annual report - Kingfish · 2016. 8. 22. · 2 kingfish limited / annual report 2013 03 1.24...

annual report

2 kingfish limited / annual report 2013

03 2013/2014 Calendar

04 About the Company

05 Directors’ Overview

08 Manager’s Report

21 Board of Directors

22 Corporate Governance Statement

27 Directors’ Statement of Responsibility

29 Independent Auditor’s Report

31 Financial Statements

48 Shareholder Information

49 Statutory Information

52 Directory

Contents

The information contained in this annual report is provided for information purposes only and does not constitute an offer, invitation, basis for a contract, financial advice, other advice or recommendation to conclude any transaction or for the purchase or sale of any security, loan or other instrument. In particular, the information contained in this annual report is not financial advice for the purposes of the Financial Advisers Act 2008 and should not be relied upon when making an investment decision. Professional financial advice from an authorised financial adviser should be taken before making an investment.

31% Healthcare

29% Industrials

19% Consumer Discretionary

8% Financials

8% Utilities

3% Consumer Staples

2% Agriculture

Performance to 30/04/13 Since 1 Month 3 Months 6 Months 1 Year 3 Years Inception (accumulated)

KFL Adjusted NAV* +1.7% +5.0% +11.6% +22.3% +42.4% +99.6%

Relative Performance

NZX50 Gross Index (NZX50G) +4.3% +8.5% +16.6% +29.8% +40.4% +78.0%

Total Shareholder Return* +0.9% +3.9% +16.1% +31.4% +68.0% +98.1%

at a Glance as at 30/04/13

KFL NAV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1.27Share Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1.18Discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.8%

aPrIl’SBIGGeSt moverS

+21% Ryman Healthcare +18% Summerset +12% Port of Tauranga +9% Fonterra Shareholders’ Fund -12% Abano Healthcare* Adjusted NAV and Total Shareholder Return assume all dividends are reinvested, but exclude imputation credits.

NB: NAV and Adjusted NAV are net of fees and tax.

31.00%29.00%19.00%8.00%8.00%3.00%2.00%

9/10/20129/10/2012

Sector SPlIt as at 30/04/13

marKet UPDateThe New Zealand equity market continued its upward trend in April (NZX50G up 4.3%), ahead of most other equity markets (MSCI up 2.9%).

The North Island drought looks to have had a much smaller impact on economic growth than previously feared, with strong milk prices and recent heavy rain minimising the impact. Outside of this, recent data continues to point to an economy that is building positive momentum, underpinned by the Christchurch rebuild.

The float of Mighty River Power could be seen as a success with strong demand evident from both local and offshore shareholders. This demand is notwithstanding the Labour/Green parties announcing an electricity policy during the month which appears to be a wealth transfer from equity holders (i.e. NZ Government, Contact and Trustpower shareholders) to electricity consumers. Although these sorts of retrospective changes do not enhance the attractiveness of New Zealand capital markets to potential offshore investors, for now there seems to be plenty of demand for quality, high yielding assets.

As well as the possibility of a Z Energy float later this year, a number of companies in the IT sector are considering floating in the near future. The latter have no doubt watched the recent strong share price movements of Xero and Diligent and will be looking to whet the appetite of potential investors in this space.

PortfolIo UPDateDelegat’s - Australian PurchaseDelegat’s has made its first foray into Australia with the purchase of Barossa Valley Estate. The purchase price was A$24.7m and

encompasses a winery, 41 hectares of vines and a well recognised brand. Barossa is well known for its Shiraz wines, which will broaden out Delegat’s portfolio. The purchase will be debt funded.

Despite strong currency headwinds, Delegat’s continues to eke out earnings growth mainly from volume growth, particularly in the USA.

Opus International - Short Listed for Major ContractsAs one of the big infrastructure consultancies in the country, it comes as no surprise that Opus has been shortlisted for two major infrastructure projects: Transmission Gully in Wellington and an irrigation storage facility in the Hawkes Bay. Transmission Gully is a 27km route running from the MacKays to Linden section of the Wellington Northern Corridor and is a major roading project which will take six years to build starting late next year. The storage facility in Hawkes Bay is a $230m project to supply water across 22,000ha of agricultural land. Outside of Christchurch, major project work is patchy due to government clampdowns on pubic spend, so getting work outside of Christchurch is important to maintain workflows.

Fonterra Shareholders’ Fund - Cost OutFonterra has surprised the market by achieving cost out well in excess of prospectus forecasts. Its latest move is to reduce head count by a further 300 staff - mainly at its head office.

Fonterra was facing a big fall in processing volumes in its second half result due to the north island drought, but recent rainfall and cost savings suggest that prospectus earnings forecasts now look very achievable.

Kathmandu – Trading UpdateKathmandu gave an unscheduled update of sales trading for the first

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maY 2013

At $1.18 Kingfish currently trades at a discount to NAV of 6.8%. The discount could provide value, as investors are able to purchase a portfolio with a NAV of $1.27 per share for only $1.18 per share.

Monthly UpdateEach month we produce a summary of what has occurred over the month, including significant market news and developments to Kingfish’s portfolio. If you would like to subscribe to our monthly update please email [email protected]

at a glance

$1.17

6.0%

at 31 March 2013

NAV PER SHARE

SHAREPRICE

DISCOUNT

$1.24

3kingfish limited / annual report 2013

2013 / 2014 Calendar

Next Dividend Payable28 June 2013

June Quarter Update NewsletterJuly 2013

Annual Shareholders’ Meeting2 August 2013, 10:30am Ellerslie Event Centre, Auckland

Interim Period End 30 September 2013

Interim Report to 30 September 2013December 2013

December Quarter Update NewsletterJanuary 2014

dividends paidduring the year ended 31 March 2013 (cents per share)

TOTAL FOR THE YEAR ENDED 31 MARCH 2013

MARCH 2013

2.39cps

DECEMBER 2012

2.29cps

SEPTEMBER 2012

2.21cps

JUNE 2012

2.21cps

9.10cps


About the CompanyKingfish Limited (“Kingfish” or “the company”) is a listed investment company that invests in growing New Zealand companies. The Kingfish portfolio is managed by Fisher Funds Management Limited (“Fisher Funds” or “the Manager”), a specialist investment manager with a track record of successfully investing in growth company shares. The aim of Kingfish is to offer investors competitive returns through capital growth and dividends, and access to a diversified portfolio of investments through a single tax-efficient investment vehicle. Kingfish listed on the NZX Main Board on 31 March 2004 and may invest in companies that are listed on the NZX Main Board, NZX Alternative Market or unlisted companies.

Investment ObjectivesThe key investment objectives of Kingfish are to:

• Achieve a high real rate of return, comprising both income and capital growth, within risk parameters acceptable to the directors; and

• Provide access to a diversified portfolio of New Zealand growth stocks through a single tax-efficient investment vehicle.

Investment ApproachThe investment philosophy of Kingfish is summarised by the following broad principles:

• Buy and hold shares in companies for the medium to long-term.

• Invest in companies that have a proven track record of growing profitability.

• Construct a diversified portfolio of investments, investing on a case-by-case basis, refraining from taking majority positions in any company, unless the opportunity is compelling.

• Invest as a medium to long-term investor selling only on the basis of a fundamental change in the original investment case.

• Focus on achieving absolute returns for shareholders.

top five investments

31 March

2013

14%

9%

13 %

6 %

7%

Ryman Healthcare Mainfre

ight

FreightwaysInfratil

NZX

31 March

2012

15%

7 %

13 %

7%

7%

Ryman Healthcare

Mainfre

ight

Freigh

tway

s

Metlifecare

NZX


Directors’ OverviewThe directors are pleased to report the progress of the Kingfish portfolio which has performed well in a strong market. The 2012/13 financial year was a very good year for Kingfish shareholders with the portfolio value up 21.4% after adjusting for 9.10 cents per share dividends paid, and the share price increasing from $0.93 (31 March 2012) to $1.17 (31 March 2013). The New Zealand sharemarket continued its upward trend (NZX50 Gross Index up 26.0%) as economic conditions began to improve, providing a positive backdrop for Kingfish over the past 12 months.

Full Year ResultKingfish shareholders will be encouraged by the strong net profit result of $26.5m for the year ended 31 March 2013, well ahead of the profit of $7.4m for the previous year.

Kingfish’s key performance ratios show a growth in total shareholder return (TSR)* of 37.3% and adjusted net asset value (NAV)* of 21.4%. Kingfish’s adjusted NAV* increased 23.7% for the year when excluding the dilutionary effect of the warrants exercised in the period.

Five Year SummaryFigure 2 (on page 7) summarises the five year performance history for the years ended 31 March 2009 - 2013. The summary shows an increase in adjusted NAV* every year since 2009, positive TSR* since 2010 and a gradual narrowing of the share price discount to NAV.

Since InceptionWe note that since inception in March 2004, Kingfish’s adjusted NAV* is up 96.2%, significantly ahead of the NZX50 Gross Index for the same period which was up 70.6%.

Share Price and Dividends (TSR)*A total of 51.23 cents per share has been paid out to shareholders in dividends, resulting in a positive TSR* of 96.5% since inception.

Figure 1 (on page 7) tracks the Kingfish share price, dividends paid and TSR*, since inception in 2004.

Share Price DiscountIt has been pleasing to see the share price discount to NAV narrow during the year from 16.0% to 6.0%.

Revenues and ExpensesThe key components of the full year result were gains on investments of $27.8m, dividend and interest income of $4.8m, and operating expenses and tax of $6.1m.

Performance FeeIn accordance with the Management Agreement, and in addition to the normal management fee, Kingfish’s Manager, Fisher Funds, earned a performance fee for achieving a return for the year in excess of the Bank

*Adjusted NAV and TSR assume all dividends are reinvested, but exclude imputation credits

Adjusted Net Asset Value (‘NAV’)

The adjusted NAV is calculated using NAVs as released to the NZX (audited at the end of each financial year) and adds back dividends paid to shareholders as announced to the NZX.

The adjusted NAV metric is unaudited but has been reviewed by an independent actuary.

The directors believe this metric to be useful as it reflects the underlying performance of the investment portfolio adjusted for dividends.

Total Shareholder Return (‘TSR’)

TSR is calculated using the share price per the NZX and adds back dividends paid to shareholders as announced to the NZX.

The TSR metric is unaudited but has been reviewed by an independent actuary.

The directors believe this metric to be useful as it mirrors the return of an investor who reinvests their dividends. No metric has been included for investors who take their dividend in cash as the return on those cash dividends will differ per shareholder. Alistair Ryan, Chairman.


Directors’ Overview continued

Bill Index plus 7% and above the High Water Mark (the highest NAV at the end of the previous financial year in which a performance fee was paid, adjusted for changes in capital). This is the first time since the 2007 financial year that Kingfish’s Manager has earned a performance fee.

Half of the performance fee (exclusive of GST) is applied by the Manager to subscribe for shares in Kingfish at an issue price per share equal to the audited NAV per share as at 31 March 2013, with the balance of the performance fee paid in cash.

DividendsIn accordance with Kingfish’s distribution policy (2% of average NAV paid four times per annum), the company paid 9.10 cents per share in dividends over the year. The next payment will be for 2.47 cents per share, payable on 28 June 2013 with a record date of 14 June 2013.

Kingfish’s distribution policy provides a regular and reliable income stream to shareholders irrespective of underlying portfolio performance. Shareholders who prefer to have increased capital rather than a regular income stream have the opportunity to participate in the company’s dividend reinvestment plan.

In December 2012, shareholders received a letter advising that online dividend statements are available from the March 2013 dividend payment onwards. The response has been positive with a large number of shareholders electing to receive their dividend statements electronically.

WarrantsThe final exercise date for Kingfish warrants was 3 September 2012. A total of 16.9m warrants were converted into ordinary shares during the two year period since issue at 95c each. The outstanding 26.8m warrants have expired and all rights in regard to them have now lapsed.

Morningstar AwardThe directors congratulate Fisher Funds for winning the Morningstar Fund Manager of the Year Award 2013 – Domestic Equities, for the second year running. Morningstar commented that Fisher Funds “deserves commendation for its hallmark, a commitment to openness, transparency, and engagement with its investors. These characteristics all mean that Fisher Funds remains at the summit among New Zealand equities fund managers.”

Board ChangesIn March 2013, the directors were pleased to announce that Andy Coupe had joined the Board as an independent director. Andy brings extensive knowledge of the capital

markets industry having worked in a number of sectors within the industry over the last 30 years. Currently, Andy is a consultant at UBS where his role encompasses equity capital markets and takeover transactions. He is also Deputy Chairman of the New Zealand Takeovers Panel and a director of Farmright Limited. We are pleased to have someone with Andy’s commercial and capital markets experience join the Board.

GovernanceThe Board constantly monitors the performance of the Manager both in terms of portfolio outcomes and compliance with the investment mandate and the Management Agreement.

The Board operates an Investment Committee to monitor the investment management of Kingfish and to ensure the portfolio is managed in accordance with the investment mandate and the long-term performance objectives of the company.

During the year the Board established a Diversity Policy. The Board recognises that having a diverse Board assists the directors in effectively carrying out their role and that outcomes are best served by having a mix of individuals with extensive expertise and experience.

Annual Shareholders’ MeetingThe Kingfish 2013 annual shareholders’ meeting will be held on Friday 2 August at 10:30am at the Ellerslie Event Centre. All shareholders are encouraged to attend with those who are unable to attend invited to cast their vote on company resolutions prior to the meeting.

This year shareholders will be given the option to vote online. Shareholders who have elected to receive their annual report electronically will automatically be given the opportunity to cast their vote online.

