Annual Report 2015
for year ended 30 June 2015
BKI INVESTMENT
COMPANY LIMITED
ABN 23 106 719 868
BKI INVESTMENT
COMPANY LIMITED
CORPORATE DIRECTORY
Directors
Robert Dobson Millner
David Capp Hall AM
Alexander James Payne
Ian Thomas Huntley
Non-Executive Chairman
Independent Non-Executive Director
Non-Executive Director
Independent Non-Executive Director
Chief Executive Officer
Thomas Charles Dobson Millner
Senior Investment Analyst
William Culbert
Company Secretaries
Jaime Pinto
Larina Tcherkezian (Alternate)
Registered Office
Level 2
160 Pitt Street Mall,
Sydney NSW 2000
Telephone:
Facsimile:
(02) 9210 7000
(02) 9210 7099
Postal Address:
GPO Box 5015,
Sydney NSW 2001
Auditors
MGI Sydney Assurance Services Pty Ltd
5th Floor, 6 O’Connell 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
2015 Annual Report
Contents
Page
Financial Highlights
List of Securities as at 30 June 2015
Group Profile
Chairman’s Address
Directors’ Report
Consolidated Income Statement
Consolidated Statement of Other Comprehensive Income
Consolidated Statement of Financial Position
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
2
3
5
6
10
20
21
22
23
24
25
43
44
46
47
1
2015 Annual ReportBKI INVESTMENT COMPANY LIMITED FINANCIAL HIGHLIGHTS
n Revenue Performance:
Total Income - Ordinary
Total Income - Special
Total Revenue from Ordinary Activities
n Profits:
Net Operating Result before special dividend income
Dividend Income - Special
Net Profit from ordinary activities after tax attributable
to shareholders
Net Profit attributable to shareholders
n Portfolio:
% Change
$’000
Up
Up
Up
Up
Up
Up
Up
15.6%
39.8%
16.5%
13.7%
39.8%
14.8%
14.8%
to
to
to
to
to
to
to
44,568
2,095
46,663
40,876
2,095
42,971
42,971
Total Portfolio Value (including cash & receivables)
Up
7.6%
to
918,264
n Earnings Per Share:
Basic Earnings Per Share before special dividend income
Basic Earnings Per Share after special dividend income
n Dividends:
Interim
Final
Full Year Total
Cents
3.5%
4.5%
to
to
7.40
7.78
Cents
2.9%
4.3%
3.6%
to
to
3.55
3.65
7.20
Up
Up
Up
Up
Up
n Dividend History (cents per share):
30 June 2004* 2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Interim
Final
Special
-
2.10
2.50
2.60
3.00
3.00
2.50
3.00
3.20
3.25
2.00
2.20
2.50
2.70
3.00
3.00
2.75
3.00
3.20
3.40
-
-
1.00
-
-
-
1.00
1.00
-
0.50
3.45
3.50
-
3.55
3.65
-
Total
2.00
4.30
6.00
5.30
6.00
6.00
6.25
7.00
6.40
7.15
6.95
7.20
* The Company listed on the ASX on 12 December 2003, no interim dividend is applicable for this financial year.
All ordinary and special dividends paid by BKI Investment Company Limited (“BKI”) since listing on the Australian
Stock Exchange have been fully franked.
n Net Tangible Asset (NTA) History:
30 June
2004
2005
2006
2007
2008 2009
2010
2011
2012
2013
2014
2015
NTA Before Tax
$1.08 $1.28 $1.43 $1.69 $1.52 $1.22 $1.32 $1.42 $1.30 $1.52 $1.63 $1.65
NTA After Tax
$1.06 $1.20 $1.32 $1.51 $1.41 $1.19 $1.27 $1.34 $1.26 $1.42 $1.51 $1.53
2
2015 Annual ReportBKI INVESTMENTCOMPANY LIMITED
FINANCIAL HIGHLIGHTS (continued)
Securities Held and their Market Value as at 30 June 2015
Stock
Financials
Commonwealth Bank
National Australia Bank
Westpac Banking Corporation
ANZ Banking Group
IAG Limited
Suncorp Group
ASX Limited
Bank of Queensland
Bendigo & Adelaide Bank
AMP Limited
Milton Corporation
Perpetual Limited
Macquarie Group
IOOF Holdings
Equity Trustees
Energy
New Hope Corporation
Woodside Petroleum
Santos Limited
Caltex Australia
Industrials
Transurban Group
Brambles Limited
Sydney Airport
Qube Holdings
Lindsay Australia
SEEK Limited
MaxiTRANS Industries
Skilled Group
Salmat Limited
Consumer Discretionary
Invocare Limited
ARB Corporation
Tatts Group Limited
Crown Resorts
Fairfax Media
G8 Education Limited
Securities
Held
Market
Value
($’000)
Portfolio
Weight
%
1,006,400
2,538,540
2,093,656
1,326,500
3,157,370
1,158,000
325,500
810,000
838,000
1,614,813
2,055,810
179,310
106,223
563,594
162,961
14,810,452
432,084
611,500
91,950
2,073,205
1,045,576
1,718,297
3,400,000
16,341,631
457,500
2,800,000
644,826
1,089,951
1,358,474
945,447
2,489,000
150,574
2,100,000
234,263
85,675
84,559
67,311
42,713
17,618
15,552
12,987
10,344
10,274
9,721
9,251
8,671
8,647
5,067
3,323
9.43%
9.31%
7.41%
4.70%
1.94%
1.71%
1.43%
1.14%
1.13%
1.07%
1.02%
0.95%
0.95%
0.56%
0.37%
391,713
43.12%
27,992
14,790
4,788
2,929
50,499
19,281
11,083
8,557
7,990
7,354
6,432
1,106
1,096
785
63,684
16,438
12,319
9,259
1,837
1,712
764
42,328
3.08%
1.63%
0.53%
0.32%
5.56%
2.12%
1.22%
0.94%
0.88%
0.81%
0.71%
0.12%
0.12%
0.09%
7.01%
1.81%
1.36%
1.02%
0.20%
0.19%
0.08%
4.66%
3
2015 Annual ReportBKI INVESTMENT COMPANY LIMITED
FINANCIAL HIGHLIGHTS (continued)
Securities Held (continued):
Stock
Consumer Staples
Wesfarmers Limited
Woolworths Limited
Coca-Cola Amatil
GrainCorp Limited
Health Care
Ramsay Health Care
Primary Health Care
Sonic Healthcare
Regis Healthcare
Materials
BHP Billiton
Brickworks Limited
Rio Tinto Limited
Alumina Limited
Property Trusts
Westfield Corporation
Scentre Group
Telecommunications Services
Telstra Corporation
TPG Telecom
Utilities
APA Group
AGL Energy Limited
Origin Energy Limited
TOTAL PORTFOLIO
Investment Portfolio
Trading Portfolio
Total Portfolio
Cash and dividends receivable
TOTAL INVESTMENT ASSETS
Securities
Held
Market
Value
($’000)
Portfolio
Weight
%
974,480
971,000
1,230,000
93,444
228,000
2,474,500
570,167
650,428
38,034
26,178
11,255
798
76,265
14,015
12,471
12,184
3,356
42,027
1,459,443
436,209
49,562
370,000
39,478
6,020
2,664
566
48,728
233,157
290,514
2,126
1,089
3,216
8,740,000
4,420,000
53,664
39,647
93,311
3,414,452
1,247,207
12,000
28,135
19,394
144
47,673
4.19%
2.88%
1.24%
0.09%
8.40%
1.55%
1.37%
1.34%
0.37%
4.63%
4.35%
0.66%
0.29%
0.06%
5.36%
0.23%
0.12%
0.35%
5.91%
4.36%
10.27%
3.10%
2.13%
0.02%
5.25%
859,443
94.61%
858,877
566
859,443
49,000
908,443
94.55%
0.06%
94.61%
5.39%
100.00%
The Group is a substantial shareholder in accordance with the Corporations Act 2001 of Lindsay Australia
Limited, holding 5.75% of the issued capital as at 30 June 2015. The Group holds less than 5% of the issued
capital in, and is therefore not a substantial shareholder of, all other investee corporations listed above.
