Full Year Results 2011

1 Disclaimer

This material has been prepared by BKI Investment Company Limited.

The information within this document is not intended to provide advice to investors or take into account an individuals financial circumstances or investment objectives. This is general investment advice only and does not constitute advice to any person. The opinions within this document are not intended to represent recommendations to investors, they are the view of BKI Investment Company Limited as of this date and are accordingly subject to change.

Information related to any company or security is for information purposes only and should not be interpreted as a solicitation of offer to buy or sell any security. The information on which this presentation is based has been obtained from sources we believe to be reliable, but we do not guarantee its accuracy or completeness.

Investors should consult their financial adviser in relation to any material within this document.

2 Background

BKI was formed on the 17th October 2003 to take over and manage the investment portfolio of Brickworks Limited (BKW). BKW established the core portfolio during the 1980’s with the objective to generate an increasing income stream through long term investment in a portfolio of securities that would grow over time.

Today, some 25 years since the inception of the core portfolio, BKI continues to invest in well-managed businesses with a profitable history and with the 2008 2009 expectation of sound dividend External management BKI Share Purchase 2007 agreement expires and BKI Plan raises $24.1m and distribution growth. becomes internally Renounceable Rights managed Issue raises $57.0m The BKI Portfolio 2004 BKI takes over Huntley BKI merges Share Placement raises Investment Company $49.3m Valuation has grown with Pacific Strategic Limited Investments Limited from $171m as at 2003 listing on 12 Dec BKI acquires the BKW Share Portfolio and 2003 to $599m as lists on the ASX at 30 June 2011. 3 Philosophy, Style, Process

Corporate Objectives The Group aims to generate an increasing income stream for distribution to its shareholders in the form of fully franked dividends, to the extent of its available imputation tax credits, through long-term investment in a portfolio of assets that are also able to deliver long term capital growth to shareholders. Investment Strategy BKI is a research driven, long term manager focusing on well managed companies, with a profitable history and that offer attractive dividend yields. Stock selection is bottom up, focusing on the merits of individual companies rather than market and economic trends. Investment Style BKI is benchmark unaware and has no specific sector or stock investment limitations. BKI has the ability to have overweight or underweight positions in certain stocks or sectors. Dividend Policy To generate an increasing income stream for distribution to its shareholders in the form of fully franked dividends. Payout Ratio of 90%-95% of Operating Profits. 4 Board and Management

Directors Robert Millner Chairman of Directors David Hall Director, Chairman of Audit Committee Alexander Payne Director, Chairman of Remuneration Committee Ian Huntley Director

Chief Executive Officer Investment Committee Thomas Millner Robert Millner Alexander Payne Company Secretary Ian Huntley Richard Pillinger Thomas Millner

5 Benefits of Investing in BKI

Dividends - Strong dividend payout ability with abundant franking credits. Historical fully franked dividend yield of 5.8%, grossed up yield 8.3% (as at 30 June 2011). Diversification - High quality diversified portfolio through BKI shares listed on the ASX (BKI.ASX). Management - Experienced Board and conservative investment team delivering sound returns with low investment risk. Low Costs - MER of 0.18%. No external portfolio management fees or performance fees. Value - Opportunity for investment at a discount to the Pre Tax NTA. Ideal for long term passive shareholders and SMSF’s. New Hope Corporation – An outstanding defensive resource investment. NHC is a low cost/low risk coal producer that has a significant cash balance (~$1.5bln), large domestic coal reserves, 100% ownership of port facilities with Management/Board strongly aligned with shareholders. NHC has paid 6 Special Dividends in 7 years of being listed on the ASX. Having NHC in the BKI portfolio gives a clear point of difference to many other investment vehicles. The Australian mining sector continues to underpin the strength of the Australian economy and BKI’s exposure to NHC places the company in a strong position to capture further upside from this sector. 6 Benefits of Investing in BKI