ConclusionIt is encouraging to see the Kingfish portfolio producing healthy returns for shareholders. Further details of the Kingfish portfolio and changes to it are discussed within the Manager’s Report.

We look forward to seeing many of you at our annual shareholders’ meeting where further information on the operations of the company and an update on performance will be presented.

On behalf of the Board,

Alistair Ryan / Chairman Kingfish Limited31 May 2013


Figure 2: Five Year Performance Summary

As at 31 March 2013 2012 2011 2010 2009

Audited NAV $1.24 $1.11 $1.13 $1.12 $0.92

Adjusted NAV* $1.90 $1.56 $1.47 $1.34 $1.02

Share Price $1.17 $0.93 $0.96 $0.91 $0.71

Share Price Discount to NAV* 6.0% 16.0% 15.1% 18.5% 23.0%

For the year ended 31 March 2013 2012 2011 2010 2009

Total Shareholder Return* 37.3% 6.6% 16.3% 43.4% (27.5%)

Adjusted NAV Return* 21.4% 6.1% 9.8% 32.1% (27.1%)

NZX50G* 26.0% 2.0% 5.3% 26.2% (25.4%)

NZSEMCG* 33.7% 1.1% 2.3% 25.8% (25.7%)

Bank Bill Index +7%* 9.7% 9.8% 10.1% 9.9% 14.7%

Dividends Paid in Year 9.10cps 8.84cps 8.69cps 9.60cps 4.50cps

Audited Earnings per Share 25.15cps 7.97cps 11.09cps 28.53% (36.32cps)

*Reviewed by an independent actuary. NB: NAV and Adjusted NAV are net of fees and tax.

Figure 1: Total Shareholder Return

The below Total Shareholder Return graph assumes all dividends are reinvested, but excludes imputation credits:

Div

iden

ds P

er S

hare

Shar

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ice/

Tota

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reho

lder

Ret

urn

Mar 2004

Mar 2005

Mar 2006

Sep 2006

Sep 2007

Sep 2008

Sep 2009

Sep 2010

Sep 2011

Mar 2012

Sep 2004

Sep 2005

Mar 2007

Mar 2008

Mar 2009

Mar 2010

Mar 2011

Sep 2012

Mar 2013

$1.90$1.70$1.50$1.30$1.10$0.90$0.70$0.50

$0.050

$0.045

$0.040

$0.035

$0.030

$0.025

$0.020

$0.015

$0.010

$0.005

$0.000

Dividends Share Price Total Shareholder Return


Manager’s ReportKingfish’s NAV (adjusting for dividends paid and the dilutionary effect of the warrants exercised during the year – i.e. the returns directly attributable to the Manager) rose by 23.7%, having increased in each quarter of the financial year. This return was below the NZX50G return of 26.0%, but we nevertheless view this as a satisfactory result as we had conservatively held above average levels of cash during the year, as protection against a potential market pullback. The Kingfish NAV performance was again ahead of that achieved by most other major world sharemarkets during the March year.

The domestic economy is slowly building momentum, underpinned by the Christchurch rebuild. Companies continue to report patchy demand and the momentum is certainly not evenly spread. The elevated NZ dollar is problematic for exporters, although portfolio companies Delegat’s and Fisher & Paykel Healthcare have businesses that are handling the impact far better than most. Portfolio companies with major operations in Australia are also performing comparatively well, given its economic slowdown. In these environments, stock picking continues to be very important.

Capital raisings in the New Zealand equity market since November 2012 now total almost $5 billion, illustrating the appetite for quality new issues. This total includes $1.7 billion recently raised by the Mighty River Power float. We did not participate in the Mighty River Power issue, as the company did not score highly against our STEEPP criteria (due to its utility type earnings and regulatory risk), and Kingfish is unlikely to participate in the proposed Meridian and Genesis Energy floats. However, we are expecting several other companies to list on the sharemarket this year, and as always, any new float is tested through our STEEPP process which steers us to growth companies with quality ‘moats’ around their businesses and a solid track record.

Portfolio ActivityDuring the year we added one company to the Kingfish portfolio and sold out of two companies, to result in a total of 19 investments. Fonterra Shareholders’ Fund entered the portfolio when it listed in November last year. This has been a highly successful float, and Fonterra easily met our STEEPP criteria. We sold out the balance of our Acurity Health holding in the March 2013 quarter, having already accepted the partial bid for the company in respect of half of our holding earlier in the financial year. Acurity’s earnings have been disappointing, notwithstanding a favourable industry backdrop. We also sold out of the balance of our Metlifecare holding in the fourth quarter. We had been reducing our holding over the past couple of years and after voting against Metlifecare’s merger with Vision Senior Living and Private Life Care, the increased liquidity gave us an opportunity to exit. The Kingfish portfolio already has a large exposure to the retirement village sector through its holdings in Ryman Healthcare and Summerset, and we have been delighted with the performance of both of these companies.

During the year we participated in a number of placements of existing shares in companies already

owned within the portfolio. In particular, we participated in both of Fairfax Media’s sell down of its holding in Trade Me, the exit of News Corp from its holding in Sky Network TV, and a further sell down of Quadrant Private Equity in Summerset. Active management and our deep knowledge of the companies within the portfolio meant that we were able to quickly decide whether to participate in these placements within very short timeframes (often within 24 hours). All of these placements were completed at prices which are now very favourable compared to current share prices.

Cash at balance date was 9.7%, and was above this level for most of the year as we took a conservative view of the potential impact of gyrating world markets and stuttering economies.

Portfolio CommentaryAbano Healthcare is in an investment phase in both its dental operations in Australasia and its audiology operations in Australia and South East Asia, as the earnings from these two divisions replace its substantial New Zealand audiology business which was sold two years ago. Start up losses from its new audiology practices are constraining Abano’s short-term earnings growth, but this new division will be at break-even in a couple of years time and has the potential to significantly add to shareholder value.

Delegat’s earnings have increased despite the elevated NZ dollar and a volatile grape supply over the last two years. Management has tilted the sales mix towards the USA market where its in-house sales team has successfully opened up this relatively new market for New Zealand premium wines. Delegat’s has bought further grape supply to meet its growth aspirations, and has also bought a small winery in the Barossa Valley to round out its wine portfolio.

Fisher & Paykel Healthcare has rejuvenated its product offerings in both its respiratory and obstructive sleep apnoea divisions. The success of these new products, coupled with operating efficiencies from its new Mexican manufacturing plant has resulted in strong earnings growth on a constant currency basis. The strong NZ dollar, despite currency hedging, is a major headwind but the company is still delivering very acceptable earnings growth and high returns on shareholders’ funds.

Fonterra Shareholders’ Fund’s earnings will have been impacted by lower collections from the recent North Island drought, however recent rain and higher than expected cost savings will likely ensure prospectus


earnings forecasts are achieved. Longer term, the outlook for protein-based food producers is very promising, especially in Asian markets where demand often far exceeds supply.

Freightways continues to provide solid earnings growth from both of its express package and information management divisions, although most of the current growth comes from the latter. The express package division should perform better as the domestic economy continues to strengthen and as further bolt-on acquisitions are consummated. The information management division has a growing footprint in Australia and strong growth prospects going forward.

Infratil continues to invest heavily in the companies within its investment portfolio, but also looks to refresh its portfolio from time to time to achieve its medium-term objective of 20% compound shareholder returns. A good example of this is Z Energy; Infratil is looking to sell down some of its holding (along with co-shareholder NZ Super) having improved Z’s earnings by judicious capital investment in what is a mature industry.

Kathmandu has started to prove up its business model to the investment community, with solid same store sales growth now recorded over its three major sales periods. The company has widened its product range, refreshed its brand, continued its store roll-out programme and refurbished older stores. This has resulted in strong earnings performance despite a difficult retail environment, particularly in Australia.

Mainfreight’s earnings have been constrained by its European operations, from both teething problems from its relatively new acquisition, but also due to the weak economies in which it operates. Its Australasian

operations continue to perform well, although short-term earnings have been impacted by growing pains in Australia. Notwithstanding this, Mainfreight remains on track to achieve its goal of being a global logistics operator.

Michael Hill International continues to post record earnings, especially in Australia. Its Professional Care Plans (PCP) continue to significantly boost cash flows in the short-term, and will contribute meaningfully to earnings in the medium-term. The PCPs are typically purchased on 30% of jewellery items sold, with very strong margins.

Fonterra Shareholders’ Fund entered the portfolio when it listed in November last year. This has been a highly successful float, and Fonterra easily met our STEEPP criteria.

Carmel Fisher, Managing Director.


NZX’s recent earnings have been impacted by higher staff and operating costs from new business areas. However, the government’s mixed ownership model and other proposed listings and placements of existing shares, are rejuvenating its earnings growth prospects. The future of the NZX looks highly promising given the renewed interest in our capital markets.

Opus International’s domestic operations continue to deliver solid earnings, although the increase in workload from the Christchurch rebuild is being offset by weakness in other areas of government spend. Outside of New Zealand, Opus’ track record continues to be inconsistent. Opus is the only company in the portfolio to post a negative shareholder return for the 2013 financial year, but we like the high returns on invested capital that it achieves from its relatively low risk infrastructure consultancy revenues. Upside exists from extracting higher margins from its offshore businesses.

Port of Tauranga continues to invest for the future at a rate which will result in it cementing itself as a major port hub in New Zealand for both exports and imports. Recent committed capital expenditure is aimed at deepening its port and lengthening its wharfs for bigger ships, expanding its container terminal and commissioning more cranes to handle increased tonnages.

Pumpkin Patch has been very successful in its online offering and in replacing its now closed USA and UK operations with wholesale sales in these and other new markets. However, its bricks and mortar stores remain challenged meaning that the group is not currently performing as well as the other retailers in our portfolio.

Ryman Healthcare’s track record is the envy of every other listed company as it continues to post impressive earnings growth year after year. Ryman’s design, build and operate model in the retirement village sector continues to be highly capital efficient and builds a ‘wave of earnings’ behind it as each new village is completed. Its move into Melbourne effectively doubles the size of its opportunity to successfully build and operate further new villages, although at least initially there is execution risk in entering this new market.

Sky Network TV’s My Sky HD and continual build-out of its programming offering is resulting in modest subscriber growth but solid growth in revenue per subscriber. This, coupled with a reduction in capital expenditure, is resulting in resumption in earnings growth. Ultra-fast broadband brings both risks and opportunities for the company, but it has a strong track record of successfully delivering its content over different delivery platforms over time.

Summerset is beginning to replicate the success of the Ryman model by building retirement villages with a higher weighting to aged care now that the economics of this segment have improved. Summerset easily surpassed its

We continue to believe that the companies in our

hand-picked portfolio have good growth prospects

and solid ‘moats’ around their businesses which

should do well no matter the economic backdrop.

Manager’s Report continued

Murray Brown, Senior Portfolio Manager.


prospectus earnings forecasts and has increased its build rate going forward. It is on-track to build solid earnings as it increases its retirement village footprint across the country.

TOWER has been split up following the sale of its health, life and investment divisions for a total consideration of $370m. $120m of this has already been returned to shareholders with a further $114m scheduled for later this year. TOWER is now effectively a general insurance business in New Zealand and the Pacific Islands.

Trade Me has successfully used its leverage as New Zealand’s leading online business to increase yields particularly in areas where it is dominant, like motor vehicle and property, to drive earnings growth. The company is looking to increase the range of offshore vendors for new goods on its website to further boost earnings, although progress in this area has been slow. Trade Me’s business model continues to generate high margins, from modest levels of capital employed.

Unlisted Waterman Holdings’ two investments, Guthrie Bowron and David Reid Homes, have been performing better as the building cycle and housing markets have been gathering momentum. For the nine months ended December 2012, sales were increased by 5% and 4% respectively, with David Reid Homes in particular likely to benefit from the increase in housing starts.

OutlookThe New Zealand sharemarket has continued to perform strongly since Kingfish’s balance date. As mentioned in our December quarter update, due to the slow moving but improving economy the sharemarket performance has been driven more by an increasing demand for equity investments than by any uplift in expected earnings growth. As a consequence, market valuation parameters are now above long-term averages and it remains our view that earnings growth needs to accelerate along with the recovering domestic economy to convincingly drive the market higher. Having said that, the sharemarket can remain well above or well below long-term averages for prolonged periods of time. A key feature of the current buoyancy in the local sharemarket is the ‘hunt for yield’, with the New Zealand sharemarket still being a standout for yield-driven investors, particularly relative to other sharemarkets.

We continue to believe that the companies in our hand-picked portfolio have good growth prospects and solid ‘moats’ around their businesses which should do well no matter the economic backdrop. Notwithstanding this, the cyclical domestic elements of their businesses should continue to see a gradual improvement, and our expectation is that this should build over the course of the next year.

Portfolio Holdings Summary as at 31 March 2013

Listed Companies % Holding

Abano Healthcare 2.2%

Delegat’s 2.3%

Fisher & Paykel Healthcare 5.0%

Fonterra Shareholders’ Fund 1.6%

Freightways 9.0%

Infratil 7.5%

Kathmandu 4.2%

Mainfreight 13.5%

Michael Hill International 4.0%

NZX 5.8%

Opus International 2.3%

Port of Tauranga 1.6%

Pumpkin Patch 1.2%

Ryman Healthcare 14.5%

Sky Network TV 3.9%

Summerset 4.1%

TOWER 2.8%

Trade Me 4.1%

Non-listed Company

Waterman Holdings 0.7%

Equity Total 90.3%

New Zealand dollar cash 9.7%

TOTAL 100.0%

Carmel Fisher / Managing Director Fisher Funds Management Limited 31 May 2013

Murray Brown / Senior Portfolio Manager Fisher Funds Management Limited 31 May 2013


S T EStrength of the BusinessWhat is the company’s competitive advantage? Is it sustainable? Is the company a market leader? Does it have a dominant position? A strong business is one that can maintain its profit margins by employing a unique strategy.

