dixon advisory smsf & investment seminar

Dixon Advisory

SMSF & Investment Seminar

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Disclaimer

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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 individual’s 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.

BKI Update Solid Background Delivering Performance

Macro Snapshot Domestic V’s International

Valuation V’s Income

Taking Advantage Investing for the Future

BKI Update Focus on Value and Yield

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Agenda

BKI Update Solid Background Delivering Performance

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Robert Millner Chairman of the Board

Chairman of the Investment Committee

David Hall Independent Non-Executive Director

Alex Payne Non-Executive Director

Investment Committee

Ian Huntley Independent Non-Executive Director


Tom Millner Chief Executive Officer


Jaime Pinto Company Secretary

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Directors and Management

BKI awarded “2011 Listed Investment Company of the Year”.

The award is a great endorsement of an LIC whose major focus

is to invest in quality companies, enabling it to generate a

growing dividend stream and capital growth.

Exciting future for the LIC sector.

Fund Manager of the Year Awards

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7

Dividends Paid

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4.3 5 5.3

6 6 5.25

6

1 1

1

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

cps cps cps cps cps cps cps cps

2004 2005 2006 2007 2008 2009 2010 2011

Ordinary Dividends Special Dividends

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Management Expense Ratio

0.69% 0.71%

0.56%

0.46% 0.46%

0.31%

0.19% 0.18%

0.10%

0.20%

0.30%

0.40%

0.50%

0.60%

0.70%

0.80%

2004 2005 2006 2007 2008 2009 2010 2011

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Source: BKI Investment Company Limited, IRESS. Portfolio Returns are measured by change in pre tax NTA and are after all

operating expenses, provision and payment of both income and capital gains tax and the reinvestment of dividends. Total Shareholder

Returns include reinvestment of dividends. Past performance is not indicative of future performance.

BKI Performance as at 31 October 2011

BKI Portfolio

Returns are

measured after

all operating

expenses,

provision and

payment of

income and

capital gains

tax.

BKI Performance 6 Mths 1 Year 3 Years 5 Years 7 Yearsas at 31 October 2011

(pa) (pa) (pa)

S&P/ASX 300 ACC INDEX (XKOAI) -9.0% -3.9% 7.1% -0.2% 6.3%

BKI Total Shareholder Returns 1.9% 6.5% 7.9% 2.1% 8.0%

BKI Share Price Outperformance V's XKOAI 10.9% 10.4% 0.8% 2.3% 1.7%

BKI Portfolio Performance -1.9% 3.4% 8.4% 3.0% 6.8%

BKI Portfolio Outperformance V's XKOAI 7.1% 7.3% 1.3% 3.2% 0.5%

Macro Snapshot Domestic V’s International

Valuation V’s Income

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Low Investor Confidence

• Domestic Inappropriate interest rates

Uncertainty on the future cost of living

Pressure on household affordability

Negativity surrounding weak global economies

Unstable federal government

• International High unemployment

Financial instability

Low economic growth outlook

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Market Commentary

Investor’s Defensive Reaction

• Domestic Changed risk appetite to investing in shares

Increased household savings

…Leading to a reduced exposure to Australian shares

• International High Australian Dollar

Unfavorable federal government policies;

Carbon Tax

Mining Resources Rent Tax

…Leading to a reduced exposure to Australian shares

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Market Commentary

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Historical PE Multiples (X)

5

7

9

11

13

15

17

19

21

23

25

2001 2003 2005 2007 2009 2011 2013

Australia US Euro UK

Valuation – PE Ratios

Source: Credit Suisse

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Valuation – PE Ratios

Australian Market – Historical PE (X)

8

9

10

11

12

13

14

15

16

17

18

2001 2003 2005 2007 2009 2011 2013

Australian Market 12-month Forward PE Average +/- 1 S.D.


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Income – Dividend Yields

10 year Historical Dividend Yields (%), Aust, US, Euro and UK

0%

1%

2%

3%

4%

5%

6%

7%

2001 2003 2005 2007 2009 2011 2013

Australia US Euro UK


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Australian Market – Historical Dividend Yield (%)

Income – Dividend Yields

2%

3%

4%

5%

6%

7%

2001 2003 2005 2007 2009 2011 2013

Australian Market Dividend Yield Average +/- 1 S.D.


Taking Advantage Investing for the Future

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• Long term investor’s need to act upon these opportunities.

• BKI has been investing through many cycles.

• Balance sheets of quality companies appear more robust than ever.

• Dividend distributions have continued to improve.

• BKI remain cautious of companies exposed to:

Retail – Poor consumer activity and changing buying patterns

Media – Low advertising spending

Manufacturing – Import pressure from high Australian Dollar

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Investment Opportunity

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

2 Principal Activity - Sustainable Business Model, Competitive

Advantage.

3 Debt Levels - Gearing Ratios, Net Interest Coverage.

4 Management and Board - Ownership, Board Meeting Attendance,

History of creating shareholder wealth.

