Black Knight
Annual Report 2022

Plain-text annual report

BKI INVESTMENT COMPANY LIMITED ABN: 23 106 719 868 Annual Report for the year ended 30 June 2022 Contents ii Annual Report 2022 ASX: BKI Financial Highlights 1Chair’s Address 4Portfolio Managers Report 8Directors’ Report 11Remuneration Report 16Statement of Profit or Loss 23Statement of Other Comprehensive Income 24Statement of Financial Position 25Statement of Changes in Equity 26Statement of Cash Flows 27Notes to the Financial Statements 28Directors’ Declaration 46Independent Auditor’s Report to the Members of BKI Investment Company Limited 47Auditor’s Independence Declaration 50Shareholder Information 51Corporate Directory 53 Financial Highlights Revenue performance Total revenue – ordinary Special investment revenue Total income from ordinary activities Profits Operating result after tax – before special investment revenue net of applicable tax Special investment revenue net of applicable tax Net profit from ordinary activities after tax attributable to shareholders Net profit attributable to shareholders Portfolio Total portfolio value (including cash & receivables) Earnings per share (EPS) Basic EPS before special investment revenue and applicable tax Basic EPS after special investment revenue and applicable tax Dividends Interim – Ordinary Interim – Special Final – Ordinary Final – Special Full Year Total Change Jun 2022 $’000 Jun 2021 $’000 up up up up up up up 58% to 4,079% to 63,390 42,713 from from 40,154 1,022 158% to 106,103 from 41,176 63% to 4,236% to 58,086 42,713 from from 35,660 985 175% to 175% to 100,799 100,799 from from 36,645 36,645 down 2% to 1,236,581 from 1,261,368 Change Cents Cents up up up up up up up 62% to 173% to 7.84 13.60 from from 75% to 100% to 21% to 100% to 73% to 3.500 0.500 3.650 1.000 8.650 from from from from from 4.83 4.97 2.000 nil 3.000 nil 5.000 10 Year Dividend History (cents per share) 30 June 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Interim – Ordinary Interim – Special Final – Ordinary Final – Special Total 3.25 0.50 3.40 – 7.15 3.45 – 3.50 – 6.95 3.55 – 3.65 – 7.20 3.60 – 3.65 – 7.25 3.60 – 3.70 – 7.30 3.625 – 3.700 – 7.325 3.625 2.500 3.700 – 9.825 3.625 1.000 2.320 – 6.945 2.000 – 3.000 – 5.000 3.500 0.500 3.650 1.000 8.650 All ordinary and special dividends paid by BKI Investment Company Limited (“BKI”) since listing on the Australian Securities Exchange have been fully franked. 10 Year Net Tangible Asset (NTA) History ($ per share) 30 June 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 NTA before tax NTA after tax 1.52 1.42 1.63 1.51 1.65 1.53 1.55 1.47 1.61 1.52 1.63 1.54 1.69 1.58 1.47 1.43 1.71 1.59 1.66 1.58 BKI Investment Company Limited ABN: 23 106 719 868 1 Financial Highlights (continued) List of Securities as at 30 June 2022 Financials Macquarie Group Limited Commonwealth Bank of Australia National Australia Bank Limited Suncorp Group Limited Pendal Group Limited Equity Trustees Limited E&P Financial Group Limited Materials BHP Group Limited Rio Tinto Limited Amcor Limited Brickworks Limited Orora Limited Consumer Discretionary Wesfarmers Limited ARB Corporation Limited Harvey Norman Holdings Limited Invocare Limited Energy Woodside Energy Limited New Hope Corporation Limited Washington H Soul Pattinson & Co Limited Ampol Limited Utilities APA Group Industrials Transurban Group Aurizon Holdings Limited Reece Limited Lindsay Australia Limited IPH Limited Smartgroup Corporation Limited Number of securities held Market value $’000 Portfolio weight % 655,182 917,528 2,501,904 1,531,408 2,920,833 383,942 6,631,759 2,640,000 295,000 1,670,000 436,209 1,600,000 1,129,102 945,447 7,040,162 1,638,974 1,652,925 12,950,952 391,908 155,000 8,775,389 3,485,952 4,650,000 515,499 17,141,631 665,000 600,000 107,784 82,926 68,527 16,815 12,910 10,059 3,216 302,237 108,900 30,297 30,127 8,087 5,840 183,251 47,321 26,699 26,119 17,144 117,283 52,629 44,810 9,226 5,306 111,971 98,899 98,899 50,128 17,670 7,104 7,028 5,426 3,666 91,022 8.72 6.71 5.54 1.36 1.04 0.81 0.26 24.44 8.81 2.45 2.44 0.65 0.47 14.82 3.83 2.16 2.10 1.39 9.48 4.26 3.62 0.75 0.43 9.06 8.00 8.00 4.05 1.43 0.57 0.57 0.44 0.30 7.36 2 Annual Report 2022 ASX: BKI List of Securities as at 30 June 2022 (continued) Consumer Staples Woolworths Group Limited Coles Group Limited Metcash Limited Treasury Wine Estates Limited Health Care Ramsay Health Care Limited Sonic Healthcare Limited Regis Healthcare Limited Telecommunications TPG Telecom Limited Telstra Corporation Limited Tuas Limited Property Goodman Group Stockland Total Portfolio Investment portfolio Trading portfolio Total Portfolio Cash and dividends receivable Total Investment Assets Number of securities held Market value $’000 Portfolio weight % 1,159,906 1,129,102 3,621,084 905,155 515,070 960,899 1,807,428 5,748,362 8,524,451 2,874,181 945,000 1,225,000 41,293 20,109 15,353 10,274 87,029 37,723 31,719 3,344 72,786 34,318 32,819 3,190 70,327 16,859 4,422 21,281 1,156,086 1,156,086 – 1,156,086 80,495 3.34 1.63 1.24 0.83 7.04 3.05 2.57 0.27 5.89 2.78 2.65 0.26 5.69 1.36 0.36 1.72 93.50 93.50 – 93.50 6.50 1,236,581 100.00 The Group is a substantial shareholder, in accordance with the Corporations Act 2001, of Lindsay Australia Limited, holding 5.68% of the issued capital as at 30 June 2022. The Group is not a substantial shareholder in any other investee corporation as each equity investment represents less than 5% of the issued capital of the investee corporation. BKI Investment Company Limited ABN: 23 106 719 868 3 Chair’s Address Dear Shareholders, I am pleased to enclose the 19th Annual Report of BKI Investment Company Limited (BKI) for the year to 30 June 2022. The Australian economy greatly benefited from a variety of stimulus packages over the last couple of years. This created a huge tailwind to households, consumers and businesses across Australia and the world. These strong economic conditions prevailed throughout FY2022 which saw company profits improve and dividends paid by Australian equities increase significantly throughout the year. However, we are now beginning to experience the secondary effects of flooding the world economy with cash through global stimulus packages distributed during 2020 and 2021. During the second half of FY2022 we faced ongoing challenges including, the war in Ukraine, labour shortages, localised flooding, inventory shortages and disruptions to energy supply. These issues impacted pricing and availability of almost every good and service within Australia, leading to a sharp rise in inflation. This forced Central Banks around the world to begin to lift interest rates which is taking a toll on the economy and equity markets. Result Highlights Over FY2022, the S&P/ASX 300 Accumulation Index declined by 6.8%. Despite this, and with the backdrop of a stronger global economy for much of the financial year, many Australian companies were able to return to paying solid dividends to their shareholders. BKI’s Revenue from investment portfolio was up 58% to $62.6 million. The result was boosted by higher ordinary dividends received over the last year from Woodside Energy (formerly Woodside Petroleum), New Hope Corporation, BHP Group, Rio Tinto, Commonwealth Bank, National Australia Bank, Transurban Group and Macquarie Group. BKI realised $0.6 million from the trading portfolio, after participating in some minor trading positions. Due to the extremely low interest rates on offer, BKI’s interest received was only $0.1 million, down 29% on FY2021. BKI’s Net Operating Profit After Tax, before special investment revenue, was a record $58.1 million, an increase of 63% over the previous corresponding period. BKI’s basic earnings per share before special investment revenue was 62% higher to 7.84 cents per share. Special Investment Revenue was significantly higher in FY2022, rising from $1.0 million to $42.7 million. Special Dividends were received from New Hope Corporation, Telstra Corporation, Smartgroup Limited and Rio Tinto Limited. BKI participated in off market buy-backs conducted by Commonwealth Bank, Woolworths Limited and Metcash Limited. Also, during the period, BKI received a fully franked in-specie distribution following the Woodside Energy acquisition of BHP Petroleum International Pty Ltd. The distribution was non-cash with BKI receiving additional Woodside Energy shares post the transaction. This significant lift in Special Investment Revenue resulted in BKI’s Net Operating Profit After Tax, including special investment revenue for FY2022 of $100.8 million, up 175% on the previous corresponding period and a record for the company. BKI’s FY2022 basic earnings per share, including special investment revenue, increased 173% to 13.60 cents per share from 4.97 cents per share in FY2021. As illustrated in the chart below, it is pleasing that in FY2022, BKI continued to record an increase in ordinary earnings per share. We are hopeful the outlook for dividends received from BKI’s investments should continue to improve in the periods ahead. Ordinary Earnings per Share (EPS) e r a h s r e p s t n e C 4.0 3.0 2.0 1.0 0.0 Dec 2018 Jun 2019 Dec 2019 Jun 2020 Dec 2020 Jun 2021 Dec 2021 Jun 2022 Ordinary EPS 4 Annual Report 2022 ASX: BKI Chair’s Address (continued) Dividends The BKI Board has declared a final ordinary dividend of 3.65cps. In addition, the Board has also declared a final special dividend of 1.00cps. Both dividends will be fully franked. This takes total dividends paid for the FY2022 year to 8.65cps, up 73% on last year. Including the payment of FY2022 dividends, BKI has now paid out $878 million or $1.23 per share in dividends and franking credits to Shareholders since listing. Based on the 4.00cps FY2022 interim dividends and 3.65cps FY2022 final dividend and 1.00cps final special dividend, the current BKI grossed up dividend yield is 7.4%, based on a tax rate of 30% and a share price of $1.66, as at 30 June 2022. Dividends per Share (DPS) e r a h s r e p s t n e C 5.0 4.0 3.0 2.0 1.0 0.0 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 Ordinary Dividends per Share Special Dividends per Share Dividend Key Dates The last trading date to be eligible for the FY2022 Final Dividends is Monday 8 August 2022. Key dates for the fully franked final dividends are as follows: Event Last trading date to be eligible for BKI’s Dividends Ex-Dividend Date Record Date DRP Nomination Payment Date Date Monday 8 August 2022 Tuesday 9 August 2022 Wednesday 10 August 2022 Thursday 11 August 2022 Tuesday 30 August 2022 BKI Investment Company Limited ABN: 23 106 719 868 5 Chair’s Address (continued) Dividend Reinvestment Plan (DRP) The BKI Board has confirmed that BKI’s Dividend Reinvestment Plan (DRP) will be maintained, offering shareholders the opportunity to acquire further ordinary shares in BKI. The DRP will not be offered at a discount. The last day to nominate for participation in the DRP is Thursday 11 August 2022. To complete a DRP form please follow the following link: https://bkilimited.com.au/dividend-information/ 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 (Wednesday 10 August 2022). Management Expense Ratio (MER) BKI’s MER as at 30 June 2022 was maintained at 0.17%. The Board and Portfolio Managers are shareholders in BKI. We invest for the long term and do not charge excessive external portfolio management fees or any performance fees. Our focus is on creating wealth for all shareholders by keeping costs low, increasing fully franked dividends and generating capital growth over the long-term. BKI has no debt and thus shareholder returns are not diluted by interest payable on such a facility. BKI’s MER continues to compare very favourably to other externally managed LICs, ETFs and managed funds in the domestic market that provide a similar broad-based exposure to Australian equities. Top 25 Investments as at 30 June 2022 Stock BHP Group Macquarie Group APA Group Commonwealth Bank National Australia Bank Woodside Energy Group Transurban Group Wesfarmers Limited New Hope Corporation 1 2 3 4 5 6 7 8 9 10 Woolworths Limited 11 12 13 Ramsay Healthcare TPG Telecom Limited Telstra Corporation % of Total Portfolio Stock % of Total Portfolio 8.8% 8.7% 8.0% 6.7% 5.5% 4.3% 4.1% 3.8% 3.6% 3.3% 3.1% 2.8% 2.7% 14 15 16 Sonic Healthcare Rio Tinto Limited