Washington H. Soul Pattinson (WHSP) - In 2009 WHSP increased their shareholding in BKI to become the largest shareholder at 13.6%. Listed in 1903, WHSP is the second oldest listed company on the ASX and holds investments worth in excess of $4.5bln. As an investment group WHSP has a window on the business world through the operating companies it controls and the investment companies where it has board representation. WHSP’s long term, patient investment philosophy is dispersed across many sectors including, Building Products, Property, Coal, Telecommunications, Financial Services, Pharmaceuticals, Retail and Agriculture. It is one of the very few family controlled Australian companies – currently in the fifth generation – so it has a strong alignment with its investors, as it invests alongside them.

7 Dividend Income FY 2011 Result 40,000 35,000 Highlights 30,000 25,000 20,000 15,000 10,000 Total Ordinary Income for the full year 5,000 increased 12.2% after a majority of the 0 companies held within the BKI Portfolio lifted $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 2004 2005 2006 2007 2008 2009 2010 2011 dividend payments over the last 12 months. Total Ordinary Income Total Special Income

Operating Profits

30,000

25,000

20,000

15,000

10,000 Net Operating Profit before special dividend

5,000 income increased 13.1% on the previous corresponding period. 0 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 8 2004 2005 2006 2007 2008 2009 2010 2011 Earnings Per Share FY 2011 Result 9.0 8.0 Highlights 7.0 6.0 5.0 4.0 3.0 EPS excluding special dividends increased 2.0 from 5.44cps in FY2010 to 6.02cps in 1.0 0.0 FY2011. 2004 2005 2006 2007 2008 2009 2010 2011

EPS Excluding Special Dividends Basic EPS

Dividend Per Share

$0.07

$0.06

$0.05 $0.04 BKI Directors have declared a Fully Franked $0.03 Final Dividend of 3.0cps.

$0.02

$0.01 A Fully Franked Special Dividend of 1.0cps

$0.00 was also declared. 2004 2005 2006 2007 2008 2009 2010 2011 INTERIM FINAL SPECIAL 9 Portfolio Valuation FY 2011 Result 600,000 Highlights 500,000

400,000

300,000

200,000 The BKI Portfolio Valuation has grown from 100,000 $171m as at listing on 12 December 2003 0 to $599m as at 30 June 2011. $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 2004 2005 2006 2007 2008 2009 2010 2011

Investment Portfolio Cash Management Expense Ratio

0.80% 0.71% 0.69% 0.70% 0.56% 0.60% 0.46% 0.46% 0.50%

0.40% 0.31% Since internalising management in 2008, the 0.30% 0.19% MER has been reduced from 0.46% to 0.18% 0.20% 0.18%. 0.10% 10 2004 2005 2006 2007 2008 2009 2010 2011 Stock Selection Criteria

BKI is a research driven, long term manager focusing on well managed companies, with a profitable history and that offer attractive dividend yields. Stock selection is bottom up, focusing on the merits of individual companies rather than market and economic trends.

BKI is focused on investing in stocks using the 5 basic fundamentals below as part of the stock selection process:

1. Income - Dividend Yields, Franking Credits, Pay Out Ratios

2. Principal Activity - Sustainable Business Model, Competitive Advantage

3. Debt Levels - Gearing Ratios, Net Interest Coverage

4. Management and Board - Share Ownership, Board Meeting Attendance, History of Creating Shareholder Wealth

5. Earnings and Valuations - Earnings Profiles, PE Multiples, EV/EBITDA Multiples 11 Portfolio Movements

BKI invested $38m into the Australian market during FY2011. Major investments included: ANZ Banking Corporation AMP Limited Milton Corporation QUBE Logistics Corporation UGL Limited QBE Insurance Group Coca Cola Amatil Woolworths Limited

Major divestments from the BKI Portfolio totalled $16m and included: Choiseul Investments Limited The Mac Services Group Westfield Retail Trust AXA Asia Pacific Limited GPT Group AWB Limited Fosters Group Intoll Group Consolidated Media Holdings