Track RecordHow has the company performed in the past? Has the company performed under the same management team? Has it grown organically or by acquisition? How did the company react during a downturn? Fisher Funds prefers to buy established companies that have executed well in the past.

Earnings HistoryHow fast has the company been able to grow its earnings in the past? How consistent has earnings growth been? We prefer to buy companies that exhibit secular growth characteristics where they have proven the ability to provide a high or improving return on invested capital.

The STEEPP ProcessFisher Funds employs a process that it calls STEEPP to analyse existing and new portfolio companies. This analysis gives each company a score against a number of criteria that Fisher Funds believes need to be present in a successful portfolio company. All companies are then ranked according to their STEEPP score to determine how significant their starting weighting within the portfolio will be (or indeed whether they make the grade to be a portfolio company in the first place). The STEEPP criteria are as follows:


E P PEarnings Growth ForecastWhat is the company’s earnings growth forecast over the next one to three years? What is the probability of achieving the forecast? What do we expect the company’s earnings potential to be? We notice that too many analysts focus on short-term earnings. As long-term growth investors we think about where the company’s earnings could be in three to five years.

People/ManagementWho is the management team and how long have they been in their roles? Who are the directors, what is their history with the company, and what do they bring to the board? What is the depth of management in the organisation and is there a succession plan for the key executive roles? Does the management team own shares in the business and how are they rewarded? Has the board and management exhibited good corporate behaviour in the areas of environmental, social and governance considerations. For us, the quality of the company management and its corporate governance is of paramount importance.

Price/ValuationHow much of the future earnings growth is already reflected in the share price? Where does the current share price sit in relation to our worst to best case valuation range? A company will generate a higher score where the market price currently reflects little of that company’s upside potential.

Using this STEEPP analysis, we constructed and maintained a portfolio which comprised 19 securities at the end of March 2013.

Michael Hill International.


DELEGAT’S GROUP LIMITED

What does it do?Abano is an active investor in,

and operator of, healthcare and medical services businesses in New Zealand, Australia and South East Asia. Its philosophy is to co-invest and partner with clinical leaders and entrepreneurial owners in the areas of audiology, rehabilitation,

diagnostics and dental care.

Why do we own it?We are attracted to Abano’s

strategy of focusing on the private revenue segment of the healthcare and medical services market. In

particular, we are attracted to the scalability of its audiology and dental

care operations in Australasia.

What does it do?Delegat’s produces and distributes super-premium wine internationally under the Oyster Bay brand. Oyster

Bay is the number one selling New Zealand wine brand in the

UK, Australia and Canada, and is currently the fastest growing New Zealand wine brand in the USA.

Why do we own it?Delegat’s continues to outperform in a difficult industry segment. The

industry has suffered from volatility in grape supplies and a strong currency

headwind. Delegat’s has been successful in expanding its sales reach through its own dedicated sales team, whilst maintaining operating margins

through changing its country sales mix.

What does it do?Fisher & Paykel Healthcare is a

leading designer, manufacturer and distributor of innovative medical devices for patients who require acute respiratory and obstructive

sleep apnoea care. Over 95% of its products are sold outside New Zealand

from dedicated manufacturing facilities in Auckland and Mexico.

Why do we own it?We are attracted to the latent demand for Fisher & Paykel’s innovative care

products as the worldwide population ages and the incidence of obesity

rises. Through its own research and development, Fisher & Paykel has continued to develop products that significantly expand its potential patient base, whilst maintaining high returns on invested capital.

The following is a brief introduction to each of your portfolio companies, with a description of why we believe they deserve a position in the Kingfish portfolio. Total shareholder return is for the year to 31 March 2013 and is sourced from Bloomberg. For companies that are new to the portfolio in the year, total shareholder return is from the first purchase date to 31 March 2013.

The Kingfish Portfolio Stocks

$108m$364m

$1,422m

3% 3% 5%64% 56% 24%

MARKET CAPITALISATION



2012 DIVIDEND YIELD

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TOTAL SHAREHOLDER RETURN




What does it do?Fonterra is a world-leading dairy co-operative which has global

businesses spanning dairy commodity and consumer markets. It has significant

businesses in developed countries and stable but growing businesses

in emerging markets in China, Asia, the Middle East and Latin America.

Why do we own it?Fonterra has a natural supply of

world-class, low cost milk coupled with high market shares in a range

of countries with recognised brands. It has a good track record of

expanding outside of New Zealand and these operations generally have

high returns on invested capital.

What does it do?Freightways operates nationwide

express package and business mail operations with brands including NZ Couriers, Post Haste and DX Mail. It has also developed an

information management business on both sides of the Tasman

encompassing document and data storage and document destruction.

Why do we own it?Freightways is one of two dominant players in the New Zealand courier

market. The company has an impressive track record of value-accretive acquisitions that leverage off its

existing infrastructure. Earnings have been resilient in times of recession, and are now growing robustly as

the economy slowly recovers.

What does it do?Infratil invests in a diverse range of

infrastructure businesses encompassing renewable energy, air and road

transport and downstream oil, with a focus on co-investment within

Australasia. It is externally managed by an experienced management team.

Why do we own it?We are attracted to Infratil’s 50%

holding in Trustpower and that it invests in a range of unlisted infrastructure assets that are not easily replicable.

Infratil’s goal of a 20% p.a. after tax return to shareholders meets our

expectations and its track record since listing has been strong.

$718m$698m

$1,406m

n/a 4% 3%36% 20% 32%




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The Kingfish Portfolio Stocks continued

What does it do?Kathmandu is a retailer of clothing and equipment for travel and adventure in Australia, New Zealand and the UK. It

operates a vertically integrated business from in-house design through to a

company operated chain of over 120 stores. Total sales are split approximately

60% clothing, 40% equipment.

Why do we own it?Kathmandu’s integrated model results

in high margins despite operating three major sales per year which make up

approx 70% of total sales. Kathmandu products make up 95% of sales and

the company effectively makes a wholesale and retail margin. Its product

range continues to be widened and optimised for the Australasian market.

What does it do?Mainfreight is a global supply chain logistics company. It is a specialist freight forwarder and distributor, with interests spanning managed warehousing, transportation of

hazardous substances, international freight, full truckload, and less than container load freight. Its operations span New Zealand,

Australia, USA, Asia and Europe.

Why do we own it?Mainfreight is a well run company with a special team culture. It continues to open new trade lanes as it spreads its logistics footprint ever wider. Growth will come organically and through

judicious acquisitions as it seeks its goal of becoming a global logistics provider.

What does it do?Michael Hill is a specialist jewellery

retailer, manufacturing most of its own diamond jewellery. The company operates stores in New Zealand, Australia, Canada and the USA.

Why do we own it?Michael Hill’s Australasian business has continued to prosper through its policy of controlled profitable growth no matter the economic backdrop. Its recently introduced Professional Care

Plans have dramatically increased cash flows, and will help to sustain

earnings growth in the medium-term.

$507m$1,119m

$528m

4% 2% 4%69% 21% 40%




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What does it do?NZX operates in three complementary

areas – Information, Markets and Infrastructure. Through a series of acquisitions and in-house build, it now has a diversified earnings

stream across an expanding range of securities and commodities products.

Why do we own it?We like NZX’s diversified revenue

streams and dominant market positions. Now that it has largely completed its acquisition and capital expenditure

phase, it is now generating significant free cash flow resulting in higher dividend flows to shareholders.

What does it do?Opus is an international

multidisciplinary infrastructure consultancy company providing

asset development and asset management solutions to the

infrastructure sector. It operates consultancy practices in New Zealand,

Australia, Canada and the UK.

Why do we own it?We are attracted to Opus’ high return on invested capital that results from its relatively low risk consultancy revenue streams connected to the

roads, rail, water supply, stormwater, and waste water treatment sectors (amongst others) that Opus consults

to. It is well positioned to benefit from the strong backlog of infrastructure work in the Christchurch rebuild.

What does it do?Port of Tauranga is the natural gateway

to and from international markets for many of New Zealand’s major

businesses. It is in close proximity to many important exporters in the forestry, dairy, meat and fruit industries. It also competes in the containerised import market through an integrated inland

container port in South Auckland with direct rail links to the Port of Tauranga.

Why do we own it?Port of Tauranga continues to grow in importance as a leading shipping

port in New Zealand for both exports and imports, whether containerised or bulk. It has many natural advantages,

including excellent access for road and rail, large land holdings and has a highly efficient work force. It is well placed to cater for the emergence of larger ships coming to New Zealand.

$342m$261m

$1,849m

4%* 5% 3%16% -15% 32%*excludes return of capital payment




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What does it do?Pumpkin Patch is a childrenswear retailer now operating two brands – “Pumpkin

Patch” and more recently “Charlie & Me”, the latter of which is aimed at the everyday children’s clothing segment. The company has stores

in Australia and New Zealand, and has global reach through wholesale

agreements and online sales.

Why do we own it?Pumpkin Patch has a strong Australasian

base and following the closure of its USA and UK stores, wider

representation via wholesale agreements and online sales. Charlie & Me stores

will leverage off Pumpkin Patch’s existing infrastructure and should add to shareholder value in the medium-term.

What does it do?Ryman Healthcare was formed in 1984

to develop, construct and operate retirement villages in New Zealand. It now has 25 retirement villages around New Zealand and is looking to expand

in a controlled way into Australia. It is the largest owner and developer of retirement villages in New Zealand.

Why do we own it?Ryman is a premium developer and operator of retirement villages, and

has stuck to its winning formula since inception. Industry dynamics

are extremely attractive, and Ryman continues to lift its build rate of units

and beds to meet latent demand from an ageing population. Australia represents an area of considerable upside if it can replicate its business

model in that marketplace.

What does it do?Sky TV is the pre-eminent pay

television broadcasting service in New Zealand. Pay television has a nearly 50% penetration rate in New Zealand with Sky TV supplying over 100 channels. Its offering includes a range of packages from basic

through to premium content, along with pay-per-view and video on demand.

Why do we own it?Sky TV continues to add to its subscriber base each year, and widen its product offering. Although sports remains key,

new channels are widening its audience and reducing churn. As a content

provider, Sky TV has been successful across a range of broadcasting

platforms with ultra-fast broadband likely to be another opportunity to add to its subscriber base.

$206m$2,520m

$2,062m

n/a 2% 4%*18% 67% 14%*excludes special cash return payment




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What does it do?Summerset is an integrated retirement village builder, owner and operator. It has a 14 year track record and is now the second largest developer

and the third largest owner of retirement villages in New Zealand.

Why do we own it?Summerset successfully operates a continuum of care model with aged

care integrated into its villages. This model tends to be difficult to

replicate, and can be operationally complex. Summerset has been

operating long enough for villages to be cycling its first set of occupiers and this, plus new developments,

starts a ‘wave of earnings’ which is financially efficient and self-funding.

What does it do?Following the sale of its health

and investment divisions, TOWER now operates in the life and

general insurance areas in New Zealand and the Pacific Islands.

Why do we own it?TOWER’s largest shareholder, Guinness Peat Group (33%), has indicated that it is likely to sell all its investments over time. TOWER is now being split up to try to crystallise shareholder value.

What does it do?Trade Me is New Zealand’s

leading online business with market leading positions across a broad

range of categories. It has became New Zealand’s leading general retail trading and auction internet platform,

and has leveraged its brand into market leading ‘vertical’ positions

in motors, property and jobs.

Why do we own it?The company is asset-light, with

minimal working capital and capex requirements. Consequently there is a high conversion of profits into

free cash flow. Although it has many competitors, its ‘moat’ is a

combination of its market position, brand, infrastructure platform, diverse revenue streams and service culture.

$566m$517m

$1,873m

1% 4% 3%75% 22% 40%




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What does it do?Unlisted Waterman Holdings

acquires and operates established unlisted medium-sized businesses in New Zealand. The portfolio

currently consists of investments in Guthrie Bowron and David Reid

Homes. It seeks significant influence over key strategic and financial

decisions of its businesses.

Why do we own it?Waterman operates in a niche

market that is typically not represented through listed market vehicles. It is run by experienced

operators who have significant ‘skin in the game’. Waterman takes a long-run view of its investments.

$13m

4% n/a


2012 DIVIDEND YIELD




Alistair Ryan MComm (Hons), CAChairman, Independent Director

Alistair Ryan has extensive corporate and finance sector experience in the listed company sector in New Zealand and Australia. He had a 16 year career with SKYCITY Entertainment Group Limited (from pre-opening and pre-listing in 1996 through 2011). Alistair was a member of the senior executive team, holding the positions of General Manager Corporate, Company Secretary and Chief Financial Officer, and has served as a director of various SKYCITY subsidiary and associated companies. Prior to SKYCITY, Alistair was a Corporate Services Partner with international accounting firm Ernst & Young, based in Auckland. Alistair has a Master of Commerce (Honours) from Canterbury University and is a member of the New Zealand Institute of Chartered Accountants and the New Zealand Institute of Company Secretaries. Alistair is also a director of Barramundi, Marlin Global, Christchurch Casinos, Metlifecare and Moa Group as well as Deputy Chairman of the New Zealand Racing Board. Alistair’s principal place of residence is Auckland.

