2
kingfish limited /
INTERIM REPORT 2014
Contents
03
07
12
13
14
15
16
17
27
Directors’ Overview
Manager’s Report
Independent Review Report
Statement of Comprehensive Income
Statement of Changes in Equity
Statement of Financial Position
Statement of Cash Flows
Notes to the Interim Financial Statements
Directory
Upcoming Events to 31 March 2015
Dividend Payment
19 December 2014 (ex-date 8 December, record date 10 December)
Quarter End
31 December 2014
December Quarter Update Newsletter
February 2015
Financial Year End
31 March 2015
The interim 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 for the purchase or sale of any security, loan or other instrument. In particular, the
information contained in this interim 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.
Directors’ Overview
3
Kingfish’s net profit of $4.2m for the first half of the 2015 financial year follows a very
strong profit of $14.9m achieved in the corresponding period last year. The six month
result includes gains on investments of $3.2m, dividend and interest income of $2.6m
less operating expenses and tax of $1.6m.
Total shareholder return (TSR)*, which includes the change in the share price plus
dividends paid per share was 6.7% for the six months.
12 Month Result (12 months ended 30 September 2014)
The net profit for the 12 month period ended 30 September 2014 was $15.8m which,
although lower than the very strong profit of $29.9m in the corresponding prior
12 month period, was a pleasing result.
For the 12 months ended 30 September 2014, shareholders have benefitted from
growth in adjusted net asset value (NAV)* of 10.2% and growth in TSR* of 12.1%.
Five-Year Summary
Figure 1 (on page 5) summarises the five-year performance history for the six
month periods ended 30 September 2010-2014. The summary shows
adjusted NAV has increased each year while TSR has been positive in
four out of the five years.
Warrants
At the annual shareholders’ meeting in August the Kingfish Board
announced it would undertake a pro-rata warrant issue as part of
its capital management programme, to put Kingfish in a better
position to grow, improve liquidity and use its capital more
effectively. One warrant was issued for every four Kingfish
shares held on 12 November 2014. The warrants give
holders the right to purchase additional Kingfish shares on
6 November 2015 at an exercise price of $1.29, adjusted
down for dividends declared during the period up to the
exercise date. The final exercise price will be announced
and an exercise form will be provided in October 2015.
Warrants are listed on the NZX Main Board and can be
bought or sold independently of Kingfish shares.
Alistair Ryan,
Chairman.
INTERIM REPORT 2014
First Half Result (6 months ended 30 September 2014)
kingfish limited /
The Kingfish portfolio continued to produce positive results in the six months
to 30 September 2014, with the portfolio value up 1.9% after adjusting for
5.35 cents per share dividends paid. The NZX50 Gross Index rose 2.2% over
the same period.
4
Directors’ Overview continued
kingfish limited /
Share Price and Dividends (TSR*)
INTERIM REPORT 2014
Kingfish’s share price closed at $1.31 on 30 September 2014, up slightly from $1.28
on 31 March 2014. Since then, the share price has continued to strengthen, closing
at $1.38 at the end of November 2014. In addition, the Kingfish warrants were first
quoted on the NZX on 14 November 2014 and closed at 9.5^ cents per warrant at the
end of November.
In accordance with Kingfish’s current distribution policy (2.0% of average NAV per
quarter), the company paid 5.35 cents per share in dividends over the six month
period (June and September dividends). The next dividend will be 2.66 cents per share
to be paid on 19 December 2014 with a record date of 10 December 2014.
It is worth noting that under the distribution plan, a total of 67 cents per share has
been paid out to shareholders in dividends since inception. Along with the increase in
share price this has resulted in a positive TSR* of 149.1% since listing.
Figure 2 (on page 6) tracks the Kingfish share price, dividends paid and TSR* since
inception.
Revenues and Expenses
The key components of the first half result were gains on investments of $3.2m,
dividend and interest income of $2.6m less operating expenses of $1.6m.
Operating expenses were $98k higher than the corresponding period mainly due to
an increase in the portfolio’s gross asset value (GAV) from which the management fee
is calculated (1.25% of GAV).
Conclusion
The Board is pleased with a solid first half result for the 2015 financial year both
in terms of portfolio performance and returns to shareholders. Further details of the
Kingfish portfolio are discussed in the Manager’s Report.
