclosed on its website its Diversity Policy. The Company is committed to
creating a workplace environment and culture that:
(cid:0) Is free of discrimination
(cid:0) Is conducive to attracting and retaining people from a broad experience base relevant to the Company
(cid:0) Rewards performance
(cid:0) Provides opportunities that allow individuals to reach their full potential irrespective of background or
difference
(cid:0) Is understanding of each individual’s personal circumstances.
Recommendation 3.3: Companies should disclose in each annual report the measureable objectives for achieving
gender diversity set by the board in accordance with the diversity policy and progress in achieving them
The Board of BKI is committed to appointing employees, Directors and other Officers based on merit, free from
positive or negative bias on any ground including gender.
BKI currently has four Non-executive Directors, one Executive employee (the Chief Executive Officer), and two other
Company Officers (Company Secretaries) appointed on a contract basis through Corporate and Administrative
Services Pty Limited. This minimalist organisational structure, combined with low Director and Executive turnover,
has been a significant driver in the successful establishment of a business model that continues to deliver solid
shareholder returns combined with low investment risk while maintaining a competitive cost structure.
Given the above, the Board has determined that numerical gender targets are not appropriate short-term
objectives for the Company. Rather, the most appropriate initial measurable objectives addressing gender
diversity will be those that ensure BKI implements workplace policies and practices such that when new
employees or Board members are required, the Company will recruit from a diverse pool of potential employees
or Directors, all of whom have skill sets appropriate for the role in question.
The following table outlines the measureable objectives the Company will initially focus on to achieve gender diversity.
Objective
Progress achieved to date
Develop and promote a Diversity Policy that promotes
a corporate culture of diversity
Policy developed, displayed on corporate website, and
distributed to appropriate stakeholders
Update recruitment documents, processes, and
partners to ensure the company always appeals to,
and targets, a diverse pool of potential employees
Performed initial review of existing recruitment
documents and Nomination Committee policies and
procedures
Update internal policies and procedures to reflect
flexible work culture
Commenced review of corporate leave policy
2012 Annual Report
25
BKI INVESTMENT
COMPANY LIMITED
CORPORATE GOVERNANCE STATEMENT (continued)
Recommendation 3.4: Companies should disclose in each annual report the proportion of women employees in
the whole organisation, women in senior executive positions and women on the Board
Role
Director
Executive Employees
Other Employees
Other Officers (Contracted*)
Total Employees and Officers
Female Total
Male Total
Female %
Nil
Nil
Nil
1
1
4
1
Nil
1
6
0%
0%
n/a
50%
14%
* through Corporate and Administrative Services Pty Limited
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
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
26
2012 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 STATEMENT (continued)
(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 and Chief Executive Officer are responsible for disclosure to
analysts, brokers and shareholders, the media and the public.
The Company has written policies and procedures on information disclosure that focus on continuous disclosure
of any information concerning the 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 Group’s 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.
2012 Annual Report
27
BKI INVESTMENT
COMPANY LIMITED
CORPORATE GOVERNANCE STATEMENT (continued)
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.
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 TCD Millner
and Mr JP Pinto 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.
28
2012 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 STATEMENT (continued)
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.
Trading Policy
ASX Listing Rule 12.9 requires that a Company must establish a policy concerning trading in company securities
by Directors, Senior Executives and employees, and release the policy to the market.
The Company has developed a Share Trading Policy which has been fully endorsed by the Board and applies to
all Directors and employees. A copy of this Policy can be found on the Group’s website.
BKI’s policy regarding allowable dealings by Directors, Officers and employees in BKI shares, options and other
securities requires 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
(cid:0) restrict their buying and selling of the Company’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 that contains 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.