Carmel Fisher BCAExecutive Director

Carmel Fisher established Fisher Funds Management Limited in 1998 and is also a director of Barramundi, Marlin Global and TOWER Managed Funds. Carmel’s interest and involvement in the New Zealand sharemarket spans nearly 30 years. Carmel is widely recognised as one of New Zealand’s pre-eminent investment professionals. Carmel’s career started when she left Victoria University with an accounting degree to spend four years in the sharebroking industry. She then managed funds for Prudential Portfolio Managers and Sovereign Asset Management before launching Fisher Funds. Carmel’s principal place of residence is Auckland and she can be contacted at Kingfish’s registered office.

Carol Campbell BCom, CAIndependent Director

Carol Campbell is a Chartered Accountant and a member of the New Zealand Institute of Chartered Accountants. Carol spent over 25 years as a partner at Ernst & Young where she was a valued and respected member of the management team. Carol was one of 10 partners in the Entrepreneurial Services Group, advising small to medium-sized businesses and was instrumental in launching Ernst & Young Entrepreneur of the Year Award in 1996. Carol has extensive financial experience and a sound understanding of efficient Board governance. Carol holds a number of directorships across a broad spectrum of companies, including Turners and Growers, New Zealand Post and The Business Advisory Group (in which she is a joint owner). Carol is also a director of Barramundi and Marlin Global. Carol’s principal place of residence is Auckland.

Andy Coupe LLBIndependent Director

Andy Coupe has extensive commercial and capital markets experience having worked in a number of sectors within the financial markets over the last 30 years. Andy is a consultant in investment banking at UBS New Zealand Limited, where his role principally encompasses equity capital markets and takeover transactions which has involved numerous initial public offerings and secondary market transactions. Andy is Deputy Chairman of the New Zealand Takeovers Panel, a director of Barramundi, Marlin Global, Coupe Consulting and Farmright, and is also a member of the Institute of Finance Professionals New Zealand. Andy’s principal place of residence is Auckland.

Board of Directors

Pictured left to right: Andy Coupe, Carmel Fisher, Alistair Ryan and Carol Campbell.


The Board of Directors (“the Board”) of Kingfish Limited (“Kingfish” or “the company”) is committed to strong corporate governance practices and has adopted a comprehensive corporate governance code. The Board believes that the corporate governance structures and practices must encourage the creation of value for Kingfish shareholders whilst ensuring the highest standards of ethical conduct and providing accountability and control systems commensurate with the risks involved.

This code meets the required corporate governance principles under the NZX Corporate Governance (‘NZXCG’) Best Practice Code and the Corporate Governance Principles and Guidelines issued by the Securities Commission (now the Financial Markets Authority).

ComplianceKingfish seeks to follow the best practice recommendations for listed companies to the extent that it is appropriate to the nature of its operations. The company considers that its governance practices complied with NZXCG Best Practice Code and the Securities Commission Corporate Governance Principles and Guidelines during the year ended 31 March 2013, except where disclosed under Principle 3 for Audit and Risk Committee composition. The following reports against these principles and guidelines.

The company’s constitution, the Board and committee charters, codes and policies referred to in this section are available to view at www.kingfish.co.nz

Principle 1 – Ethical StandardsDirectors observe and foster high ethical standards.

Kingfish has adopted policies of business conduct that provide all directors and representatives with clear guidance on those standards.

The Code of Ethics details the ethical and professional behavioural standards required of the directors and officers. The code also provides the means for proactively addressing and resolving potential ethical issues.

The Conflicts of Interests Policy details the process to be adopted for identifying conflicts of interests and the actions that should be taken.

The Insider Trading Policy details the procedure whereby persons nominated by Kingfish (its directors and persons associated with the Manager) may trade in Kingfish shares and take up shares purchased under the Kingfish dividend reinvestment plan. Nominated persons may not trade in Kingfish shares when they have price sensitive information that is not publicly available. In addition, except where the nominated person has the permission of the Board, the nominated person may trade in the company shares only during the trading window commencing immediately after Kingfish’s weekly disclosure of its net asset value to the New Zealand Stock Exchange (‘NZX’), and ending at the close of trade two days following the net asset value disclosure.

No breaches of ethics principles were identified during the year.

A copy of the complete Code of Ethics, Conflicts of Interest Policy and the Insider Trading Policy is available to view at www.kingfish.co.nz

Corporate Governance Statement

Principle 2 – Board Composition and PerformanceThere is a balance of independence, skills, knowledge, experience and perspective among directors that allows the Board to work effectively.

Board Size and CompositionThe NZX Listing Rules require a minimum of three directors with at least two of the directors being ordinarily resident in New Zealand. The composition of the Board must include a minimum number of two independent directors. The Board currently comprises three independent directors including the Chairman and one director who is not deemed to be independent.

The Board elects a Chairman whose primary responsibility is the efficient functioning of the Board.

Profiles of the individual directors can be found on page 21.

Director IndependenceKingfish retains a separate Board of Directors from the Manager. The Board ensures that shareholders’ interests are held paramount.

As at 31 March 2013, the Board considered Alistair Ryan (Chairman), Carol Campbell and Andy Coupe to be independent directors in terms of the NZX definition. Carmel Fisher was not considered independent due to also being a director of Fisher Funds.

On appointment, each director is required to provide information to the Board to assess and confirm their independence as part of their consent to act as a director. Directors have undertaken to inform the Board as soon as practicable if they think their status as an independent director has or may have changed.

Board Role and ResponsibilityThe Board is responsible for the direction and control of Kingfish and is accountable to shareholders and others for Kingfish’s performance and its compliance with the appropriate laws and standards.

Kingfish offers shareholders a highly experienced Board with financial markets experience and strengths in funds management and corporate governance.

The Board’s responsibilities include:

• Manager’s performance – regularly review both the performance and compliance with contractual arrangements of the Manager;


• capital management – implementing initiatives including share buybacks if it is in the opinion of the Board that the value of the shares do not appropriately reflect the underlying net asset value;

• determining distribution policy;

• Board performance and composition – evaluating the performance of independent directors, determining the size and composition of the Board as well as making recommendations for the appointment and removal of directors;

• succession planning – planning Board succession;

• financial performance – approving the annual budget and monitoring financial performance;

• financial reporting – considering and approving the annual and half-year financial reports;

• audit – selecting and recommending to shareholders the appointment of the external auditor. Maintaining a direct and ongoing dialogue with the external auditor;

• risk management – identifying the principal risks faced by the company and ensuring that appropriate control and monitoring systems are in place to manage the impact of these risks;

• overseeing communication and reporting to shareholders;

• relationship with regulators, NZX and adherence to its obligations regarding continuous disclosure – maintaining ongoing dialogue with the NZX;

• custodian – appointing a custodian to safeguard the company’s assets. Trustees Executors Limited is the custodian of Kingfish’s assets;

• other service providers – appointing other service providers and evaluating their performance.

The Board met five times during the year and received papers, including regular reports from the Chief Financial Officer and the Manager to read and consider before each meeting. At all times, the Board is provided with accurate timely information on all aspects of Kingfish operations. The Board is kept informed of key risks to Kingfish on a continuing basis. In addition, the Board meets whenever necessary to deal with specific matters needing attention between the scheduled meetings and the independent directors meet as required.

Meetings Meetings Board Members Attended ScheduledAlistair Ryan (Chairman from 1 September 2012) 5 5

Carmel Fisher 5 5Carol Campbell (appointed 5 June 2012) 4 4Andy Coupe (appointed 1 March 2013) 0 0Mark Todd (retired 16 September 2012) 2 2James Miller (retired 31 August 2012, Chairman to 31 August 2012) 2 2

Annabel Cotton (retired 28 May 2012) 0 0Meetings Held 5 5

The Manager’s responsibilities as stated in the Management Agreement include:

• the provision of management services to the company such as the investment and portfolio management services and administrative services;

• dealing with the Custodian; and • attendance at Kingfish Board meetings.

The Manager is to at all times invest the portfolio on a prudent and commercial basis consistent with the company’s investment criteria and performance objectives.

While the Board’s key role is to monitor the performance of the Manager, it is not involved in the selection or management of investments within the Kingfish portfolio.

Retirement and Re-election of DirectorsIn accordance with the company’s constitution one third, or the number nearest to one third, of the directors (excluding any director appointed since the previous Annual Shareholders’ Meeting [‘ASM’]) retire by rotation at the ASM.

Appropriate notice of director nominations has been provided in accordance with the requirements of the NZX, the Kingfish constitution and the Companies Act 1993.

Diversity PolicyThe Board views diversity as including but not being limited to, skills, qualifications, experience, gender, race, age, disability, ethnicity and cultural background.

During the financial year, the Board established a Diversity Policy under the oversight of the Remuneration and Nominations Committee which is available on the company’s website. The Kingfish Diversity Policy is limited to the Board and the Chief Financial Officer.


Corporate Governance Statement continued

The Board recognises that having a diverse Board will assist it in effectively carrying out its role as described in Principle 2.

All appointments to the Board will be based on merit, and will include consideration of the Board’s diversity needs, including gender diversity. Under the policy, the principal measurable diversity objective is to embed gender diversity as an active consideration in all succession planning for Board positions. During the year, there were two appointments to the Board (Carol Campbell, 5 June 2012 and Andy Coupe, 1 March 2013).

The gender composition as at 31 March was as follows:

as at as at 31 March 2013 31 March 2012Directors two females, two females, two males three malesChief Financial Officer male male

The Board believes that the company has achieved the objectives set out in its Diversity Policy for the year ended 31 March 2013.

Board Performance ReviewThe Board usually conducts a formal review of its performance annually, however the 2013 review has been deferred to later in the year, due to a number of director changes during the 2013 financial year.

The Remuneration and Nominations Committee assesses the performance of individual directors whilst directors also assess the collective performance of the Board and the performance of the Chairman.

Principle 3 – Board CommitteesThe Board uses committees where this enhances effectiveness in key areas while retaining Board responsibility.

Audit and Risk CommitteeThe Kingfish Audit and Risk Committee focuses on audit and risk management and specifically addresses responsibilities relative to financial reporting and regulatory conformance. The Committee operates within the terms of reference established by the Kingfish Board, which the Committee reviews annually.

The Audit and Risk Committee is accountable for ensuring the performance and independence of the external auditor PricewaterhouseCoopers (‘PwC’). A statement regarding PwC’s independence is included in their Auditor’s and Accountants’ Reports.

The Audit and Risk Committee also recommends to the Board which services other than the statutory audit, may be provided by PwC as auditor.

During the year, the Committee held private sessions with the auditor. The auditor has a clear line of direct

communication at any time with either the Chair of the Audit and Risk Committee or the Chairman of the Board, both of whom are independent directors.

The Audit and Risk Committee relies on information provided by management and the external auditor. Management determines and makes representations to the Board that the company’s financial statements and disclosures are complete and accurate. The external auditor has the duty to plan and conduct audits.

As at 31 March 2013, the Audit and Risk Committee comprised independent directors Carol Campbell (Chair), Alistair Ryan and Andy Coupe all of whom have appropriate financial experience and an understanding of the industry in which Kingfish operates. Meetings are held not less than twice a year having regard to Kingfish’s reporting and audit cycle.

During the year, executive director Carmel Fisher was temporarily added to the Audit and Risk Committee to meet the minimum member requirements of NZX Listing Rule 3.6 and for that period the majority of members were independent, non-executive directors (although the Corporate Governance Best Practice Code suggests that all members are non-executive directors).

Audit and Risk Meetings Meetings Committee Members Attended ScheduledCarol Campbell (appointed 5 June 2012, Chair from 1 September 2012)

1 1

Alistair Ryan (Chair from 29 May 2012 to 31 August 2012)

2 2

Andy Coupe (appointed 1 March 2013) 0 0Carmel Fisher (appointed 17 September 2012, retired 28 March 2013)

1 1

Mark Todd (retired 16 September 2012) 1 1James Miller (retired 31 August 2012) 1 1Annabel Cotton (retired 28 May 2012, Chair to 28 May 2012)

0 1

Meetings Held 2 2

The Audit and Risk Committee may have in attendance such members of management including the Kingfish Chief Financial Officer, a representative from the Manager, and such other persons including the external auditor, as it considers necessary to provide appropriate information and explanations.

A copy of the Audit and Risk Committee Charter is available to view at www.kingfish.co.nz

Remuneration and Nominations CommitteeThe Remuneration and Nominations Committee comprises all Board members and meets at least once per year.

The Board’s Remuneration and Nominations Committee has a formal charter which can be found on the company’s


website. Each Committee member, other than Carmel Fisher, is independent.

Independent directors receive fees determined by the Board on the recommendation of the Committee. Each year the Committee reviews the level of directors’ remuneration. The Committee considers the skills, performance, experience and level of responsibility of directors when undertaking the review, and is authorised to obtain independent advice on market conditions.

Investment CommitteeThe Investment Committee comprises all Board members and meets at least twice per year. The Committee has a formal charter which can be found on the company’s website.

The objective of the Committee is to oversee the investment management of Kingfish to ensure the portfolio is managed in accordance with the investment mandate and with the long-term performance objectives of the company.

Principle 4 – Reporting and DisclosureThe Board demands integrity both in financial reporting and in the timeliness and balance of disclosures on entity affairs.

Timely and Balanced DisclosureThe company is committed to promoting investor confidence by providing complete and equal access to information in accordance with the NZX Listing Rules. The company has a Continuous Disclosure Policy designed to ensure this occurs. This policy can be found on the company’s website.

The Chief Financial Officer is the company’s market disclosure officer, and is responsible for ensuring compliance with its disclosure obligations. The Board is accountable for making the final decision as to whether or not information requires disclosure.

The Chief Financial Officer is responsible for releasing any relevant information to the market once it has been approved. Financial information released is approved by the Board on the recommendation of the Audit and Risk Committee, while information released on other matters is approved by the Board.