On behalf of the Board,
Alistair Ryan / Chairman
Kingfish Limited
5 December 2014
*Adjusted NAV and Total Shareholder Return assume all dividends are reinvested, but exclude
imputation credits
^Figure amended from 95 cents to 9.5 cents in the printed version to correct a typographical error
5
As at 30 September
2014
2013
2012
2011
2010
$1.33$1.31 $1.15 $1.05$1.07
Adjusted NAV1
$2.29$2.08 $1.69 $1.43$1.34
Share Price
$1.31
Share Price Discount to NAV1
1.7% 2.9% 8.6% 15.5%13.6%
$1.27
2013
$1.05
$0.89
2012
$0.92
Six month period ended 30 September
2014
Total Shareholder Return1
6.7%13.1%18.1%(2.7%) 6.3%
2011
2010
Adjusted NAV Return1
1.9% 9.3% 7.9% (2.9%)(0.6%)
NZX50G 2.2% 7.1% 9.2% (2.8%)(2.8%)
NZSEMCG1
7.8% 5.8%14.6%(2.7%) 0.1%
NZ 90 Day Bank Bill Index +3.5%
(half the performance fee premium)1,2
5.2% 4.8% 4.8% 4.9%5.0%
1
Dividends paid in six months
5.35cps 5.04cps 4.42cps 4.56cps 4.38cps
Earnings per Share
3.49cps 12.92cps 11.64cps (2.22cps) 0.00cps
NB: All figures are unaudited. NAV and adjusted NAV are net of fees and tax, and include the dilution
effect of warrants exercised.
Reviewed by an independent actuary.
1
The annual performance benchmark rate is the change in the NZX 90 Day Bank Bill Index plus 7%. For the
purposes of this five year performance summary, the premium has been calculated at half the annual rate
(3.5%) for the interim periods.
2
Adjusted Net Asset Value
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.
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 is calculated using the share price performance plus dividends paid to shareholders.
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.
INTERIM REPORT 2014
NAV
kingfish limited /
Figure 1: Five Year Performance Summary
Directors’ Overview continued
The below Total Shareholder Return graph assumes all dividends are reinvested, but
excludes imputation credits:
3.00
2.75
$
2.50
$
2.25
$
2.00
$
1.75
$
1.50
$
1.25
$
1.00
$
0.75
$
0.50 Mar
Share Price
Share Price
Total Shareholder Return
Total Shareholder Return
$
$
0.050
$
$
0.045
$
0.040
$
0.035
$
0.030
$
0.025
$
0.020
$
0.015
$
0.010
$
0.005
$
0.000
Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep
2004 2004 2005 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 2013 2013 2014 2014
Dividends Per Share
Dividends
Dividends Per Share
INTERIM REPORT 2014
Dividends
Share Price/Total Shareholder Return
kingfish limited /
Figure 2: Total Shareholder Return
Share Price/Total Shareholder Return
6
Manager’s Report
7
The renewed buoyancy in the market has seen Orion Healthcare and Evolve Education list
this month. Rest home operator Arvida is due to list before Christmas. Several others are set
to list early next year, subject of course to market conditions remaining favourable.
Portfolio Commentary
Abano Healthcare has got on with business since two disgruntled investors unsuccessfully
tried to vote for the removal of the current Chairman at a special meeting in June. The
company has continued to buy more dental clinics for its Trans-Tasman dental group and its
Australian audio business is now expected to achieve positive earnings in the current year.
Delegat Group had another strong year with earnings up 19% in the year to June despite a
currency headwind. The company is putting in place the stepping-stones to meet its forecast
of an increase in case sales of 8.8% per annum over the next five years, with more investment
in grapes and winery capacity. Barossa Valley Estate in Australia will become a core and
growing part of the company going forward.
EBOS Group has continued to make bolt-on acquisitions with the
recent purchase of BlackHawk Premium Pet Care. Animal care is
now becoming a larger part of the group and will represent around
20% of total operating earnings after this latest acquisition. EBOS
has had a solid start to the current year
with earnings up 10% year-to-date.
Fisher & Paykel Healthcare’s earnings growth on a constant
currency basis continues to be strongly driven by demand
for its innovative products and efficiency gains from its
Mexico plant. Revenue from new applications, for its
consumable products in particular, is growing robustly
and the company continues to make products that will
increase its addressable markets.
*Adjusted NAV assumes all dividends are reinvested, but excludes
imputation credits.
Murray Brown,
Senior Portfolio Manager.
INTERIM REPORT 2014
The share market has subsequently performed very well post the General Election on
20 September 2014 (+6.6% at the time of writing) with the share prices of the ‘gentailers’
in particular performing strongly from a ‘relief rally’ on the back of the re-election of the
National government. The Reserve Bank has indicated that it is unlikely to lift the Official
Cash Rate until well into next year, and this has seen a renewed ‘hunt for yield’ as interest
rates are likely to remain lower for longer.
kingfish limited /
The Kingfish adjusted NAV* rose 1.9% for the half year ended 30 September
2014, slightly behind the broader market (NZX50G 2.2%).