29
2012 Annual Report
BKI INVESTMENT
COMPANY LIMITED
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 30 JUNE 2012
Revenue from investment portfolio
Revenue from bank deposits
Other Income
Other Gains
Note
2 (a)
2 (c)
2 (d)
2 (e)
2012
$’000
2011
$’000
27,610
25,414
1,525
2,138
-
623
4
-
Income from operating activities before special investment revenue
29,758
27,556
Operating Expenses
3
(1,037)
(1,046)
Operating Result before income tax expense and special
investment revenue
Income Tax Expense
28,721
26,510
4
(1,005)
(1,169)
Net Operating Result before special investment revenue
27,716
25,341
Special Investment Revenue
2 (b)
2,266
4,557
Net Operating Profit
29,982
29,898
Profit for the year attributable to members of the Company
29,982
29,898
Basic and diluted Earnings Per Share before special
dividend income
Basic and diluted Earnings Per Share after special
dividend income
2012
Cents
2011
Cents
6.51
6.02
7.04
7.10
21
21
This Income Statement should be read in conjunction with the accompanying notes
30
2012 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 COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2012
Profit for the year attributable to members of the Company
Other Comprehensive Income
2012
$’000
2011
$’000
29,982
29,898
Unrealised gains / (losses) on investment portfolio
(46,757)
36,313
Deferred tax benefit / (expense) on unrealised gains/ (losses) on
investment portfolio
Realised losses on investment portfolio
Tax benefit / (expense) relating to realised losses on investment portfolio
Total Other Comprehensive Income
Total Comprehensive Income
14,027
(10,894)
(931)
206
(109)
(85)
(33,455)
25,225
(3,473)
55,123
This Statement of Comprehensive Income should be read in conjunction with the accompanying notes
2012 Annual Report
31
BKI INVESTMENT
COMPANY LIMITED
CONSOLIDATED BALANCE SHEET
AS AT 30 JUNE 2012
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
Note
2012
$’000
2011
$’000
6
7
8
9
10
11
12
13
14
15
16
17
18
24,996
6,185
26
33,900
4,347
19
31,207
38,266
525,483
561,230
5
6
4,200
4,050
529,688
565,286
560,895
603,552
547
96
17
660
233
509
18
760
20,596
20,596
34,395
34,395
21,256
35,155
539,639
568,397
460,080
454,833
46,721
525
32,313
79,451
1,250
32,863
539,639
568,397
This Balance Sheet should be read in conjunction with the accompanying notes
32
2012 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 2012
Share
Capital
$’000
Revaluation
Reserve
$’000
Realised
Capital
Gains
Reserve
$’000
Retained
Profits
$’000
Total
Equity
$’000
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 for the year
Net realised gains 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
Total equity at 1 July 2011
454,833
79,451
1,250
32,863
568,397
Issue of shares, net of cost
5,247
Dividends paid or provided for
Revaluation of investment portfolio
Provision for tax on unrealised losses
Profit for the year
Net realised gains through other
comprehensive income
-
-
-
-
-
-
-
(46,757)
14,027
-
-
-
-
-
-
-
- 5,247
(30,532)
(30,532)
-
-
(46,757)
14,027
29,982
29,982
(725)
-
(725)
Total equity at 30 June 2012
460,080
46,721
525
32,313
539,639
This Statement of Changes in Equity should be read in conjunction with the accompanying notes
2012 Annual Report
33
BKI INVESTMENT
COMPANY LIMITED
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 30 JUNE 2012
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
Note
2012
$’000
2011
$’000
(1,104)
(1,019)
-
4
29,304
29,240
(484)
1,107
1,777
(1,023)
-
-
2,338
(633)
Net cash inflow from operating activities
19(a)
29,577
29,930
Cash flows from investing activities
Payment for investment portfolio
Proceeds from sale of investment portfolio
(27,682)
(31,956)
14,486
9,730
Net cash outflow from investing activities
(13,196)
(22,226)
Cash flows from financing activities
Proceeds from issues of ordinary shares less issue costs
Dividends paid
(9)
-
5(a)
(25,276)
(21,128)
Net cash outflow from financing activities
(25,285)
(21,128)
Net increase / (decrease) in cash held
Cash at the beginning of the year
Cash at the end of the year
(8,904)
(13,424)
33,900
47,324
24,996
33,900
This Cash Flow Statement should be read in conjunction with the accompanying notes
34
2012 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 2012
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 (the Group),
and BKI Investment Company Limited as an individual parent entity. 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.