Amcor 17 ARB Corporation 18 Harvey Norman Holdings 19 Coles Group 20 Aurizon Holdings 21 Invocare Limited 22 Goodman Group 23 Suncorp Group 24 Metcash Limited 25 Pendal Group Cash and cash equivalents 2.6% 2.5% 2.4% 2.2% 2.1% 1.6% 1.4% 1.4% 1.4% 1.4% 1.2% 1.0% 6.5% Total of Top 25 including cash and cash equivalents 93.1% 6 Annual Report 2022 ASX: BKI Chair’s Address (continued) Outlook The last couple of years were extraordinary and we continue to experience the secondary effects of flooding the world economy with cash through global stimulus packages distributed during 2020 and 2021. Throughout the remainder of 2022, we expect to see further challenges emerging from the war in Ukraine, labour shortages, localised flooding, inventory shortages and disruptions to energy supply. We believe that Central Banks around the world will continue to lift interest rates. This will continue to impact our economy and equity markets over the short to medium term. However, despite times of uncertainty there are always opportunities to invest within equity markets. Our goal is to always invest in high quality businesses with a strong balance sheet, competitive advantage and managed by capable and trustworthy people. We seek to invest in businesses that will pay us an attractive and sustainable dividend stream throughout the cycle. We will target those companies that have pricing power and the ability to pass on prices to their customers in this environment to ensure continued profitability, earnings growth and dividend growth for our shareholders. We look to invest in these businesses at a reasonable price with a view of holding them for the long-term. BKI holds a portfolio of high-quality dividend paying stocks and has no debt. We are well positioned to take advantage of any market opportunity which may present itself over the year ahead with 6.5% of the portfolio currently in cash. Robert Millner Chair BKI Investment Company Limited ABN: 23 106 719 868 7 Portfolio Manager’s Report Dear Shareholders, Contact Asset Management, as the Investment Manager of BKI Investment Company, is pleased to include our Investment Report for FY2022. Market Commentary Most Global equities fell hard in the latter part of FY2022 on increased concerns over rising inflation and the chance of an economic recession. Over the year the NASDAQ fell 23.4%, Hang Seng fell 21.9%, Euro STOXX fell 15.4%, China CSI 300 fell 12.4% and the S&P 500 dropped 10.6%. The Australian S&P/ASX 300 was not immune, falling 6.8% during the year. In particular it has been a very weak first half of 2022 for global equity markets. The 21% pullback in the S&P 500 in the first half of the year was the poorest showing since 1970. The Dow’s 15% decline was the worst since 1962. As for the Nasdaq, down 29% and the Russell 2000, down 24%, both are the biggest first-half falls on record. In the Australian market large stocks continue to outperform smaller stocks. The S&P/ASX 20 index decreased by 5.3% over the year, while the S&P/ASX Small Ordinaries Index declined by 19.5%. It is interesting to note that large resources through the S&P/ASX 200 Resources Index delivered a positive 3.3% return for the year, massively outperforming the small industrials through the S&P/ASX Small Industrials index which retuned negative 24.0%. Commodity markets were generally strong over the year, led by Energy. Oil, Gas and Thermal Coal prices continue to trade at elevated levels and demand continues to be very strong. While Oil prices finished the year off its highs at US$114/bbl after hitting US$120/bbl, the price is well above where it was a year ago when it traded at US$75/bbl and was on a downward trajectory. Thermal Coal had a spectacular year, with the Thermal Coal gc NEWC (6,000 kcal/kg NAR) price closing near record territory. Gold continues to hover around US$1,800/oz and soft commodities continue to remain elevated and are currently very positive for the Australian agricultural sector. However, the last quarter has been mixed, with Copper prices in particular tumbling to a 17-month low, falling 20% in the quarter ended 30 June 2022. Copper is widely considered a barometer of the world economy. Iron Ore is also off its recent highs but demand remains robust and we are confident on the future of this sort after commodity. The lower Australian Dollar is also a positive tailwind for Australian resource companies and helps underpin our investment case in the sector. The main issue for investors as we head into FY2023 is the monetary policy tightening underway by Central Banks. There seems to be a “whatever it takes” attitude to combat inflation. It appears that Central Bankers remain convinced economies are strong enough to handle the perceived rate increases. The pace of rate hikes remains an overhang as does the level at which interest rates settle. The RBA, which increased rates again in early July to 1.35%, is hoping that it can burst the inflation bubble and settle rates at around 3.0% - 3.5% by mid-2023. While this is a significant percentage increase from the pandemic low-rate environment, a rate of 3.5% is still very accommodative in a historical context. Given the declines in equity markets, valuation multiples now look very compelling with the S&P/ASX 300 index trading on a P/E multiple of 13 times for FY2022. This is the same multiple as the low of the COVID-19 panic selling. The challenge, of course, is the outlook for earnings. The current dividend yield for the market is just under 5.0%. The upcoming August earnings season will be interesting. It is anticipated that earnings will be robust as the recent interest rate increases would not have had a material impact on household budgets as yet. We expect outlook statements to be very cautious. Nevertheless, with the S&P/ASX 300 Accumulation Index already down over 12% from recent highs, some of the negativity could be already priced in. 8 Annual Report 2022 ASX: BKI Portfolio Manager’s Report (continued) Portfolio Movements In the first half of this financial year, we realised approximately $80 million worth of sales through exiting positions in Brambles, Platinum Asset Management and Magellan Financial. These sales were prompted by a reduction in our confidence for these companies to increase dividends over the short to medium term. Endeavour Group was traded out of the portfolio after receipt as a demerger dividend from Woolworths. BKI also traded the Transurban Rights received as part of the entitlement offer following the successful bid for the Westconnex assets. BKI reduced its exposure to ASX Limited and reduced positions in Commonwealth Bank, Woolworths Limited and Metcash Limited following their off-market buybacks. This enabled us to add to several existing positions, all of which offered significant grossed up dividend yields. They are companies well known to the BKI Investment Committee and provided a very good opportunity to increase BKI’s Investment Revenue and Net Profits. The main investments over the first half of FY2022 were made in Aurizon Holdings, Rio Tinto, BHP Group, Fortescue Metals, Harvey Norman, APA Group, Pendal Limited, Suncorp Group and Metcash Limited. BKI also accepted the Washington H. Soul Pattinson (SOL) Proposal to merge with Milton Corporation, which was implemented on 5 October 2021. BKI now holds 391,908 shares in SOL. In the second half of FY2022 BKI realised approximately $40 million worth of further sales with the exit of positions in Fortescue Metals and ASX Limited. These divestments allowed BKI to reinvest capital into other companies within the portfolio including BHP Group, Metcash Limited and Aurizon Holdings. We also added Ampol Limited and Smartgroup Corporation to the portfolio. Following the Woodside Energy (formerly Woodside Petroleum) acquisition of BHP Petroleum International Pty Ltd, BKI received a non-cash distribution from the transaction by receiving 477,049 additional Woodside Energy shares. As at the end of June 2022, there were 39 stocks within the BKI Portfolio, with the Top 25 holdings and cash accounting for 93.1% of the total Portfolio. The Investment Portfolio (including cash) was valued at $1.24 billion, with the cash position of $80 million representing 6.5%. Performance For the year to 30 June 2022, BKI’s Total Shareholder Return was positive 6.8% this compares very favorably to the S&P/ASX 300 Accumulation Index which returned negative 6.8% for the same period. BKI’s Total Shareholder Returns including franking credits for the year to 30 June 2022 was positive 8.7%, outperforming the index by 14.0%. BKI Total Shareholder Returns (TSR) Including Franking Credits as at 30 June 2022 8.7% 8.4% 7.3% 7.6% 10.6% 12.5% 10.0% 7.5% 5.0% 2.5% 0.0% 2.7% 6 months 1 year 3 years pa 5 years pa 10 years pa 15 years pa BKI Total Shareholder Returns – 100% Franked BKI Investment Company Limited ABN: 23 106 719 868 9 Portfolio Manager’s Report (continued) BKI’s Net Portfolio Return (after all operating expenses, provisions and payment of both income and capital gains tax and the reinvestment of dividends) for the year to 30 June 2022 was positive 1.5% compared to the S&P/ASX 300 Accumulation Index which returned negative 6.8% for the same period. BKI’s Premium/Discount to NTA BKI’s Pre-Tax Net Tangible Assets as at 30 June 2022 was $1.66, and represented a 0% discount to the BKI share price. BKI’s Premium/Discount as at 30 June 2022 $1.90 $1.80 $1.70 $1.60 $1.50 $1.40 $1.30 $1.20 $1.10 $1.00 $0.90 $0.80 $0.70 $0.60 40% 30% 20% 10% 0% –10% –20% Dec 2003 Dec 2005 Dec 2007 Dec 2009 Dec 2011 Dec 2013 Dec 2015 Dec 2017 Dec 2019 Dec 2021 Prem/Disc % Prem/Disc Trend BKI Share Price Pre Tax NTA Research and Ratings During the year, BKI was recognised at the Self Managed Super Fund Awards for 2021 as a Finalist in the Listed Investment Company Advisor Choice category. BKI was also once again well endorsed by various investment product research and ratings companies. BKI currently has a Recommended rating from LONSEC, a Recommended-Plus rating from Independent Investment Research (IIR) and a Neutral rating from Morningstar. Tom Millner and Will Culbert Contact Asset Management 10 Annual Report 2022 ASX: BKI Directors’ Report The Directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the ‘Group’) consisting of BKI Investment Company Limited (referred to hereafter as the ‘Company’ or ‘parent entity’) and the entities it controlled at the end of, or during, the year ended 30 June 2022. Directors The following persons were directors of BKI Investment Company Limited during the whole of the financial year and up to the date of this report, unless otherwise stated: Robert Dobson Millner Non-Executive Director and Chair David Capp Hall AM Non-Executive Director Ian Thomas Huntley Non-Executive Director Alexander James Payne Non-Executive Director Jacqueline Ann Clarke Non-Executive Director (appointed 18 January 2022) Principal Activities The 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. Dividends Final ordinary dividend for the year ended 30 June 2021 of 3.0 cents per share (2020: 2.32 cents per share) fully franked at the tax rate of 30%, paid on 26 August 2021 Final special dividend for the year ended 30 June 2021 of nil cents per share (2020: 1.00 cent per share fully franked at the tax rate of 30%) Consolidated 2022 $’000 2021 $’000 22,170 17,065 – 7,355 Interim ordinary dividend for the year ended 30 June 2022 of 3.5 cents per share (2021: 2.00 cents per share) fully franked at the tax rate of 30%, paid on 3 March 2022 25,874 14,754 Interim special dividend for the year ended 30 June 2022 of 0.5 cents per share (2021: nil cents per share) fully franked at the tax rate of 30%, paid on 3 March 2022 Total dividends paid 3,756 – 51,800 39,174 Operating Results BKI’s Ordinary Revenue from investment portfolio was up 58% to $62.6 million. The result was boosted by higher ordinary dividends received during the last year from Woodside Energy (formerly Woodside Petroleum), New Hope Corporation, BHP Group, Rio Tinto, Commonwealth Bank, National Australia Bank, Transurban Group and Macquarie Group. BKI realised $0.6 million from the trading portfolio, after participating in some minor trading positions. Due to the extremely low interest rates on offer, BKI’s interest received was only $0.1 million, down 29% on FY2021. BKI’s Net Operating Profit After Tax, before special investment revenue, was a record $58.1 million, an increase of 63% over the previous corresponding period. BKI’s basic earnings per share before special investment revenue was 62% higher to 7.84 cents per share. BKI Investment Company Limited ABN: 23 106 719 868 11 Directors’ Report (continued) Operating Results (continued) Special Investment Revenue was significantly higher in FY2022, rising from $1.0 million to $42.7 million. Special Dividends were received from New Hope Corporation, Telstra Corporation, Smart Group Limited and Rio Tinto Limited. BKI participated in off market buy-backs conducted by Commonwealth Bank, Woolworths Limited and Metcash Limited. Also, during the period, BKI received a fully franked in-specie distribution following the Woodside Energy acquisition of BHP Petroleum International Pty Ltd. The distribution was non-cash with BKI receiving additional Woodside Energy shares. This significant lift in Special Investment Revenue resulted in BKI’s Net Operating Profit After Tax, including special investment revenue for FY2022 of $100.8 million, up 175% on the previous corresponding period and a record for the company. BKI’s FY2022 basic earnings per share, including special investment revenue, increased 173% to 13.60 cents per share from 4.97 cents per share in FY2021. Total Shareholder Return including franking credits for the year to 30 June 2022 was positive 8.7%, compared to the S&P/ ASX 300 Accumulation Index, which returned negative 5.3% over the same period, an outperformance of 14.0%. BKI’s Total Shareholder Return including Franking Credits for 15 years was positive 7.6% per annum compared to the S&P/ASX 300 Accumulation Index, which returned positive 6.3%. 