8
Manager’s Report continued
kingfish limited /
Freightways has had its strongest first quarter performance since 2004 and demonstrates
its operating leverage to a growing domestic market. Net profit was up 22% for the
June quarter with both its Express Package and Information Management divisions
performing strongly. Freightways continues to successfully make bolt-on acquisitions and
grow shareholder value.
INTERIM REPORT 2014
Infratil has conducted a ‘generational refresh’ of its portfolio with the recent sale of
Infratil Energy Australia. A portion of the sale proceeds were used to make a special
15 cent dividend along with a further buyback of shares, while the majority of the
proceeds are being retained for the time being. Although Infratil has said it will look
to do more capital management next calendar year, in our opinion, a more likely
scenario is that it will look to reinvest the proceeds for further growth to match its goal of
achieving a 20% shareholder return in the medium term.
Kathmandu ended up having a solid 2014 financial year after initially reporting that an
unusually warm June would affect its critical winter sales period. The current financial
year has started strongly although this is the low part of the year’s trading. Adventure
travel is a growth segment within the retail industry and Kathmandu is a dominant player
in this segment.
Mainfreight’s divisions are all currently contributing and expanding their margins. Its
USA division is starting to gain traction and is looking to add warehousing logistics in
three cities, the same service to that offered in Australasia. Although its New Zealand
operations are performing strongly, this is likely to be a smaller part of the group going
forward.
Metro Performance Glass has a dominant market position, high barriers to entry to its
industry, national distribution and low processing costs. Housing starts remain buoyant
and retro-fitting of existing homes with double glazing is likely to continue for many
more years. Earnings growth should be solid over the short-medium term.
Michael Hill International continues to judiciously roll out its store network, with a focus
on Canada and Australia. Its Canadian operations are finally reaching critical mass and
are starting to make a positive and material contribution to earnings. Its fledgling ‘Emma
& Roe’ chain represents another growth option going forward.
NZX is delivering solid revenue growth across most of its operations year-to-date, and it
has the prospect of many more new listings over the next year to further boost revenue.
Staff numbers are leveling off, and as a result cost growth should slow going forward
pointing to a resumption of solid earnings growth.
Opus International continues to disappoint with many of its offshore operations not
performing to expectations post-acquisition and its New Zealand operations are now
under renewed margin pressure. Notwithstanding this, we expect the company to
perform better next year and we are giving them the benefit of the doubt for now.
Port of Tauranga reported a flat first quarter trading result at its recent Annual Meeting,
but longer term earnings are underwritten by its 10 year deal with Kotahi which
9
Sky Network TV is expanding its content over broadband offering to compete with new
entrants in this fast-moving space. Sky’s ‘Neon’ offering will compete in the subscriber
video-on-demand space early next year, as viewers expand the number of devices they
are watching content on. Sky has also secured the rugby rights for a further five years.
Summerset remains on track to build 250 retirement units in 2014 and lift this again next
year. Underlying earnings growth will be constrained in the near term due to increased
costs from ramping up its build rate as well as now constructing its main building
and aged care facilities earlier on in the development process. Notwithstanding this,
earnings growth thereafter should resume as a ‘wave of earnings’ is built behind it as
new villages become fully operational and increasingly profitable.
Trade Me is in a period of accelerated investment whereby it is investing strongly in
people, marketing and software to improve the performance of the company. In the short
term this is constraining earnings growth to low single-digit earnings growth, but should
position the company for stronger growth further out. Encouragingly,
revenue growth remains robust.
Waterman Holdings announced the sale of decorator Guthrie
Bowron in December and proposes to conduct a buyback of 30%
of existing shares in Waterman with the proceeds. This will leave
Waterman with just one remaining investment, David Reid
Homes. David Reid is trading well, underpinned by solid
residential housing starts.
Portfolio Changes
As alluded to in our June Quarter Update Newsletter,
we added Metro Performance Glass to the portfolio
in July through the Initial Purchase Offer and added
to our holding through on-market purchases over
the next month or so. Metro Performance Glass now
represents just under 2% of the portfolio and in our
opinion is a worthy addition to the Kingfish portfolio.
We have progressively been adding to our position
in Fisher & Paykel Healthcare for some time now
Zoie Regan,
Senior Investment Analyst.