Buyback participation included small parcels of BHP Billiton and Woolworths Limited. 12 BKI Portfolio As at 30 June 2011

1 New Hope Corporation 11 Limited 2 BHP Billiton Limited 12 ANZ Banking Group 3 13 QBE Insurance Group 4 Commonwealth Bank 14 Limited 5 Banking Corp 15 Coca Cola Amatil 6 Limited 16 Westpac pref shares 7 Telstra Corporation 17 TPG Telecom 8 Woolworths Limited 18 Invocare Limited 9 Campbell Brothers Limited 19 ASX Limited 10 AGL Energy Limited 20 AMP Limited

BKI’s Top 20 investments, including cash & cash equivalents equate to 82.2% of the Total Portfolio Value. 13 BKI Performance as at 30 June 2011

BKI Performance 6 Mths 1 Year 3 Years 5 Years 7 Years as at 30 June 2011 (pa) (pa) (pa)

BKI Portfolio S&P/ASX 300 ACC INDEX (XKOAI) -1.3% 11.9% 0.3% 2.4% 8.4% Returns are BKI Total Shareholder Returns -1.3% 11.2% 5.1% 2.9% 8.0% measured after BKI Share Price Outperformance V's XKOAI 0.0% -0.7% 4.8% 0.5% -0.4% all operating expenses, BKI Portfolio Performance 1.9% 12.0% 2.3% 4.4% 8.4% provision and payment of BKI Portfolio Outperformance V's XKOAI 3.2% 0.1% 2.0% 2.0% 0.0% income and Source: BKI Investment Company Limited, IRESS. Portfolio Returns are measured by change in pre tax NTA and are after all capital gains operating expenses, provision and payment of both income and capital gains tax and the reinvestment of dividends. Total Shareholder tax. Returns include reinvestment of dividends. Past performance is not indicative of future performance.

14 Market Commentary

Retail investors continue to be bombarded with negativity surrounding weak global economies, high local interest rates and pressure on household affordability.

As a defensive reaction to these circumstances we have seen household savings increase as the uncertainty on the future cost of living escalates.

This is therefore having a negative impact on the local stock market as many individuals reduce their exposure to Australian shares.

Offshore investors have also fled our market due to the high Australian Dollar and uncertainty surrounding federal government policies.

BKI understands the caution that many investors have shown, in particular over the past 3 months. 15 Market Commentary

As a long term investor, however, BKI needs to continue to act upon these opportunities and invest for the future.

BKI has been investing in good quality companies for many years and through many cycles. This period is no different.

The quality of the BKI portfolio enables the company to distribute an attractive fully franked dividend yield to shareholders.

Shares in BKI are currently yielding 5.8% (based on a share price as at 30 June 2011). The franking credits that BKI pass on to shareholders enables this yield to be grossed up to 8.3%.

16 Market Commentary

Balance sheets of quality companies appear more robust than ever. With this in mind, BKI remains confident that dividend distributions will continue to improve during the FY2011 reporting season and into FY2012.

BKI will, however, be cautious of companies whose earnings are exposed to the high Australian Dollar and consumer activity in the upcoming reporting season.

BKI continue to be very comfortable with our exposure to the resource sector and in particular with the position in New Hope Corporation (NHC). Having NHC in the BKI Portfolio gives a clear point of difference to many other investment products.

The Australian mining sector continues to underpin the strength of the Australian economy and BKI’s exposure to the resource industry through holdings in NHC, BHP Billiton, Woodside Petroleum and Campbell Brothers places the company in a strong position. 17 Office Level 2, 160 Pitt Street Mall Low Cost NSW 2000 Telephone +61 2 9210 7000 Fax +61 2 9210 7099 Web www.bkilimited.com.au Low Risk ABN 23 106 719 868 High Yield…

…all through BKI.ASX

18