2012 Annual Report
35
BKI INVESTMENT
COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012 (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 entity 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’.
36
2012 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 2012 (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.
2012 Annual Report
37
BKI INVESTMENT
COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012 (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.
38
2012 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 2012 (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 2012 (“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.
2012 Annual Report
39
BKI INVESTMENT
COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012 (continued)
2. REVENUES
(a) Revenue from investment portfolio
Rebateable dividends:
- other corporations
Non - rebateable dividends:
- other corporations
Distributions:
- other corporations
(b) Special investment revenue
Rebateable dividends - special:
- other corporations
(c) Revenue from bank deposits
Interest received
(d) Other income
Other revenue
(e) Other gains
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
2012
$’000
2011
$’000
25,385
22,308
1,691
2,589
534
27,610
517
25,414
2,266
4,557
1,525
2,138
-
623
623
4
-
-
32,024
32,113
272
8
606
150
1
1,037
301
8
578
156
3
1,046
40
2012 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 2012 (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% (2011:30%)
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 realised (losses) / gains on investment portfolio
Tax calculated at 30% (2011: 30%)
Tax effect of:
- difference between accounting and tax cost bases for capital gains purposes
Total Tax (credit) / 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 2011 of 3.00 cents per share
(2010 final: 2.75 cents per share) fully franked at the tax rate of 30%,
paid on 31 August 2011
Final special dividend for the year ended 30 June 2011 of 1.00 cents per share
(2010 final special: 0.50 cents per share) fully franked at the tax rate 30%,
paid on 31 August 2011
Interim dividend for the year ended 30 June 2012 of 3.20 cents per share
(2011 interim: 3.00 cents per share) fully franked at the tax rate 30%,
paid on 12 March 2012
Total
2012 Annual Report
Consolidated
2012
$’000
2011
$’000
30,987
9,296
31,067
9,320
(8,295)
4
1,005
(931)
(279)
73
799
909
(114)
4
799
(8,060)
(91)
1,169
(109)
(33)
118
1,254
1,281
64
(91)
1,254
12,686
11,511
4,229
2,093
13,617
30,532
12,650
26,254
41
BKI INVESTMENT
COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012 (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
2012
$’000
2011
$’000
25,276
5,256
30,532
21,128
5,126
26,254
17,542
18,001
(5,863)
(7,249)
11,679
10,752
Since the end of the year the Directors have declared a final ordinary dividend for the year ended 30 June 2012
of 3.2 cents per share fully franked at the tax rate of 30% (2011: final ordinary dividend of 3.0 cents per share
and a special dividend of 1.0 cents per share, both fully franked at the tax rate of 30%), payable on 30 August
2012, 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
Outstanding settlements
Other receivable
23,804
1,192
24,996
32,246
1,654
33,900
4,449
212
1,518
6
3,877
464
-
6
6,185
4,347
42
2012 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 2012 (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
2012
$’000
2011
$’000
525,483
561,230
525,483
561,230
19
(14)
5
6
-
(1)
5
19
(13)
6
9
-
(3)
6
49
57
4,094
4,200
211
39
3,800
4,050
2012 Annual Report
43
BKI INVESTMENT
COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012 (continued)
10. NON CURRENT ASSETS - DEFERRED TAX ASSETS (continued)
Movements in deferred tax assets
Transaction costs on equity issues
Accrued expenses
Tax losses
Balance as at 30 June 2011
Transaction costs on equity issues
Accrued expenses
Tax losses
Balance as at 30 June 2012
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
Credited/
(Charged) to
Statement of
(Credited)/
Comprehensive Charged to
Income
$'000
Equity
$'000
(208)
(16)
41
(183)
(162)
18
294
150
-
-
-
-
-
-
-
-
Closing
Balance
$'000
211
39
3,800
4,050
49
57
4,094
4,200
Opening
Balance
$'000
419
55
3,759
4,233
211
39
3,800
4,050
Consolidated
2012
$’000
2011
$’000
547
233
96
509
17
17
17
18
18
18
44
2012 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 2012 (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
2012
$’000
2011
$’000
20,372
34,207
224
188
20,596
34,395
Credited/
(Charged) to
Statement of
(Credited)/
Comprehensive Charged to
Income
$'000
Equity