INTERIM REPORT 2014
Ryman Healthcare has opened its first village in Melbourne and bought some more
land there to start its second village. Melbourne has the same ageing demographics as
New Zealand and in fact has a greater percentage of people aged over-75 years than
the whole of New Zealand. Whilst its move into the Melbourne market is still early days,
the success of its first village augurs well for Ryman to secure an additional profit stream
from this new marketplace.
kingfish limited /
guarantees minimum volumes for shipping out of both Timaru and Tauranga. This deal
effectively underwrites the cost of dredging the port at Tauranga, thereby providing Port
of Tauranga with a lead over its competitors in attracting larger ships to New Zealand.
10
Manager’s Report continued
kingfish limited /
as its earnings growth has continued to surprise on the upside. A year ago Fisher &
Paykel Healthcare represented 6.5% of the portfolio, but through strong share price
performance and some on-market purchases this company now represents 11.6% of the
portfolio. Essentially we have let our profits run with this company, backed up by an
increase in our STEEPP weighting as earnings growth has increased.
INTERIM REPORT 2014
Outlook
The prolonged fall in the milk price will see domestic economic growth rates decline
from their likely peak in the June quarter this year, but still remain relatively robust from
a historical perspective. This combined with subdued inflation has caused the Reserve
Bank to reassess its interest rates setting, with the Official Cash Rate likely to now
remain flat at 3.5% until well into next year. This is a relatively favourable back-drop
for domestic equities although it should be noted that the market continues to trade well
above long-term average historical fundamentals.
We are likely to see a raft of new listings over the next few months. As always, we put
all new investment opportunities through our earnings-driven STEEPP process in order to
maintain a portfolio of quality New Zealand companies.
Murray Brown / Senior Portfolio Manager
Fisher Funds Management Limited
5 December 2014
Carmel Fisher / Managing Director
Fisher Funds Management Limited
5 December 2014
11
Portfolio Holdings Summary as at 30 September 2014
% Holding
Abano Healthcare
2.5%
Delegat Group
3.0%
EBOS Group
3.0%
11.6%
Freightways8.3%
Infratil7.7%
Kathmandu5.0%
Mainfreight14.2%
Metro Performance Glass
1.6%
Michael Hill International
4.0%
NZX5.4%
Opus International
1.8%
Port of Tauranga
2.6%
Ryman Healthcare
Sky Network TV
11.2%
2.5%
Summerset4.3%
Trade Me
3.5%
Non-listed Company
Waterman Holdings
Equity Total
New Zealand dollar cash
0.7%
92.9%
7.1%
TOTAL100.0%
INTERIM REPORT 2014
Fisher & Paykel Healthcare
kingfish limited /
Listed Companies
12
kingfish limited /
Independent Review Report
to the shareholders of Kingfish Limited
INTERIM REPORT 2014
Report on the Interim Financial Statements
We have reviewed the accompanying interim financial statements of Kingfish Limited (‘the company’),
which comprise the statement of financial position as at 30 September 2014, and the statement of
comprehensive income, the statement of changes in equity and the statement of cash flows for the
period ended on that date, and a summary of significant accounting policies and selected explanatory
notes.
Directors’ Responsibility for the Interim Financial Statements
The directors of the company are responsible for the preparation and fair presentation of these
interim financial statements in accordance with New Zealand Equivalent to International Accounting
Standard 34 Interim Financial Reporting (‘NZ IAS 34’) and for such internal controls as the directors
determine are necessary to enable the preparation of interim financial statements that are free from
material misstatement, whether due to fraud or error.
Our Responsibility
Our responsibility is to express a conclusion on the accompanying interim financial statements based
on our review. We conducted our review in accordance with the New Zealand Standard on Review
Engagements 2410 Review of Financial Statements Performed by the Independent Auditor of the
Entity (‘NZ SRE 2410’). NZ SRE 2410 requires us to conclude whether anything has come to our
attention that causes us to believe that the interim financial statements, taken as a whole, are not
prepared in all material respects, in accordance with NZ IAS 34. As the auditor of the company, NZ
SRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual
financial statements.
A review of interim financial statements in accordance with NZ SRE 2410 is a limited assurance
engagement. The auditor performs procedures, primarily consisting of making enquiries, primarily of
persons responsible for financial and accounting matters, and applying analytical and other review
procedures. The procedures performed in a review are substantially less than those performed in an
audit conducted in accordance with International Standards on Auditing (New Zealand). Accordingly
we do not express an audit opinion on these interim financial statements.
Our firm carries out other services for Kingfish Limited in the area of other assurance services.
These services have not impaired our independence as auditor of the company.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the
accompanying interim financial statements of the company are not prepared, in all material respects,
in accordance with NZ IAS 34.