4
2015 Annual ReportBKI INVESTMENTCOMPANY LIMITED
GROUP PROFILE
BKI Investment Company Limited (“BKI” or “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.
BKI shares were listed on the Australian Stock Exchange Limited from 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
With respect to prudent business practices, and ensuring the business retains sufficient working capital to allow
the achievement of the Group’s Corporate Objectives and Business Strategy, the Group will pay the maximum
amount of realised profits after tax for that year to shareholders as fully franked dividends to the extent permitted
by the Corporations Act and the Income Tax Assessment Act.
Ordinary dividends will be declared by the Board of Directors out of the Company’s Net Operating Result, after
tax but before special investment revenue.
In circumstances where the Group accumulates sufficient special investment revenue after ensuring the business
retains sufficient working capital in accordance with its capital management objectives, the Board will consider
declaring special fully franked dividends to the extent permitted by the Corporations Act and the Income Tax
Assessment Act.
In circumstances where the Group generates sufficient qualifying capital gains, LIC Gains will be distributed to
shareholders to the extent permitted by the Corporations Act and the Income Tax Assessment Act.
Management
The Group has an internal portfolio management function comprising the CEO, Mr Tom Millner and Senior
Investment Analyst, Mr William Culbert.
The Group also engages Corporate & Administrative Services Pty Ltd to provide accounting, company secretarial
and administrative services. These services are overseen by the BKI Company Secretary, Mr Jaime Pinto.
5
2015 Annual ReportBKI INVESTMENT COMPANY LIMITED CHAIRMAN’S ADDRESS
Dear Shareholders,
I am pleased to enclose the 12th Annual Report of BKI Investment Company Limited (BKI) for the year to 30 June 2015.
Result Highlights
We’ve been able to deliver another solid result for our shareholders in a market dominated by volatility and
uncertainty. Net Operating Result before special dividend income increased 14% to $40.9m, while Basic Earnings
per Share before special dividend income increased 4% to 7.40cps. Special dividend income for the year totalled
$2.1m, taking Basic Earnings per Share after special dividend income to 7.78cps, up 5% from last year.
BKI’s improved result was mainly driven by higher dividends received from BHP Billiton, Woodside Petroleum,
APA Group, Commonwealth Bank, Transurban Limited, Suncorp Group, Westpac Bank, ANZ Bank, ASX Limited,
Wesfarmers Limited and Macquarie Bank. Lower contributions were received from New Hope Corporation, ALS
Limited, Salmat Limited and Coca Cola Amatil.
BKI also received special dividend income from ARB Corporation, Suncorp Group, New Hope Corporation,
Wesfarmers Limited and Milton Corporation. These special dividends helped lift Net Profit attributable to
shareholders by 15% to $43.0m, against the previous year.
We’ll continue to look through the short term noise and keep investing for the long term, through profitable
dividend paying companies that we understand and are supported by a long term thematic. We will continue to
invest our shareholders funds with a clear focus on generating an increasing income stream for distribution as
fully franked dividends.
45
40
35
30
25
20
15
10
5
0
s
n
o
i
l
l
i
M
$
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Above: Net Operating Result by financial year end 30 June ($millions)
6
2015 Annual ReportBKI INVESTMENTCOMPANY LIMITED
CHAIRMAN’S ADDRESS (continued)
Dividends
Fully franked Final Ordinary Dividend was 3.65cps, up 4% from last year. Full Year Ordinary Dividends totalled
7.20cps, up from 6.95cps in FY2014.
BKI’s Dividend Reinvestment Plan (DRP) will be maintained, offering shareholders the opportunity to acquire
further ordinary shares. The DRP will not be offered at a discount. The DRP price will be 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 5 trading days after, but not including, the Record Date (Friday 7 August 2015).
The last day for shareholders to nominate their participation in the DRP is Monday 10 August 2015.
1.00
5.00
5.30
6.00
6.00
1.00
5.25
0.50
6.65
1.00
6.00
6.40
6.95
7.20
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
4.30
2.00
2004
2005
2006
2007 2008
2009
2010
2011 2012
2013
2014
2015
Ordinary Dividends
Special Dividends
Above: Fully franked Interim and Final dividends declared (cents per share)
MER
BKI’s Board & Management are shareholders in BKI. We invest for the long term and do not charge external
portfolio management or performance fees. We focus on creating wealth for all shareholders by keeping costs
low and increasing fully franked dividends and capital growth. BKI has ample franking credits to ensure dividends
are fully franked into the future.
0.80%
0.70%
0.60%
0.50%
0.40%
0.30%
0.20%
0.10%
0.18%
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Above: Historical MER achieved by BKI.
7
2015 Annual ReportBKI INVESTMENT COMPANY LIMITED CHAIRMAN’S ADDRESS (continued)
Performance
BKI’s Total Shareholder Returns (including the reinvestment of dividends) for the year to 30 June 2015 was 5.4%,
compared to the S&P/ASX 300 Accumulation Index which returned 5.6% over the same period. BKI’s Total
Shareholder Returns for 5 years and 10 years have outperformed the Index by 3.8% per annum and 2.6% per
annum respectively.
BKI’s 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 2015 was 5.6%, in line with the S&P/ASX 300
Accumulation Index.
BKI Performance
as at 30 June 2015
1 Year
3 Yrs
(pa)
5 Yrs
(pa)
7 Yrs
(pa)
10 Yrs
(pa)
S&P/ASX 300 ACC INDEX (XKOAI)
BKI Total Shareholder Returns (TSR)
BKI TSR Outperformance V’s XKOAI
BKI Portfolio Performance
BKI Portfolio Outperformance V’s XKOAI
5.6%
5.4%
-0.2%
5.6%
0.0%
14.7%
9.5%
5.1%
18.2%
13.3%
10.0%
3.5%
13.0%
3.8%
9.4%
-1.7%
-0.1%
4.9%
5.9%
0.8%
6.9%
9.5%
2.6%
7.6%
0.7%
The performance figures above exclude the value of franking credits passed on by BKI to shareholders.
The following chart shows BKI’s Total Shareholder Returns including Franking Credits. The S&P/ASX 300
Accumulation Index is franked to 80%.
BKI’s Total Shareholder Returns for 5 years and 10 years have outperformed the Index by 4.3% per annum and
3.0% per annum respectively.
20.5%
16.5%
15.7%
7.3% 7.1%
7.0%
8.8%
11.4%
12.3%
11.8%
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
1 Year
3 Years pa
5 Years pa
7 Years pa
10 Years pa
BKI Total Shareholder Returns
S&P/ASX 300 ACC Index
Above: BKI Total Shareholder Returns Including Franking Credits as at 30 June 2015
Portfolio Movements
BKI deployed approximately $107m into the market over FY2015, offset by sales of approximately $57m. Major
investments during the year included National Australia Bank, APA Group, Sydney Airports, Transurban Group,
Qube Logistics, Santos Limited, Wesfarmers Limited, Lindsay Australia and ASX Limited.
A new position in Regis Healthcare was also established during the year.
The main disposals included Toll Holdings, ALS Limited, DUET Group, GWA Group, South32 Limited, Healthscope
Limited, Medibank Private, UGL Limited, Arrium Limited and Seven West Media.
8
2015 Annual ReportBKI INVESTMENTCOMPANY LIMITED
CHAIRMAN’S ADDRESS (continued)
Outlook
Fiscal 2016 will be another interesting year for equity markets with the low interest rate environment in Australia
expected to continue. Given this, the most sought-after equity investments are likely to be those companies
offering quality dividend yields. Further opportunities exist to obtain sustainable income outside of cash and fixed
interest with the dividend yield of the S&P/ASX300 Index alone forecast at 4.9% in FY2016. However, for many
companies, the ability to continually offer this high income stream to yield motivated shareholders is becoming
increasingly challenging.