$'000
Closing
Balance
$'000
-
11,134
34,207
(119)
(119)
-
36
36
-
188
11,134
34,395
(13,835)
20,372
-
224
(13,835)
20,596
Opening
Balance
$'000
23,073
307
23,380
34,207
188
34,395
Revaluation of investment portfolio
Non rebateable dividends receivable and
interest receivable
Balance as at 30 June 2011
Revaluation of investment portfolio
Non rebateable dividends receivable and
interest receivable
Balance as at 30 June 2012
2012 Annual Report
45
BKI INVESTMENT
COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012 (continued)
Consolidated
2012
$’000
2011
$’000
15. SHARE CAPITAL
(a) Issued and paid-up capital
427,516,347 ordinary shares fully paid (2011: 422,863,407)
460,080
454,833
(b) Movement in ordinary shares
Beginning of the financial year
Issued during the year:
- dividend reinvestment plan
End of the financial year
2012
$’000
Number of
Shares
2011
$’000
Number of
Shares
422,863,407
454,833
418,566,158
449,707
4,652,940
5,247
4,297,249
5,126
427,516,347
460,080
422,863,407
454,833
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 2012 net debt was $ Nil (2011: $Nil).
46
2012 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 2012 (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
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
Dividends provided for or paid
Retained profits at the end of the year
Consolidated
2012
$’000
2011
$’000
79,451
(32,730)
54,032
25,419
46,721
79,451
1,250
1,444
(725)
525
(194)
1,250
32,863
29,982
29,219
29,898
(30,532)
(26,254)
32,313
32,863
2012 Annual Report
47
BKI INVESTMENT
COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012 (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:
- depreciation expense
Change in assets and liabilities, net of the effects of purchase of subsidiaries
(Increase) / Decrease in receivables and prepayments
Decrease in deferred tax assets
Increase / (Decrease) in payables
Increase in employee entitlements
Increase / (Decrease) 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, $5,256,000
(2011: $5,126,000) of dividends were paid via the issue of
4,652,940 shares (2011: 4,297,249).
(c) Acquisition of controlled entities
No controlled entities were acquired in 2012 or 2011.
20. AUDITOR’S REMUNERATION
Remuneration of the auditor of the parent entity for:
Auditing the financial report of the Parent and the controlled entities
Consolidated
2012
$’000
2011
$’000
29,982
29,898
1
3
(327)
56
51
(1)
228
(413)
(535)
98
35
5
121
305
29,577
29,930
19
19
19
19
48
2012 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 2012 (continued)
21. EARNINGS PER SHARE
Net Operating Profit
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 and diluted earnings per share before special dividend income (cents)
Basic and diluted earnings per share after special dividend income (cents)
Consolidated
2012
$’000
2011
$’000
29,982
29,982
29,898
29,898
2012
2011
No. ('000)
No. ('000)
425,698
421,079
6.51
7.04
6.02
7.10
22. KEY MANAGEMENT PERSONNEL REMUNERATION
The names and positions held of Group Directors and Other 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
JP Pinto
Position
Non-Executive Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director
Chief Executive Officer
Company Secretary1 (resigned 2 November 2011)
Company Secretary1 (appointed 2 November 2011)
1 Services provided under contract through Corporate and Administrative Services Pty Limited
Details of the nature and amount of each Non-Executive Director’s and Other Key Management Personnel’s
emoluments from the Group in respect of the year to 30 June 2012 have been included in the Remuneration
Report section of the Directors’ Report.
The combined annual payment to all Non-Executive Directors is capped 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.
2012 Annual Report
49
BKI INVESTMENT
COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012 (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 2012, subsidiaries of the Parent were:
Country of Incorporation
Percentage Owned (%)
Brickworks Securities Pty Limited
Pacific Strategic Investments Pty Limited
Huntley Investment Company Pty Limited
Australia
Australia
Australia
2012
100
100
100
2011
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 2012 were:
Directors:
RD Millner
DC Hall
AJ Payne
IT Huntley
Chief Executive Officer
TCD Millner
Company Secretary:
RJ Pillinger1 (resigned 2 November 2011)
JP Pinto1 (appointed 2 November 2011)
1 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
ended 30 June 2012 were $122,100 (2011: $119,405, 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 2012.