Restriction on Use of Our Report
This report is made solely to the company’s shareholders, as a body. Our review 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 our review 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 shareholders as a body for our
review procedures, for this report, or for the conclusion we have formed.
Chartered Accountants
25 November 2014
PricewaterhouseCoopers, 188 Quay Street, Private Bag 92162, Auckland 1142, New Zealand
T: +64 9 355 8000, F: +64 9 355 8001, pwc.co.nz
Auckland
KINGFISH LIMITED
13
Statement of Comprehensive Income
Notes
6 months
6 months
endedended
30/09/1430/09/13
unauditedunaudited
$000$000
195 234
Dividend income
2,449 2,179
Net changes in fair value of investments 1(i)
3,151 13,954
Total net income
5,795 16,367
Operating expenses
1(ii)
1,587 1,489
Operating profit before tax
4,208 14,878
3
9
9
Net operating profit after tax attributable to shareholders
4,199 14,869
Total tax expense
Other comprehensive income
Items that may be reclassified to profit or loss:
Change in the value of available-for-sale financial assets
7
(3)
Total comprehensive profit after tax attributable to shareholders
4,206 14,866
Earnings per share
Basic and diluted earnings per share
Profit attributable to owners of the company ($000)
Weighted average number of ordinary shares on issue net
of treasury stock (‘000)
4,199 14,869
120,106 115,078
3.49c12.92c
The Notes to the Interim Financial Statements set out on pages 17 to 26 should be read in conjunction
with this Statement of Comprehensive Income.
INTERIM REPORT 2014
Interest income
kingfish limited /
For the six months ended 30 September 2014
14
KINGFISH LIMITED
Statement of Changes in Equity
kingfish limited /
For the six months ended 30 September 2014
Attributable to shareholders of the company
Notes
Share Available-Performance Retained
Total
Capital
for-sale Fee Reserve
Earnings
Equity
Reserve
$000$000 $000$000$000
INTERIM REPORT 2014
Balance at 1 April 2013 (audited)
111,021 426 1,446 28,376 141,269
Comprehensive income
Profit for the period
0
0
0 14,869 14,869
Other comprehensive income
0
(3)
0
0
(3)
Total comprehensive income for the
period ended 30 September 2013
0
(3)
0
14,869 14,866
Transactions with owners
Manager’s performance fee
settled with ordinary shares
2
1,446 0
(1,446)
0
Manager’s performance fee to
be settled with ordinary shares
0
0
9
0
Dividends paid
2
0
0
0 (5,810)
Dividends reinvested
2,499 0
0
0
9
(5,810)
2,499
Total transactions with owners for the
period ended 30 September 2013
3,945 0
(1,437)
(3,302)
Balance at 30 September 2013
(unaudited)
114,966 423 9
(5,810)
0
37,435 152,833
Balance at 1 April 2014 (audited) 117,616 459 879 42,842 161,796
Comprehensive income
Profit for the period
0
0
0
4,199 4,199
Other comprehensive income
0
7
0
0
7
Total comprehensive income for the
period ended 30 September 2014
4,199 4,206
Transactions with owners
Manager’s performance fee
settled with ordinary shares
2
879 0
(879)
0
Dividends paid
2
0
0
0 (6,429)
Dividends reinvested
2
2,674 0
0
0
0
7
0
0
(6,429)
2,674
Total transactions with owners for the
period ended 30 September 2014
3,553 0
(879)
(3,755)
Balance at 30 September 2014
(unaudited)
121,169 466 0
(6,429)
40,612 162,247
The Notes to the Interim Financial Statements set out on pages 17 to 26 should be read in conjunction
with this Statement of Changes in Equity.
KINGFISH LIMITED
15
Statement of Financial Position
Notes 30/09/1431/03/14
unaudited audited
$000$000
Current Assets
Cash and cash equivalents 10,085 11,303
Trade and other receivables 1,716 596
Investments at fair value through profit or loss 4
149,862 150,288
Current tax receivable
3
3
Total Current Assets 161,666 162,190
Non-current Assets
Available-for-sale financial assets
5
1,094 1,087
Total Non-current Assets 1,094 1,087
TOTAL ASSETS
162,760 163,277
LIABILITIES
Current Liabilities Trade and other payables 513 1,481
Total Current Liabilities 513 1,481
TOTAL LIABILITIES
513 1,481
EQUITY
Share capital
Available-for-sale reserve
2
121,169 117,616
5(iii)
466 Performance fee reserve
0
459
879
Retained earnings
40,612 42,842
TOTAL EQUITY
162,247 161,796
TOTAL EQUITY AND LIABILITIES
162,760 163,277
These interim financial statements have been authorised for issue for and on behalf of the Board by:
A B Ryan / Chairman 25 November 2014
C A Campbell / Chair of the Audit and Risk Committee
25 November 2014
The Notes to the Interim Financial Statements set out on pages 17 to 26 should be read in conjunction
with this Statement of Financial Position.