In many sectors of the economy, company revenue growth has been flat for a number of years. Managers have
been forced to focus on cutting expenses to ensure they deliver increased dividends. However, there has been
a lack of growth in earnings in this period. To continually increase dividend distributions, payout ratios of the
S&P/ASX 300 Index have grown from 59% in FY2010 to an estimated 75% for FY2015.
59%
80%
70%
60%
50%
40%
30%
20%
75%
Dividend Payout Ratios
S&P/ASX 300
Resources
Banks
2007
2008
2009
2010
2011
2012
2013
2014
2015e
This cost out strategy has been appropriate in recent years, but it’s the next phase where investors need to be
careful. BKI’s strict investment process ensures we don’t chase investments with high, unsustainable payout
ratios or high gearing levels. We become concerned when companies are not reinvesting back into their business
for future growth or can’t afford to service their debt.
When companies need to address their lack of investment or high debt levels, something has to give and it’s
usually the dividend that goes first. With this in mind BKI will be taking a cautious approach to the next year. We
will continue to invest as we always have done, with a focus on the companies which are well managed and
profitable. We prefer to buy stocks that have strong dividend growth but we won’t be chasing stocks offering
high yields that we don’t think are sustainable.
BKI remains in a strong financial position with no debt, and cash and cash equivalents (including dividends
receivable) representing 5.4% of the total portfolio.
Yours sincerely,
Robert Millner
Chairman
Sydney
4 August 2015
9
2015 Annual ReportBKI INVESTMENT COMPANY LIMITED DIRECTORS’ REPORT
The Directors of BKI Investment Company Limited (“the Company”, or “BKI”) present the following report on the
Company and its controlled entities (“the Group”) for the year to 30 June 2015.
1. Directors
The following persons were Directors since the start of the financial year and up to the date of this report:
Robert Dobson Millner, FAICD – Non-Executive Director and Chairman (appointed 17 October 2003)
Mr Millner was appointed Non-executive Chairman upon the Company’s formation in October 2003. Mr Millner
has over 30 years experience as a company director and extensive experience in the investment industry, and is
currently a director of the following listed companies:
K Washington H Soul Pattinson and Company Limited (appointed 1984, Chairman since 1998)
K New Hope Corporation Limited (appointed 1995, Chairman since 1998)
K Brickworks Limited (appointed 1997, Chairman since 1999)
K Milton Corporation Limited (appointed 1998, Chairman since 2002)
K Apex Healthcare Berhad (Appointed 2000)
K Australian Pharmaceutical Industries Limited (Appointed 2000)
K TPG Telecom Limited (appointed 2000)
During the past three years Mr Millner has also served as a Director of the following ASX listed companies:
K Exco Resources Limited (company delisted January 2013)
Special Responsibilities:
K Chairman of the Board
K Chairman of the Investment Committee
K Member of the Remuneration Committee
David Capp Hall, AM, FCA, FAICD – Independent Non-Executive Director (appointed 17 October 2003)
Mr Hall was appointed a Non-executive Director and Chair of the Audit Committee upon the Company’s formation
in October 2003. 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:
K Chairman of the Audit Committee
K Member of the Remuneration Committee
K Member of the Nomination Committee
Alexander James Payne, B.Comm, Dip Cm, FCPA, FCIS, FCIM – Non-Executive Director
(appointed 17 October 2003)
Mr Payne was appointed a Non-executive Director upon the Company’s formation in October 2003, and has
been a member of the Audit Committee since then. Mr Payne is Chief Financial Officer of Brickworks Limited
and has considerable experience in finance and investment.
Special Responsibilities:
K Member of the Audit Committee
K Member of the Investment Committee
K Chairman of the Remuneration Committee
K Member of the Nomination Committee
10
2015 Annual ReportBKI INVESTMENTCOMPANY LIMITED DIRECTORS’ REPORT (continued)
Ian Thomas Huntley, BA – Independent Non-Executive Director (appointed 10 February 2009)
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.
Special Responsibilities:
K Member of the Investment Committee
K Member of the Remuneration Committee
K Member of the Audit 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 and PM Capital Global
Opportunities Fund Limited, providing him with additional insight into Australian and global investment markets.
Special Responsibilities:
K Member of the Investment Committee
Jaime Pinto, BComm, CA – Company Secretary
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 of Quickstep
Holdings Limited (ASX:QHL), and is Company Secretary and CFO of a number of unlisted investment and
industrial companies.
3. Meetings of Directors
The numbers of meetings of the Board of Directors and each Board Committee held during the year to 30 June
2015, and the numbers of meetings attended by each Director were:
Board
Investment
Audit
Remuneration
Nomination*
Attended
Eligible Attended
to attend
Eligible
to attend
Attended Eligible
to attend
Attended Eligible
to attend
Attended
Eligible
to attend
RD Millner 7
7
AJ Payne
7
DC Hall
7
IT Huntley
7
7
7
7
14
15
-
15
15
15
-
15
-
3
3
3
-
3
3
3
2
2
2
2
2
2
2
2
1
1
-
1
1
1
-
1
* The sole meeting of the Nomination Committee was held in July 2014. 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 2014 AGM Mr DC Hall was reappointed to the
Committee, and Mr RD Millner and Mr IT Huntley resigned from the Committee as they are due for re-election
as Directors at the 2015 AGM.
11
2015 Annual ReportBKI INVESTMENT COMPANY LIMITED
DIRECTORS’ REPORT (continued)
4. 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 were no significant changes in the nature of those activities during the year.
5. Operating Results
Net Operating Result before special dividend income increased 14% to $40.9m, while Basic Earnings per Share
before special dividend income increased 4% to 7.40cps. Special dividend income for the year totalled $2.1m,
taking Basic Earnings per Share after special dividend income to 7.78cps, up 5% from last year.
BKI’s improved result was mainly driven by higher dividends from BHP Billiton, Woodside Petroleum, APA
Group, Commonwealth Bank, Transurban Limited, Suncorp Group, Westpac Bank, ANZ Bank, ASX Limited,
Wesfarmers and Macquarie Bank. Lower contributions were received from New Hope Corporation, ALS Limited,
Salmat Limited and Coca Cola Amatil.
BKI also received special dividend income from ARB Corporation, Suncorp Group, New Hope Corporation,
Wesfarmers Limited and Milton Corporation. These special dividends helped lift the Net Profit attributable to
shareholders by 15% to $43.0m (2014:$37.4M).
6. Review of Operations
Operating expenses for the full year were $1.61m, an increase of $0.36m on FY2014. This, in combination
with an 8% increase in the Total Portfolio Value from 30 June 2014, resulted in BKI’s MER increasing to 0.18%
(2014: 0.17%).
BKI’s Total Shareholder Return (including the reinvestment of dividends) for the year to 30 June 2015 was 5.4%,
underperforming the S&P/ASX 300 Accumulation Index by 0.2%. BKI’s Total Shareholder Returns for 5 years
and 10 years outperformed the Index by 3.8% per annum and 2.6% per annum respectively.
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 2015 was 5.6%, compared to the S&P/ASX 300
Accumulation Index which returned 5.6% over the same period.
During the year BKI successfully completed a Share Purchase Plan (SPP), raising $47.8m at $1.655 per share.
BKI deployed funds of approximately $107 into the market over FY2015, offset by sales of approximately $57m.
Major investments during the year included National Australia Bank, APA Group, Sydney Airports, Transurban
Group, Qube Logistics, Santos Limited, Wesfarmers Limited, Lindsay Australia and ASX Limited. A new position
in Regis Healthcare was also established.
Main disposals included Toll Holdings, ALS Limited, DUET Group, GWA Group, South32 Limited, Healthscope
Limited, Medibank Private, UGL Limited, Arrium Limited and Seven West Media.
7. Financial Position
Net assets of the Group increased during the financial year by $61.8 million to $853.2 million. This movement
was driven by the $47.8 million raised in the SPP in August 2014.
8. Employees
The Group has two employees as at 30 June 2015 (2014: two).
12
2015 Annual ReportBKI INVESTMENTCOMPANY LIMITED DIRECTORS’ REPORT (continued)
9. 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.