Directors formally consider at each Board meeting whether there is relevant material information which should be disclosed to the market.

Financial ReportingThe Audit and Risk Committee oversees the quality and integrity of external financial reporting including the accuracy, completeness and timeliness of financial statements.

It reviews half-yearly and annual financial statements and makes recommendations to the Board concerning

accounting policies, areas of judgement, compliance with accounting standards, stock exchange and legal requirements and the results of the external audit.

The Kingfish Chief Financial Officer is responsible for ensuring compliance with the NZX continuous disclosure requirements and overseeing and co-ordinating disclosure to the exchange.

Principle 5 – RemunerationThe remuneration of directors and executives is transparent, fair and reasonable.

Independent Directors’ RemunerationThe fees payable to independent directors are determined by the Board within the aggregate amount approved by shareholders. The current directors’ fee pool limit of $100,000 was approved by shareholders’ written resolution in February 2004.

Details of remuneration paid to directors are disclosed in note 1 to the Financial Statements and are further disclosed in the Statutory Information section of this report.

Share Purchase PlanA Share Purchase Plan was introduced by the Board on 29 February 2012 and states that all independent directors will receive company shares in lieu of 10% of their annual directors’ fees. Once an individual shareholding reaches 50,000 shares, the independent director can elect whether to continue with the plan. The intention of the Share Purchase Plan is to further align the interests of directors with those of shareholders.

Principle 6 – Risk Management and Internal ControlThe Board regularly verifies that the entity has appropriate processes that identify and manage potential and relevant risks.

The Board has overall responsibility for Kingfish’s system of risk management and internal control. Kingfish has in place policies and procedures to identify areas of significant business risk and implement procedures to manage those risks effectively. Key risk management tools used by Kingfish include the Audit and Risk Committee function, outsourcing of certain functions to service providers, internal controls, financial and compliance reporting procedures and processes, business continuity planning and insurance.

A copy of the complete Risk Management Policy is available to view at www.kingfish.co.nz

In addition to the company’s policies and procedures in place to manage business risks, the Manager has its own comprehensive risk management policy. The Kingfish Board is informed of any changes to the Manager’s policy.


Principle 7 – AuditorsThe Board ensures the quality and independence of the external audit process.

Approach to Audit GovernanceThe independence of the external auditor is of particular importance to shareholders and the Board. The Audit and Risk Committee is responsible for overseeing the external audit of the company. Accordingly, it monitors developments in the areas of audit, and threats to audit independence, to ensure its policies and practices are consistent with emerging best practice in these areas.

As part of its responsibilities, the Audit and Risk Committee reviews the independence of external auditors and the appropriateness of any non-audit services they undertake for the company.

Engagement of the External AuditorKingfish’s external auditor is PwC, who were appointed by shareholders at the 2005 annual meeting in accordance with the provisions of the Companies Act 1993 (‘the Act’). PwC is automatically reappointed as auditor under Section 200 of the Act.

Attendance at the Annual MeetingPwC, as external auditor of the 2013 financial statements, is invited to attend this year’s annual meeting and will be available to answer questions about the conduct of the audit, preparation and content of the auditor’s report, accounting policies adopted by Kingfish and the independence of the auditor in relation to the conduct of the audit.

Principle 8 – Shareholder RelationsThe Board fosters constructive relationships with shareholders that encourage them to engage with the company.

The Board recognises the importance of providing to shareholders comprehensive, timely and equal access to information about its activities. The Board aims to ensure that shareholders have available to them all information necessary to assess the company’s performance. It has a system in place for canvassing shareholder views and for communicating the Board’s views to shareholders.

Alongside periodic and continuous disclosure to NZX, Kingfish maintains a website www.kingfish.co.nz including making available the most recent net asset value that is released to the NZX on a weekly basis and at the end of each month, corporate governance policies, shareholder reports, monthly updates, market announcements, copies of ASM minutes, presentations, press releases and news articles as well as performance data.

Information is also communicated to shareholders in the annual and interim reports, quarterly update newsletters which are published between these two reports and the monthly updates.

The release of the annual report is followed by the ASM which the Board recognises as an important forum at which the shareholders can meet and question the Board and the Manager. The notice of meeting is circulated at least 10 days prior to the meeting and is also posted on the company’s website. Shareholders are provided with notes on any resolutions proposed through the notice of meeting each year. This year’s meeting will be held on 2 August 2013, 10:30am at the Ellerslie Event Centre in Auckland. Full participation of shareholders is encouraged at the ASM to ensure a high level of accountability and identification with the company’s strategies and goals. Shareholders are encouraged to submit questions in writing prior to the meeting.

Principle 9 – Stakeholder InterestsThe Board respects the interests of stakeholders within the context of the company’s ownership type and its fundamental purpose.

The Board recognises that other stakeholders may have an interest in the company’s activities. While there are no specific stakeholders’ interests that are currently identifiable, the company will continue to review policies in consideration of future interests.

Corporate Governance Statement continued


Directors’ Statement of Responsibility

For the year ended 31 March 2013

We have pleasure in presenting the financial statements for Kingfish Limited for the year ended 31 March 2013.

We have ensured that the financial statements for Kingfish Limited give a true and fair view of the financial position of the company as at 31 March 2013 and its financial performance and cash flows for the year ended on that date.

We have ensured that the accounting policies used by the company comply with generally accepted accounting practice in New Zealand and believe that proper accounting records have been kept. We have ensured compliance of the financial statements with the Financial Reporting Act 1993.

We also consider that adequate controls are in place to safeguard the company’s assets and to prevent and detect fraud and other irregularities.

The Kingfish Board authorised these financial statements for issue on 28 May 2013.

Alistair Ryan Carol Campbell

Carmel Fisher Andy Coupe


29 Independent Auditor’s Report

31 Statement of Comprehensive Income

32 Statement of Changes in Equity

33 Statement of Financial Position

34 Statement of Cash Flows

35 Statement of Accounting Policies

39 Notes to the Financial Statements

Financial Statements Contents

Fonterra Shareholders’ Fund.


PricewaterhouseCoopers, 188 Quay Street, Private Bag 92162, Auckland 1142, New Zealand T: +64 (9) 355 8000, F: +64 (9) 355 8001, www.pwc.com/nz

Independent Auditor’s Report to the shareholders of Kingfish Limited Report on the Financial Statements We have audited the financial statements of Kingfish Limited on pages 31 to 47, which comprise the statement of financial position as at 31 March 2013, the statement of comprehensive income, the statement of changes in equity and the statement of cash flows for the year then ended, and the Notes to the Financial Statements that include a summary of significant accounting policies and other explanatory information. Directors’ Responsibility for the Financial Statements The directors are responsible for the preparation of these financial statements in accordance with generally accepted accounting practice in New Zealand and that give a true and fair view of the matters to which they relate and for such internal controls as the directors determine are necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing (New Zealand) and International Standards on Auditing. These standards require that we comply with relevant ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal controls relevant to the company’s preparation of financial statements that give a true and fair view of the matters to which they relate, in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. We have no relationship with, or interests in, Kingfish Limited other than in our capacities as auditor and provider of other assurance services. These services have not impaired our independence as auditor of the company.

PricewaterhouseCoopers, 188 Quay Street, Private Bag 92162, Auckland 1142, New Zealand T: +64 (9) 355 8000, F: +64 (9) 355 8001, www.pwc.com/nz

Independent Auditor’s Report to the shareholders of Kingfish Limited Report on the Financial Statements We have audited the financial statements of Kingfish Limited on pages 31 to 47, which comprise the statement of financial position as at 31 March 2013, the statement of comprehensive income, the statement of changes in equity and the statement of cash flows for the year then ended, and the Notes to the Financial Statements that include a summary of significant accounting policies and other explanatory information. Directors’ Responsibility for the Financial Statements The directors are responsible for the preparation of these financial statements in accordance with generally accepted accounting practice in New Zealand and that give a true and fair view of the matters to which they relate and for such internal controls as the directors determine are necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing (New Zealand) and International Standards on Auditing. These standards require that we comply with relevant ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal controls relevant to the company’s preparation of financial statements that give a true and fair view of the matters to which they relate, in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. We have no relationship with, or interests in, Kingfish Limited other than in our capacities as auditor and provider of other assurance services. These services have not impaired our independence as auditor of the company.


Independent Auditor’s Report Kingfish Limited

Opinion In our opinion, the financial statements on pages 31 to 47:

(i) comply with generally accepted accounting practice in New Zealand;

(ii) comply with International Financial Reporting Standards; and

(iii) give a true and fair view of the financial position of the company as at 31 March 2013, and its financial performance and cash flows for the year then ended.

Report on Other Legal and Regulatory Requirements We also report in accordance with Sections 16(1)(d) and 16(1)(e) of the Financial Reporting Act 1993. In relation to our audit of the financial statements for the year ended 31 March 2013:

(i) we have obtained all the information and explanations that we have required; and

(ii) in our opinion, proper accounting records have been kept by the company as far as appears from an examination of those records.

Restriction on Distribution or Use This report is made solely to the company’s shareholders, as a body, in accordance with Section 205(1) of the Companies Act 1993. Our audit work has been undertaken so that we might state to the company’s shareholders those matters which we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s shareholders, as a body, for our audit work, for this report or for the opinions we have formed.

Chartered Accountants Auckland 28 May 2013


The Statement of Accounting Policies set out on pages 35 to 38 and the Notes to the Financial Statements set out on pages 39 to 47 should be read in conjunction with this Statement of Comprehensive Income.

Notes 2013 2012 $000 $000

Interest income 379 332

Dividend income 4,425 3,116

Net changes in fair value of investments 1(i) 27,772 6,207

Total net income 32,576 9,655

Operating expenses 1(ii) (6,081) (2,241)

Operating profit before tax 26,495 7,414

Total tax expense 3(i) (19) (11)

Net operating profit after tax attributable to shareholders 26,476 7,403

Other comprehensive income

Change in fair value of available-for-sale financial assets (23) 0

Total comprehensive income after tax attributable to shareholders 26,453 7,403

Earnings per share Basic earnings per share

Profit attributable to owners of the company ($000) 26,476 7,403

Weighted average number of ordinary shares on issue net of treasury stock (‘000) 105,283 92,914

25.15c 7.97c

Diluted earnings per share Profit attributable to owners of the company ($000) 26,476 7,403

Weighted average number of ordinary shares on issue net of treasury stock and adjusted for warrants (‘000)

- Weighted average number of ordinary shares on issue 105,283 92,914

- Weighted average number of warrants on issue - 41,293

Ordinary shares to be issued under performance fee arrangement 1,236 -

106,519 134,207

24.86c 5.52c

Statement of Comprehensive IncomeFor the year ended 31 March 2013


The Statement of Accounting Policies set out on pages 35 to 38 and the Notes to the Financial Statements set out on pages 39 to 47 should be read in conjunction with this Statement of Changes in Equity.

Notes Share Available- Performance Retained Total Capital for-sale fee Earnings Equity reserve reserve $000 $000 $000 $000 $000

Balance at 1 April 2011 88,556 449 0 12,522 101,527

Comprehensive income

Profit for the year 0 0 0 7,403 7,403

Other comprehensive income 0 0 0 0 0

Total comprehensive income for the year ended 31 March 2012 0 0 0 7,403 7,403

Transactions with owners

Shares issued for warrants exercised 2 2,115 0 0 0 2,115

Share buybacks 2 (1,069) 0 0 0 (1,069)

Dividends paid 0 0 0 (8,227) (8,227)

Dividends reinvested 2 3,802 0 0 0 3,802

Balance at 31 March 2012 93,404 449 0 11,698 105,551

Comprehensive income

Profit for the year 0 0 0 26,476 26,476

Other comprehensive income 0 (23) 0 0 (23)

Total comprehensive income for the year ended 31 March 2013 0 (23) 0 26,476 26,453

Transactions with owners

Shares issued for warrants exercised 2 13,337 0 0 0 13,337

Share buybacks 2 (112) 0 0 0 (112)

Manager’s performance fee to be settled with ordinary shares 0 0 1,446 0 1,446

Dividends paid 0 0 0 (9,798) (9,798)

Dividends reinvested 2 4,392 0 0 0 4,392

Balance at 31 March 2013 111,021 426 1,446 28,376 141,269

Statement of Changes in EquityFor the year ended 31 March 2013

Attributable to shareholders of the company


The Statement of Accounting Policies set out on pages 35 to 38 and the Notes to the Financial Statements set out on pages 39 to 47 should be read in conjunction with this Statement of Financial Position.

Notes 2013 2012 $000 $000

ASSETS

Current Assets

Cash and cash equivalents 13,861 10,317

Trade and other receivables 4 997 193

Investments at fair value through profit or loss 6 127,580 94,353

Current tax receivable 3(ii) 2 3

Total Current Assets 142,440 104,866

Non-current Assets

Available-for-sale financial assets 7(i) 1,054 1,077

Total Non-current Assets 1,054 1,077

TOTAL ASSETS 143,494 105,943

LIABILITIES

Current Liabilities

Trade and other payables 5 2,225 392

Total Current Liabilities 2,225 392

TOTAL LIABILITIES 2,225 392

EQUITY

Share capital 2 111,021 93,404

Available-for-sale reserve 7(iii) 426 449

Performance fee reserve 1,446 0

Retained earnings 28,376 11,698

TOTAL EQUITY 141,269 105,551

TOTAL EQUITY AND LIABILITIES 143,494 105,943

These financial statements have been authorised for issue for and on behalf of the Board by:

A B Ryan / Chairman C A Campbell / Chair of the Audit and Risk Committee28 May 2013 28 May 2013

Statement of Financial Positionas at 31 March 2013


The Statement of Accounting Policies set out on pages 35 to 38 and the Notes to the Financial Statements set out on pages 39 to 47 should be read in conjunction with this Statement of Cash Flows.