INTERIM REPORT 2014
ASSETS
kingfish limited /
as at 30 September 2014
16
KINGFISH LIMITED
Statement of Cash Flows
kingfish limited /
For the six months ended 30 September 2014
Notes
6 months
6 months
endedended
30/09/1430/09/13
unauditedunaudited
$000$000
INTERIM REPORT 2014
Operating Activities
Cash was provided from:
- Sale of investments
9,220 - Interest received
195 16,686
234
- Dividends received
2,251 1,866
Cash was applied to:
- Purchase of investments
(6,291)
(7,037)
- Operating expenses (3,778)
(5,029)
- Taxes paid
(9)
(9)
1,588 6,711
Net cash inflows from operating activities
6
Financing Activities
Cash was provided from:
- Manager’s application of the performance fee to purchase
ordinary shares
949 1,538
Cash was applied to:
- Dividends paid (net of dividends reinvested)
(3,755)
(3,311)
Net cash outflows from financing activities
(2,806)
(1,773)
Net (decrease)/increase in cash and cash equivalents held
(1,218)
4,938
Cash and cash equivalents at beginning of the period
11,303 13,861
Cash and cash equivalents at the end of the period
10,085 18,799
All cash balances comprise short-term cash deposits.
The Notes to the Interim Financial Statements set out on pages 17 to 26 should be read in conjunction
with this Statement of Cash Flows.
KINGFISH LIMITED
Notes to the Interim Financial Statements
GENERAL INFORMATION
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 2013.
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 Interim Financial Statements
The Kingfish Board of Directors authorised these interim financial statements for issue on
25 November 2014.
No party may change these interim financial statements after their issue.
ACCOUNTING POLICIES
Period Covered by Interim Financial Statements
These interim financial statements cover the unaudited results from operations for the six
months ended 30 September 2014.
Statement of Compliance
The interim financial statements have been prepared in accordance with New Zealand
Generally Accepted Accounting Practice (“NZ GAAP”) and the Financial Reporting
Act 2013. They comply with the New Zealand Equivalent to International Accounting
Standard 34 (“NZ IAS 34”) and International Accounting Standard 34 Interim Financial
Reporting.
The interim financial statements do not include all of the information required for full
year financial statements and should be read in conjunction with the company’s annual
financial report for the year ended 31 March 2014.
The company has applied consistent accounting policies in the preparation of these
interim financial statements as for the 2014 full year financial statements.
INTERIM REPORT 2014
Entity Reporting
The interim financial statements for Kingfish Limited (“Kingfish” or “the company”) have
been prepared in accordance with the requirements of the Financial Reporting Act 2013.
kingfish limited /
For the six months ended 30 September 2014
17
18
Notes to the Interim Financial Statements continued
kingfish limited /
For the six months ended 30 September 2014
Critical Judgements, Estimates and Assumptions
The preparation of interim 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.
INTERIM REPORT 2014
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.
19
6 months
6 months
endedended
30/09/1430/09/13
unauditedunaudited
$000$000
(i) Net Changes in Fair Value of Investments
Investments designated at fair value through profit or loss
- New Zealand listed equity investments
Total gains
3,151 13,954
3,151 13,954
INTERIM REPORT 2014
kingfish limited /
Note 1 - Statement of Comprehensive Income
(ii) Operating Expenses
Auditor’s fees:
- Statutory audit and review of financial statements
18 - Other assurance services
Management fee (note 7)
Performance fee (note 7)
18
5
5
1,160 1,070
0
20
Directors’ fees
58 58
Brokerage and transaction fees
61 73
Custody and NZX fees
93 70
Salaries and other personnel costs
64 59
Administration and other
63 69
Investor relations and communications
35 33
Taxation and legal services
28 12
2
2
1,587 1,489
Bank fees
Total operating expenses
Other assurance services include a share register audit, annual shareholders meeting
procedures and performance fee procedures. 20
Notes to the Interim Financial Statements continued
kingfish limited /
For the six months ended 30 September 2014
Note 2 - Share Capital
INTERIM REPORT 2014
6 months
Year
endedended
30/09/1431/03/14
unauditedaudited
$000$000
Ordinary Shares
Opening balance
117,616 111,021
Manager’s performance fee settled with ordinary shares
879 1,446
New shares issued under the dividend reinvestment plan
2,674 5,149
121,169 117,616
Closing balance
As at 30 September 2014 there were 121,710,846 (31 March 2014: 118,928,164) fully
paid Kingfish shares on issue, including treasury stock of nil shares (31 March 2014: nil
shares).