10. Likely Developments and Expected Results
The operations of the Group will continue with planned long term investments in Australian equities and fixed
interest securities. Neither the expected results of those operations nor the strategy for particular investments
have been included in this report as, in the opinion of the Directors, this information would prejudice the interests
of the Group if included.
11. 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. the results of those operations; or
iii. the state of affairs of the Group in subsequent years.
12. Dividends
There were two dividend payments made during the year to 30 June 2015:
K On 28 August 2014, a final total dividend of $19,359,186 (ordinary dividend of 3.50 cents per share fully
franked) was paid out of retained profits at 30 June 2014.
K On 26 February 2015, an interim total dividend of $19,698,078 (ordinary dividend of 3.55 cents per share,
fully franked) was paid out of retained profits at 31 December 2014.
In addition, the Directors declared a final ordinary dividend of 3.65 cents per share fully franked payable on
27 August 2015.
At 30 June 2015 there are $13,847,692 of franking credits available to the Group (2014: $13,122,959) after
allowing for payment of the final, fully franked ordinary dividend.
13. Environmental Regulations
The Group’s operations are not materially affected by environmental regulations.
14. 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 2015, the Group paid a premium of $30,000 in respect of an insurance contract
to insure each of the officers against all liabilities and expenses arising as a result of work performed in their
respective capacities.
13
2015 Annual ReportBKI INVESTMENT COMPANY LIMITED DIRECTORS’ REPORT (continued)
15. Proceedings on Behalf of the 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.
16. Non-audit Services
No non-audit services were provided by and no fees for non-audit services were paid to the external auditor, MGI
Sydney Assurance Services Pty Limited (“MGI Sydney”), during the year to 30 June 2015.
17. Auditor Rotation
In accordance with section 324DAA of the Corporations Act 2001 (“the Act”) and the recommendation of the BKI
Audit Committee, the Board of BKI has granted approval for Martin Boxce of MGI Sydney (formerly Ruwald +
Evans) to play a significant role in the audit of BKI for an additional 2 successive financial years to 30 June 2015.
Approval is so granted as the BKI Board is satisfied that retaining MGI Sydney will maintain the quality of the audit
provided to the company; and will not give rise to a conflict of interest situation (as defined in section 324CD of
the Act). Reasons supporting this decision include:
K BKI will retain the right to reassess the appointment at any time;
K MGI Sydney has a number of independent registered auditors available to undertake the audit of BKI;
K MGI Sydney does not provide any services to BKI other than audit services;
K The existing independence and service metrics put in place by MGI Sydney and BKI are sufficient to ensure
that auditor independence will not be diminished by such an extension.
18. Auditor’s Independence Declaration
The Auditor’s Independence Declaration for the year to 30 June 2015 is on page 46.
19. 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:
SHAREHOLDINGS
Name
RD Millner*
DC Hall
AJ Payne
IT Huntley
TCD Millner*
JP Pinto
Number of Shares
8,484,091
277,970
286,194
11,224,980
7,624,640
50,802
* Common to RD Millner and TCD Millner are 7,231,771 shares (2014: 7,231,771) held in related companies and
trusts in which both beneficial interests.
14
2015 Annual ReportBKI INVESTMENTCOMPANY LIMITED DIRECTORS’ REPORT (continued)
20. Corporate Governance Statement
BKI’s Corporate Governance Statement can be found on the Company’s website at the following address:
http://bkilimited.com.au/about-us/corporate-governance/#statement
21. 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, including performance
incentives, for the Directors themselves, the Chief Executive Officer, the Senior Investment Analyst and the
Company Secretary. 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 and
other Key Executives of the Group is as follows:
K The remuneration policy is developed by the Remuneration Committee and approved by the Board after
professional advice is sought from independent external consultants.
K All Key Management Personnel and other Key Executives receive a base salary or fee, superannuation and
performance incentives.
K Performance incentives are only paid once predetermined key performance indicators have been met.
K Incentives paid in the form of shares are intended to align the interests of the Key Management Personnel and
other Key Executives with those of the shareholders.
K The Remuneration Committee reviews the remuneration packages of Key Management Personnel and other
Key Executives annually by reference to the Group’s performance, Executive performance and comparable
information from industry sectors.
The performance of Key Management Personnel and other Key Executives is measured against relative market
indices and financial and strategic goals approved by the Board and as agreed with each Executive. Performance
is measured on an ongoing basis using management reporting tools. Performance for the assessment of
incentives is performed annually, 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 and other Key Executives 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.
15
2015 Annual ReportBKI INVESTMENT COMPANY LIMITED DIRECTORS’ REPORT (continued)
Performance-based Remuneration
BKI has established a Short Term and a Long Term Incentive Scheme. The participants in this scheme are the
CEO, Mr Thomas Millner, the Senior Investment Analyst (SIA), Mr William Culbert, and the Company Secretary,
Mr Jaime Pinto. Mr Thomas Millner and Mr Jaime Pinto are classified as Key Management Personnel, whereas
Mr William Culbert is classified as an Other Key Executive.
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 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 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. The value of the Short Term
Incentive for the SIA is calculated as 10% of SIA Base Remuneration.
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%
The Short Term Incentive is subject to discretionary Board adjustment for the achievement of improved
Management Expense Ratio and promotion of BKI.
The following table summarises performance for the year to 30 June 2015 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
5.6%
5.6%
Equal to Index
100%
Given the above performance, the vesting criteria for the 2015 Financial Year Short Term Incentives were satisfied,
and subsequent to 30 June 2015 the Company purchased on market 51,577 shares on behalf of executives.
16
2015 Annual ReportBKI INVESTMENTCOMPANY LIMITED
DIRECTORS’ REPORT (continued)
Long Term Incentive
The Long Term Incentive is determined by reference to annual Total Shareholder Returns compared to the S&P/
ASX 300 Accumulation Index. Total Shareholder Returns are based on the change in BKI Share Price and include
the reinvestment of dividends.
For the CEO the Long Term Incentive is calculated on 25% of the base remuneration of the CEO. All outstanding
incentives granted are to 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
is to be retested in Year 5.
For the Company Secretary, the Long Term Incentive is to be set at 40% of the CEO Long Term Incentive and
subject to the same vesting conditions.
For the SIA, the Long Term Incentive is calculated on 15% of the Base Remuneration of the SIA, and subject to
the same vesting conditions as the CEO Long Term Incentive.
The Long Term Incentive Scheme is to be paid by way of BKI shares purchased on market by the Company
should the incentive targets be met. The Company has accrued as an expense in 2015FY the appropriate portion
of these future costs, and has included these costs in the disclosed remuneration of the CEO and Company
Secretary.
No outstanding Long Term Incentives granted by the Company became eligible for vesting as at 30 June 2015.
No outstanding Long Term Incentives granted by the Company became eligible for vesting between 1 July 2015
and the date of this report.
During the 2015 financial year the Company purchased on market 60,033 shares on behalf of executives in
satisfaction of rights for the period to 30 June 2014 that satisfied the required performance criteria.
The following table summarises movements in Long Term Incentives granted by the Company that have not
vested as at the date of this report:
Incentive Issue
Issue Number of Value of
Rights
Date
Granted
Initial
Grant
Initial
Vesting
Date
Expiry
Date
Number Number of
of Rights
Vested/ Yet to Vest/
Lapsed
Lapse
Rights
J Pinto 2012 LTI
13/12/2011 18,010
$21,450 12/12/2015 11/12/2016
T Millner 2013 LTI 1/07/2012 64,230
$74,250 30/06/2016 30/06/2017
J Pinto 2013 LTI
1/07/2012 25,692
$29,700 30/06/2016 30/06/2017
T Millner 2014 LTI 1/07/2013 54,996
$76,500 30/06/2017 30/06/2018
J Pinto 2014 LTI
1/07/2013 21,998
$30,600 30/06/2017 30/06/2018
W Culbert 2014 LTI 1/12/2013 12,847
$20,075 30/11/2017 30/11/2018
T Millner 2015 LTI 1/07/2014 46,363
$76,500 30/06/2018 30/06/2019
J Pinto 2015 LTI
1/07/2014 18,545
$30,600 30/06/2018 30/06/2019
W Culbert 2015 LTI 1/07/2014 20,904
$34,493 30/06/2018 30/06/2019
-
-
-
-
-
-
-
-
-
18,010
64,230
25,692
54,996
21,998
12,847
46,363
18,545
20,904
Rights granted under the Short Term and a Long Term Incentive Scheme do not carry an entitlement to receive
dividends.