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 2022 was positive 1.5%. Review of Operations Operating expenses increased slightly to $2.1m (2021: $2.0m), with most cost categories in line with the previous year. As a result, BKI was able to maintain its MER at 0.17% for the year (2021: 0.17%). BKI made a number of changes to the portfolio during FY2022. We realised approximately $117 million worth of sales through exiting positions in Brambles, Platinum Asset Management, Magellan Financial, Fortescue Metals and ASX Limited. Endeavour Group was traded out of the portfolio after receipt as a demerger dividend from Woolworths. BKI also traded the Transurban Rights received as part of the entitlement offer following the successful bid for the Westconnex Assets. BKI reduced the exposure to positions in Commonwealth Bank, Woolworths Limited and Metcash Limited following the participation in their off-market buybacks. Main investments over FY2022 were made in BHP Group, Rio Tinto, Aurizon Holdings, Fortescue Metals, Harvey Norman, APA Group, Pendal Limited, Suncorp Group and Metcash Limited. Ampol Limited and Smartgroup Corporation were added to the portfolio. BKI also accepted the Washington H. Soul Pattinson (SOL) Proposal to merge with Milton Corporation, which was implemented on the 5 October 2021. BKI now holds 391,908 shares in SOL. Following the Woodside Energy (formerly Woodside Petroleum) acquisition of BHP Petroleum International Pty Ltd, BKI received a non-cash distribution from the transaction in the form of receiving 477,049 additional Woodside Energy shares. As at the end of June 2022, there were 39 stocks within the BKI Portfolio, with the Top 25 holdings and cash accounting for 93.1% of the total Portfolio. The Investment Portfolio (including cash) was valued at $1.24 billion, with the cash position of $80 million representing 6.5%. Financial Position Net assets of the Group decreased marginally during the financial year to $1,171.6m (2021: $1,172.4m). Non-current assets decreased during the financial year to $1,164.0m (2021: $1,210.6m) primarily driven by the devaluation of the investment portfolio. 12 Annual Report 2022 ASX: BKI Directors’ Report (continued) Employees The Group had no employees as at 30 June 2022 (2021: nil). Significant changes in the state of affairs There were no significant changes in the state of affairs of the Group during the financial year. Matters subsequent to the end of the financial year Since the end of the year the Directors have declared a final ordinary dividend for the year ended 30 June 2022 of 3.65 cents per share and a special dividend of 1.0 cents per share, both fully franked at the tax rate of 30% are payable on 30 August 2022, but are not recognised as a liability at the year end. No other matter or circumstance has arisen since 30 June 2022 that has significantly affected, or may significantly affect the Group’s operations, the results of those operations, or the Group’s state of affairs in future financial years. Likely developments and expected results of operations The operations of the Group will continue with planned long-term investments in Australian equities and fixed interest securities. The Group will continue its strategy of investing for the long term in a portfolio of assets to deliver shareholders an increasing income stream and long-term capital growth. The success of this strategy will be strongly influenced by the performance of the underlying investee companies, their share price movements, and capital management and income distribution policies. The performance of these companies will be influenced by general economic and market conditions such as economic growth rates, interest rates and inflation. Performance could also be influenced by regulatory change. These external conditions are difficult to predict and not within the control of the Group, making it difficult to forecast the future results of the Group. The advent of the COVID-19 economic crisis created significant social and economic upheaval in FY2020 and FY2021, causing heightened economic uncertainty across all industries globally, and resulting in extreme fluctuations in global sharemarkets. The social, economic and financial impacts of COVID-19 have continued in FY2022. The extent of future impacts will be influenced by both medical advances to address the underlying pandemic, as well as further changes in government policy, central bank policies and regulations in order to address these impacts. All of these changes will potentially impact the intention and/or ability of companies to generate returns and pay dividends, including those companies in which BKI invests. However, BKI is a research driven, long-term manager focusing on investing in well managed, profitable companies, focusing on the merits of individual companies rather than market and economic trends. BKI will continue to implement prudent business practice to allow the achievement of the Group’s Corporate Objectives and Business Strategy. Environmental regulation The Group is not subject to any significant environmental regulation under Australian Commonwealth or State law. BKI Investment Company Limited ABN: 23 106 719 868 13 Directors’ Report (continued) Information on Directors Robert Dobson Millner FAICD Non-Executive Director and Chair Mr Millner was appointed Non-executive Chair upon the Company’s formation in October 2003. Mr Millner has extensive experience in the investment industry. Other current directorships: p Washington H Soul Pattinson and Company Limited (appointed 1984, Chair since 1998) p New Hope Corporation Limited (appointed 1995, Chair since 1998) p Brickworks Limited (appointed 1997, Chair since 1999) p Apex Healthcare Berhad (appointed 2000) p TPG Telecom Limited (appointed July 2020) p Tuas Limited (appointed May 2020) Former directorships (last 3 years): p Milton Corporation Limited (appointed 1998, resigned 2021 following delisting from ASX on 6 October 2021) p Australian Pharmaceutical Industries Limited (appointed 2000, resigned July 2020) p TPG Corporation Limited (appointed 2000, resigned July 2020) Special responsibilities: p Chair of the Board p Chair of the Investment Committee p Member of the Remuneration Committee p Chair of the Nomination Committee Interests in shares: 10,794,971 David Capp Hall, AM FCA, FAICD Non-Executive Director Mr Hall was appointed a Non-executive Director and Chair of the Audit & Risk Committee upon the Company’s formation in October 2003. Mr Hall is a Chartered Accountant with extensive experience in corporate management, finance and as a Company Director. Other current directorships: None Former directorships (last 3 years): None Special responsibilities: p Chair of the Audit & Risk Committee p Member of the Remuneration Committee p Member of the Nomination Committee Interests in shares: 3,014,753 Ian Thomas Huntley BA Non-Executive Director Mr Huntley joined the Board as a Non-Executive Director in February 2009. After a career in financial journalism, Mr Huntley acquired Your Money Weekly newsletter in 1973. Over the following 33 years, Mr Huntley built the Your Money Weekly newsletter into one of Australia’s best known investment advisory publications. He and his partners sold the business to Morningstar Inc of the USA in mid-2006. 14 Annual Report 2022 ASX: BKI Directors’ Report (continued) Information on Directors (continued) Other current directorships: None Former directorships (last 3 years): None Special responsibilities: p Member of the Investment Committee p Member of the Remuneration Committee p Member of the Audit & Risk Committee p Member of the Nomination Committee Interests in shares: 11,218,920 Alexander James Payne B.Comm, Dip Cm, FCPA, FCIS, FCIM Non-Executive Director Mr Payne was appointed a Non-executive Director upon the Company’s formation in October 2003 and has been a member of the Audit & Risk Committee since then. Mr Payne was Chief Financial Officer of Brickworks Limited for 13 years and has considerable experience in finance and investment. Other current directorships: None Former directorships (last 3 years): None Special responsibilities: p Member of the Audit & Risk Committee p Member of the Investment Committee p Chair of the Remuneration Committee Interests in shares: 530,000 Jacqueline Ann Clarke FCA, CTA, JP, GAICD Non-Executive Director (appointed 18 January 2022) Ms Clarke has over 30 years of experience, including over 20 years with PwC and Deloitte, 15 of which as partner of Deloitte. Having held a number of executive roles across Australia, New Zealand and Asia, her experience covers many industries and sectors including retail, property, automotive, professional services (accounting, legal and engineering), technology, financial services, agriculture and oil & gas. Ms Clarke currently sits on the Paul Fudge Group Advisory Board, acts as Treasurer and Non-executive Director of the Humpty Dumpty Foundation and is also founder of boutique accounting and advisory firm Maxima Private. Other current directorships: p Empire Energy Group Limited (alternate Director) (appointed 16 August 2021) Former directorships (last 3 years): None Special responsibilities: p Member of the Audit & Risk Committee p Member of the Investment Committee p Member of the Remuneration Committee Interests in shares: 69,121 ‘Other current directorships’ quoted above are current directorships for listed entities only and excludes directorships of all other types of entities, unless otherwise stated. ‘Former directorships (last 3 years)’ quoted above are directorships held in the last 3 years for listed entities only and excludes directorships of all other types of entities, unless otherwise stated. BKI Investment Company Limited ABN: 23 106 719 868 15 Directors’ Report (continued) Company Secretaries Mr Pinto was appointed Company Secretary in November 2011. He is a Chartered Accountant with extensive experience in both professional practice and in senior commercial roles across a broad range of industries. On 1 June 2022, Ms Wong (CPA, LLB) was appointed as Company Secretary. Ms Wong is a finance professional having held senior roles in ASX listed companies and also a qualified lawyer with experience gained in private practice. Meetings of Directors The number of meetings of the Company’s Board of Directors (‘the Board’) and of each Board committee held during the year ended 30 June 2022, and the number of meetings attended by each director were: Full Board Investment Audit & Risk Remuneration Nomination1 Attended Held Attended Held Attended Held Attended Held Attended Held R D Millner A J Payne D C Hall I T Huntley J A Clarke2 8 7 8 7 3 8 7 8 7 3 11 11 – 10 5 11 11 – 11 6 – 2 2 2 1 – 2 2 2 1 2 2 2 2 – 2 2 2 2 – 1 2 2 1 – 1 2 2 1 – Held represents the number of meetings held during the time the director held office or was a member of the relevant committee. 