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. All the shares acquired under the
buyback scheme are initially held as treasury stock but are available to be re-issued.
There were no shares bought back during the period (year to 31 March 2014: nil). The
net cost of treasury stock is deducted from share capital.
Total dividends per share for the period ended 30 September 2014 were $0.0535
(2013: $0.0504). Dividends paid for the period ended 30 September 2014, and prior
to any reinvestment, totalled $6,429,000 (2013: $5,810,000).
Note 3 - Taxation
The tax rate used is the corporate tax rate of 28% payable by New Zealand corporate
entities on taxable profits under New Zealand tax law (30 September 2013 and
31 March 2014: 28%).
21
kingfish limited /
Note 4 - Investments at Fair Value through Profit or Loss
30/09/1431/03/14
unauditedaudited
$000$000
New Zealand listed equity investments
149,862 150,288
149,862 150,288
Total investments at fair value through profit or loss
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 last sale
prices from an active market and are classified as Level 1 in the fair value hierarchy.
Note 5 - Available-for-sale Financial Assets
INTERIM REPORT 2014
30/09/1431/03/14
unauditedaudited
$000$000
(i) New Zealand unlisted equity investment
Waterman Holdings Limited
1,094 1,087
Total available-for-sale financial assets
1,094 1,087
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 audited financial statements for the year ended 31 March
2014. The implied net asset value per share for Waterman from these 2014 audited
financial statements has been used as the basis for the valuation of Kingfish’s investment.
At the date of signing the Kingfish accounts for the period ended 30 September 2014,
the interim Waterman accounts for the period ended 30 September 2014 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 (31 March
2014), but note that the valuation will need to be reviewed when the Waterman interim
financial statements for the period ended 30 September 2014 become available.
change in the valuation method for Waterman by Kingfish could result in a higher or
A
lower fair value, though the difference is not expected to be material.
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 period ended 30 September 2014.
22
Notes to the Interim Financial Statements continued
kingfish limited /
For the six months ended 30 September 2014
Note 5 - Available-for-sale Financial Assets continued
INTERIM REPORT 2014
UnlistedUnlisted
equitiesequities
30/09/1431/03/14
unauditedaudited
$000$000
(ii) Available-for-sale reconciliation
Opening balance
Change in fair value of available-for-sale financial assets
Closing balance
1,087 1,054
7
33
1,094 1,087
(iii) Available-for-sale reserve
Opening balance
Change in fair value of available-for-sale financial assets
Closing balance
459 426
7
33
466 459
Note 6 - Reconciliation of Operating Profit after Tax
to Net Cash Flows from Operating Activities
Net profit after tax
6 months
6 months
endedended
30/09/1430/09/13
unauditedunaudited
$000$000
4,206 14,866
Items not involving cash flows
Unrealised loss/(gain) on investments
2,381 (7,834)
2,381 (7,834)
Impact of changes in working capital items
Decrease in fees and other payables
(Increase)/decrease in interest, dividends and other receivables
Decrease in current tax receivable
(968)
(1,351)
(1,120)
95
0
0
(2,088)
(1,256)
continued on page 23
23
6 months
6 months
endedended
30/09/1430/09/13
unauditedunaudited
$000$000
Items relating to investments
Net amount received from investments
2,929 9,649
Realised gains on investments
(5,539)
(6,117)
Increase in unsettled purchases of investments
(258)
(629)
Increase/(decrease) in unsettled sales of investments
906 (439)
Decrease in performance fee payable to be settled
by issue of shares
(879)
(1,437)
(70)
(92)
(2,911)
935
Net cash inflows from operating activities
1,588 6,711
Adjustment to the fair value of ordinary shares issued
in relation to performance fee paid
Note 7 - 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 NZ 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. For the six months ended 30 September 2014 no reduction was necessary
(30 September 2013: no reduction).
Management fees paid or payable (inclusive of GST) to Fisher Funds for the six months
ended 30 September 2014 totalled $1,160,193 (30 September 2013: $1,070,341). INTERIM REPORT 2014
kingfish limited /
Note 6 - Reconciliation of Operating Profit after Tax
to Net Cash Flows from Operating Activities
continued
24
Notes to the Interim Financial Statements continued
kingfish limited /
For the six months ended 30 September 2014
Note 7 - Related Party Information continued
INTERIM REPORT 2014
In addition, a performance fee may be earned by the Manager provided certain
benchmarks and a high water mark test have been met. No performance fee has been
earned by the Manager for the six months to 30 September 2014 (30 September 2013:
$20,002 and 31 March 2014: $2,113,393).