17
2015 Annual ReportBKI INVESTMENT COMPANY LIMITED
DIRECTORS’ REPORT (continued)
Remuneration Details for the Year to 30 June 2015
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
TCD Millner
JP Pinto
Position
Non-Executive Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director
Chief Executive Officer
Company Secretary1
1 Services provided under contract through Corporate & Administrative Services Pty Limited
Mr William Culbert was appointed as Senior Investment Analyst in December 2013. Mr Culbert is not considered
to be a member of Key Management Personnel.
Details of the nature and amount of each Non–Executive Director’s and Other Key Management Personnel’s
emoluments from the Parent and its controlled entities in respect of the year to 30 June were:
Directors:
2014
RD Millner
DC Hall
AJ Payne
IT Huntley
Total
2015
RD Millner
DC Hall
AJ Payne
IT Huntley
Total
Primary
Superannuation
Total
$
$
$
59,598
46,246
37,908
37,908
5,513
4,278
3,507
3,507
65,111
50,524
41,415
41,415
181,660
16,805
198,465
62,100
48,173
39,383
39,383
5,900
4,576
3,741
3,741
68,000
52,750
43,125
43,125
189,041
17,959
207,900
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 among the Directors as
they may determine.
18
2015 Annual ReportBKI INVESTMENTCOMPANY LIMITED
DIRECTORS’ REPORT (continued)
Other Key Management Personnel:
Share based performance
related remuneration
Salary
$
Superannuation
$
STI
$
LTI
$
Total
$
2014
TCD Millner
JP Pinto
Total
2015
TCD Millner
JP Pinto
Total
288,225
-
17,775
-
288,225
17,775
-
-
-
101,051
24,169
125,220
407,051
24,169
431,220
291,717
-
291,717
18,783
-
18,783
45,900
91,746
18,360 51,948
143,694
64,260
448,146
70,308
518,454
Proportion of
Remuneration
Performance
Related
24.8%
100.0%
30.7%
100.0%
The value included in the preceding table for share based performance related remuneration (STI and LTI) is the
portion of the estimated value of the performance rights which has been allocated as an expense in each relevant
reporting period.
There were no retirement allowances provided for the retirement of Non-Executive Directors or Other Key
Management Personnel.
Contract of Employment
Mr TCD 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 $315,000
per annum inclusive of superannuation.
Remuneration is reviewed annually by the Remuneration Committee.
Mr JP Pinto provides Company Secretarial services under contract through Corporate & Administrative Services
Pty Limited. This is an open ended contract with a notice period of one month required to terminate.
This report is made in accordance with a resolution of the Directors.
Robert D Millner
Director
Sydney
4 August 2015
19
2015 Annual ReportBKI INVESTMENT COMPANY LIMITED
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 30 JUNE 2015
Revenue from investment portfolio
Revenue from bank deposits
Other Income
Other Gains
2015
$’000
2014
$’000
40,815
36,539
1,519
1,791
Note
2 (a)
2 (c)
2 (d)
2 (e) 2,226
8
-
232
Income from operating activities before special investment revenue
44,568
38,562
Operating Expenses
Expenses associated with acquisition of controlled entity
3
(1,607)
(1,251)
-
(75)
Operating Result before income tax expense and special investment revenue
42,961
37,236
Income Tax Expense
4
(2,085)
(1,296)
Net Operating Result before special investment revenue
40,876
35,940
Special investment revenue
2 (b)
2,095
1,499
Net Operating Profit
42,971
37,439
Profit for the year attributable to members of the Company
42,971
37,439
Basic and diluted Earnings Per Share before special dividend income 19
Basic and diluted Earnings Per Share after special dividend income
19
2015
Cents
2014
Cents
7.40
7.78
7.15
7.45
This Income Statement should be read in conjunction with the accompanying notes
20
2015 Annual ReportBKI INVESTMENTCOMPANY LIMITED
CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE
INCOME
FOR THE YEAR ENDED 30 JUNE 2015
2015
$’000
2014
$’000
Profit for the year attributable to members of the Company
42,971
37,439
Other Comprehensive Income
Unrealised gains on investment portfolio
Deferred tax expense on unrealised gains on investment portfolio
Realised gains/(losses) on investment portfolio
3,671
73,069
(1,101)
(21,921)
2,670 (15,694)
Tax (expense)/benefit relating to realised losses on investment portfolio
(802) 4,708
Total Other Comprehensive Income
Total Comprehensive Income
4,438
40,162
47,409
77,601
This Statement of Other Comprehensive Income should be read in conjunction with the accompanying notes.
21
2015 Annual ReportBKI INVESTMENT COMPANY LIMITED
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2015
Current Assets
Cash and cash equivalents
Trade and other receivables
Trading portfolio
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
Employee benefits
Total Non-Current Liabilities
Total Liabilities
Net Assets
Equity
Share capital
Revaluation reserve
Realised capital gains reserve
Retained profits
Total Equity
Note
2015
$’000
2014
$’000
6
7
8
8
9
10
11
12
13
14
13
15
16
17
18
41,133
17,688
566
29
59,416
40,960
7,488
761
20
49,229
858,877
18
9,375
868,270
804,162
11
10,352
814,525
927,686
863,754
486
993
19
1,498
291
230
18
539
72,936
6
72,952
71,769
-
71,769
74,450
72,308
853,236
791,446
652,562
167,216
(10,369)
43,827
853,236
599,124
164,646
(12,237)
39,913
791,446
This Statement of Financial Position should be read in conjunction with the accompanying notes
22
2015 Annual ReportBKI INVESTMENTCOMPANY LIMITED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2015
Share
Capital
$’000
Revaluation
Reserve
$’000
Realised
Capital
Gains
Reserve
$’000
Retained
Profits
$’000
Total
Equity
$’000
Total equity at 1 July 2013
484,198 113,498 (1,251) 35,587
632,032
Issue of shares, net of cost
Dividends paid or provided for
Revaluation of investment portfolio
Provision for tax on unrealised gains on
revaluation of investment portfolio
Net operating profit for the year
Net realised losses through other
comprehensive income
114,926 - - -
114,926
- - - (33,113) (33,113)
- 73,069 - -
73,069
- (21,921)
- -
- - - 37,439
(21,921)
37,439
- - (10,986)
-
(10,986)
Total equity at 30 June 2014
599,124
164,646
(12,237)
39,913
791,446
Total equity at 1 July 2014
599,124
164,646
(12,237)
39,913
791,446
Issue of shares, net of cost
Dividends paid or provided for
Revaluation of investment portfolio
Provision for tax on unrealised gains on
revaluation of investment portfolio
Net operating profit for the year
Net realised gains through other
comprehensive income
53,438
-
-
-
-
-
-
-
3,671
(1,101)
-
-
-
-
-
-
-
(39,057)
-
53,438
(39,057)
3,671
-
42,971
(1,101)
42,971
-
1,868
-
1,868
Total equity at 30 June 2015
652,562
167,216
(10,369)
43,827
853,236
This Statement of Changes in Equity should be read in conjunction with the accompanying notes
23
2015 Annual ReportBKI INVESTMENT COMPANY LIMITED
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 30 JUNE 2015
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
Interest paid
Income tax paid
Note
2015
$’000
2014
$’000
(1,409)
(1,352)
8
42,398
(8,763)
10,629
1,655
-
(986)
-
36,862
(1,510)
2,577
1,743
(3)
(499)
Net cash inflow from operating activities
20(a)
43,532
37,818
Cash flows from investing activities
Cash acquired on acquisition of controlled entity
Payments for investment portfolio
Proceeds from sale of investment portfolio
Capital returns received from investment portfolio
Payments for plant and equipment
Net cash outflow from investing activities
Cash flows from financing activities
Proceeds from issues of ordinary shares less issue costs
Dividends paid
Net cash inflow from financing activities
Net increase in cash held
Cash at the beginning of the year
Cash at the end of the year
-
702
(92,833)
(132,324)
33,270
21,236
1,930
(14)
-
(10)
(57,647)
(110,396)
47,482
105,190
5(a)
(33,194)
(27,882)
14,288
77,308
173
4,730
40,960
41,133
36,230
40,960
6
This Cash Flow Statement should be read in conjunction with the accompanying notes
24
2015 Annual ReportBKI INVESTMENTCOMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
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 its controlled entities, with
information relating to BKI Investment Company Limited as an individual parent entity summarised in Note 27.