1 During the year, two meetings of the Nomination Committee were held and at the time of the first meeting held in July 2021, both Mr R D Millner and Mr I T Huntley were not members as they were each scheduled for re-election as Directors under the Company’s Director rotation policy. Subsequent to each being re-elected as Directors at the 2021 AGM, Mr Millner and Mr Huntley were reappointed to the Nomination Committee and eligible to attend the second Nomination Committee meeting held during the year. 2 Ms J A Clarke was appointed to the Board on 18 January 2022 and will be scheduled for re-election at the 2022 AGM. Remuneration Report Remuneration Report (Audited) The remuneration report details the key management personnel remuneration arrangements for the Group, in accordance with the requirements of the Corporations Act 2001 and its Regulations. Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including all directors. The remuneration report is set out under the following main headings: p Principles used to determine the nature and amount of remuneration p Details of remuneration p Service agreements p Share-based compensation p Additional disclosures relating to key management personnel 16 Annual Report 2022 ASX: BKI Directors’ Report (continued) Remuneration Report (continued) Principles used to determine the nature and amount of remuneration 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. The Company has externalised its investment management, accounting and company secretarial functions to Contact Asset Management Pty Limited, and currently has no employees. Remuneration Policy The Board is responsible for determining and reviewing remuneration arrangements, including performance incentives, for the Directors themselves 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 Management Personnel fairly and appropriately with reference to relevant employment market conditions, their performance, experience and expertise. Elements of Director and Key Management Personnel (KMP) remuneration The Board’s policies for determining the nature and amount of remuneration for Key Management Personnel of the Group is as follows: p The Director Remuneration Policy and Executive Remuneration Policy are developed by the Remuneration Committee and approved by the Board. Professional advice is sought from independent external consultants if deemed appropriate. p All Key Management Personnel are eligible to receive a base fee, or salary and superannuation, combined with performance incentives if deemed appropriate by the Board. p Performance incentives are only paid once predetermined key performance indicators have been met. p Incentives paid in the form of shares are intended to align the interests of the Key Management Personnel with those of the shareholders. p The Remuneration Committee reviews the remuneration packages of Key Management Personnel annually by reference to the Group’s performance, KMP performance and comparable information from industry sectors. The performance of Key Management Personnel is assessed annually by the Board. Assessment of performance incentives offered is conducted annually, based on the growth of shareholder and portfolio returns. The Board may exercise discretion in relation to approving incentives and can recommend changes to the Remuneration Committee’s recommendations. Any changes must be justified by reference to measurable performance criteria. The policies are designed to attract the highest calibre of KMP and reward them for performance results leading to long-term growth in shareholder wealth. All remuneration paid to Key Management Personnel is valued at the cost to the Group and expensed. Non-executive directors remuneration 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. 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 2022 financial year (2021: nil). At the next Annual General meeting, anticipated to be in October 2022, BKI will seek the approval of its shareholders by way of ordinary resolution, to increase the remuneration pool from $300,000 to $400,000. BKI Investment Company Limited ABN: 23 106 719 868 17 Directors’ Report (continued) Remuneration Report (continued) Performance-based remuneration BKI previously established the BKI Executive Incentive Scheme to form part of the remuneration packages of the Group’s executive team. 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. In July 2021 the Remuneration Committee resolved to cease making any new grants under the BKI Incentive Scheme until further notice. On 31 May 2022, the services agreement between BKI and CAS ceased and in accordance with the BKI Executive Incentive Scheme, all unpaid and/or unallocated incentives were forfeited. At 30 June 2022, there were no participants or entitlements under the Scheme. Use of remuneration consultants The Group did not engage remuneration consultants during the year ended 30 June 2022. Voting and comments made at the Company’s 12 October 2021 Annual General Meeting (‘AGM’) At the 12 October 2021 AGM, 94.57% of the votes received supported the adoption of the remuneration report for the year ended 30 June 2021. The Company did not receive any specific feedback at the AGM regarding its remuneration practices. Details of remuneration Amounts of remuneration Details of the remuneration of key management personnel of the Group are set out in the following tables. The key management personnel of the Group consisted of the following directors of BKI Investment Company Limited: p R D Millner – Non-Executive Director and Chair p D C Hall – Non-Executive Director p I T Huntley – Non-Executive Director p A J Payne – Non-Executive Director p J A Clarke – Non-Executive Director (appointed 18 January 2022) And the following person: p J P Pinto – Company Secretary* * Services provided under contract through Corporate & Administrative Services Pty Limited ceased on 31 May 2022. 18 Annual Report 2022 ASX: BKI Directors’ Report (continued) Remuneration Report (continued) 2022 Non-Executive Directors R D Millner D C Hall I T Huntley A J Payne J A Clarke* Other Key Management Personnel J P Pinto** Total 2021 Non-Executive Directors R D Millner D C Hall I T Huntley A J Payne Other Key Management Personnel J P Pinto** Total Short-term benefits Post- employment benefits Share- based payments Cash salary and fees Super- annuation $ $ Equity- settled $ Total $ 68,727 57,682 47,909 47,909 26,227 6,873 5,768 4,791 4,791 2,623 – – 248,454 24,846 69,041 53,379 43,562 43,562 6,559 5,071 4,138 4,138 – – – – – – – – – – – 75,600 63,450 52,700 52,700 28,850 – 273,300 75,600 58,450 47,700 47,700 – – 209,544 19,906 2,752 2,752 2,752 232,202 * Ms Clarke was appointed a Non-Executive Director on 18 January 2022. ** Mr Pinto was remunerated by Corporate & Administrative Services Pty Limited. The proportion of remuneration linked to performance and the fixed proportion are as follows: Non-Executive Directors R D Millner D C Hall I T Huntley A J Payne J A Clarke Other Key Management Personnel J P Pinto Fixed remuneration At risk – STI At risk – LTI 2022 2021 2022 2021 2022 2021 100% 100% 100% 100% 100% 100% 100% 100% 100% – – – – – – – – – – – – – – – – – – – – – – – – – – 100% BKI Investment Company Limited ABN: 23 106 719 868 19 Directors’ Report (continued) Remuneration Report (continued) Service agreements Mr J P Pinto provided Company Secretarial services under contract through Corporate & Administrative Services Pty Limited (CAS). On 31 May 2022, services between CAS and BKI ceased. Commencing from 1 June 2022, Contact Asset Management Pty Limited became the main provider of Company Secretarial services to BKI. Share-based compensation Issue of shares There were no shares issued to directors and other key management personnel as part of compensation during the year ended 30 June 2022. Options During the financial year ended 30 June 2022, the following incentives lapsed: Incentive issue Issue date Number of rights granted Value of initial grant J Pinto 2018 J Pinto 2019 J Pinto 2020 J Pinto 2021 01/07/2017 01/07/2018 01/07/2019 01/07/2020 25,000 25,000 25,000 25,000 $41,385 $38,040 $38,678 $35,943 Initial vesting date 30/06/2021 30/06/2022 30/06/2023 30/06/2024 Expiry date 30/06/2022 30/06/2023 30/06/2024 30/06/2025 Number of rights vested/ lapsed Number of rights yet to vest/ lapse 25,000 25,000 25,000 25,000 – – – – Additional disclosures relating to key management personnel Shareholding The number of shares in the Company held during the financial year by each director and other members of key management personnel of the Group, including their personally related parties, is set out below: Balance at the start of the year Received as part of remuneration Additions Disposals/ others Ordinary shares R D Millner D C Hall I T Huntley A J Payne J A Clarke J P Pinto Total 9,874,304 2,499,444 11,224,980 430,000 – 130,568 24,159,296 – – – – – – – Balance at the end of the year 10,794,971 3,014,753 11,218,920 530,000 69,121 136,269 920,667 515,309 – 100,000 69,121 5,701 – – (6,060) – – – 1,610,798 (6,060) 25,764,034 Directors acquired shares through the Dividend Reinvestment Plan, and/or on-market purchase. Other Key Management Personnel acquired shares through the Dividend Reinvestment Plan. All KMP or their associated entities, being shareholders, are entitled to receive dividends. 20 Annual Report 2022 ASX: BKI Directors’ Report (continued) Remuneration Report (continued) Option holding The number of options over ordinary shares in the Company held during the financial year by each director and other members of key management personnel of the Group, including their personally related parties, is set out below: Options over ordinary shares J P Pinto Total Balance at the start of the year 100,000 100,000 Granted Exercised Expired/ forfeited/ other Balance at the end of the year – – – – 100,000 100,000 – – This concludes the remuneration report, which has been audited. Shares under option There were no unissued ordinary shares of BKI Investment Company Limited under option at the date of this report. Shares issued on the exercise of options There were no ordinary shares of BKI Investment Company Limited issued on the exercise of options during the year ended 30 June 2022 and up to the date of this report. Indemnity and insurance of officers The Company has indemnified the directors and executives of the Company for costs incurred, in their capacity as a director or executive, for which they may be held personally liable, except where there is a lack of good faith. During the financial year, the Company paid a premium in respect of a contract to insure the directors and executives of the Company against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. Indemnity and insurance of auditor The Company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the Company or any related entity against a liability incurred by the auditor. During the financial year, the Company has not paid a premium in respect of a contract to insure the auditor of the Company or any related entity. Proceedings on behalf of the Company No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings. Non-audit services There were no non-audit services provided during the financial year by the auditor. BKI Investment Company Limited ABN: 23 106 719 868 21 Directors’ Report (continued) Officers of the Company who are former partners of MGI Sydney Assurance Services Pty Ltd There are no officers of the Company who are former partners of MGI Sydney Assurance Services Pty Ltd. Rounding of amounts The Company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and Investments Commission, relating to ‘rounding-off’. Amounts in this report have been rounded off in accordance with that Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar. Auditor’s independence declaration A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out immediately after this directors’ report. Auditor MGI Sydney Assurance Services Pty Ltd continues in office in accordance with section 327 of the Corporations Act 2001. This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001. On behalf of the directors Robert D Millner Chair Sydney 19 July 2022 22 Annual Report 2022 ASX: BKI Statement of Profit or Loss for the year ended 30 June 2022 Ordinary revenue from investment portfolio Revenue from bank deposits Other income Other gains Income from operating activities before special investment revenue Operating expenses Operating result before income tax expense and special investment revenue Special investment revenue Operating result before income tax expense Income tax expense Consolidated Note 5 6 5 7 2022 $’000 62,604 141 – 645 63,390 (2,139) 61,251 42,713 103,964 (3,165) 2021 $’000 39,738 109 2 305 40,154 (1,979) 38,175 1,022 39,197 (2,552) Operating result after income tax expense for the year attributable to the owners of BKI Investment Company Limited 13 100,799 36,645 Basic and diluted earnings per share before special investment revenue Basis and diluted earnings per share after special investment revenue Note 25 25 2022 Cents 7.84 13.60 2021 Cents 4.83 4.97 The above Statement of Profit or Loss should be read in conjunction with the accompanying notes. BKI Investment Company Limited ABN: 23 106 719 868 23 Statement of Other Comprehensive Income for the year ended 30 June 2022 Consolidated 2022 $’000 2021 $’000 Note Operating result after income tax expense for the year attributable to the owners of BKI Investment Company Limited 100,799 36,645 Other comprehensive income Items that may be reclassified subsequently to profit or loss Unrealised (losses)/gains on investment portfolio (100,681) 141,324 Deferred tax benefit/(expense) on unrealised gains/losses on investment portfolio Realised gains on investment portfolio Tax expense relating to realised gains on investment portfolio 7 30,204 20,120 (6,036) (42,397) 32,903 (9,871) Other comprehensive income for the year, net of tax (56,393) 121,959 Total comprehensive income for the year attributable to the owners of BKI Investment Company Limited 44,406 158,604 The above Statement of Other Comprehensive Income should be read in conjunction with the accompanying notes. 24 Annual Report 2022 ASX: BKI Statement of Financial Position as at 30 June 2022 Assets Current assets Cash and cash equivalents Trade and other receivables Income tax refund due Other Total current assets Non-current assets Investment portfolio Property, plant and equipment Deferred tax Total non-current assets Total assets Liabilities Current liabilities Trade and other payables Income tax Total current liabilities Non-current liabilities Deferred tax Total non-current liabilities Total liabilities Net assets Equity Share capital Reserves Retained profits Total equity Consolidated 2022 $’000 2021 $’000 Note 8 9 7 10 7 7 7 11 12 13 72,078 8,594 51 58 80,781 40,606 36,105 – 52 76,763 1,156,086 1 7,836 1,194,994 1 15,601 1,163,923 1,210,596 1,244,704 1,287,359 270 – 270 72,855 72,855 73,125 10,363 1,190 11,553 103,414 103,414 114,967 1,171,579 1,172,392 935,766 144,047 91,766 929,185 200,440 42,767 1,171,579 1,172,392 The above Statement of Financial Position should be read in conjunction with the accompanying notes. BKI Investment Company Limited ABN: 23 106 719 868 25 Statement of Changes in Equity for the year ended 30 June 2022 Consolidated Share capital $’000 Revaluation reserve $’000 Realised capital gains reserve $’000 Retained profits $’000 Total equity $’000 Balance at 1 July 2020 924,130 130,657 (52,176) 45,296 1,047,907 Operating result after income tax expense for the year Other comprehensive income for the year, net of tax Total comprehensive income for the year Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs (note 11) Dividends paid (note 14) – – – – – 36,645 36,645 98,927 98,927 23,032 23,032 – 121,959 36,645 158,604 5,055 – – – – – – 5,055 (39,174) (39,174) Balance at 30 June 2021 929,185 229,584 (29,144) 42,767 1,172,392 Balance at 1 July 2021 929,185 229,584 (29,144) 42,767 1,172,392 Operating result after income tax expense for the year Other comprehensive income for the year, net of tax Total comprehensive income for the year Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs (note 11) Dividends paid (note 14) – – – – – 100,799 100,799 (70,477) (70,477) 14,084 14,084 – (56,393) 100,799 44,406 6,581 – – – – – – 6,581 (51,800) (51,800) Balance at 30 June 2022 935,766 159,107 (15,060) 91,766 1,171,579 The above Statement of Changes in Equity should be read in conjunction with the accompanying notes. 26 Annual Report 2022 ASX: BKI Statement of Cash Flows for the year ended 30 June 2022 Cash flows from operating activities Other receipts in the course of operations Payments to suppliers and employees Dividends and distributions received Interest received Proceeds from sale of trading portfolio Payments for trading portfolio Income taxes paid Net cash from operating activities Cash flows from investing activities Payments for investments Proceeds from sale of investment portfolio Capital returns received from investment portfolio Net cash used in investing activities Cash flows from financing activities Share issue transaction costs Dividends paid Net cash used in financing activities Consolidated Note 2022 $’000 2021 $’000 2 (1,703) 41,996 109 42,925 (42,620) (2,628) 38,081 – (2,100) 104,512 141 9,961 (9,316) (3,032) 100,166 (171,601) 145,865 2,261 (147,630) 135,990 – (23,475) (11,640) (16) (45,203) (45,219) 31,472 40,606 72,078 (21) (34,104) (34,125) (7,684) 48,290 40,606 24 14 Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Cash and cash equivalents at the end of the financial year 8 The above Statement of Cash Flows should be read in conjunction with the accompanying notes BKI Investment Company Limited ABN: 23 106 719 868 27 Notes to the Financial Statements for the year ended 30 June 2022 Note 1. General information The financial statements cover BKI Investment Company Limited as a Group consisting of BKI Investment Company Limited and the entities it controlled at the end of, or during, the year. The financial statements are presented in Australian dollars, which is BKI Investment Company Limited’s functional and presentation currency. BKI Investment Company Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is: Suite 302, Level 3 1 Castlereagh Street Sydney NSW 2000 A description of the nature of the Group’s operations and its principal activities are included in the directors’ report, which is not part of the financial statements. The financial statements were authorised for issue, in accordance with a resolution of directors, on 19 July 2022. The directors have the power to amend and reissue the financial statements. Note 2. Significant accounting policies The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. New or amended Accounting Standards and Interpretations adopted The Group has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (‘AASB’) that are mandatory for the current reporting period. Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. Basis of preparation These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (‘AASB’) and the Corporations Act 2001, as appropriate for for-profit oriented entities. These financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board (‘IASB’). Historical cost convention The financial statements have been prepared under the historical cost convention, except for, financial assets at fair value through other comprehensive income. Critical accounting estimates The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 3. Parent entity information In accordance with the Corporations Act 2001, these financial statements present the results of the Group only. Supplementary information about the parent entity is disclosed in note 21. 28 Annual Report 2022 ASX: BKI Notes to the Financial Statements (continued) Note 2. Significant accounting policies (continued) Principles of consolidation The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of BKI Investment Company Limited (‘Company’ or ‘parent entity’) as at 30 June 2022 and the results of all subsidiaries for the year then ended. BKI Investment Company Limited and its subsidiaries together are referred to in these financial statements as the ‘Group’. Subsidiaries are all those entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases. Intercompany transactions, balances and unrealised gains on transactions between entities in the Group are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest, without the loss of control, is accounted for as an equity transaction, where the difference between the consideration transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity attributable to the parent. Where the Group loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The Group recognises the fair value of the consideration received and the fair value of any investment retained together with any gain or loss in profit or loss. Operating segments Operating segments are presented using the ‘management approach’, where the information presented is on the same basis as the internal reports provided to the Chief Operating Decision Makers (‘CODM’). The CODM is responsible for the allocation of resources to operating segments and assessing their performance. 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 continuously. Movements in carrying values of securities are recognised as Other Comprehensive Income and taken to the Revaluation Reserve. Where disposal of an investment occurs, any revaluation increment or decrement relating to it is transferred from the Revaluation Reserve to the Realised Capital Gains Reserve. Valuation of trading portfolio Listed securities are initially brought to account at market value, which is the cost of acquisition, and are re-valued to market values continuously. BKI Investment Company Limited ABN: 23 106 719 868 29 Notes to the Financial Statements (continued) Note 2. Significant accounting policies (continued) 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. 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 and distribution revenue is recognised when the right to receive a dividend or distribution has been established. All revenue is stated net of the amount of goods and services tax (GST). Income tax The income tax expense or benefit for the period is the tax payable on that period’s taxable income based on the applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to temporary differences, unused tax losses and the adjustment recognised for prior periods, where applicable. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for: p When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor taxable profits; or p When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable that there are future taxable profits available to recover the asset. Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on either the same taxable entity or different taxable entities which intend to settle simultaneously. BKI Investment Company Limited (the ‘head entity’) and its wholly-owned Australian subsidiaries have formed an income tax consolidated group under the tax consolidation regime. The head entity and each subsidiary in the tax consolidated group continue to account for their own current and deferred tax amounts. The tax consolidated group has applied the ‘separate taxpayer within group’ approach in determining the appropriate amount of taxes to allocate to members of the tax consolidated group. In addition to its own current and deferred tax amounts, the head entity also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from each subsidiary in the tax consolidated group. Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts receivable from or payable to other entities in the tax consolidated group. The tax funding arrangement ensures that the intercompany charge equals the current tax liability or benefit of each tax consolidated group member, resulting in neither a contribution by the head entity to the subsidiaries nor a distribution by the subsidiaries to the head entity. 