The consideration for any performance fee payable is calculated in accordance with
the Management Agreement with Fisher Funds and comprises cash and Kingfish share
capital. Full details of the performance fee calculation methodology are included in the
Kingfish annual report for the year ended 31 March 2014.
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 Limited, issued at a price equal to the audited net asset value per share at
31 March 2015.
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 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 period ended 30 September 2014 off-market transactions between Kingfish
and other funds managed by Fisher Funds totalled $291,710 for purchases and nil for
sales (30 September 2013: purchases $5,928 and sales $1,616,529).
Note 8 - Financial Risk Management Policies
The 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 Management
The 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.
25
Market Risk
All 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.
Price Risk
The 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 company. The
following companies individually comprise more than 10% of Kingfish’s total assets as
at 30 September 2014: Ryman Healthcare 11%, Fisher and Paykel Healthcare 12% and
Mainfreight 14% (30 September 2013: Ryman Healthcare 13% and Mainfreight 13%
and 31 March 2014: Ryman Healthcare 15% and Mainfreight 14%).
Interest Rate Risk
Surplus 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 30 September 2014.
Currency Risk
The company holds monetary and non-monetary 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 Risk
In the normal course of its business, the company is exposed to credit risk from
transactions with its counterparties.
INTERIM REPORT 2014
In June 2009, the company announced a long-term distribution policy paying out 2% of
average net asset value each quarter.
kingfish limited /
The company was not subject to any externally imposed capital requirements during the
period.
26
Notes to the Interim Financial Statements continued
kingfish limited /
For the six months ended 30 September 2014
Note 8 - Financial Risk Management Policies continued
INTERIM REPORT 2014
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
which carry a short term Standard and Poor’s credit rating of A-1+.
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 Risk
The 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 as
necessary 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 9 - Net Asset Value
The unaudited net asset value of Kingfish as at 30 September 2014 was $1.33 per share
(30 September 2013: $1.31 per share, 31 March 2014: $1.36 per share).
Note 10 - Subsequent Events
On 13 November 2014, 30,448,940 new Kingfish warrants (KFLWC) were allotted and
listed on the New Zealand Stock Exchange. All eligible shareholders were issued one
new warrant for every four shares held on the record date (12 November 2014). The
warrants are exercisable at $1.29, adjusted for dividends declared during the period
up to the exercise date of 6 November 2015. Warrant holders can elect to exercise
some or all of their warrants on the exercise date subject to a minimum exercise of 200
warrants.
At 19 November 2014, the unaudited net asset value of the company was $1.38 per
share and the share price was $1.38.
On 25 November 2014, the Board declared a dividend of 2.66 cents per share.
The record date for this dividend is 10 December 2014 with a payment date of
19 December 2014.
There were no other events which require adjustment to or disclosure in these interim
financial statements.
Directory
27
The principal activity of Kingfish is investment in growing New Zealand companies.
Auditor
Fisher Funds Management Limited
Level 1
67–73 Hurstmere Road
Takapuna
Auckland 0622
PricewaterhouseCoopers New Zealand
188 Quay Street
Auckland 1010
Directors
Independent Directors
Alistair Ryan (Chairman)
Carol Campbell
Andy Coupe
Executive Director
Carmel Fisher
Corporate Manager
Glenn Ashwell
Registrar
Shareholders with enquiries about
transactions and changes of address
should contact Kingfish’s share registrar:
Computershare Investor Services Limited
Level 2
159 Hurstmere Road
Takapuna
Auckland 0622
Phone: +64 9 488 8777
Email: [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
Solicitor
Bell Gully
Level 21
48 Shortland Street
Auckland 1010
Banker
ANZ Banking Group Limited
Level 9
215–229 Lambton Quay
Wellington 6011
Investor Enquiries
Kingfish Limited
Level 1
67–73 Hurstmere Road
Takapuna
Auckland 0622
Phone: + 64 9 489 7094
Fax: + 64 9 489 7139
Email: [email protected]
INTERIM REPORT 2014
Manager
kingfish limited /
Nature of Business
Printed onto Advance Laser, which is produced from Elemental Chlorine Free (ECF) pulp from virgin wood. This wood is sourced from
managed farmed trees in an ISO14001 and ISO9001 (International Quality Management Standard) accredited mill, that generates a
portion of their power from tree waste, saving 200 million litres of diesel oil annually.