50
2012 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 2012 (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 (KMP) or their related
entities:
Shares
2012
RD Millner1
DC Hall
AJ Payne
IT Huntley
TCD Millner1
RJ Pillinger2
JP Pinto3
Total
2011
RD Millner1
DC Hall
AJ Payne
IT Huntley
TCD Millner1
RJ Pillinger
Total
Balance at
1/07/11
6,774,543
240,473
226,665
11,063,445
5,828,678
14,261
0
Granted as
compensation
Net Change
Other
Balance at
30/6/12
484,116
7,258,659
0
0
0
240,473
226,665
11,063,445
36,020
14,408
0
460,000
6,324,698
0
0
28,669
0
24,148,065
50,428
944,116
25,142,609
Balance at
1/07/10
6,252,078
234,460
191,305
11,063,445
10,068
-
17,751,356
Granted as
compensation
Net Change
Other
Balance at
30/6/11
-
-
-
-
35,652
14,261
49,913
522,465
6,774,543
6,013
35,360
240,473
226,665
-
11,063,445
5,782,958
5,828,678
-
14,261
6,343,288
24,148,065
1 Common to RD Millner and TCD Millner are 6,230,540 (2011: 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.
2 Mr Pillinger ceased being a KMP upon his resignation on 2 November 2011.
3 Mr Pinto became a KMP upon his appointment on 2 November 2011.
Directors acquired shares through Dividend Reinvestment Plan or on-market purchase.
There have been no other changes to Directors’ shareholdings during the years ended 30 June 2011 or
30 June 2012.
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.
2012 Annual Report
51
BKI INVESTMENT
COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012 (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 94% (2011: 93%) 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%
(2011: 5%) movement in the net assets before provision for tax on unrealised capital gains at 30 June 2012.
The net asset backing before provision for tax on unrealised capital gains would move by 6.1 cents per share at
30 June 2012 (2011: 6.6 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.
52
2012 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 2012 (continued)
26. MANAGEMENT OF FINANCIAL RISK (continued)
d) Market risk (continued)
At 30 June 2012, the spread of investments is in the following sectors:
Percentage of total investment
Amount
Sector
Financials
Energy
Consumer Staples
Materials
Industrials
Telecommunications Services
Consumer Discretionary
Utilities
Health Care
Property Trusts
Total Investments
Cash and dividends receivable
Total Portfolio
2012
%
35.66%
13.29%
11.62%
9.16%
7.91%
6.20%
5.11%
3.95%
1.18%
0.40%
94.47%
5.53%
100.00%
2011
%
34.35%
15.87%
10.40%
11.89%
7.25%
4.58%
4.52%
3.48%
0.94%
0.34%
93.62%
6.38%
100.00%
Securities representing over 5% of the investment portfolio at 30 June 2012 were:
Company
New Hope Corporation Limited
Commonwealth Bank of Australia
National Australia Bank Limited
BHP Billiton Limited
Westpac Banking Corporation
10.6%
9.0%
8.5%
7.7%
6.0%
41.9%
12.9%
7.7%
7.9%
10.0%
4.6%
43.1%
2012
$’000
2011
$’000
198,342
205,893
73,907
64,610
50,952
44,022
34,481
28,450
21,965
6,539
2,215
525,483
30,740
556,223
59,189
50,265
47,174
43,055
33,554
95,136
62,344
71,274
43,481
27,483
27,105
20,852
5,645
2,017
561,230
38,248
599,478
76,312
46,254
47,112
59,618
27,279
233,237
256,575
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.
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.
2012 Annual Report
53
BKI INVESTMENT
COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012 (continued)
26. MANAGEMENT OF FINANCIAL RISK (continued)
e) Liquidity risk (continued)
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
2012
$’000
2011
$’000
31,207
727,065
758,272
581
226,099
226,680
460,080
71,512
531,592
29,982
29,982
38,266
762,663
800,929
681
239,898
240,579
454,833
105,517
560,350
29,898
29,898
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 2012.