30 Annual Report 2022 ASX: BKI Notes to the Financial Statements (continued) Note 2. Significant accounting policies (continued) Cash and cash equivalents Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Goods and Services Tax (‘GST’) and other similar taxes Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of financial position. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the tax authority, are presented as operating cash flows. 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. Rounding of amounts The Company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and Investments Commission, relating to ‘rounding-off’. Amounts in this report have been rounded off in accordance with that Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar. New Accounting Standards and Interpretations not yet mandatory or early adopted Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory, have not been early adopted by the Group for the annual reporting period ended 30 June 2022. The Group has not yet assessed the impact of these new or amended Accounting Standards and Interpretations. Note 3. Critical accounting judgements, estimates and assumptions The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions on historical experience and on other various factors, including expectations of future events, management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal the related actual results. The judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year are discussed below. Deferred tax balances 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 7. 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. BKI Investment Company Limited ABN: 23 106 719 868 31 Notes to the Financial Statements (continued) Note 4. Operating segments Identification of reportable operating segments 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 the performance of the operating segments. The Group operates solely in the securities industry in Australia and has no reportable segments. Note 5. Revenue (a) Ordinary 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 investment revenue (c) Revenue from bank deposits Interest received (d) Other income Other income (e) Other gains Consolidated 2022 $’000 50,673 5,998 5,933 62,604 42,713 – 42,713 2021 $’000 28,437 4,777 6,524 39,738 899 123 1,022 141 109 – 2 Net realised gain on sale of investments held for trading Total revenue 645 305 106,103 41,176 Note 6. Operating expenses Administration expenses Employment expenses Investment management Professional fees Total operating expenses 463 175 1,320 181 2,139 414 239 1,167 159 1,979 32 Annual Report 2022 ASX: BKI Notes to the Financial Statements (continued) Note 7. Income tax Consolidated 2022 $’000 2021 $’000 (a) Income tax expense on operating profit before net gains on investments Current tax Deferred tax – origination and reversal of temporary differences Adjustment recognised for prior periods Aggregate income tax expense Numerical reconciliation of income tax expense and tax at the statutory rate Operating result before income tax expense Tax at the statutory tax rate of 30% Tax effect amounts which are not deductible/(taxable) in calculating taxable income: Franked dividends and distributions received Adjustment recognised for prior periods Income tax expense (b) Total tax expense Net income tax expense on operating profit before net gains on investments Income tax on net realised gains/(losses) on investment portfolio Total tax expense (c) Movements in deferred tax assets 787 1,684 694 3,165 103,964 31,189 (28,718) 2,471 694 3,165 3,165 6,036 9,201 Credited/ (charged) to statement of comprehensive income $’000 Credited/ (charged) to equity $’000 (259) 5 (9,895) (10,149) (243) (30) (7,492) (7,765) 6 – – 6 – – – – Opening balance $’000 510 34 25,200 25,744 257 39 15,305 15,601 Transaction costs on equity issues Accrued expenses Realised capital tax losses Balance as at 30 June 2021 Transaction costs on equity issues Accrued expenses Realised capital tax losses Balance as at 30 June 2022 2,300 658 (406) 2,552 39,197 11,759 (8,801) 2,958 (406) 2,552 2,552 9,871 12,423 Closing balance $’000 257 39 15,305 15,601 14 9 7,813 7,836 BKI Investment Company Limited ABN: 23 106 719 868 33 Notes to the Financial Statements (continued) Note 7. Income tax (continued) (d) Movements in deferred tax liabilities Revaluation of investment portfolio Unfranked dividends receivable and interest receivable Balance as at 30 June 2021 Revaluation of investment portfolio Unfranked dividends receivable and interest receivable Opening balance $’000 58,853 1,123 59,976 101,911 1,503 Balance as at 30 June 2022 103,414 Credited/ (charged) to statement of comprehensive income $’000 – 380 380 – (46) (46) (e) Income tax refund due Income tax refund due (f) Provision for income tax Provision for income tax Credited/ (charged) to equity $’000 43,058 – Closing balance $’000 101,911 1,503 43,058 103,414 (30,513) – 71,398 1,457 (30,513) 72,855 Consolidated 2022 $’000 2021 $’000 51 – – 1,190 Note 8. Current assets – cash and cash equivalents Cash at bank 72,078 40,606 Note 9. Current assets – trade and other receivables Dividends and distributions receivable Outstanding settlements on share sales Other receivables 8,417 – 177 8,594 7,465 28,316 324 36,105 34 Annual Report 2022 ASX: BKI Notes to the Financial Statements (continued) Note 10. Non-current assets – Investment portfolio Consolidated 2022 $’000 2021 $’000 Listed securities at fair value through other comprehensive income 1,156,086 1,194,994 Fair value measurement BKI measures the fair value of its trading portfolio and investment portfolio with reference to the following fair value measurement hierarchy mandated by accounting standards: Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices); and Level 3: inputs for the assets or liabilities that are not based on observable market data (unobservable inputs). Both the trading portfolio and investment portfolio are classified as Level 1, and are measured in accordance with the policy outlined in note 2. Note 11. Equity – Share capital Ordinary shares – fully paid 743,074,632 739,002,595 935,766 929,185 Consolidated 2022 Shares 2021 Shares 2022 $’000 2021 $’000 Movements in ordinary share capital Balance at 1 July 2020 Dividend reinvestment plan Transaction costs Balance at 30 June 2021 Dividend reinvestment plan Transaction costs Balance at 30 June 2022 Ordinary shares Shares 735,513,845 3,488,750 – 739,002,595 4,072,037 – $’000 924,130 5,069 (14) 929,185 6,597 (16) 743,074,632 935,766 Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the Company in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the Company does not have a limited amount of authorised capital. On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. BKI Investment Company Limited ABN: 23 106 719 868 35 Notes to the Financial Statements (continued) Note 11. Equity – Share capital (continued) Share buy-back There is no current on-market share buy-back. Capital risk management The Group’s objective in managing capital is 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 fully franked 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 the Group 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 2022 net debt was $nil (2021: $nil). The capital risk management policy remains unchanged from the 30 June 2021 Annual Report. Note 12. Equity – reserves Revaluation surplus reserve Capital profits reserve Consolidated 2022 $’000 159,107 (15,060) 144,047 2021 $’000 229,584 (29,144) 200,440 Financial assets at fair value through other comprehensive income reserve The reserve is used to recognise increments and decrements in the fair value of financial assets at fair value through other comprehensive income. Realised capital gains reserve The realised capital gains reserve records net gains and losses after applicable income tax arising from the disposal of securities in the investment portfolio. 36 Annual Report 2022 ASX: BKI Notes to the Financial Statements (continued) Note 12. Equity – reserves (continued) Movements in reserves Movements in each class of reserve during the current and previous financial year are set out below: Consolidated Balance at 1 July 2020 Gross revaluation of investment portfolio Deferred tax provision on unrealised gains/losses Net gains/(losses) on investment portfolio transferred from Statement of Comprehensive Income Balance at 30 June 2021 Gross revaluation of investment portfolio Deferred tax provision on unrealised gains/losses Net gains/(losses) on investment portfolio transferred from Statement of Comprehensive Income Balance at 30 June 2022 Note 13. Equity – retained profits Retained profits at the beginning of the financial year Operating result after income tax expense for the year Dividends paid (note 14) Retained profits at the end of the financial year Revaluation reserve $’000 Realised capital gains reserve $’000 130,657 141,324 (42,397) – 229,584 (100,681) 30,204 – 159,107 (52,176) – – 23,032 (29,144) – – 14,084 (15,060) Total $’000 78,481 141,324 (42,397) 23,032 200,440 (100,681) 30,204 14,084 144,047 Consolidated 2022 $’000 42,767 100,799 (51,800) 91,766 2021 $’000 45,296 36,645 (39,174) 42,767 BKI Investment Company Limited ABN: 23 106 719 868 37 Notes to the Financial Statements (continued) Note 14. Equity – dividends (a) Dividends paid during the year Final ordinary dividend for the year ended 30 June 2021 of 3.0 cents per share (2020: 2.32 cents per share) fully franked at the tax rate of 30%, paid on 26 August 2021 Final special dividend for the year ended 30 June 2021 of nil cents per share (2020: 1.00 cent per share fully franked at the tax rate of 30%) Interim ordinary dividend for the year ended 30 June 2022 of 3.5 cents per share (2021: 2.0 cents per share) fully franked at the tax rate of 30%, paid on 3 March 2022 Interim special dividend for the year ended 30 June 2022 of 0.5 cents per share (2021: nil cents per share) fully franked at the tax rate of 30%, paid on 3 March 2022 Total dividends paid (b) Reconciliation of total dividends paid to dividends paid in cash Total dividends paid Less: Dividends reinvested in shares via DRP Dividends paid in cash (c) Franking accounting 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 Franking credits available for subsequent financial years based on a tax rate of 30% Estimated impact on the franking account of dividends declared but not recognised as a liability at the end of the financial year (refer below) Net imputation credits available for future dividends Consolidated 2022 $’000 2021 $’000 22,170 17,065 – 7,355 25,874 14,754 3,756 51,800 51,800 (6,597) 45,203 – 39,174 39,174 (5,069) 34,105 43,538 24,043 43,538 24,043 (14,808) 28,730 (9,501) 14,542 Maximum fully franked dividends payable from available franking credits at the tax rate of 30% (2021: 30%) 67,035 33,931 The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for: p franking credits that will arise from the payment of the amount of the provision for income tax at the reporting date p franking debits that will arise from the payment of dividends recognised as a liability at the reporting date p franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date Dividends declared after balance date Since the end of the year the Directors have declared a final ordinary dividend for the year ended 30 June 2022 of 3.65 cents per share and a special dividend of 1.0 cents per share, both fully franked at the tax rate of 30% (2021: final ordinary dividend of 3.00 cents per share, franked at the tax rate of 30%), payable on 30 August 2022, but not recognised as a liability at the year end. 38 Annual Report 2022 ASX: BKI Notes to the Financial Statements (continued) Note 15. Financial instruments 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 & Risk Committee. 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. 