5 Earnings and Valuations - Earnings Profiles, PE Multiples,

EV/EBITDA Multiples. 19

Stock Selection Criteria

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Portfolio Movements

Since 30 June 2011

Major Investments FY12 Forecast

Dividend Yield (%)

FY12 Forecast

EPS Growth (%)

FY12 Forecast

PE Multiple (X)

Wespac Banking Corp 7.7 2.7 9.9

National Australia Bank 7.2 8.5 8.7

Fleetwood Corporation 6.9 0.6 12.3

Wesfarmers Limited 5.6 22.7 15.7

Telstra Corporation 9.2 3.7 11.3

Commonwealth Bank 6.9 4.1 11.2

QUBE Logistics 3.1 10.2 15.6

Tatts Limited 9.8 13.7 9.8

Crown limited 4.6 20.4 14.7

Invocare Limited 5.0 17.6 16.7

Source: BKI Investment Company, Credit Suisse

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Portfolio Movements

Since 30 June 2011

Source: BKI Investment Company, Credit Suisse

Major Divestments FY11 Actual

Dividend Yield (%)

FY11 Actual

EPS Growth (%)

FY11 Actual

PE Multiple (X)

Bluescope Steel 2.9 -204 -10.7

Echo Entertainment 0 n.a 22.6

Westpac Pref Shares(WBCPA) 5.0 0 n.a

Orica Pref Shares (ORIPB) 6.4 0 n.a

1 New Hope Corporation 11 ANZ Banking Group

2 BHP Billiton Limited 12 Woodside Petroleum

3 National Australia Bank 13 QBE Insurance Group

4 Commonwealth Bank 14 Coca Cola Amatil Limited

5 Westpac Banking Corp 15 Metcash Limited

6 Wesfarmers Limited 16 Westpac Banking Corp SPSII

7 Telstra Corporation 17 ARB Corporation

8 Campbell Brothers Limited 18 ASX Limited

9 Woolworths Limited 19 Invocare Limited

10 AGL Energy Limited 20 TPG Telecom Limited

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Diversification Top 20 Investments

As at 31 October 2011

Diversification Sector Weightings

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Financials 31.6%

Energy 15.9%

Materials 11.9%

Consumer Staples 10.4%

Industrials 7.3%

Cash 6.4%

Telecommunications 4.6%

Consumer Discretionary 4.5%

Utilities 3.5%

Preference Shares 2.8%

Healthcare 0.9%

Property Trusts 0.3%

Diversification S&P/ASX300 Acc Indices

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-15%

-5%

5%

15%

25%

35%

Financials Consumer Staples

S&P/ASX 300 Acc Index

Industrials Energy Materials

NAB CBA WBC WES

WOW AGK BHP

NHC

BKI

CPB

Source: BKI Investment Company, IRESS

12 Month Total Shareholder Returns as at 31 October 2011.

Larger portfolio holdings V’s Index returns; diversification delivering performance.

BKI Update Focus on Yield and Value

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BKI announced as the inaugural winner of the “Listed Investment

Company of the Year”.

Revenues from the Investment Portfolio (excluding Special Dividend

Income) is up approx 7% on the previous corresponding period.

Operating Profits (excluding Special Dividend Income) is up 7% on the

previous corresponding period.

BKI is confident of at least maintaining the interim and final ordinary

dividends during FY2012.

BKI historical grossed up dividend yield is 8.1% as at 31 October 2011.

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BKI Update July 2011 – October 2011

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New Hope Corporation

• Solid FY2011 results:

• Despite flood impacts and rail line closures

• Realised Net Profits from sale of Arrow Energy of $329m

• Achieved record export sales

• Plans to double production in next 5 - 7 years

• Increased Final Dividend by 11%

• Announced 7th Special Dividend (15cps fully franked)

• Launched a formal bid process after a number of approaches from

interested parties.

• Total Return since 30 June 2011 is 17.6%.

• Ranked by market Cap as the 43rd largest company in Australia.

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Value

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

$0.50

$0.60

$0.70

$0.80

$0.90

$1.00

$1.10

$1.20

$1.30

$1.40

$1.50

$1.60

$1.70

$1.80

Prem/Disc % Pre Tax NTA BKI Share Price

Opportunity for investment at a 10% discount to the Pre Tax NTA. Ideal

for long term passive shareholders and SMSF’s.

Strong dividend payout ability with abundant franking credits. Historical

grossed up dividend yield was 8.1% as at 31 October 2011.

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Yield

1.0%

3.0%

5.0%

7.0%

9.0%

BKI Grossed Up Dividend Yield 90 Day Bank Bill

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Office Level 2, 160 Pitt Street

Sydney NSW 2000

Telephone +61 2 9210 7000

Fax +61 2 9210 7099

Web www.bkilimited.com.au

ABN 23 106 719 868

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