Notes 2013 2012 $000 $000

Operating Activities

Cash was provided from:

- Sale of investments 21,522 14,263

- Interest received 380 332

- Dividends received 4,237 3,141

Cash was applied to:

- Purchase of investments (27,676) (13,449)

- Operating expenses (2,720) (2,101)

- Taxes paid (18) (14)

Net cash (outflows)/inflows from operating activities 8 (4,275) 2,172

Financing Activities

Cash was provided from:

- Proceeds from warrants exercised 13,337 2,115

Cash was applied to:

- Share buybacks (112) (1,099)

- Dividends paid (net of dividends reinvested) (5,406) (4,425)

Net cash inflows/(outflows) from financing activities 7,819 (3,409)

Net increase/(decrease) in cash and cash equivalents held 3,544 (1,237)

Cash and cash equivalents at beginning of the year 10,317 11,554

Cash and cash equivalents at end of the year 13,861 10,317

All cash balances comprise short-term cash deposits.

Statement of Cash FlowsFor the year ended 31 March 2013


Statement of Accounting PoliciesFor the year ended 31 March 2013

GENERAL INFORMATIONEntity ReportingThe financial statements for Kingfish Limited (“Kingfish” or “the company”) have been prepared in accordance with the requirements of the Financial Reporting Act 1993 and the Companies Act 1993.

Legal Form and Domicile Kingfish is incorporated and domiciled in New Zealand.

The company is a limited liability company, incorporated under the Companies Act 1993 on 30 January 2004.

Kingfish is listed on the NZX and is an issuer under the terms of the Financial Reporting Act 1993.

The company is a profit-oriented entity and began operating as a listed investment company on 31 March 2004.

The company’s registered office is Level 1, 67 - 73 Hurstmere Road, Takapuna, Auckland.

Authorisation of Financial StatementsThe Kingfish Board of Directors authorised these financial statements for issue on 28 May 2013.

No party may change these financial statements after their issue.

ACCOUNTING POLICIESPeriod Covered by Financial StatementsThese financial statements cover the audited results from operations for the year ended 31 March 2013.

Statement of ComplianceThe financial statements have been prepared in accordance with New Zealand Generally Accepted Accounting Practice (‘NZ GAAP’), the Companies Act 1993 and the Financial Reporting Act 1993. They comply with the New Zealand Equivalents to International Financial Reporting Standards (‘NZ IFRS’) and other applicable Financial Reporting Standards, as appropriate. These financial statements comply with International Financial Reporting Standards (‘IFRS’) as published by the International Accounting Standards Board.

The following standard has been adopted by the company in the year ended 31 March 2013:

FRS 44 New Zealand Additional Disclosures - Under this standard the company needs to disclose the amount of imputation credits available for subsequent reporting periods.

The company has also moved the Cash Flow Statement

Reconciliation from the primary statements to the Notes to the Financial Statements.

No other changes to NZ IFRS were of material relevance to the company’s financial statements for the 2013 financial year.

The following standards have been issued but are not yet effective:

NZ IFRS 9: Financial instruments – This standard will eventually replace NZ IAS 39: Financial instruments – recognition and measurement (‘NZ IAS 39’) and is expected to be adopted by the company in the period ending 30 September 2015 when it becomes effective. The standard is not expected to materially affect the company’s financial statements, although available-for-sale financial assets will likely be reclassified to financial assets at fair value through profit or loss.

NZ IFRS 13: Fair value measurement (‘NZ IFRS 13’) - This standard defines the concept of fair value and establishes a framework for measuring fair value, while setting the disclosure requirements for fair value measurement. In measuring fair value, NZ IFRS 13 permits the use of any price within the bid-ask spread that is most representative of fair value, rather than prescribing a specific market price that must be used. The standard will be adopted by the company for the period ending 30 September 2013 when it becomes effective.

The effect on the value of investments at fair value through profit or loss were NZ IFRS 13 to have been adopted for the year ended 31 March 2013 has been quantified overleaf. The effect of adoption is based on the assumption that last sale price is used to value investments at fair value through profit or loss rather than the current bid price valuation as this is deemed to be a closer representation of fair value. Where the last sale price falls outside of the bid-ask spread for the valuation of a particular stock, bid price will be used.

The effect of moving from bid price to last sale price at 31 March 2013, would have been an uplift of approximately $800,000 in the value of investments at fair value through profit or loss. This would increase net operating profit for the year ended 31 March 2013 and net assets as at 31 March 2013 by the same amount before performance fee and other adjustments. There were no instances of the last sale price of investments falling outside of the bid-ask spread for this analysis.

Any other proposed accounting standards and amendments not disclosed are not expected to have a material impact on the financial statements when they are initially applied.


Statement of Accounting Policies continuedFor the year ended 31 March 2013

Summary of Significant Accounting Policies

The accounting policies that materially affect the recognition, measurement and disclosure of items in the Statement of Comprehensive Income, Statement of Changes in Equity, Statement of Financial Position and Statement of Cash Flows are set out below. These policies have been consistently applied to all the years presented.

Measurement Base

The financial statements have been prepared on the historical cost basis, as modified by the fair valuation of certain assets as identified in specific accounting policies below.

Critical Judgements, Estimates and Assumptions

The preparation of financial statements requires the directors to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses.

Specifically, these relate to the fair value of available-for-sale financial assets disclosed in these financial statements. They are based on historical experience, recent arm’s length transactions, underlying financial performance, indicative net asset value and various other factors that are believed to be reasonable in the circumstances.

The directors’ estimate of the fair value of available-for-sale financial assets has been based on the latest available information. Actual results may differ from these estimates.

Cash and Cash Equivalents

Cash and cash equivalents includes cash in hand and short-term money market deposits. Cash and cash equivalents are classified as loans and receivables under NZ IAS 39.

Statement of Cash Flows

The following are definitions of the terms used in the Statement of Cash Flows:

(a) Operating activities include all principal revenue producing activities and other events that are not financing activities.

(b) Financing activities are those activities that result in changes in the size and composition of the capital structure.

Functional and Presentation Currency

The financial statements are presented in New Zealand dollars, which is the company’s functional and presentation currency.

Interest Income and Dividend IncomeInterest is accounted for as earned using the effective interest method.

Dividend income is recognised when the company’s right to receive payments is established (ex-dividend date).

Manager’s Performance FeeThe performance fee is recognised in the Statement of Comprehensive Income on an accrual basis based on the performance of the company up to the balance date. Refer to note 12 of the Notes to the Financial Statements.

Share-Based PaymentsThe consideration for any performance fee paid to Fisher Funds Management Limited (“the Manager”) is calculated in accordance with the Management Agreement described in note 12 and comprises cash and Kingfish share capital. Performance fees, where earned by the Manager, are paid annually within 30 days of balance date, relating to the preceding period and recognised as an expense in the Statement of Comprehensive Income. The portion paid in share capital is an equity-settled share-based payment and is recognised at the fair value of half of the performance fee expense (excluding GST) as an equity reserve until the ordinary shares are issued. These shares are issued at a price equal to the audited net asset value per share at year end. The component paid in cash is treated in line with a typical operating expense.

Income TaxCurrent tax is calculated by reference to the amount of income taxes payable or recoverable for the period. It is calculated using tax rates and tax laws that have been enacted or substantively enacted at balance date. Current tax for current and prior periods is recognised as a liability (or asset) to the extent that it is unpaid (or refundable).

Deferred tax (if any) is accounted for using the balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax base of those items.

In principle, deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised to the extent that it is probable that sufficient taxable amounts will be available against which deductible temporary differences or unused tax losses and tax offsets can be utilised. However, deferred tax assets and liabilities are not recognised if the temporary differences giving rise to them arise from the initial recognition of assets and liabilities (other than as a result of a business combination) which affects neither taxable income nor accounting profit.


The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the entity expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.

Kingfish elected into the Portfolio Investment Entity (‘PIE’) regime on 1 October 2007.

Goods and Services Tax (‘GST’)The company is not registered for GST as its activities relate to financial services. The financial statements include GST where it is charged by other parties as it cannot be reclaimed.

Investments at Fair Value Through Profit or LossClassificationInvestments in listed entities are classified at fair value through profit or loss in the financial statements under NZ IAS 39. This designation on inception is to provide more relevant information given that the investment portfolio is managed, and performance evaluated, on a fair value basis, in accordance with a documented investment strategy.

Recognition and MeasurementAll investments at fair value through profit or loss are initially recognised at fair value and are subsequently revalued to reflect changes in fair value.

Net changes in the fair value of investments classified as fair value through profit or loss are recognised in the Statement of Comprehensive Income as they arise.

The fair values of investments at fair value through profit or loss traded in active markets are based on current market bid prices at balance date.

Transaction costs for all financial assets carried at fair value through profit or loss are expensed as incurred.

All purchases and sales of investments are recognised at trade date, which is the date on which the company commits to purchase or sell the asset.

Dividend income from investments at fair value through profit or loss is separately recognised in the Statement of Comprehensive Income when the company’s right to receive payments is established (ex-dividend date).

Available-for-sale Financial AssetsClassificationInvestments in unlisted companies are held as available-for-sale assets under NZ IAS 39.

Recognition and MeasurementAll investments held as available-for-sale assets are initially recognised at fair value plus transaction costs.

All purchases and sales of investments are recognised at trade date, which is the date on which the company commits to purchase or sell the asset. Investments are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the company has transferred substantially all the risks and rewards of ownership.

Dividend income from available-for-sale assets is separately recognised in the Statement of Comprehensive Income when the company’s right to receive payments is established (ex-dividend date).

Available-for-sale financial assets are subsequently carried at fair value with changes in fair value being recognised in equity. Typically there is no active market for unlisted investments and the company establishes fair value by using valuation techniques. These may include the use of recent arm’s length transactions, underlying net asset values of investments, reference to other instruments that are substantially the same or discounted cash flow analysis as appropriate.

The company assesses at each balance date whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of equity investments classified as available-for-sale, a significant or prolonged decline in the fair value of the investment below its cost is considered in determining whether the investment is impaired.

If any such evidence exists for available-for-sale financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss – is recognised in the Statement of Comprehensive Income. Impairment losses recognised in the Statement of Comprehensive Income on equity instruments are not reversed through the Statement of Comprehensive Income.

Fair ValueThe fair value of investments at fair value through profit or loss traded in active markets is based on current market bid prices at balance date.

The fair value of investments that are not traded in an active market is determined by using valuation techniques. The company uses a variety of methods and makes assumptions that are based on market conditions existing at each year end date. Valuation techniques include the use of comparable recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis and other valuation techniques commonly used by market participants making the maximum use of market inputs and relying as little as possible on entity-specific inputs.


Statement of Accounting Policies continuedFor the year ended 31 March 2013

Fair Value continuedThe output of valuation techniques is always an estimate or approximation of a value that cannot be determined with certainty, and the valuation may not fully reflect all factors relevant to the positions the company holds. Valuations are therefore adjusted, where appropriate, to allow for additional factors including liquidity risk and counterparty risk. This applied in determining the fair value of the Level 3 investment disclosed in note 7.

The fair value hierarchy has the following levels:

• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;

• Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and

• Level 3 inputs are unobservable inputs for the asset or liability.

Investments whose values are based on quoted market prices in active markets are classified within Level 1. The company does not adjust the quoted price for these instruments.

Derivative financial instruments are valued based on observable inputs and are classified within Level 2.

Investments classified within Level 3 have significant unobservable inputs, as they trade infrequently or have suspended trading on their shares. As observable prices are not available for these securities, the company uses valuation techniques to derive the fair value.

Loans and ReceivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the company makes short-term cash deposits or accrues trade receivables with no intention of selling the receivable. They are included in current assets, except for those with maturities greater than 12 months after the balance sheet date which are classified as non-current assets.

Trade and Other ReceivablesTrade and other receivables are initially recognised at fair value and subsequently carried at amortised cost less impairment where collection is doubtful. Receivables are assessed on a case by case basis for impairment. The fair value of trade receivables is equivalent to their carrying amount.

Trade PayablesTrade payables are initially recognised at fair value and subsequently measured at amortised cost. The fair value of trade payables is equivalent to their carrying amount.

Financial InstrumentsFinancial instruments carried on the Statement of Financial Position include cash and cash equivalents, equity investments, trade receivables, trade payables and borrowings (when used). The various accounting policies associated with these financial instruments have been disclosed above.

Dividends PayableDividend distributions to the company’s shareholders are recognised as a liability in the financial statements in the period in which the dividends are declared by the Kingfish Board.

Segmental ReportingOperating segments are identified on the basis of internal reports that are regularly reviewed by the Chief Operating Decision Maker, which for the company is deemed to be the Board of Directors and the Manager, to govern the company’s operations and assess its performance.

Operating segments are reported in a manner consistent with the internal reporting provided to the Board of Directors and the Manager.

Earnings per ShareBasic earnings per share is calculated by dividing the profit attributable to equity holders of the company by the weighted average number of ordinary shares on issue during the year. Refer to the Statement of Comprehensive Income for the earnings per share calculations.

Share CapitalOrdinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds. Share capital bought back by the company reduces share capital and may be held as treasury stock at the value of the consideration paid. Treasury stock may later be re-issued which increases share capital by the fair value of the shares on issue date.