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. Credit risk The risk that a financial loss will occur because a 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. Cash and bank bills are reviewed monthly by the Board to ensure cash is only placed with pre-approved financial institutions with low risk profiles (primarily “Big 4” banks) and that the spread of cash and bank bills between banks 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. Market risk Price 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% (2021: 93%) of total assets. As at 30 June 2022, a 5% (2021: 5%) movement in the market value of the BKI portfolio would result in: p A 5% movement in the net assets of BKI before provision for tax on unrealised capital gains (2021: 5%); and p A movement of 7.8 cents per share in the net asset backing before provision for tax on unrealised capital gains (2021: 8.1 cents). BKI Investment Company Limited ABN: 23 106 719 868 39 Notes to the Financial Statements (continued) Note 15. Financial instruments (continued) 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. At 30 June 2022 and 30 June 2021, the spread of investments was in the following sectors: Financials Materials Consumer discretionary Energy Utilities Industrials Consumer staples Health care Telecommunications services Property Total investments Cash and dividends receivable Percentage of total investment Amount 2022 % 24.44 14.82 9.48 9.06 8.00 7.36 7.04 5.89 5.69 1.72 93.50 6.50 2021 % 30.70 14.68 12.22 3.85 5.49 6.26 8.18 5.78 5.54 2.04 94.74 5.26 2022 $’000 302,237 183,251 117,283 111,971 98,899 91,022 87,029 72,786 70,327 21,281 2021 $’000 387,217 185,144 154,125 48,520 69,201 79,118 103,217 72,847 69,891 25,714 1,156,086 80,495 1,194,994 66,374 Total portfolio 100.00 100.00 1,236,581 1,261,368 Securities representing over 5% of the investment portfolio at 30 June 2022 or 30 June 2021 were: BHP Group Macquarie Group APA Group Commonwealth Bank National Australia Bank Wesfarmers Percentage of total investment Amount 2022 % 8.8 8.7 8.0 6.7 5.5 3.8 2021 % 8.1 8.1 5.5 8.7 5.2 5.3 2022 $’000 108,900 107,784 98,899 82,926 68,527 47,321 2021 $’000 102,518 102,490 69,201 109,166 65,600 66,730 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. Foreign currency risk The Group is not exposed to foreign currency risk as all investments are quoted in Australian dollars. 40 Annual Report 2022 ASX: BKI Notes to the Financial Statements (continued) Note 15. Financial instruments (continued) Interest rate risk The Group is not materially exposed to interest rate risk. All cash investments are short term (up to 1 year) for a fixed rate, except for cash in operating bank accounts which are at-call and attract variable rates. The Group has no financial liability as at 30 June 2022 (2021: Nil). Liquidity risk Liquidity risk is the risk that the Group is unable to meet financial obligations as they fall due. The Group has no borrowings, and sufficient cash reserves to fund core operations at current levels for more than 10 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. Note 16. Key management personnel disclosures Compensation The aggregate compensation made to directors and other members of key management personnel of the Group is set out below: Short-term employee benefits Post-employment benefits Share-based payments Consolidated 2022 $’000 2021 $’000 248 25 – 273 209 20 3 232 Note 17. Remuneration of auditors During the financial year the following fees were paid or payable for services provided by MGI Sydney Assurance Services Pty Ltd, the auditor of the Company: Consolidated 2022 $’000 2021 $’000 Audit services – MGI Sydney Assurance Services Pty Ltd Audit or review of the financial statements 28 28 Note 18. Contingent liabilities The Group had no contingent liabilities as at 30 June 2022 and 30 June 2021. Note 19. Commitments The Group had no capital and leasing commitments as at 30 June 2022 and 30 June 2021. BKI Investment Company Limited ABN: 23 106 719 868 41 Notes to the Financial Statements (continued) Note 20. Related party transactions Parent entity BKI Investment Company Limited is the parent entity. Subsidiaries Interests in subsidiaries are set out in note 22. Key management personnel Disclosures relating to key management personnel are set out in note 16 and the remuneration report included in the directors’ report. Transactions with related parties Corporate & Administrative Services Pty Limited Corporate & Administrative Services Pty Limited (CAS), an entity in which Mr R D Millner has an indirect interest, provided the Group with administration, company secretarial and accounting services, including preparation of all financial accounts. The contract was terminated on 31 May 2022. Fees paid to CAS for services provided to the Parent and controlled entities for the year to 30 June 2022 were $126,042 (2021: $122,100, including GST) and are at standard market rates. As at 30 June 2022 the Group owed $11,458 to CAS (2021: $nil). Contact Asset Management Pty Limited Contact Asset Management Pty Limited (Contact) is the Investment Manager of the Group. Additionally, from 1 June 2022, Contact provides accounting, administrative, and company secretarial services, including the preparation of all financial accounts. Contact is an entity in which Mr R D Millner has an indirect interest. Fees payable to Contact for services provided to the Parent and controlled entities for the year to 30 June 2022 were $1,430,827 including GST (2021: $1,252,911) and are at standard market rates. As at 30 June 2022 the Group owed $125,125 to Contact (2021: $116,588). Loans to/from related parties There were no loans to or from related parties at the current and previous reporting date. 42 Annual Report 2022 ASX: BKI Notes to the Financial Statements (continued) Note 21. Parent entity information Set out below is the supplementary information about the parent entity. Statement of profit or loss and other comprehensive income Operating result after income tax Other comprehensive income for the year, net of tax Total comprehensive income Statement of financial position Total current assets Total non-current assets Total assets Total current liabilities Total non-current liabilities Total liabilities Net assets Equity Share capital Reserves Retained profits Total equity Parent 2022 $’000 2021 $’000 100,797 – 100,797 36,674 121,959 158,633 80,779 76,763 1,365,275 1,411,948 1,446,054 1,488,711 190 282,247 282,437 11,474 312,806 324,280 1,163,617 1,164,431 935,766 144,858 82,993 929,185 201,251 33,995 1,163,617 1,164,431 Guarantees entered into by the parent entity in relation to the debts of its subsidiaries The parent entity had no guarantees in relation to the debts of its subsidiaries as at 30 June 2022 and 30 June 2021. Contingent liabilities The parent entity had no contingent liabilities as at 30 June 2022 and 30 June 2021. Capital commitments - Property, plant and equipment The parent entity had no capital commitments for property, plant and equipment as at 30 June 2022 and 30 June 2021. Significant accounting policies The accounting policies of the parent entity are consistent with those of the Group, as disclosed in note 2, except for the following: p Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity. p Dividends received from subsidiaries are recognised as other income by the parent entity and its receipt may be an indicator of an impairment of the investment. BKI Investment Company Limited ABN: 23 106 719 868 43 Notes to the Financial Statements (continued) Note 22. Interests in subsidiaries The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in note 2: Name Brickworks Securities Pty Limited Huntley Investment Company Pty Limited BKI Sub Pty Limited Pacific Strategic Investments Pty Limited Principal place of business / Country of incorporation Australia Australia Australia Australia Ownership interest 2022 % 100 100 100 100 2021 % 100 100 100 100 Note 23. Events after the reporting period Since the end of the year the Directors have declared a final ordinary dividend for the year ended 30 June 2022 of 3.65 cents per share and a special dividend of 1.0 cents per share, both fully franked at the tax rate of 30% are payable on 30 August 2022, but are not recognised as a liability at the year end. No other matter or circumstance has arisen since 30 June 2022 that has significantly affected, or may significantly affect the Group’s operations, the results of those operations, or the Group’s state of affairs in future financial years. Note 24. Cash flow information Reconciliation of operating result after income tax to net cash from operating activities Operating result after income tax expense for the year Adjustments for: Dividend income – non-cash Change in operating assets and liabilities: Decrease/(increase) in trade and other receivables Increase in income tax refund due Decrease in deferred tax assets Increase in prepayments Increase in trade and other payables Decrease in provision for income tax Increase/(decrease) in deferred tax liabilities Consolidated 2022 $’000 2021 $’000 100,799 36,645 – (1,954) (805) (51) 31,933 (6) 45 (1,190) (30,559) 3,291 – 400 (7) 37 (1,249) 918 Net cash from operating activities 100,166 38,081 Non-cash investing and financing activities Dividend reinvestment plan Under the terms of the dividend reinvestment plan, $6,597,000 (2021: $5,069,000) of dividends were paid via the issue of 4,072,037 shares (2021: 3,488,750). 44 Annual Report 2022 ASX: BKI Note 25. Earnings per share (a) Calculation of earnings Operating result after income tax attributable to the owners of BKI Investment Company Limited Less: Special investment revenue Add: Tax expense attributable to special investment revenue Consolidated 2022 $’000 100,799 (42,713) – 2021 $’000 36,645 (1,022) 37 Earnings used in calculating basic and diluted earnings per share before special investment revenue 58,086 35,660 (b) Number of shares 2022 Number 2021 Number Weighted average number of ordinary shares used in calculating basic earnings per share, before after special investment revenue 741,249,270 737,798,000 Weighted average number of ordinary shares used in calculating diluted earnings per share, before and after special investment revenue 741,249,270 737,798,000 (c) Earnings per share Basic and diluted earnings per share before special investment revenue Basic and diluted earnings per share after special investment revenue 2022 Cents 7.84 13.60 2021 Cents 4.83 4.97 BKI Investment Company Limited ABN: 23 106 719 868 45 Directors’ Declaration for the year ended 30 June 2022 In the directors’ opinion: p the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; p the attached financial statements and notes comply with International Financial Reporting Standards as issued by the International Accounting Standards Board as described in note 2 to the financial statements; p the attached financial statements and notes give a true and fair view of the Group’s financial position as at 30 June 2022 and of its performance for the financial year ended on that date; and p there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. The directors have been given the declarations required by section 295A of the Corporations Act 2001. Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001. On behalf of the directors Robert D Millner Chair 19 July 2022 Sydney 46 Annual Report 2022 ASX: BKI Independent Auditor’s Report to the Members of BKI Investment Company Limited MGI Sydney Assurance Services Pty Limited Level 14, 20 Martin Place Sydney NSW 2000 Tel: +61 2 9230 9200 PO Box H258 Australia Square Sydney NSW 1215 ABN 24 160 063 525 www.mgisyd.com.au Report on the Audit of the Financial Report Opinion We have audited the accompanying financial report of BKI Investment Company Limited and Controlled Entities (the consolidated entity), which comprises the consolidated statement of financial position as at 30 June 2022, the consolidated income statement, consolidated statement of other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies and the directors’ declaration of the consolidated entity comprising BKI Investment Company Limited and the entities it controlled at the year’s end or from time to time during the year. In our opinion, the accompanying financial report of BKI Investment Company Limited and its Controlled Entities, is in accordance with the Corporations Act 2001, including: a) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2022 and of its performance for the year ended on that date; and b) complying with Australian Accounting Standards and the Corporations Regulations 2001. c) the financial report also complies with the International Financial Reporting Standards as disclosed in Note 1. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of BKI Investment Company Limited in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of BKI Investment Company Limited, would be in the same terms if given to the directors as at the time of this auditor’s report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. MGI refers to one or more of the independent member firms of MGI Worldwide. MGI Worldwide is a network of independent auditing, accounting and consulting firms. Each MGI firm in Australasia is a separate legal entity and has no liability for another Australasian or international member’s acts or omissions. MGI is a brand name for the MGI Australasian network and for each of the member firms of MGI Worldwide. Liability limited by a scheme approved under Professional Standards Legislation. Chartered Accountants and Taxation Advisors BKI Investment Company Limited ABN: 23 106 719 868 47 Independent Auditor’s Report (continued) Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key Audit Matter How Our Audit Addressed the Key Audit Matter Valuation and Existence of Investments The investment portfolio at 30 June 2022 comprised of listed equity investments of $1,156.09 million. We focused on the valuation and existence of investments because investments represent the principal element of the net asset value disclosed on the Consolidated Statement of Financial Position in the financial report. Revenue from Investments ASAs presume there are risks of fraud in revenue recognition unless rebutted. We focused on the cut-off, accuracy and completeness of dividend revenue and dividend receivables We tested the valuation of a representative sample of listed investments by vouching the share prices to external market information to ensure they are fairly stated. We agreed the existence of a representative sample of listed investments by confirming shareholdings with share registries. No material differences were identified. We assessed the accounting policy for revenue recognition for compliance with the accounting standards and performed testing to ensure that revenue had been accounted for in accordance with the accounting policy. We found that the accounting policies implemented were in accordance with the accounting standards, and that revenue has been accounted for in accordance with the accounting policy. We tested the accuracy and completeness of dividend revenue by agreeing the dividends and distributions of a representative sample of investments to supporting documentation obtained from share registries. We tested the cut-off and completeness of dividend revenue and dividend receivables by checking the dividend details of a representative sample of investments from external market information and ensured that dividends that were declared before, but payable after, the reporting date were recorded. No material differences were identified. Other Information The directors of BKI Investment Company Limited are responsible for the other information. The other information comprises the information in the annual report for the year ended 30 June 2022, but does not include the financial report and the auditor’s report thereon. Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. 48 Annual Report 2022 ASX: BKI Independent Auditor’s Report (continued) Responsibilities of the Directors for the Financial Report The directors of BKI Investment Company Limited are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101: Presentation of Financial Statements, the financial statements comply with International Financial Reporting Standards. In preparing the financial report, the directors are responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial reports. A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website at: https://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our auditor’s report. Opinion on the Remuneration Report We have audited the Remuneration Report included on pages 16 to 21 of the directors’ report for the year ended 30 June 2022. In our opinion, the Remuneration Report of BKI Investment Company Limited for the year ended 30 June 2022, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of BKI Investment Company Limited are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Matters relating to the electronic presentation of the audited financial report This auditor’s report relates to the financial report of BKI Investment Company Limited and Controlled Entities for the year ended 30 June 2022 included on BKI Investment Company Limited’s web site. The directors of the Company are responsible for the integrity of BKI Investment Company Limited’s web site. We have not been engaged to report on the integrity of this web site. The auditor’s report refers only to the financial report named above. It does not provide an opinion on any other information which may have been hyperlinked to/from the financial report. If users of this report are concerned with the inherent risks arising from electronic data communications they are advised to refer to the hard copy of the audited financial report to confirm the information included in the audited financial report presented on this web site. MGI Sydney Assurance Services Pty Limited Chartered Accountants Clayton Lawrence Director Sydney, 19 July 2022 BKI Investment Company Limited ABN: 23 106 719 868 49 Auditor’s Independence Declaration MGI Sydney Assurance Services Pty Limited Level 14, 20 Martin Place Sydney NSW 2000 Tel: +61 2 9230 9200 PO Box H258 Australia Square Sydney NSW 1215 ABN 24 160 063 525 www.mgisyd.com.au BKI INVESTMENT COMPANY LIMITED AND CONTROLLED ENTITIES ABN: 23 106 719 868 AUDITOR’S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001 TO THE DIRECTORS OF BKI INVESTMENT COMPANY LIMITED AND CONTROLLED ENTITIES As lead auditor for the audit of BKI Investment Company Ltd and Controlled Entities for the year ended 30 June 2022, I declare that, to the best of my knowledge and belief, there have been: (i) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and (ii) no contraventions of any applicable code of professional conduct in relation to the audit. Name of Firm: MGI Sydney Assurance Services Pty Limited Chartered Accountants Name of Auditor: Clayton Lawrence Director Address: Level 14, 20 Martin Place, Sydney NSW 2000 Dated this: 19th day of July 2022 MGI refers to one or more of the independent member firms of MGI Worldwide. MGI Worldwide is a network of independent auditing, accounting and consulting firms. Each MGI firm in Australasia is a separate legal entity and has no liability for another Australasian or international member’s acts or omissions. MGI is a brand name for the MGI Australasian network and for each of the member firms of MGI Worldwide. Liability limited by a scheme approved under Professional Standards Legislation. Chartered Accountants and Taxation Advisors 50 Annual Report 2022 ASX: BKI Shareholder Information for the year ended 30 June 2022 The shareholder information set out below was applicable as at 30 June 2022. Distribution of equitable securities Analysis of number of equitable security holders by size of holding: Number of shares held 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Ordinary shares Number of holders % of total shares issued 1,603 2,664 2,461 9,477 1,170 0.08 1.03 2.51 43.43 52.95 17,375 100.00 Holding less than a marketable parcel of 301 shares 697 – Equity security holders Twenty largest quoted equity security holders The names of the twenty largest security holders of quoted equity securities are listed below: Washington H Soul Pattinson and Company Limited HSBC Custody Nominees (Australia) Limited Huntley Group Investments Pty Limited BNP Paribas Nominees Pty Limited J S Millner Holdings Pty Limited J P Morgan Nominees Australia Pty Limited I R McDonald Pty Limited Netwealth Investments Limited Jeanneau Cloud Nine Pty Limited John E Gill Trading Pty Limited Nibot Pty Limited Donald Cant Pty Limited Estate of Francis Albert Robertson Snow Foundation Limited T N Phillips Investments Pty Limited K C Perks Investments Pty Limited Citicorp Nominees Pty Limited Fennybentley Pty Limited G Guglielmini Nominees Pty Limited Mr Timothy Frank Robertson Ordinary shares Number held % of total shares issued 63,311,002 12,320,612 8,523,274 7,766,364 6,216,300 3,404,701 3,000,000 2,759,974 2,669,612 2,284,877 2,251,845 2,198,698 2,136,110 2,092,700 2,058,962 2,004,223 1,993,111 1,800,000 1,713,785 1,661,364 8.52 1.66 1.15 1.05 0.84 0.46 0.40 0.37 0.36 0.31 0.30 0.30 0.29 0.28 0.28 0.27 0.27 0.24 0.23 0.22 132,167,514 17.80 BKI Investment Company Limited ABN: 23 106 719 868 51 Shareholder Information (continued) Equity security holders (continued) Article 5.12 of the Company’s Constitution provides: a) Subject to this Constitution and any rights or restrictions attached to a class of Shares, on a show of hands at a meeting of Members, every Eligible Member present has one vote. b) Subject to this Constitution and any rights or restrictions attached to a class of Shares, on a poll at a meeting of Members, every Eligible Member present has: (i) one vote for each fully paid up Share (whether the issue price of the Share was paid up or credited or both) that the Eligible Member holds; and (ii) a fraction of one vote for each partly paid up Share that the Eligible Member holds. The fraction is equal to the proportion which the amount paid up on that Share (excluding amounts credited) is to the total amounts paid up and payable (excluding amounts credited) on that Share. Unquoted equity securities There are no unquoted equity securities. Substantial Shareholders As at 30 June 2022 the name and holding of each substantial shareholder as disclosed in a notice received by the Parent is listed below. The number of shares held and percentage ownership do not necessarily reflect the current ownership levels of these shareholders, as any subsequent movements of less than 1% would not need to be disclosed to ASX or the Company. Substantial Shareholder Washington H Soul Pattinson & Company Limited 1 Brickworks Limited 2 Number Held % of total shares issued 62,405,057 62,405,057 8.40 8.40 1 Details included on substantial shareholder notice dated 26 June 2018. 2 Details included on substantial shareholder notice dated 27 June 2018. 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. Other Information: p There is no current on-market buy-back in place. p There were 109 (2021: 113) transactions in securities undertaken by the Group and the total brokerage paid or accrued during the year was $448,268 (2021: $553,659). Management Expense Ratio: The Management Expense Ratio (“MER”) is the operating 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. The table below summarises the MER for each financial year ended 30 June. 2005 0.71 2014 0.17 2006 0.56 2015 0.18 2007 0.46 2016 0.16 2008 0.46 2017 0.15 2009 0.31 2018 0.16 2010 0.19 2019 0.17 2011 0.18 2020 0.17 2012 0.18 2021 0.17 2013 0.19 2022 0.17 52 Annual Report 2022 ASX: BKI Share Registry Advanced Share Registry Services Limited 110 Stirling Highway Nedlands, WA 6009 Telephone: (08) 9389 8033 Auditor MGI Sydney Assurance Services Pty Ltd 20 Martin Place Sydney NSW 2000 ASX BKI Investment Company Limited shares are listed on the Australian Securities Exchange (ASX code: BKI) Website www.bkilimited.com.au Corporate Governance Statement www.bkilimited.com.au/about-us/corporate- governance/#statement Corporate Directory Directors Robert Dobson Millner Non-Executive Chair David Capp Hall AM Independent Non-Executive Director Alexander James Payne Non-Executive Director Ian Thomas Huntley Independent Non-Executive Director Jacqueline Ann Clarke Independent Non-Executive Director Investment Manager Contact Asset Management Pty Limited (Contact) Thomas Charles Dobson Millner Portfolio Manager William Anthony Culbert Portfolio Manager Company Secretaries Jaime Perry Pinto Amanda Wong Larina Tcherkezian (Alternate) Registered office and principal place of business Suite 302, Level 3 1 Castlereagh Street Sydney NSW 2000 Telephone: (02) 7251 6242 (02) 8355 1617 Facsimile: Postal Address: PO Box H280 Australia Square NSW 1215 Produced by APM Graphics Management > 1800 806 930 BKI Investment Company Limited ABN: 23 106 719 868 53 ABN: 23 106 719 868 Suite 302, Level 3 1 Castlereagh Street Sydney NSW 2000 

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