BKI Investment Company Limited is a listed public company, incorporated and domiciled in Australia.
The financial report complies 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(i) to the financial statements. All controlled entities have
a 30 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.
25
2015 Annual ReportBKI INVESTMENT COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
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’.
Valuation of investment portfolio
Listed securities are initially brought to account at market value, which is the cost of acquisition, and are
re-valued to market values continually. 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.
26
2015 Annual ReportBKI INVESTMENTCOMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
1. Summary of Significant Accounting Policies (continued)
c.
Financial Instruments (continued)
Valuation of trading portfolio
Listed securities are initially brought to account at market value, which is the cost of acquisition, and are
re-valued to market values continually.
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 last sale price for all quoted investments. In previous years fair value was
determined based on current bid prices.
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.
(iii) Share incentives
Share incentives are provided under the Short and Long Term Incentive Plans.
The Short Term Incentive Plan is 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.
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).
27
2015 Annual ReportBKI INVESTMENT COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
1. Summary of Significant Accounting Policies (continued)
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.
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.
28
2015 Annual ReportBKI INVESTMENTCOMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
1. Summary of Significant Accounting Policies (continued)
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 2015 (“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.
2. Revenues
(a) Revenue from investment portfolio
Fully franked dividends
Unfranked dividends
Trust Distributions
Total ordinary revenue from investment portfolio
(b) Special investment revenue
Fully franked dividends
Unfranked dividends
Total special revenue from investment portfolio
(c) Revenue from bank deposits
Interest received
(d) Other income
Other revenue
(e) Other gains
Net realised gain on sale of investments held for trading
Net unrealised gain/(loss) on investments held for trading
Total other gains
Total Income
3. Operating Expenses
Administration expenses
Occupancy costs
Employment expenses
Professional fees
Depreciation
Interest Expense
Total operating expenses
2015
$’000
2014
$’000
36,785
1,034
2,996
40,815
33,176
1,285
2,078
36,539
2,095
-
2,095
1,114
385
1,499
1,519
1,791
8
-
2,163
63
2,226
234
(2)
232
46,663
40,061
352
13
1,075
160
7
-
1,607
371
11
707
156
3
3
1,251
29
2015 Annual ReportBKI INVESTMENT COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
2015
$’000
2014
$’000
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% (2014:30%)
Tax effect of amounts which are not deductible (taxable) in
calculating taxable income:
- Franked dividends and distributions received
- Accounting distributions not taxable
- Costs associated with acquisition of subsidiary
- Under provision in prior year
45,056
38,735
13,517
11,621
(11,664)
-
-
232
(10,287)
(91)
23
30
Net tax expense on operating profit before net gains on investments
2,085
1,296
Net realised gains (losses) on investment portfolio
Tax calculated at 30% (2014: 30%)
Total tax expense / (benefit)
(b) The components of tax expense comprise:
Current tax
Deferred tax
Under provision in prior year
5. Dividends
(a) Dividends paid during the year
Final dividend for the year ended 30 June 2014 of 3.50 cents per share
(2013 final: 3.40 cents per share) fully franked at the tax rate of 30%,
paid on 28 August 2014
Interim dividend for the year ended 30 June 2015 of 3.55 cents per share
(2014 interim: 3.45 cents per share) fully franked at the tax rate 30%,
paid on 26 February 2015
Total
30
2,670
(15,694)
802
(4,708)
2,887
(3,412)
1,531
1,124
232
2,887
1,122
(4,564)
30
(3,412)
19,359
15,169
19,698
17,944
39,057
33,113
2015 Annual ReportBKI INVESTMENTCOMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
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
Estimated 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
2015
$’000
2014
$’000
33,194
5,863
39,057
27,882
5,231
33,113
22,554
20,987
(8,706)
(7,864)
13,848
13,123
Since the end of the year the Directors have declared a final ordinary dividend for the year ended 30 June 2015
of 3.65 cents per share fully franked at the tax rate of 30% (2014: final ordinary dividend of 3.50 cents per share
fully franked at the tax rate of 30%), payable on 27 August 2015, but not recognised as a liability at the year end.
6. Cash and Cash Equivalents
Cash at bank
Short term bank deposits
7. Trade and Other Receivables
Dividends and distributions receivable
Interest receivable
Outstanding settlements
Other receivable
8. Financial Assets - Investment Portfolio
Trading Portfolio - Current
Listed securities at fair value held for trading
Investment Portfolio - Non-Current
Listed securities at fair value available for sale
Total Investment Portfolio
2,633
38,500
460
40,500
41,133
40,960
7,537
321
9,821
9
17,688
6,901
458
-
129
7,488
566
761
858,877
804,162
859,443
804,923
31
2015 Annual ReportBKI INVESTMENT COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
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. Deferred Tax Assets
The deferred tax asset balance comprises the following
timing differences and unused tax losses:
Transaction costs on equity issues
Accrued expenses
Realised capital tax losses
Movements in deferred tax assets
Transaction costs on equity issues
Accrued expenses
Tax losses
Balance as at 30 June 2014
Transaction costs on equity issues
Accrued expenses
Tax losses
Opening
Balance
$’000
62
87
4,817
4,966
499
56
9,797
2015
$’000
2014
$’000
43
(25)
18
11
14
(7)
18
29
(18)
11
4
10
(3)
11
444
119
8,812
499
56
9,797
9,375
10,352
Credited/
(Charged) to
Statement of
Comprehensive
Income
$’000
Credited/
(Charged)
to Equity
$’000
Closing
Balance
$’000
(137)
(31)
4,980
4,812
(147)
63
(985)
574
-
-
574
92
-
-
92
499
56
9,797
10,352
444
119
8,812
9,375
Balance as at 30 June 2015
10,352
(1,069)
32
2015 Annual ReportBKI INVESTMENTCOMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
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
Non-current
14. 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
Opening
Balance
$’000
2015
$’000
2014
$’000
486
291
993
230
35
18
19
16
35
18
-
18
72,308
628
71,196
573
72,936
71,769
(Credited)/
Charged to
Statement of
(Credited)/
Comprehensive Charged
to Equity
$’000
Income
$’000
Closing
Balance
$’000
Revaluation of investment portfolio
Unfranked dividends receivable
and interest receivable
48,961 - 22,235 71,196
325
248 - 573
Balance as at 30 June 2014
49,286
248 22,235 71,769
Revaluation of investment portfolio
Unfranked dividends receivable
and interest receivable
71,196
573
Balance as at 30 June 2015
71,769
-
55
55
1,112
72,308
-
628
1,112
72,936
33
2015 Annual ReportBKI INVESTMENT COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
2015
$’000
2014
$’000
15. Share Capital
(a) Issued and paid-up capital
556,560,509 ordinary shares fully paid (2014: 524,240,486)
652,562
599,124
(b) Movement in ordinary shares
2015
2014
Number of
Shares
$’000
Number of
Shares
$’000
Beginning of the financial year
524,240,486
599,124
446,139,639
484,198
Issued during the year:
- dividend reinvestment plan
- share purchase plan
- placement
- rights issue
- acquisition of controlled entity
Gross funds raised during year
- less net transaction costs
3,440,622
28,879,401
-
-
-
3,298,704
-
39,900,000
32,468,378
2,433,765
5,864
47,790
-
-
-
53,654
(216)
End of the financial year
556,560,509
652,562
524,240,486
5,231
-
59,052
48,053
3,931
116,267
(1,341)
599,124
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 2015 net debt was $Nil (2014: $Nil).
