This material has been prepared by BKI Investment Company Limited.

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2 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 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. 2

3 12 Months ago Uncertainty surrounding global economies led to low levels of investor confidence. Stock valuations were very attractive and dividend yields were at historical highs. Weak Global Economies Low Investor Confidence Attractive Stock Valuations High Dividend Yields 3

4 12 Months ago A great opportunity for the long term investor who could block out the noise, focus on bottom up stock selection and basic investment fundamentals. Opportunity Interest Tax V s Dividends + Franking Fixed Interest Equities Cash Safety Defensive Reaction Security of Cash Protect Preserve / Defend Wealth 4

5 Where are we now Have global l economies stabilised, should we expect another market correction? Or do we have a positive backdrop to invest against? Are valuations stretched, are stocks overvalued, are we paying up for quality income and growth possibilities? Or should we be re-rating the better quality companies within our market? Domestic & Global Economies Investor Confidence Stock Valuations Dividend Yields 5

6 Domestic & Global Economies Improvements in the Eurozone have been encouraging, although these have been modest and from country to country somewhat unbalanced. Consensus growth rates are forecast at 1.3% for FY2014. UK growth prospects are sound, supported by stronger business confidence. Consensus growth rates of 2.8% are expected. Whilst tapering is approaching, the US economy should continue to be supported by the Fed over the short term. Growth rates of 3.0% are expected in FY

7 Domestic & Global Economies Emerging Markets have continued their positive growth trajectory. In particular the Chinese economy which is expected to grow between 7.5% - 8.0% in FY2014. As a result of aggressive stimulus incentives, Japan is expected to record growth rates of above 2.0%. Despite low interest rates and a slight fall in the AUD, the RBA recently lowered economic forecasts for That said, the high end of forecasts is still expected to be ~3.0% growth. 7

8 Domestic & Global Economies Global Growth Outlook Developed Markets V s Emerging Markets Source: Credit Suisse Emerging Markets Quarterly - Page 7, Thomson Reuters DataStream, Haver Analytics, 8

9 Investor Confidence Ex-resources and mining investment, the confidence of the local investor has grown considerably over the last 12 months. Change of Government has helped momentum build into Christmas. Interest rates at 2.50% should ultimately lead to: Reduced levels of personal debt Mortgage growth and appreciating house prices Recovery in confidence, discretionary spending, job security Increased business confidence and business lending Improved economic data Further confidence expected if the Australian Dollar falls again from US0.94c. 9

10 Stock Valuations Industrial stocks and major resources saw a significant re-rating post the July/Sept reporting season. FY2014 EPS forecasts for the industrial sector lifted by 17.0%. Upgrades to better quality companies were based on: Continued cost savings Balance sheet strength Earnings expectations ti A less risky local economy The Australian market is now currently trading at a forecast FY2014 PE multiple of 15.2x. This is 7% above 20-year average of 14.2x. 10

11 Stock Valuations Resource sector trading at 11.6x. A 19% discount to the 20-year average of 14.3x. Resources continue to be cyclical; lower margins leading to: Closure of some producing mines and many exploration projects Mining techniques and technology improvement Availability of workforce Availability of equipment Lower Supply can ultimately lead to Higher Demand Higher Demand leads to Higher Commodity Prices 11

12 Stock Valuations On a Historical PE valuation, Australian equity markets have constantly traded in line with the US and at a premium to the UK and European markets. 19 to earning gs ratio (X) Price Australia US Euro UK Source: Credit Suisse, as at 31 October

13 Stock Valuations Opportunities for Australian companies to benefit from the continual growth of the Emerging Markets: Major Resources WPL up 21.2%*, RIO up 19.0%*, BHP up 17.9%* Agriculture WCB up 154.1%*, BGA up 145.6%*, TGR up 138.5%* Impact on Australia, population growth: Finance ace BOQ up 91.7%*, NAB up 55.2%*, WBC up 42.7* HealthCare RHC up 60.4%*, SHL up 30.1%, PRY up 28.3%* All Industries go through cycles presenting long term opportunities: 29 Feb WES $13.50; 3 for 7 Entitlement Offer 31 Oct 2012 WES $34.77; + FF Dividends of $ Nov 2013 WES $43.50; + FF Dividends idends of $6.80 TSR* of 273% (excluding franking credits) * Total Shareholder Returns from 19 th November th November Returns include the reinvestment of dividends 13

14 Dividend Yields The Australian equity market is offering an attractive dividend yield above global peers. 8% 7% 6% 5% 4% 3% 2% 1% Australia US Euro UK Source: Credit Suisse, as at 31 October

15 Dividend Yields Australian equity market offering Dividend Yields at the 10 Year Historical average. Financial strength, ability to return surplus funds to shareholders. Special Dividend distributions from NHC, SUN, CCL, MLT, WBC. Franking Credits - 30% tax rate already paid on dividend income. Tax credits passed directly to shareholders by many Australian Companies. Attractive stable dividend outlook for FY2014 and beyond. 15