28. CAPITAL AND LEASING COMMITMENTS
The Group has no capital and leasing commitments at 30 June 2012.
29. CONTINGENT LIABILITIES
The Group has no contingent liabilities at 30 June 2012.
30. AUTHORISATION
The Financial Report was authorised for issue on 13 August 2012 by the Board of Directors.
54
2012 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’ DECLARATION
The Directors of BKI Investment Company Limited declare that:
1.
The financial statements and notes, as set out on pages 30 to 54, 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 2012 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 2012.
2.
3.
This declaration is made in accordance with a resolution of the Board of Directors.
Robert D Millner
Director
Sydney
13 August 2012
2012 Annual Report
55
BKI INVESTMENT
COMPANY LIMITED
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 2012, the
statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, 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 and Controlled entities is in accordance with the Corporations Act 2001,
including:
i. giving a true and fair view of the company and consolidated entity’s financial position as at 30 June 2012 and of their performance
for the year ended on that date; and
ii. 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 2012. 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 2012, complies with section 300A
of the Corporations Act 2001.
RUWALD & EVANS
Martin Bocxe
Partner
Level 1, 276 Pitt Street, SYDNEY NSW 2000, 13 August 2012
56
Liability limited by a scheme approved under Professional Standards Legislation
2012 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
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 2012, 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
13 August 2012
Liability limited by a scheme approved under Professional Standards Legislation
2012 Annual Report
57
BKI INVESTMENT
COMPANY LIMITED
ASX ADDITIONAL INFORMATION
1) Equity Holders
At 31 July 2012, there were 11,052 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 410 shares
Votes of Members
Article 5.12 of the Company’s Constitution provides:
No. of Shareholders
825
1,742
1,705
6,220
560
11,052
524
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).
58
2012 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)
The 20 largest holdings of the Parent’s share as at 31 July 2012 are listed below:
Name
Shares Held
%
Washington H. Soul Pattinson & Company Limited
57,870,223
13.54
Huntley Group Investments Pty Limited
8,523,274
Argo Investments Limited
J S Millner Holdings Pty Limited
HSBC Custody Nominees (Australia) Limited
Bougainville Copper Limited
National Nominees Limited
UBS Wealth Management Australia Nominees Pty Limited
Lunicash Super Pty Limited
Huntley Group Investments Pty Limited
T G Millner Holdings Pty Limited
Milton Corporation Limited
K C Perks Investments Pty Limited
D E C Investments Pty Limited
Nulis Nominees (Australia) Limited
The Miller Foundation Ltd
Farjoy Pty Ltd
Mrs Patricia Roberta Huntley
One 478 Pty Ltd
Willpower Investments Pty Limited
8,311,237
4,365,288
4,156,596
3,875,709
3,670,872
1,739,499
1,700,000
1,529,360
1,153,442
1,147,375
1,135,187
1,056,920
1,019,227
1,000,000
1,000,000
902,763
900,000
885,401
2012 Annual Report
1.99
1.94
1.02
0.97
0.91
0.86
0.41
0.40
0.36
0.27
0.27
0.27
0.25
0.24
0.23
0.23
0.21
0.21
0.21
59
BKI INVESTMENT
COMPANY LIMITED
ASX ADDITIONAL INFORMATION (continued)
2) Substantial Shareholders
As at 31 July 2012 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 Limited1
53,561,922
13.68%
1 Details included on substantial shareholder notice dated 19 February 2009
3) Other Information
• There is no current on-market buy-back in place.
• There were 87 (2011: 135) transactions in securities undertaken by the Group and the total brokerage paid or
accrued during the year was $102,768 (2011: $120,510)
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
30/06/12
0.69%
0.71%
0.56%
0.46%
0.46%
0.31%
0.19%
0.18%
0.18%
Chart showing MER by year:
60
2012 Annual Report
BKI INVESTMENT
COMPANY LIMITED