34
2015 Annual ReportBKI INVESTMENTCOMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
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 net gains and losses after applicable
taxation arising from the disposal of securities in the investment portfolio.
Balance at the beginning of the year
Net gains/(losses) 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
19. Earnings per Share
Net Operating Profit
Earnings used in calculating basic and diluted earnings per share
before special dividend income
Earnings used in calculating basic and diluted earnings per share
after special dividend income
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)
2015
$’000
2014
$’000
164,646
2,570
167,216
113,498
51,148
164,646
(12,237)
(1,251)
1,868
(10,369)
(10,986)
(12,237)
39,913
42,971
(39,057)
43,827
35,587
37,439
(33,113)
39,913
42,971
37,439
40,876
35,940
42,971
37,439
2015
2014
No. (‘000) No. (‘000)
552,158
502,728
7.40
7.78
7.15
7.45
35
2015 Annual ReportBKI INVESTMENT COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
20. Reconciliation of Cash Flow
(a) Reconciliation of cash flow from operating activities to operating profit
Net Profit from ordinary activities
42,971
37,439
2015
$’000
2014
$’000
Non cash items:
- expenses associated with acquisition of subsidiary
- depreciation expense
- unrealised loss on trading investments
Change in assets and liabilities, net of effects from consolidation of subsidiary:
(Increase) / decrease in trade and other receivables
(Increase) / decrease in held for trading investments
(Increase) / decrease in prepayments
(Increase) / decrease in current tax assets
(Increase) / decrease in deferred tax assets
(Decrease) increase in payables
(Decrease) increase in provisions
(Decrease) increase in current tax liabilities
(Decrease) increase in deferred tax liabilities
Net cash inflow from operating activities
(b) Non-cash financing and investing activities
-
7
(63)
75
3
2
(3,131)
2,448
(9)
-
241
194
17
763
94
43,532
(1,246)
834
5
138
168
(94)
3
230
261
37,818
(i) Dividend reinvestment plan
Under the terms of the dividend reinvestment plan, $5,864,000 (2014: $5,231,000) of dividends were paid
via the issue of 3,440,622 shares (2014: 3,298,704).
(ii) Acquisition of controlled entity
During the 2014FY the Company Group acquired shares in an unlisted investment company via the issue
of 2,433,765 new shares in BKI (refer below).
(c)
Acquisition of controlled entities
During the 2015FY no acquisitions were made.
During the 2014FY the Company acquired 100% of the shares of an unlisted investment company for
a consideration of 2,433,765 new shares in BKI Investment Company Limited (2013FY: No acquisitions
were made). Based on an issue price of $1.615 per share, the consideration for the acquisition had a fair
value of $3,930,530.
36
2015 Annual ReportBKI INVESTMENTCOMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
21. Auditors’ Remuneration
Remuneration of the auditor of the parent entity for:
Auditing the financial report of the Parent and the controlled entities
2015
$’000
2014
$’000
23
23
24
24
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
JP Pinto
Position
Non-Executive Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director
Chief Executive Officer
Company Secretary1
1 Services provided under contract through Corporate & Administrative Services Pty Limited
Mr William Culbert was appointed as Senior Investment Analyst in December 2013. Mr Culbert is not considered
to be a member of Key Management Personnel.
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 2015 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 the Board 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. No such payments were
made in 2015FY (2014: nil).
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.
37
2015 Annual ReportBKI INVESTMENT COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
24. Related Party Transactions
Related parties of the Group fall into the following categories:
(i) Controlled Entities
At 30 June 2015, subsidiaries of the Parent were:
Country of incorporation
Percentage Owned (%)
Brickworks Securities Pty Limited
Huntley Investment Company Pty Limited
R Love Investments Pty Limited
Pacific Strategic Investments Pty Limited
Australia
Australia
Australia
Australia
2015
2014
100
100
100
100
100
100
100
100
Transactions between the Parent and controlled entities consist of transfers of investment holdings from
subsidiaries to the parent entity. In addition, there are loan balances 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 2015 were:
Directors:
RD Millner
DC Hall
AJ Payne
IT Huntley
Chief Executive Officer: TCD Millner
Company Secretary:
JP Pinto1
1 Services provided under contract through Corporate & Administrative Services Pty Limited
During the 2014FY the company conducted a non-renounceable entitlement offer, which was partially
underwritten by three of BKI’s directors. This underwriting facility was not called upon.
In September 2013 the Company entered into a short term revolving loan agreement with Washington H. Soul
Pattinson and Company Limited, a major shareholder in BKI. The facility was established to achieve more
efficient use of the funds raised in the placement completed by the Company in September 2013. The terms
and conditions of the facility were as follows:
– Facility Limit: $10,000,000
–
– Term: 14 days
The first draw-down on the facility was on 9 September 2013 and repayment was made in full on 12 September
2013. Total interest paid on the facility was $2,891.
Interest: 5.0% per annum compounded daily
Corporate & Administrative Services Pty Limited
The Group has appointed Corporate & Administrative Services Pty Limited (CAS), an entity in which Mr RD Millner
and Mr TCD Millner have an indirect interest, to provide the Group with administration, company secretarial and
accounting services, including preparation of all financial accounts.
Fees paid to CAS for services provided to the Parent and controlled entities for the year to 30 June 2015 were
$122,100 (2014: $122,100, including GST) and are at standard market rates. No fees were owed by the Group
to CAS as at 30 June 2015.
38
2015 Annual ReportBKI INVESTMENTCOMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
(iii) Transactions in securities
Share Holdings
Aggregate number of listed securities of the Company held by Key Management Personnel (KMP) or their related entities:
2015
Balance at
1/07/14
Granted as
compensation
Net Change
Other
Balance at
Net Movements
30/6/15 Post Balance Date
Balance at date
of Annual Report
RD Millner1 8,167,659
DC Hall
268,906
AJ Payne
277,130
IT Huntley
11,224,980
-
-
-
-
316,432
8,484,091
9,064
9,064
277,970
286,194
-
11,224,980
-
-
-
-
8,484,091
277,970
286,194
11,224,980
TCD Millner1
7,236,094
60,033
301,365
7,597,492
27,148
7,624,640
JP Pinto
Total
2014
32,296
-
7,647
39,943
10,859
50,802
27,207,065
60,033
643,572
27,910,670
38,007
27,948,677
Balance at
1/07/13
Granted as
compensation
Net Change
Other
Balance at
Net Movements
30/6/14 Post Balance Date
Balance at date
of Annual Report
RD Millner1
7,364,206 -
803,453
8,167,659 304,384
8,472,043
DC Hall
252,101 -
AJ Payne
259,810 -
16,805
17,320
268,906 9,064 277,970
277,130 9,064 286,194
IT Huntley
11,063,445 -
161,535
11,224,980
-
11,224,980
TCD Millner1
6,431,309
92,415
712,370
7,236,094 361,398
7,597,492
JP Pinto
15,813
13,198
3,285
32,296
6,044 38,340
Total
25,386,684
105,613
1,714,768
27,207,065
689,954
27,897,019
1 Common to RD Millner and TCD Millner are the following shares held in related companies and trusts in which both hold beneficial interests:
- 7,231,771 (2014: 6,954,579) as at 30 June 2015.
- 7,231,771 (2014: 7,231,771) as at date of Annual Report
Directors acquired shares through the Dividend Reinvestment Plan, the 2013 Entitlement Offer, the 2014 Share
Purchase Plan or on-market purchase.
There have been no other changes to Directors’ shareholdings during the years ended 30 June 2015 or
30 June 2014.
Other Key Management Personnel acquired shares through the Dividend Reinvestment Plan, the 2013 Entitlement
Offer, the 2014 Share Purchase Plan, on-market purchase, or purchases by the company on behalf of the KMP
in satisfaction of vested performance rights.