Note 1 - Statement of Comprehensive Income

2013 2012 $000 $000

(i) Net changes in fair value of investments Investments designated at fair value through profit or loss - New Zealand equity investments 27,772 6,409Available-for-sale financial assets - Impairment loss 0 (202)

Total investment gains 27,772 6,207

(ii) Operating expenses Auditor’s fees: - Statutory audit and review of financial statements 37 35 - Other assurance services 4 4 Management fee (note 9) 1,779 1,472 Performance fee (note 12) 3,446 0 Directors’ fees 112 114 Brokerage and transaction fees 194 82 Custody and NZX fees 164 121 Salaries and other personnel costs 104 117 Administration and other 136 177 Investor relations 73 83 Taxation and legal services 30 36 Bank fees 2 0

Total operating expenses 6,081 2,241

No non-audit fees were paid to the auditor during the year (2012: nil).

Note 2 - Share Capital

Ordinary shares As at 31 March 2013 there were 113,502,791 (31 March 2012: 95,332,346) fully paid Kingfish shares on issue, including treasury stock of nil shares (31 March 2012: nil). All ordinary shares are classified as equity, rank equally and have no par value. All shares (with the exception of treasury stock) carry an entitlement to dividends and one vote attached to each fully paid ordinary share.

2013 2012 $000 $000

Opening balance 93,404 88,556 Shares issued for new warrants exercised 13,337 2,115 Proceeds of shares issued from treasury stock under the dividend reinvestment plan 110 1,089 New shares issued under the dividend reinvestment plan 4,282 2,713 Share buybacks held as treasury stock (112) (1,069)

Closing balance 111,021 93,404

Notes to the Financial StatementsFor the year ended 31 March 2013


Notes to the Financial Statements continuedFor the year ended 31 March 2013


Note 2 - Share Capital continued

Treasury stock On 31 October 2012, Kingfish announced the continuation of its share buyback programme of its ordinary shares in accordance with section 65 of the Companies Act 1993. All the shares acquired under the buyback scheme are initially held as treasury stock but are available to be re-issued. The net cost of treasury stock is deducted from share capital. Number of Shares

2013 2012 2013 2012 $000 $000 ‘000 ‘000

Opening balance (581) (561) 0 58 Share buybacks 112 1,069 118 1,153 Shares re-issued under dividend reinvestment plan (110) (1,089) (118) (1,211)

Closing balance (579) (581) 0 0

The value of treasury stock is in debit at 31 March 2013 due to the differences in the price the company has bought shares back for and the price the company has re-issued shares for.

Warrants On 31 August 2010, 43,670,377 new Kingfish warrants (KFLWB) were allotted and listed on the NZX. One new warrant was issued to all eligible shareholders for every two shares held on record date, exercisable at $0.95.

For the year ended 31 March 2013, 14,039,454 Kingfish warrants (31 March 2012: 2,226,023) were converted into ordinary shares at $0.95 per share. On 3 September 2012, the remaining 26,787,134 unexercised warrants expired and there were no Kingfish warrants outstanding as at 31 March 2013.

Note 3 - Taxation 2013 2012 $000 $000

(i) Total tax expense

Operating profit before tax 26,495 7,414

Non-taxable realised gain on investments (693) (7,055)Non-taxable unrealised (gain)/loss on investments (27,040) 856 Imputation credits 1,341 1,061 Other 253 190

Taxable income 356 2,466

Tax at 28% (2012: 28%) 100 690 Imputation credits (1,341) (1,061)Deferred tax not recognised 1,260 382

Total tax expense 19 11

Taxation expense comprises: - Current tax 19 11 - Deferred tax 0 0

19 11


Note 3 - Taxation continued 2013 2012 $000 $000

(ii) Current tax balance Opening balance 3 0 Current tax movements (19) (11)Tax paid 18 14

Current tax receivable 2 3

(iii) Deferred tax balance A deferred tax asset of $2,236,000 at 31 March 2013 has not been recognised as the tax structure of the company is unlikely to lead to the utilisation of a deferred tax asset. In accordance with NZ IAS 12, this unrecognised deferred tax asset will be reviewed annually. The unrecognised deferred tax asset at 31 March 2012 was $976,000.

(iv) Imputation credits Imputation credits available for subsequent reporting periods total $277,000 (2012: $162,000). This amount represents the balance of the imputation credit account at the end of the reporting period, adjusted for imputation credits that will arise from the receipt of dividends recognised as a receivable at 31 March 2013.

Note 4 - Trade and Other Receivables 2013 2012 $000 $000

Interest receivable 0 1 Dividends receivable 362 174 Unsettled investment sales 617 0 Other receivables and prepayments 18 18

Total trade and other receivables 997 193

Trade receivables are classified as loans and receivables under NZ IAS 39. Total loans and receivables are $14,858,000 (31 March 2012: $10,510,000) being cash plus trade and other receivables.

Note 5 - Trade and Other Payables 2013 2012 $000 $000

Related party payable (note 9) 2,173 128 Payments received in advance of warrant exercise 0 123 Unsettled investment purchases 0 82 Other payables and accruals 52 59

Total trade and other payables 2,225 392

Trade payables are classified as other financial liabilities under NZ IAS 39. All payables are contractually required to be paid within three months.




Note 6 - Investments at Fair Value through Profit and Loss 2013 2012 $000 $000

(i) New Zealand listed equity investments 127,580 94,353

Total investments at fair value through profit or loss 127,580 94,353

Although investments at fair value through profit or loss are treated as current assets from an accounting point of view, the investment strategy of the company is to hold for the medium to long-term.

All investments at fair value through profit or loss are valued using quoted bid prices from an active market and are classified as Level 1 in the fair value hierarchy.

Note 7 - Available-for-sale Financial Assets 2013 2012 $000 $000

(i) New Zealand unlisted equity investment (Waterman Holdings Limited) 1,054 1,077

Total available-for-sale investments 1,054 1,077

Available-for-sale assets are represented by Kingfish’s shareholding in Waterman Holdings Limited (‘Waterman’). These shares were originally recognised at cost and then subsequently measured at fair value using recent arm’s length transactions. The last recorded sales transaction for Waterman was on 4 May 2010. The directors have resolved to base the valuation of the Waterman investment on the latest available information, being Waterman’s unaudited interim financial statements for the period ended 30 September 2012. The implied net asset value per share for Waterman from these 2012 interim financial statements has been used as the basis for the valuation of Kingfish’s investment. As at the date of signing these Kingfish accounts (year ended 31 March 2013), the audited accounts for Waterman (for the year ended 31 March 2013) are not yet available.

The directors are not aware of any information that would suggest that reliance cannot continue to be placed on the latest available Waterman financial statements (30 September 2012), but note that the valuation will need to be reviewed when the Waterman financial statements for the year ended 31 March 2013 become available.

These financial assets are classified as Level 3 in the fair value hierarchy. There have been no transfers in or out of Level 3 during the year ended 31 March 2013.

Unlisted Unlisted Equities Equities 2013 2012 $000 $000

(ii) Available-for-sale reconciliation Opening balance 1,077 1,279 Change in fair value of available-for-sale financial assets (23) 0 Losses recognised in profit and loss 0 (202)

Closing balance 1,054 1,077

(iii) Available-for-sale reserve Balance at beginning of year 449 449 Change in fair value of available-for-sale financial assets (23) 0

Closing balance 426 449


Note 8 - Reconciliation of Operating Profit after Tax to Net Cash Flows from Operating Activities

2013 2012 $000 $000 Net profit after tax 26,476 7,403

Items not involving cash flows: Unrealised (gains)/losses on revaluation of investments (27,063) 856

(27,063) 856

Impact of changes in working capital items Increase/(decrease) in fees and other payables 1,833 (42)(Increase)/decrease in interest, dividends and other receivables (804) 13 Decrease/(increase) in current tax receivable 1 (3)

1,030 (32)

Items relating to investments Net amount (paid for)/received from investments (6,154) 814 Realised gains on investments (709) (7,063)Decrease in unsettled purchases of investments 82 164 Increase in unsettled sales of investments 617 0 Decrease in share buyback payable 0 30

(6,164) (6,055)

Other Performance fee payable to be settled by issue of shares 1,446 0

1,446 0

Net cash (outflows)/inflows from operating activities (4,275) 2,172

Note 9 - Related Party Information

Parties are considered to be related if one party has the ability to control or exercise significant influence over the other party in making financial or operational decisions.

The Manager of Kingfish is Fisher Funds Management Limited (“Fisher Funds” or “the Manager”). Fisher Funds is a related party by virtue of the Manager’s common directorship and a Management Agreement.

The Management Agreement with Fisher Funds provides for the provisional payment of a management fee equal to 1.25% per annum of the gross asset value, calculated weekly and payable monthly in arrears. This management fee is reduced by 0.10% for each 1.0% per annum by which the Gross Return achieved on the portfolio during each financial period is less than the change in the NZX 90 Day Bank Bill Index over the same period but subject to a minimum management fee of 0.75% of the average gross asset value for that period. No such adjustment to the management fee was necessary at balance date (31 March 2012: no adjustment).

Management fees paid or payable (inclusive of GST) to Fisher Funds for the year ended 31 March 2013 totalled $1,778,741 (31 March 2012: $1,471,688), with $173,480 being payable at 31 March 2013 (31 March 2012: $127,870). During the year to 31 March 2013, the management fee was calculated and invoiced at 1.25% of gross asset value (31 March 2012: 1.25%).



Note 9 - Related Party Information continued

In addition, a performance fee may be earned by the Manager provided certain benchmarks and a high water mark test have been met. A performance fee of $3,445,649 has been accrued for the performance for the year to 31 March 2013, see note 12 (31 March 2012: nil). The performance fee to be paid to the Manager is included within payables ($1,999,672) and a performance fee reserve ($1,445,977).

Kingfish’s corporate management team is employed by Fisher Funds to provide management services to Kingfish. The corporate team’s remuneration is recharged by Fisher Funds and the cost for the year ended 31 March 2013 was $104,291 (31 March 2012: $116,739). These costs do not include any key management personnel compensation.

Administration and marketing costs incurred by Fisher Funds on behalf of Kingfish amounted to $32,272 for year ended 31 March 2013 and were recharged in full to Kingfish (31 March 2012: $27,549).

The directors of Kingfish are the only key management personnel as defined by NZ IAS 24 Related Party Disclosures and they earn a fee for their services which is disclosed in note 1(ii) under directors’ fees (only independent directors earn a director’s fee). The directors also held shares in the company at 31 March 2013 which are disclosed in the Statutory Information section of the annual report and total 2.43% of total shares on issue (31 March 2012: 3.03%). The directors did not receive any other benefits which may have necessitated disclosure under NZ IAS 24 (paragraph 16).

Off-market transactions between Kingfish and other funds managed by Fisher Funds take place for the purposes of rebalancing portfolios without incurring brokerage costs. These transactions are conducted after the market has closed at last sale price (arm’s length). During the year ended 31 March 2013, off-market transactions between Kingfish and other funds managed by Fisher Funds totalled $66,976 for purchases and $1,546,815 for sales (year ended 31 March 2012: purchases $1,225,979 and sales $3,637,558).

Note 10 - Financial Risk Management PoliciesThe company is subject to a number of financial risks which arise as a result of its investment activities, including; market risk, credit risk and liquidity risk.

The Management Agreement between Kingfish and Fisher Funds details permitted investments. Financial instruments currently recognised in the financial statements also comprise cash and short-term deposits, trade and other receivables and trade and other payables.

Capital Risk ManagementThe company’s objective when managing capital (share capital, reserves and borrowings [if any]) is to prudently manage shareholder capital.

In order to maintain or adjust the capital structure, the company may adjust the amount of dividends paid to shareholders, return capital to shareholders, undertake share buybacks, issue new shares and make borrowings in the short-term.

The company was not subject to any externally imposed capital requirements during the year.

In June 2009, the company announced a long-term distribution policy paying out 2% of average net asset value each quarter.

Market RiskAll equity investments present a risk of loss of capital often due to factors beyond the company’s control such as competition, regulatory changes, commodity price changes and changes in general economic climates domestically and internationally. The Manager moderates this risk through careful stock selection and diversification, daily monitoring of the market positions and monthly reporting to the Board of Directors. In addition, the Manager has to meet the criteria of authorised investments within the prudential limits defined in the Management Agreement.

The maximum market risk resulting from financial instruments is determined as their fair value.


Note 10 - Financial Risk Management Policies continued

Price RiskThe company is exposed to the risk of fluctuations in the underlying value of its listed portfolio companies and changes in the fair value of its unlisted portfolio companies. The following companies individually comprise more than 10% of Kingfish’s total assets at 31 March 2013: Ryman Healthcare 14% and Mainfreight 13% (31 March 2012: Ryman Healthcare 15% and Mainfreight 13%).

Interest Rate RiskSurplus cash is held in interest-bearing New Zealand bank accounts. The company is therefore exposed to the risk of movements in local interest rates. There is no hedge against the risk of movements in interest rates.

The company may use short-term fixed rate borrowings to fund investment opportunities. There were no borrowings at 31 March 2013.

Currency RiskThe company holds assets denominated in New Zealand dollars. It is therefore not directly exposed to currency risk. The portfolio companies that Kingfish invests in may be affected by currency risk that in turn has an impact on the market value of the underlying portfolio company.

Credit RiskIn the normal course of its business, the company is exposed to credit risk from transactions with its counterparties.

Other than cash at bank, there are no significant concentrations of credit risk. The company does not expect non-performance by counterparties, therefore no collateral or security is required.

All transactions in listed securities are paid for on delivery according to standard settlement instructions. The company invests cash with banks registered in New Zealand and Australia which carry a minimum short-term credit rating of AA-.

Listed securities are held in trust by an independent trustee company.