16 Dividend Yields Dividends + Franking Credits received from a $10,000 investment in BKI at inception V s Bank Quarterly Interest. Highlights the benefit of receiving a fully franked dividend in a falling interest rate environment. 1,400 1,200 n Dollars $ Australia 1, FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 BKI Dividend BKI Franking Interest Source: BKI; IRESS. An investor who spent the equivalent of $10,000 to purchase BKI shares upon listing in December 2003 would now be receiving fully franked dividends of $1,019pa. The franking credits enhance the income by a further $437 (total income of $1,456). The same investment in a term deposit (based on the cash rate) would be earning $494pa with no franking credits. Figures include reinvestment of dividends and cash, Ignores capital appreciation of BKI shares. Assumes tax rate of 30%. 16

17 Where are we now Global l economies have stabilised Investor confidence continues to grow Re-rating of the better quality companies Investing for income with growth possibilities Domestic & Global Economies Investor Confidence Stock Valuations Dividend Yields 17

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19 BKI Portfolio Top 25 As at 31 October 2013 BKI - Top 25 Investments % of Total Index Portfolio Weight 1 NAB National Australia Bank 9.1% 5.8% 2 CBA Commonwealth Bank 8.9% 8.5% 3 WBC Westpac Banking Corp 7.3% 7.4% 4 NHC New Hope Corporation 6.4% 0.0% 5 BHP BHP Billiton Limited 60% 6.0% 83% 8.3% 6 TLS Telstra Corporation 4.9% 4.4% 7 ANZ ANZ Banking Group 4.2% 6.3% 8 WES Wesfarmers Limited it 42% 4.2% 29% 2.9% 9 WOW Woolworths Limited 3.6% 3.0% 10 TPM TPG Telecom Limited 2.4% 0.3% Total 1-10 Investments 57.0% 46.9% 19

20 BKI Portfolio Top 25 As at 31 October 2013 BKI - Top 25 Investments % of Total Index Portfolio Weight 11 ALQ ALS Limited 2.3% 0.3% 12 AGK AGL Energy Limited 2.2% 0.6% 13 WPL Woodside Petroleum Limited 1.9% 2.2% 14 IAG Insurance Australia Group 1.5% 0.9% 15 IVC InvoCare Limited 13% 1.3% 01% 0.1% 16 CCL Coca Cola Amatil 1.3% 0.7% 17 MTS Metcash Limited 1.2% 0.2% 18 ARP ARB Corporation 11% 1.1% 01% 0.1% 19 APA APA Group 1.1% 0.3% 20 BEN Bendigo & Adelaide Bank 1.1% 0.3% Total Investments 15.0% 5.7% 20

21 BKI Portfolio Top 25 As at 31 October 2013 BKI - Top 25 Investments % of Total Index Portfolio Weight 21 MLT Milton Corporation 1.0% 0.0% 22 BOQ Bank of Queensland 1.0% 0.3% 23 PPT Perpetual Limited 1.0% 0.1% 24 ASX ASX limited 0.9% 0.5% 25 RHC Ramsay Healthcare 08% 0.8% 05% 0.5% Cash and Cash Equivalents 11.6% 0.0% Total Investments + Cash 16.3% 1.4% Total of Top 25 Investments + Cash 88.3% 54.0% 21

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23 BKI s 10 th Annual General Meeting BKI Shareholders have grown from 7,832 in FY2004 to 12,350*. Portfolio Valuation has increased by 358%, from $171m to $784m*. In 8 years Ordinary Dividends paid to shareholders have increased by 55%. BKI has paid 5 Special Dividends since listing. Internalised management; Since FY2004, BKI s MER has been reduced by 72% Won 2011 Listed Investment Company of the Year Award. Reduced share price discount to NTA. *As at 30 September

24 BKI Portfolio Valuation BKI successfully raised $107m at $1.48 per share through a Placement and a 1 for 15 Entitlement Offer. The BKI Portfolio Valuation including cash and receivables was $864m as at 31 October llions) ($ mi 1, Oct 2013 Investment Portfolio Cash 24

25 Ttl Total Shareholder hld Returns Rt As at 31 October % 26.8% Total Shareholder Returns exclude the 24.8% benefit of franking credits being passed on 25.0% from BKI to Shareholders. 20.0% 15.0% 10.0% 0% 14.3% 9.6% 12.0% 11.0% 6.5% 10.2% 86% 8.6% 5.0% 4.4% 0.0% 1 Year 3 Years (pa) 5 Years (pa) 7 Years (pa) 9 Years (pa) BKI Total Shareholder Returns S&P/ASX 300 ACC INDEX (XKOAI) Source: BKI Investment Company Limited, IRESS. Total Shareholder Returns include reinvestment of dividends. Past performance is not indicative of future performance. 25

26 1 st Quarter FY2014 Update* Revenue Revenue from the Investment Portfolio (excluding Special Dividend Income) is up approx 9% on the previous corresponding period.* Net Operating Result Net Operating Result (excluding Special Dividend Income) is up approx 10% on the same time last year. * Special Dividend Income - BKI is expected to receive $920k in Special Dividend Income in the first half of FY2014 from New Hope Corporation, Suncorp Group, Coca Cola Amatil and Milton Corporation Dividends Barring any unforeseen circumstances, BKI is confident of at least maintaining the Interim and Final Ordinary Dividends during FY2014. * Figures referred to in the 1 st Quarter FY2014 Update are unaudited. Revenue and Net Operating Result are partly driven by the $59m Placement completed on 5 September