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.
39
2015 Annual ReportBKI INVESTMENT COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
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 Board 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.
b.
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.
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 a 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/unit prices of the companies and trusts in which it is invested.
The market value of the portfolio changes continuously because the market value of individual companies
within the portfolio fluctuates throughout the day. The change in the market value of the portfolio is
recognised through the Revaluation Reserve. Listed Investments represent 93% (2014: 93%) of total
assets.
As at 30 June 2015, a 5% movement in the market value of the BKI portfolio would result in:
- A 5% movement in the net assets of BKI before provision for tax on unrealised capital gains (2014: 5%);
and
- A movement of 7.7 cents per share in the net asset backing before provision for tax on unrealised
capital gains (2014: 7.7 cents).
The performance of the companies within the portfolio, both individually and as a whole, is monitored by the
Investment Committee and the Board.
BKI 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 sector of the market.
40
2015 Annual ReportBKI INVESTMENTCOMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
At 30 June 2015, the spread of investments is in the following sectors:
Sector
Financials
Telecommunications Services
Consumer Staples
Industrials
Energy
Materials
Utilities
Consumer Discretionary
Health Care
Property Trusts
Total portfolio
Cash and dividends receivable
Percentage of total investment
Amount
2015
%
43.12%
10.27%
8.40%
7.01%
5.56%
5.36%
5.25%
4.66%
4.63%
0.35%
94.61%
5.39%
2014
%
41.96%
8.19%
9.27%
8.16%
7.14%
7.19%
5.56%
3.76%
2.80%
0.30%
94.32%
5.68%
2015
$’000
391,713
93,311
76,265
63,684
50,499
48,728
47,673
42,328
42,027
3,216
859,443
49,000
2014
$’000
358,104
69,889
79,087
69,647
60,888
61,330
47,443
32,076
23,865
2,594
804,923
48,447
Total investment assets
100.00%
100.00%
908,443
853,370
Securities representing over 5% of the investment portfolio at 30 June 2015 or 30 June 2014 were:
Company
Commonwealth Bank
National Australia Bank
Westpac Banking Corporation
Telstra Corporation
BHP Billiton
Percentage of total investment
Amount
2015
%
9.4%
9.3%
7.4%
5.9%
4.4%
2014
%
9.5%
8.9%
8.1%
5.3%
6.0%
2015
$’000
85,675
84,559
67,311
53,664
39,478
2014
$’000
81,398
76,050
68,880
45,535
51,303
36.4%
37.9%
330,686
323,166
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.
e.
f.
Interest Rate Risk
The Group is not materially exposed to interest rate risk as all its cash investments, excluding cash in
operating bank accounts, are short term (up to 1 year) for a fixed rate.
During the 2014FY the Group entered into a short term revolving facility (refer Note 24(ii)). Given the facility
was fixed rate in nature, any movement in market interest rates would not have affected the value of the
underlying financial liability nor would it have affected the Group’s operating result. This facility was closed
with no liability existing as at 30 June 2014.
Foreign Currency Risk
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.
41
2015 Annual ReportBKI INVESTMENT COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
g.
h.
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 more than 5 years.
The Group’s other major cash outflows are the purchase of securities and dividends paid to shareholders
and the level of both of these is fully controllable by the Board.
Furthermore, the majority of the assets of the Group are in the form of readily tradeable securities which
can be sold on-market if necessary.
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
2015
$’000
2014
$’000
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
The parent company has no contingent liabilities as at 30 June 2015.
28. Capital and Leasing Commitments
The Group has no capital and leasing commitments as at 30 June 2015.
29. Contingent Liabilities
The Group has no contingent liabilities as at 30 June 2015.
59,409
49,149
1,069,620 1,013,789
1,129,029 1,062,938
429
279,028
279,457
599,124
184,289
783,413
1,416
282,338
283,754
652,562
192,713
845,275
42,973
37,452
4,439
40,163
30. Authorisation
The financial report was authorised for issue on 4 August 2015 by the Board of Directors.
42
2015 Annual ReportBKI INVESTMENTCOMPANY LIMITED
DIRECTORS’ DECLARATION
The Directors of BKI Investment Company Limited declare that:
1.
the financial statements and notes, as set out on pages 20 to 42, 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 2015 and of the performance for the
year ended on that date of the consolidated entity;
2.
3.
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 2015.
This declaration is made in accordance with a resolution of the Board of Directors.
Robert D Millner
Director
Sydney
4 August 2015
43
2015 Annual ReportBKI INVESTMENT COMPANY LIMITED INDEPENDENT AUDITOR’S REPORT
44
2015 Annual ReportBKI INVESTMENTCOMPANY LIMITED INDEPENDENT AUDITOR’S REPORT
45
2015 Annual ReportBKI INVESTMENT COMPANY LIMITED AUDITOR’S INDEPENDENCE DECLARATION
46
2015 Annual ReportBKI INVESTMENTCOMPANY LIMITED ASX ADDITIONAL INFORMATION
1)
Equity Holders
At 30 June 2015 there were 13,594 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
No. of Shareholders
932
1,836
1,885
8,101
840
13,594
534
Holding less than a marketable parcel of 301 shares
The 20 largest holdings of the Parent’s share as at 30 June 2015 are listed below:
Name
Shares Held
%
Washington H Soul Pattinson and Company Limited
61,749,705
11.09
Huntley Group Investments Pty Ltd
8,523,274
J S Millner Holdings Pty Limited
UBS Wealth Management Austalia Nominees Pty Ltd
I R McDonald Pty Limited
Nulis Nominees (Australia) Limited
Navigator Australia Ltd
5,199,235
3,575,028
3,000,000
2,498,454
2,034,753
Huntley Group Investments Pty Ltd
1,630,711
Farjoy Pty Limited
Fennybentley Pty Limited
T N Philiips Investments Pty Limited
Trevin Ronald Love
Netwealth Investments Limited
T G Millner Holdings Pty Limited
Lunicash Super Pty Ltd
K C Perks Investments Pty Ltd
Milton Corporation limited
Mr Timothy Frank Robertson
Donald Cant Pty Limited
The Miller Foundation Ltd
1.53
0.93
0.64
0.54
0.45
0.37
0.29
0.26
0.25
0.24
0.24
1,450,800
1,400,000
1,357,129
1,352,092
1,331,919
0.24
1,251,805
1,250,000
1,242,816
1,223,866
1,133,892
1,128,358
1,100,000
0.22
0.22
0.22
0.22
0.20
0.20
0.20
47
2015 Annual ReportBKI INVESTMENT COMPANY LIMITED ASX ADDITIONAL INFORMATION
Votes of Members
Article 5.12 of the Company’s Constitution provides
a)
b)
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.
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.
2)
Substantial Shareholders
As at 30 June 2015 the name and holding of each substantial shareholder as disclosed in a notice received by
the Parent is:
Substantial Shareholders
Washington H Soul Pattinson & Company Limited1
Brickworks Limited2
Shares Held
%
61,740,641
11.87%
61,740,641
11.87%
1 Details included on substantial shareholder notice dated 18 November 2013 lodged by Brickworks Limited. This does not agree to the
holding of Washington H. Soul Pattinson & Company Limited as at 30 June 2015
2 Details included on substantial shareholder notice dated 18 November 2013. Shares held by Brickworks Limited represent a technical
relevant interest as a result of Brickworks Limited’s shareholding in Washington H Soul Pattinson & Company Limited.
3) Other Information:
K There is no current on-market buy-back in place.
K There were 164 (2014: 226) transactions in securities undertaken by the Group and the total brokerage
paid or accrued during the year was $256,093 (2014: $497,746)
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
30/06/13
30/06/14 30/06/15
0.69%
0.71%
0.56%
0.46%
0.46%
0.31%
0.19%
0.18%
0.18%
0.19%
0.17%
0.18%
48
2015 Annual ReportBKI INVESTMENTCOMPANY LIMITED