The maximum credit risk of financial assets is deemed to be their carrying amount as reported in the Statement of Financial Position.

Liquidity RiskThe company endeavours to invest the proceeds from the issue of shares in appropriate investments while maintaining sufficient liquidity, through daily cash monitoring, to meet working capital and investment requirements. Such liquidity can be augmented by short-term borrowings from a registered bank to a maximum value of 20% of the gross asset value of the company. No such borrowings have arisen to date.

Note 11 - Sensitivity Analysis

The sensitivity of the year end result and shareholders’ equity to reasonably possible changes in market conditions (based on historic trends) at 31 March 2013 and 31 March 2012 is as follows:

2013: COMPANY ($000) EQUITY PRICES (i)

Carrying Amount

-10% +10%

Profit Equity Profit Equity

Cash and cash equivalents 13,861 0 0 0 0

Investments at fair value (listed) 127,580 (12,758) (12,758) 12,758 12,758

Available-for-sale investments (unlisted) 1,054 0 0 0 0



Note 11 - Sensitivity Analysis continued

2013: COMPANY ($000) INTEREST RATE (i)

Carrying Amount

-3% +3%


Cash and cash equivalents 13,861 (416) (416) 416 416

Investments at fair value (listed) 127,580 0 0 0 0


The percentage movement for the interest rate sensitivity relates to an absolute change in the interest rate rather than a percentage change in interest rate. The above sensitivities do not take into account impact on tax balances.

2012: COMPANY ($000) EQUITY PRICES (i)

Carrying Amount

-10% +10%


Cash and cash equivalents 10,317 0 0 0 0

Investments at fair value (listed) 94,353 (9,435) (9,435) 9,435 9,435


2012: COMPANY ($000) INTEREST RATE (i)

Carrying Amount

-3% +3%


Cash and cash equivalents 10,317 (310) (310) 310 310

Investments at fair value (listed) 94,353 0 0 0 0


The percentage movement for the interest rate sensitivity relates to an absolute change in the interest rate rather than a percentage change in interest rate. The above sensitivities do not take into account impact on tax balances.

(i) The table above summarises the impact on profit and equity if interest rates were 3% higher/lower with all other variables held constant, and if equity prices were 10% higher/lower with all other variables held constant.

Note 12 - Performance Fee

The Management Agreement with Fisher Funds provides for an annual performance fee for outperforming the benchmark rate and providing excess returns.

The performance fee payable to the Manager under the agreement is 15% of the lesser of:

(a) the excess return for the applicable period multiplied by the number of shares on issue at the end of the period; or

(b) the dollar amount by which the net asset value per share exceeds the highest net asset value per share at the end of the previous calculation period multiplied by the number of shares on issue.


Note 12 - Performance Fee continued

Excess return is defined as the excess above a benchmark return which is the change in the NZX 90 Day Bank Bill Index in the period plus 7% per annum.

In accordance with the terms of the Management Agreement, half of any performance fee payable (exclusive of GST) will be applied by the Manager to subscribe for shares in Kingfish, issued at a price equal to the audited net asset value per share at 31 March 2013.

At 31 March 2013 the net asset value per share, before the deduction of a performance fee, of $1.26 (2012: $1.11) was above the high water net asset value per share (after adjustment for capital changes and distributions) of $1.06 (being the highest net asset value per share at the end of the previous calculation period of 31 March 2007 adjusted for any capital changes and distributions).

Accordingly the company has expensed a performance fee of $3,445,649 in its Statement of Comprehensive Income for the year to 31 March 2013 (31 March 2012: nil).

Note 13 - Net Asset Value

The audited net asset value of Kingfish as at 31 March 2013 was $1.24 per share (31 March 2012: $1.11).

Note 14 - Contingent Liabilities and Unrecognised Contractual Commitments

There were no material contingent liabilities or unrecognised contractual commitments as at 31 March 2013 (31 March 2012: nil).

Note 15 - Segmental Reporting

The company operates in a single operating segment being financial investment in New Zealand.

Note 16 - Subsequent Events

At 22 May 2013, the unaudited net asset value of the company was $1.31 per share and the share price was $1.30.

On 28 May 2013, the Board declared a dividend of 2.47 cents per share. The record date for this dividend is 14 June 2013 with a payment date of 28 June 2013.

On 30 April 2013, Kingfish paid a performance fee of $3,537,881 to Fisher Funds relating to the year ended 31 March 2013. At year end, this performance fee was accrued within payables ($1,999,672) and within a performance fee reserve ($1,445,977). The difference between the amount paid to Fisher Funds and the amount accrued is $92,232, which is an adjustment to the fair value of the equity component of the performance fee as detailed below.

In accordance with the Management Agreement, Fisher Funds used half of the performance fee (net of GST) to subscribe for Kingfish ordinary shares at the audited 31 March 2013 net asset value per share. Accordingly on 2 May 2013, Kingfish issued 1,235,878 shares to Fisher Funds upon receiving $1,538,209. The fair value of these shares, based on the closing share price on 31 March 2013 of $1.17 and in accordance with IFRS 2, was $1,445,977. A post balance sheet adjustment of $92,232 was made to the financial statements as at 31 March 2013 to reflect the adjustment to fair value of the ordinary shares issued to Fisher Funds post year end.

There were no other events which require adjustment to or disclosure in these financial statements.


Shareholder Information

SIZE OF SHAREHOLDING AS AT 16 MAY 2013Holding Range # of Shareholders # of Shares % of Total

1 to 999 208 101,194 0.09%

1,000 to 4,999 1,021 2,954,972 2.57%

5,000 to 9,999 1,075 7,501,395 6.54%

10,000 to 49,999 2,040 42,419,616 36.97%

50,000 to 99,999 256 16,805,105 14.65%

100,000 to 499,999 146 25,308,192 22.06%

500,000 + 18 19,648,195 17.12%

TOTAL 4,764 114,738,669 100.00%

20 LARGEST SHAREHOLDERS AS AT 16 MAY 2013Holder Name # of Shares % of Total

Investment Custodial Services Limited 3,222,397 2.81%

ASB Nominees Limited 2,750,560 2.40%

Custodial Services Limited 2,487,631 2.17%

Custodial Services Limited 1,452,680 1.27%

ASB Nominees Limited 1,235,878 1.08%

ASB Nominees Limited 900,000 0.78%

Murray John Lombard Aldridge + Lesley Ann Aldridge + Nicholas Corporate Trustee Co Limited 839,616 0.73%

Graham John Paull + Owen Brent Ennor 800,000 0.70%

FNZ Custodians Limited 794,669 0.69%

Forsyth Barr Custodians Limited 752,578 0.66%

Custodial Services Limited 603,672 0.53%


Stephen Thomas Wright 557,738 0.49%


John Licco Sarfati 550,000 0.47%

Donalyn Kathleen Stanleigh Glover + Kay Adela Niepold + Veronica House Limited 522,380 0.46%

William Francis Glover + Veronica House Limited + Kay Adela Niepold 522,380 0.45%

James Alton Jamieson 513,184 0.44%

John Morton Hatrick 479,678 0.42%

Leveraged Equities Finance Limited 465,254 0.41%

TOTAL 20,593,127 17.95%


Statutory Information

DIRECTORS’ RELEVANT INTERESTS IN EQUITY SECURITIES AT 31 MARCH 2013

Interests RegisterThe company is required to maintain an interests register in which the particulars of certain transactions and matters involving the directors must be recorded. The interests register for Kingfish is available for inspection at its registered office. Particulars of entries in the interests register as at 31 March 2013 are as follows:

Ordinary Shares Ordinary Shares Held Directly Held by Associated Persons

A B Ryan(1) 3,054 0

C M Fisher 0 2,750,560

C A Campbell 0 0

R A Coupe 0 0

(1) A B Ryan received 2,799 shares in the year ended 31 March 2013, issued under the share purchase plan (issue price $0.98). A B Ryan received 255 shares in the year ended 31 March 2013, issued under the dividend reinvestment plan (average issue price $1.03).

DIRECTORS HOLDING OFFICEThe company’s directors as at 31 March 2013 were:

• A B Ryan (Chairman) • C M Fisher • C A Campbell• R A Coupe

On 28 May 2012 Annabel Cotton ceased to hold office, on 31 August 2012 James Miller ceased to hold office and on 16 September 2012 Mark Todd ceased to hold office. In accordance with the Kingfish constitution, at the 2012 Annual Shareholders’ Meeting, Alistair Ryan and Carol Campbell were elected to the Board and Carmel Fisher retired by rotation and being eligible was re-elected. Alistair Ryan retires by rotation at the 2013 Annual Shareholders’ Meeting and being eligible, offers himself for re-election. Andy Coupe, being eligible, offers himself for election in accordance with the company’s constitution.

DIRECTORS’ REMUNERATIONThe following table sets out the total remuneration received by each director from Kingfish for the year ended 31 March 2013. The directors’ fees disclosed in the financial statements include a portion of non-recoverable GST expensed by Kingfish.

Directors’ remuneration* for the 12 months ended 31 March 2013

A B Ryan $36,087(1)

C A Campbell (appointed 5 June 2012) $25,501

R A Coupe (appointed 1 March 2013) $2,292

M T Todd (retired 16 September 2012) $12,664

J B Miller (retired 31 August 2012) $16,667(2)

A M Cotton (retired 28 May 2012) $ 5,150

*excludes GST(1) $2,750 of this amount was applied to the purchase of 2,799 shares under the Kingfish share purchase plan.(2) $4,000 of this amount was applied to the purchase of 4,071 shares under the Kingfish share purchase plan.

Carmel Fisher does not earn directors’ fees.


EMPLOYEE REMUNERATIONKingfish does not have any employees. Corporate Management services are provided to the company by Fisher Funds.

DISCLOSURE OF INTERESTS AS AT 31 MARCH 2013General Interest Pursuant to Section 140 of the Companies Act 1993 as at 31 March 2013:

A B Ryan Barramundi Limited Director Marlin Global Limited Director Christchurch Casinos Limited Director* The New Zealand Racing Board Member and Deputy Chairman* Metlifecare Limited Director* Moa Group Limited Director* Auditor Regulation Advisory Group Member*

C M Fisher Barramundi Limited Director Marlin Global Limited Director Fisher Funds Management Limited Director

C A Campbell Barramundi Limited Director* Marlin Global Limited Director* Turners and Growers Limited Director* Hick Bros Civil Construction Limited & associated companies Director* Woodford Properties Limited Director* Brave Star Media Limited Director* CMS Alphatech Limited Director* New Zealand Post Group Limited Director* Key Assets NZ Limited Director* The Business Advisory Group Limited Director* Key Assets Foundation Trustee*

R A Coupe Barramundi Limited Director* Marlin Global Limited Director* New Zealand Takeovers Panel Deputy Chairman* Coupe Consulting Limited Director* Farmright Limited Director* UBS New Zealand Limited Consultant* Institute of Finance Professionals New Zealand Member* Rosmini College Board of Trustees*

1. Notices given by directors during the year ended 31 March 2013 are marked with an asterisk.2. The following details included in the Interests Register as at 31 March 2012, or entered during the year ended 31 March

2013, have been removed during the year ended 31 March 2013:

• A B Ryan is no longer a director of Queenstown Casinos Limited• A B Ryan is no longer a director of Vision Senior Living Limited and subsidiaries• A B Ryan is no longer an executive of SKYCTY Entertainment Group

Statutory Information continued


DIRECTORS’ INDEMNITY AND INSURANCEKingfish has insured all of its directors against liabilities and costs referred to in Section 162 (3), 162 (4) and 162 (5) of the Companies Act 1993. The insurance does not cover liabilities arising from criminal actions.

During the year, the company granted an indemnity in favour of all current and future directors of the company in accordance with the company’s constitution.

AUDITOR’S REMUNERATIONDuring the 31 March 2013 year the following amounts were paid/payable to the auditor – PricewaterhouseCoopers.

$000

Audit Fees and Assurance Services 41

Other Services 0

DONATIONS The company did not make any donations during the period ended 31 March 2013.

NEW ZEALAND EXCHANGE WAIVERSAs at 31 March 2013, the company held a waiver granted by the NZX.

1. Waiver from Listing Rules 3.1.1 and 7.3.1 (a) to the extent that Kingfish may issue shares to the Manager, Fisher Funds, only where it is in accordance with the performance fee as described in Kingfish’s offer document and the Kingfish constitution.


Directory

Manager Fisher Funds Management LimitedLevel 167 – 73 Hurstmere RoadTakapunaAuckland 0622

Directors Independent DirectorsAlistair Ryan (Chairman)Carol CampbellAndy Coupe

Executive DirectorCarmel Fisher

Chief Financial Officer Ben Doshi

RegistrarShareholders with enquiries about transactions and changes of address should contact Kingfish’s share registrar:

Computershare Investor Services LimitedLevel 2159 Hurstmere RoadTakapunaAuckland 0622Phone: +64 9 488 8777Email: [email protected] Alternatively, to change your address, update your payment instructions, and to view your investment portfolio including transactions online, please visit: www.computershare.co.nz/investorcentre

Auditor PricewaterhouseCoopers New Zealand188 Quay StreetAuckland 1010

SolicitorBell GullyLevel 2148 Shortland StreetAuckland 1010

BankerANZ Banking Group LimitedLevel 9215 – 229 Lambton QuayWellington 6011

Investor Enquiries Kingfish LimitedLevel 167 – 73 Hurstmere RoadTakapunaAuckland 0622Phone: +64 9 489 7094Fax: +64 9 489 7139Email: [email protected]

Nature of Business The principal activity of Kingfish is investment in growing New Zealand companies.


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